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

8178

Vol. 66, No. 20

Tuesday, January 30, 2001

DEPARTMENT OF AGRICULTURE

Food Safety and Inspection Service

9 CFR Part 381

[Docket No. 98–062E]

Performance Standards for On-line

Antimicrobial Reprocessing of Prechill Poultry Carcasses

AGENCY: Food Safety and Inspection

Service, USDA.

ACTION: Extension of comment period.

SUMMARY: The Food Safety and

Inspection Service (FSIS) is extending

the comment period for the proposed

rulemaking, Performance Standards for

On-line Antimicrobial Reprocessing of

Pre-chill Poultry Carcasses, which was

scheduled to close on January 30, 2001.

At the request of the National Chicken

Council and the National Turkey

Federation, FSIS is granting a 60-day

extension to permit the associations to

collect additional data. Because the

comment period included the holiday

season, the requestors asked for

additional time to accommodate loss of

time and personnel during the holidays.

The proposed rule was published on

December 1, 2000 (65 FR 75187) and

requested comments on the proposed

performance standards for poultry

products reprocessed on-line and other

information and data.

DATES: Comments must be received on

or before April 2, 2001.

ADDRESSES: Send one original and two

copies of written comments to FSIS

Docket No. 98–062P, Department of

Agriculture, Food Safety and Inspection

Service, Room 102, 300 12th Street,

SW., Washington, DC 20250–3700.

FOR FURTHER INFORMATION CONTACT:

Daniel L. Engeljohn, Ph.D., Director,

Regulations Development and Analysis

Division, Office of Policy, Program

Development, and Evaluation by

telephone at (202) 720–5627 or by fax

(202) 690–0486.

Done in Washington, DC, on January 25,

2001.

Thomas J. Billy,

Administrator.

[FR Doc. 01–2652 Filed 1–26–01; 2:34 pm]

BILLING CODE 3410–DM–P

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the

Currency

12 CFR Parts 1, 7, and 23

[Docket No. 01–01]

RIN 1557–AB94

Investment Securities; Bank Activities

and Operations; Leasing

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 rules governing investment

securities, bank activities and

operations, and leasing. The proposed

revisions to the investment securities

regulations incorporate the authority to

underwrite, deal in, and purchase

certain municipal bonds that is

provided to well capitalized national

banks by the Gramm-Leach-Bliley Act

(GLBA). The proposed revisions to the

bank activities and operations

regulations: Establish the conditions

under which a school where a national

bank participates in a financial literacy

program is not considered a branch

under the McFadden Act; revise the

OCC’s regulation governing bank

holidays to conform it with the wording

of the statute that authorizes the

Comptroller to proclaim mandatory

bank closings; clarify the scope of the

term ‘‘NSF fees’’ for purposes of 12

U.S.C. 85, the statute that governs the

rate of interest that national banks may

charge; simplify the OCC’s current

regulation governing national banks’

non-interest charges and fees; and

provide that state law applies to a

national bank operating subsidiary to

the same extent as it applies to the

parent national bank. The proposed

revisions to the leasing regulations

authorize the OCC to vary the

percentage limit on the extent to which

a national bank may rely on estimated

residual value to recover its costs in

personal property leasing arrangements.

The purpose of these changes is to

update and revise the OCC’s regulations

to keep pace with developments in the

law and in the national banking system.

DATES: Comments must be received by

April 2, 2001.

ADDRESSES: Direct your comments to:

Public Information Room, Office of the

Comptroller of the Currency, 250 E

Street, SW, Mailstop 1–5, Washington,

DC 20219, Attention: Docket No. 01–01.

Comments will be available for public

inspection and photocopying at the

same location. In addition, you may

send comments by fax to (202) 874–

4448, or by electronic mail to

regs.comments@occ.treas.gov.

FOR FURTHER INFORMATION CONTACT: For

questions concerning proposed 12 CFR

1.2, contact Beth Kirby, Senior Attorney,

Securities and Corporate Practices

Division, (202) 874–5210, or Mark

Tenhundfeld, Assistant Director,

Legislative and Regulatory Activities

Division, (202) 874–5090. For questions

concerning proposed 12 CFR 7.3000,

contact Stuart Feldstein, Assistant

Director, or Andra Shuster, Senior

Attorney, Legislative and Regulatory

Activities Division, (202) 874–5090. For

questions concerning proposed 12 CFR

7.1021, 7.4001, 7.4002 and 7.4006,

contact Mark Tenhundfeld, Assistant

Director, or Andra Shuster, Senior

Attorney, Legislative and Regulatory

Activities Division, (202) 874–5090. For

questions concerning 12 CFR 23.21,

contact Steven Key, Attorney, Bank

Activities and Structure Division, (202)

874–5300.

SUPPLEMENTARY INFORMATION:

Background

The OCC proposes to revise 12 CFR

parts 1, 7, and 23 in order to address

changing industry practices and recent

statutory amendments. This proposal

reflects the OCC’s continuing

commitment to assess the effectiveness

of our rules and to make changes where

necessary to improve our regulations.

Section-by-Section Description of the

Proposal

A. Part 1—Investment Securities

Pursuant to 12 U.S.C. 24(Seventh), the

total amount of investment securities of

any one obligor held by a national bank

for its own account generally may not

exceed 10 per cent of the bank’s capital

Federal Register / Vol. 66, No. 20 / Tuesday, January 30, 2001 / Proposed Rules 8179

1Pub. L. 106–102, § 151, 113 Stat. 1338, 1384

(November 12, 1999).

2 12 U.S.C. 1831o.

3See, e.g., 12 CFR 1.2(i) and 1.3(a) defining Type

I securities and providing that Type I securities are

not subject to the 10 per cent capital and surplus

limit); 12 CFR §§ 1.2(j) and 1.3 (defining Type II

securities and describing the quantitative limit);

and 12 CFR §§ 1.2(k) and 1.3(c) (defining Type III

securities and describing the quantitative limit).

4See 12 CFR 6.4(b)(1) (defining the term ‘‘well

capitalized’’).

5This proposal is consistent with the limitation,

found in 12 U.S.C. 93a, which states that the

general rulemaking authority vested in the OCC by

that section ‘‘does not apply to section 36 of [Title

12 of the United States Code].’’ This limitation

simply makes clear that section 93a does not

expand whatever authority the OCC has pursuant

to other statutes to adopt regulations affecting

national bank branching. Congress clearly

contemplated that the OCC would implement

section 36, as is evidenced by the repeated

references to obtaining the OCC’s approval

throughout that section (see, e.g., paragraphs (b)(1),

(b)(2), (c), (g), and (i) of section 36). It would be

illogical to conclude that the OCC, in implementing

the provisions requiring national banks to obtain

the OCC’s prior approval under the sections cited,

cannot interpret what the terms of the statute mean

or that the interpretation must be made on a caseby-case basis. This rulemaking simply clarifies a

situation that falls outside the branching

restrictions imposed by section 36.

6 12 U.S.C. 36(c) (describing the circumstances

under which a national bank may ‘‘establish and

operate’’ new branches); 12 U.S.C. 36(j) (defining

the term ‘‘branch’’ to include ‘‘any branch bank,

branch office, branch agency, additional office, or

any branch place of business located in any State

or Territory of the United States or in the District

of Columbia at which deposits are received, or

checks paid, or money lent.’’).

7 In First National Bank in Plant City v.

Dickinson, 396 U.S. 122, 126–29, 134–37 (1969), the

Supreme Court used a two-stage analysis to reach

the conclusion that an armored car service was a

branch within the meaning of the McFadden Act.

The Court looked first at whether the off-premises

facility was ‘‘established and operated’’ by the

national bank. It then looked at whether the bank

was using the off-premises facility to take deposits

within the meaning of the McFadden Act’s

definition of a ‘‘branch.’’ Subsequent lower Federal

court decisions using the same two-stage analysis

employed by the Supreme Court in Plant City have

concluded that certain off-premises locations are

not branches under the McFadden Act. For

example, in Cades v. H & R Block, Inc., 43 F.3d 869,

874 (4th Cir. 1994), the U.S. Court of Appeals for

the Fourth Circuit articulated the Supreme Court’s

two-stage analysis as a two-part test and used that

test to determine that an office of the tax

preparation firm H & R Block was not a branch. The

court looked at key indicators of the bank’s

relationship with Block to determine whether the

Block offices were established and operated by the

bank. These indicators included the facts that the

bank had no ownership or leasehold interest in the

Block offices; no bank employees worked there; and

the bank exercised no authority or control over

Block’s employees or methods of operation. The

court held that, under these circumstances, the

bank did not ‘‘establish or operate’’ the Block

offices, that there was no need to go on to consider

whether bank business—such as taking deposits—

was transacted at Block offices, and that,

accordingly, the Block offices were not branches.

and surplus. Section 24(Seventh),

however, exempts certain types of

securities from this limitation and

permits a bank to underwrite, deal in,

and purchase them without quantitative

restriction. Section 151 of the GrammLeach-Bliley Act (GLBA) 1 amended

§ 24(Seventh) to exempt certain

municipal bonds from the 10 per cent

limit if the national bank is well

capitalized under the statutory prompt

corrective action standards.2 We

propose to amend part 1 of our

regulations, which implements the

statutory investment securities

provisions, to reflect this change in the

statute.

The proposal adds new § 1.2(g),

which defines the municipal bonds

described in § 151 of GLBA. Thus, the

term ‘‘municipal bonds’’ means

obligations of a State or political

subdivision other than general

obligations, and includes limited

obligation bonds, revenue bonds, and

obligations that satisfy the requirements

of section 142(b)(1) of the Internal

Revenue Code of 1986 issued by or on

behalf of any State or political

subdivision of a State, including any

municipal corporate instrumentality of

1 or more States, or any public agency

or authority of any State or political

subdivision of a State.

Part 1 classifies permissible national

bank investment securities into several

categories, or types.3 Type I securities

are securities—such as obligations

issued by, or backed by the full faith

and credit of, the United States—that a

national bank may purchase, sell, deal

in, and underwrite without regard to

any capital and surplus limitation. The

proposal amends the list of Type I

securities that a national bank may

underwrite, deal in, and purchase

without quantitative limit, which

appears in redesignated § 1.2(j) of the

regulation, to add the municipal bonds

as defined in new § 1.2(g), subject to the

requirement that the bank be well

capitalized. The regulation refers to the

definition of well capitalized that the

OCC uses for purposes of compliance

with the prompt corrective action

standards.4

In addition, the proposal modifies the

section that defines certain Type II

securities, newly designated as § 1.2(k),

to make it clear that obligations issued

by a State or political subdivision or

agency of a State, for housing,

university, or dormitory purposes are

Type II securities only when they do not

qualify as Type I securities (for example,

when the subject bank is not well

capitalized under prompt corrective

action standards). The proposal also

modifies the paragraph that defines

Type III securities, newly redesignated

as § 1.2(l), and uses municipal bonds as

an example of that type, to make clear

that municipal bonds are Type III

securities only when they do not qualify

as Type I securities. Regardless of the

treatment of municipal bonds as Type I

or Type III securities, a national bank

must understand the fiscal condition of

any municipality in whose bonds the

bank invests.

B. Part 7—Bank Activities and

Operations

The proposal makes five changes to

part 7. First, it adds new § 7.1021,

which defines the circumstances under

which a school where a bank

participates in a financial literacy

program is not considered a branch of

the bank under the McFadden Act.

Second, the proposal amends § 7.3000

to conform it with the Comptroller’s

statutory authority to declare mandatory

bank closings, as provided in 12 U.S.C.

95(b)(1). Third, the proposed rule

revises current § 7.4001 to clarify the

scope of the term ‘‘NSF fees’’ for

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

proposal revises current § 7.4002, which

governs non-interest charges and fees, to

remove language that may be confusing.

Finally, the proposal adds new § 7.4006,

which provides that state laws apply to

a national bank operating subsidiary to

the same extent that they apply to the

parent national bank.

Bank Participation in Financial Literacy

Programs (New § 7.1021)

Proposed new § 7.1021(b) provides

that a school premises or facility where

a national bank participates in a

financial literacy program is not a

branch of the national bank under the

McFadden Act if the conditions set out

in the rule are satisfied.5 Pursuant to

these conditions, the bank must not

‘‘establish and operate’’ the school

premises or facility. This requirement

derives from the text of the statute,

which describes the circumstances

under which a national bank may

‘‘establish and operate’’ new branches

and defines the term ‘‘branch,’’ 6 and

from Federal judicial precedents

determining when an off-premises

location is a branch under these

standards. Under those precedents, the

court first determines whether the

national bank has ‘‘establish[ed] and

operate[d]’’ the off-premises location in

question. If so, the court goes on to

determine whether the off-premises

location is covered by the definition of

the term ‘‘branch’’ that the statute

provides because it accepts deposits,

pays checks, or lends money at that

location.7

In construing the phrase ‘‘establish

and operate,’’ the courts have looked at

8180 Federal Register / Vol. 66, No. 20 / Tuesday, January 30, 2001 / Proposed Rules

8See Community Reinvestment Act; Interagency

Questions and Answers Regarding Community

Reinvestment, 64 FR 23, 618 (May 3, 1999) (Q and

A 3 addressing 12 CFR §§ 25.12(j), 228.23(j),

345.23(j), and 563e.12(i) (examples of community

development services)).

9The regulation also provides that when a State

or a legally authorized State official designates any

day to be a legal holiday for ceremonial reasons, a

national bank may choose to remain open or to

close. 12 CFR 7.3000(c). Finally, it provides that a

national bank should assure that all liabilities or

other obligations under the applicable law due to

the bank’s closing are satisfied. 12 CFR 7.3000(d).

10 Interpretive Letter No. 452 (Aug. 11, 1988),

reprinted in [1988–89 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 85,676 (IL 452).

11See Brief Amicus Curiae of the Office of the

Comptroller of the Currency in Support of National

Bank Plaintiffs, Bank of America, N.A. v. San

the nature of the bank’s interest in the

location in question and at the degree of

control the bank maintains over the

employees who work at the location or

the business conducted there. A bank

would usually have no property interest

in the school location. Its employees

would typically work at the school only

in connection with their participation in

the financial literacy program. Finally,

the bank would exercise no control over

the school, its teachers, or its

curriculum.

The proposed regulation also requires

that the financial literacy program be

principally intended to educate

students. As noted in the proposal, a

program would be considered

principally educational if it is designed

to teach students the principles of

personal economics or the benefits of

saving for the future, without being

designed for the purpose of making

profits.

Students in the financial literacy

program need not be of any particular

age or income background in order for

the program to be eligible under this

proposal. If the students are low- or

moderate-income individuals, however,

a bank’s participation in a school

savings program may also be given

positive consideration under the

Community Reinvestment Act as a

community development service.8

Bank Holidays (Revised § 7.3000)

Under 12 U.S.C. 95(b)(1), in the event

of natural or other emergency

conditions existing in any State, the

Comptroller may proclaim any day a

legal holiday for national banks located

in that State or affected area. In such a

case, the Comptroller may require

national banks to close on the day or

days designated. If a State or State

official designates any day as a legal

holiday for ceremonial or emergency

reasons, a national bank may either

close or remain open unless the

Comptroller directs otherwise by

written order.

The OCC has issued a regulation

implementing this authority that is set

forth at 12 CFR 7.3000. The wording of

§ 7.3000 does not follow that of the

statute precisely, however. Currently,

§ 7.3000 requires the Comptroller to

issue a proclamation authorizing the

emergency closing in accordance with

12 U.S.C. 95 at the time of the

emergency condition, or soon thereafter.

When the Comptroller, a State, or a

legally authorized State official declares

a day to be a legal holiday due to

emergency conditions, the regulation

permits a national bank to choose to

remain open or to close any of its

banking offices in the affected

geographic area.9 Thus, unlike the

statute, § 7.3000 does not authorize the

Comptroller to require national banks to

close in the event the Comptroller

declares a legal holiday but, instead,

gives national banks discretion to

remain open during either a

Comptroller- or State-declared holiday.

This proposed rule amends § 7.3000

to conform it with the Comptroller’s

statutory authority to proclaim

mandatory bank closings, as provided in

12 U.S.C. 95(b)(1). It provides that if the

Comptroller or a State declares a legal

holiday due to emergency conditions, a

national bank may temporarily limit or

suspend operations at its affected offices

or it may choose to continue its

operations unless the Comptroller by

written order directs otherwise.

Definition of ‘‘Interest’’ for Purposes of

12 U.S.C. 85 (Revised § 7.4001(a))

The proposed rule revises current

§ 7.4001 to clarify the scope of the term

‘‘NSF fees’’ for purposes of 12 U.S.C. 85.

Section 85 governs the interest rates that

national banks may charge, but it does

not define the term ‘‘interest.’’ Section

7.4001 generally defines the charges that

are considered ‘‘interest’’ for purposes

of section 85, then sets out a

nonexclusive list of charges covered by

that definition. The list includes ‘‘NSF

fees.’’

The inclusion of ‘‘NSF fees’’ in the

definition of ‘‘interest’’ was intended to

codify a position the OCC took in an

interpretive letter issued in 1988.

Interpretive Letter No. 452 concluded

that charges imposed by a credit card

bank on its customers who paid their

accounts with checks drawn on

insufficient funds were ‘‘interest’’

within the meaning of section 85.10 IL

No. 452 referred to the charges in

question as ‘‘NSF charges.’’ The term,

however, is also commonly used to refer

to fees imposed by a bank on its

checking account customers whenever a

customer writes a check against

insufficient funds, regardless of whether

the check was intended to pay an

obligation due to the bank. These

different uses of the term ‘‘NSF fees’’

have created ambiguity about the scope

of the term as used in § 7.4001(a).

The proposal amends § 7.4001(a) to

clarify that the term ‘‘NSF fees’’

includes only those fees imposed by a

creditor bank when a borrower attempts

to pay an obligation to that bank with

a check drawn on insufficient funds.

Fees that a bank charges for its deposit

account services—including overdraft

and returned check charges—are not

covered by the term ‘‘NSF fees.’’ These

fees are therefore not ‘‘interest’’ but,

rather, are charges covered by 12 CFR

7.4002.

We also invite comment on whether

the term ‘‘NSF fees’’ should also include

at least some portion of the fee imposed

by a national bank when it pays a check

notwithstanding that its customer’s

account contains insufficient funds to

cover the check. As a matter of practice,

banks often vary the amount of the

charges they impose depending on

whether they honor the customer’s

check. A bank that pays a check drawn

against insufficient funds may be

viewed as having extended credit to the

accountholder. Consistent with that

approach, the difference between what

the bank charges a customer when it

pays the check and what it charges

when it dishonors the check and returns

it could be viewed as interest within the

meaning of 12 U.S.C. 85. Currently, the

OCC’s regulation does not expressly

resolve this issue.

National Bank Non-Interest Charges

(Revised § 7.4002)

Current § 7.4002 sets out the basic

authority to impose non-interest charges

and fees, including deposit account

service charges. It provides that the

decision to do so and to determine the

amounts of charges and fees is a

business decision to be made by each

bank, in its discretion, according to

sound banking judgment and safe and

sound banking principles. It also

provides that a bank ‘‘reasonably

establishes’’ non-interest charges and

fees if it considers, among other factors,

the four factors enumerated in the

regulation. The OCC construes § 7.4002

to mean that a national bank that

considers at least these four factors in

setting its non-interest charges and fees

has satisfied the safety and soundness

concerns in the regulation and faces no

supervisory impediment to exercising

the authority to set charges and fees that

the regulation describes.11

Federal Register / Vol. 66, No. 20 / Tuesday, January 30, 2001 / Proposed Rules 8181

Francisco, No. C 99 4817 VRW (N.D. Ca.) (citing

OCC opinion letters construing and describing the

operation of 12 CFR 7.4002). On July 11, 2000, the

U.S. District Court for the Northern District of

California granted the plaintiffs in this case

permanent injunctive relief against San Francisco

and Santa Monica city ordinances that purported to

prohibit national banks from charging fees for

providing banking services through automatic teller

machines (ATMs). The case is currently pending

appeal in the U.S. Court of Appeals for the Ninth

Circuit.

12Pub. L. 106–102, § 121, 113 Stat. at 1378,

codified at 12 U.S.C. 24a(g)(3).

13 12 CFR 5.34(e)(3).

14 12 CFR 559.3(n). See 61 FR 66561, 66563

(December 18, 1996) (preamble to OTS final rule

adopting section 559.3(n); explaining that the basis

for the OTS rule is that the operating subsidiary of

a Federal savings association ‘‘is treated as the

equivalent of a department of the parent thrift for

regulatory and reporting purposes’’).

15See WPS Financial, Inc. v. Dean, No. 99 C 0345

C (W.D. Wi. Nov. 26, 1999); Chaires v. Chevy Chase

Bank, FSB, 131 Md. App. 64, 748 A.2d 34, 44 (Md.

Ct. Sp. App. 2000).

The proposal eliminates certain

ambiguities in the text of § 7.4002

without altering the substance of the

regulation or the way in which the OCC

intends that it operate. First, current

§ 7.4002(a) gives two examples of the

types of non-interest charges and fees

that national banks may impose:

Charges on dormant accounts and fees

for credit reports or investigations. We

have removed these examples in the

proposal, given that the explicit

reference to the two types fees is

unnecessary and could be

misinterpreted as a limitation on a

national bank’s ability to charge other

types of fees. We note, however, that

dormant account charges and fees for

credit reports and investigations

continue to be permissible non-interest

charges and fees even though they are

no longer specifically mentioned in the

rule.

We also propose to amend § 7.4002(b)

to clarify what a bank’s obligations are

under that section. The sentence in

§ 7.4002(b) that currently introduces the

four factors says that a bank ‘‘reasonably

establishes’’ non-interest charges and

fees if it considers those factors among

others. This language was intended to

convey that the bank must exercise

sound banking judgment and rely on

safe and sound banking principles in

setting charges and fees. In order to

clarify that intent, we have revised the

sentence in § 7.4002(b) that currently

introduces the four factors to say that a

bank establishes non-interest charges

and fees ‘‘in accordance with safe and

sound banking principles’’ if it employs

a decision-making process through

which it considers the four factors. This

revision clarifies that consideration of

the four factors is a process requirement

to be implemented by the bank and

more clearly establishes the connection

between the required process and the

safety and soundness considerations

that underlie it.

The four factors are the same as under

the current regulation, including the

factor addressing the maintenance of the

bank’s safety and soundness. We expect

that, pursuant to this factor, a bank

would consider any risks, such as

reputation or litigation risk, that would

be affected by the imposition of a

particular fee. We note that

consideration of the four factors is

relevant both when establishing a new

fee and when changing a fee that

already has been established. The

reference to factors other than the four

that are enumerated in § 7.4002(b) has

been retained in order to avoid creating

any doubt about a national bank’s

ability to rely on factors in addition to

those stated in the regulation.

Section 7.4002(a) is also revised to

clarify that the authorization it contains

to establish fees and charges necessarily

includes the authorization to decide the

amount and method by which they are

computed. Thus, for example, fees

resulting from the method the bank

employs to post checks presented for

payment are included within the

authorization provided by § 7.4002.

Finally, current § 7.4002(d) addresses

the OCC’s issuance of opinions

concerning whether state laws

purporting to limit or prohibit national

bank non-interest charges and fees are

preempted. The first clause of current

paragraph (d) states that the OCC

evaluates on a case-by-case basis

whether a national bank may establish

fees pursuant to paragraphs (a) and (b)

of § 7.4002; the second clause provides

that, in determining whether a state law

purporting to limit or prohibit such fees

is preempted, the OCC applies

preemption principles derived from the

Supremacy Clause of the United States

Constitution and applicable judicial

precedent. The first clause simply

underscores that a national bank’s

establishment of fees is governed by the

preceding paragraphs of § 7.4002; the

second clause was intended to convey

that the law as articulated by the

Supreme Court and the lower Federal

courts governs issues of federal

preemption. The proposal revises

§ 7.4002(d) to rephrase and restate these

two points more directly and succinctly.

Applicability of State Law to National

Bank Subsidiaries (New § 7.4006)

Proposed § 7.4006 clarifies that state

laws apply to a national bank operating

subsidiary to the same extent as those

laws apply to the parent national bank.

Operating subsidiaries have been

authorized for national banks for

decades, recognizing that, under various

circumstances, it may be convenient or

useful for the bank to conduct activities

that the bank could conduct directly,

through the alternate form of a

controlled subsidiary company. Thus,

operating subsidiaries and the activities

they conduct are an embodiment of the

incidental powers of their parent bank,

and often have been described as the

equivalent of a department or division

of their parent bank—organized for

convenience in a different corporate

form.

Consistent with the concept

underlying this authority for operating

subsidiaries, and recent legislation

recognizing the status of national bank

operating subsidiaries, the proposal

provides that state law applies to the

activities of an operating subsidiary to

the same extent it would apply if those

activities were conducted by its parent

bank. In GLBA, for example, Congress

recognized the authority of national

banks to own subsidiaries that engage

‘‘solely in activities that national banks

are permitted to engage in directly and

are conducted subject to the same terms

and conditions that govern the conduct

of such activities by national banks.’’ 12

Similarly, the OCC operating subsidiary

regulation provides that an operating

subsidiary conducts its activities subject

to the same authorization, terms, and

conditions that apply to the conduct of

those activities by its parent bank.13

Fundamental to the description of the

characteristics of operating subsidiaries

in GLBA and the OCC’s rule is that,

unless otherwise provided by Federal

law or OCC regulation, State laws apply

to operating subsidiaries to the same

extent as they apply to the parent

national bank.

The Office of Thrift Supervision

(OTS) has already taken this approach

with respect to the operating

subsidiaries of Federal savings

associations. An OTS rule also provides

that state law applies to Federal savings

associations’ operating subsidiaries,

which are limited to engaging in

activities permissible for the parent

thrift, to the extent it applies to the

parent thrift.14 A Federal district court

has recently upheld this OTS rule.15

For the reasons stated above, the OCC

proposes to add a new § 7.4006, stating

that, except where Federal law or an

OCC rule provides otherwise, State law

applies to operating subsidiaries only to

the extent that the law applies to the

parent bank.

8182 Federal Register / Vol. 66, No. 20 / Tuesday, January 30, 2001 / Proposed Rules

16 M&M Leasing v. Seattle First National Bank,

563 F.2d 1377 (9th Cir. 1977), cert. denied, 436 U.S.

956 (1978) (bank leasing of personal property

permissible because it was functionally equivalent

to loaning money on personal security).

C. Part 23—Leasing

Estimated Residual Value for Section 24

(Seventh) Leases (Revised § 23.21)

The OCC’s regulations at 12 CFR part

23 currently authorize national banks to

engage in leasing activities pursuant to

two distinct sources of authority:

section 24 (Tenth), which expressly

authorizes leasing subject to certain

conditions specified in that statute,

including a 10% of assets limit on the

amount of the activity that the national

bank can conduct; and section 24

(Seventh), which authorizes leasing as

an activity that is part of the business of

banking without imposing a percentageof-assets limit.16 The rules require that

leases be ‘‘full-payout leases.’’ That term

is defined to mean a lease in which the

national bank reasonably expects to

recover its investment in the leased

property, plus its cost of financing, from

rental payments, estimated tax benefits,

and the estimated residual value of the

leased property at the expiration of the

lease term. The rules for section 24

(Seventh) leases further provide that the

bank’s estimate of the residual value of

the leased property must be reasonable

in light of the nature of the property and

all the circumstances surrounding the

lease transaction and that, in any event,

the unguaranteed amount of residual

value relied upon may not exceed 25%

of the bank’s original cost of the

property. 12 CFR 23.3, 23.2(e), 23.21.

The OCC last revised the leasing rules

in 1996. Since then, our experience

supervising national banks that engage

in the leasing business has suggested

that the 25% residual value limit may

not be appropriate for all types of

personal property leasing. We are

therefore proposing to modify current

§ 23.21 to provide that the limit on the

amount of estimated residual value is

either 25% or the percentage for a

particular type of personal property that

is specified in guidance published by

the OCC. As revised, § 23.21 would

permit the OCC to establish a different

percentage requirement than 25% if a

different limit is warranted. If the OCC

does not specify a different limit, the

25% limit would continue to apply. We

would apprise national banks of any

different limit or limits established

under this provision by publishing an

OCC bulletin, which would

subsequently be incorporated into the

Comptroller’s Handbook booklet on

Lease Financing.

Request for Comments

The OCC invites comment on all

aspects of the proposed regulation.

Specifically, we invite your comments

on how to make this proposed rule

easier to understand. For example:

Have we organized the material to suit

your needs?

Are all the requirements in the rule

clearly stated?

Does the rule contain technical

language or jargon that is not clear?

Would a different format (grouping

and order of sections, use of headings,

paragraphing) make the rule easier to

understand?

Would more (but shorter) sections be

better?

What else could we do to make the

rule easier to understand?

In addition, we invite your comments

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 comments on the impact of this

proposal on community banks’ current

resources and available personnel with

the requisite expertise, and whether the

goals of the proposed regulation could

be achieved, for community banks,

through an alternative approach.

Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act, 5 U.S.C.

605(b) (RFA), the regulatory flexibility

analysis otherwise required under

section 604 of the RFA is not required

if the agency certifies that the rule will

not have a significant economic impact

on a substantial number of small entities

and publishes its certification and a

short, explanatory statement in the

Federal Register along with its rule.

Pursuant to section 605(b) of the RFA,

the OCC hereby certifies that this

proposal will not have a significant

economic impact on a substantial

number of small entities. The proposal

codifies caselaw and OCC

interpretations, but adds no new

requirements. Accordingly, a regulatory

flexibility analysis is not needed.

Executive Order 12866

The OCC has determined that this

proposal is not a significant regulatory

action under Executive Order 12866.

Unfunded Mandates Act of 1995

Section 202 of the Unfunded

Mandates Reform Act of 1995, 2 U.S.C.

1532 (Unfunded Mandates Act),

requires that the agency prepare a

budgetary impact statement before

promulgating any rule likely to result in

a Federal mandate that may result in the

expenditure by State, local, and tribal

governments, in the aggregate or by the

private sector, of $100 million or more

in any one year. If a budgetary impact

statement is required, section 205 of the

Unfunded Mandates Act also requires

the agency to identify and consider a

reasonable number of regulatory

alternatives before promulgating the

rule. The OCC has determined that this

proposal will not result in expenditures

by State, local, and tribal governments,

or by the private sector, of $100 million

or more in any one year. Accordingly,

the OCC has not prepared a budgetary

impact statement or specifically

addressed any regulatory alternatives.

The proposal codifies caselaw and OCC

interpretations, but adds no new

requirements.

Executive Order 13132

Executive Order 13132 (Order)

requires Federal agencies, including the

OCC, to certify their compliance with

that Order when they transmit to the

Office of Management and Budget

(OMB) any draft final regulation that has

Federalism implications. Under the

Order, a regulation has Federalism

implications if it has ‘‘substantial direct

effects on the States, on the relationship

between the national government and

the States, or on the distribution of

power and responsibilities among the

various levels of government.’’ In the

case of a regulation that has Federalism

implications and that preempts State

law, the Order imposes certain specific

requirements that the agency must

satisfy, to the extent practicable and

permitted by law, prior to the formal

promulgation of the regulation.

Executive Order 13132 imposes

certain requirements when an agency

issues a regulation that has federalism

implications or that preempts State law.

Under the Order, a regulation has

federalism implications if it has

substantial direct effects on the States,

on the relationship between the national

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. In general, the

Order requires the agency to adhere

strictly to federal constitutional

principles in developing rules that have

federalism implications; provides

guidance about an agency’s

interpretation of statutes that authorize

regulations that preempt State law; and

requires consultation with State officials

before the agency issues a final rule that

has federalism implications or that

preempts State law.

It is not clear that the Order applies

to this proposal. Proposed § 7.4006

Federal Register / Vol. 66, No. 20 / Tuesday, January 30, 2001 / Proposed Rules 8183

addresses the applicability of state law

to national bank operating subsidiaries,

but, in the opinion of the OCC, it

reflects the conclusion that a federal

court would reach, even in the absence

of the regulation, pursuant to the

Supremacy Clause and applicable

federal judicial precedent. Nonetheless,

the OCC plans for its final rule to satisfy

the requirements of the Order. If an

agency promulgates a regulation that

has federalism implications and

preempts State law, the Order imposes

upon the agency requirements to

consult with State and local officials, to

publish a ‘‘federalism summary impact

statement,’’ and to make written

comments from State and local officials

available to the Director of OMB. In the

preamble to any final rule that results

from our proposal, we will describe the

results of our consultation with State or

local officials and include a federalism

summary impact statement. Moreover,

we will make any written comments we

receive from State or local officials

available to the Director of OMB.

List of Subjects

12 CFR Part 1

Banks, banking, National banks,

Reporting and recordkeeping

requirements, Securities.

12 CFR Part 7

Credit, Insurance, Investments,

National banks, Reporting and

recordkeeping requirements, Securities,

Surety bonds.

12 CFR Part 23

National banks.

Authority and Issuance

For the reasons set forth in the

preamble, parts 1, 7, and 23 of chapter

I of title 12 of the Code of Federal

Regulations are proposed to be amended

as follows:

PART 1—INVESTMENT SECURITIES

1. The authority citation for part 1

continues to read as follows:

Authority: 12 U.S.C. 1, et seq., 12 U.S.C.

24 (Seventh) and 93a.

2. In § 1.2, current paragraphs (g)

through (m) are redesignated as (h)

through (n), a new paragraph (g) is

added, newly designated paragreaphs

(j)(4), (k)(1), and (l) are revised to read

as follows:

§ 1.2 Definitions.

* * * * *

(g) Municipal bonds means

obligations of a State or political

subdivision other than general

obligations, and includes limited

obligation bonds, revenue bonds, and

obligations that satisfy the requirements

of section 142(b)(1) of the Internal

Revenue Code of 1986 issued by or on

behalf of any State or political

subdivision of a State, including any

municipal corporate instrumentality of

1 or more States, or any public agency

or authority of any State or political

subdivision of a State.

* * * * *

(j) * * *

(4) General obligations of a State of

the United States or any political

subdivision thereof; and municipal

bonds if the national bank is well

capitalized as defined in 12 CFR

6.4(b)(1);

* * * * *

(k) * * *

(1) Obligations issued by a State, or a

political subdivision or agency of a

State, for housing, university, or

dormitory purposes that would not

satisfy the definition of Type I securities

pursuant to paragraph (j) of § 1.2.

* * * * *

(l) Type III security means an

investment security that does not

qualify as a Type I, II, IV, or V security.

Examples of Type III securities include

corporate bonds and municipal bonds

that do not satisfy the definition of Type

I securities pursuant to paragraph (j) of

§ 1.2.

* * * * *

PART 7—BANK ACTIVITIES AND

OPERATIONS

3. The authority citation for part 7 is

revised to read as follows:

Authority: 12 U.S.C. 1 et seq., 92, 92a, 93,

93a, 481, 484, 1818.

Subpart A—Bank Powers

4. A new § 7.1021 is added to read as

follows:

§ 7.1021 National bank participation in

financial literacy programs.

A national bank may participate in a

financial literacy program on the

premises of, or at a facility used by, a

school. The school premises or facility

will not be considered a branch of the

bank if:

(a) The bank does not establish and

operate the school premises or facility

on which the financial literacy program

is conducted; and

(b) The principal purpose of the

financial literacy program is

educational. For example, a program is

educational if it is designed to teach

students the principles of personal

economics or the benefits of saving for

the future, and is not designed for the

purpose of profit-making.

5. In § 7.3000, the last sentence of

paragraph (b) is removed and two

sentences are added in its place to read

as follows:

§ 7.3000 Bank hours and legal holidays.

* * * * *

(b) * * * When the Comptroller, a

State, or a legally authorized State

official declares a legal holiday due to

emergency conditions, a national bank

may temporarily limit or suspend

operations at its affected offices.

Alternatively, the national bank may

continue its operations unless the

Comptroller by written order directs

otherwise.

* * * * *

6. In § 7.4001, the second sentence of

paragraph (a) is revised to read as

follows:

§ 7.4001 Charging interest at rates

permitted competing institutions; charging

interest to corporate borrowers.

(a) * * * It includes, among other

things, the following fees connected

with credit extension or availability:

numerical periodic rates, late fees, not

sufficient funds (NSF) fees that are

imposed by a creditor when a borrower

tenders payment on a debt with a check

drawn on insufficient funds, overlimit

fees, annual fees, cash advance fees, and

membership fees.* * *

* * * * *

7. Section 7.4002 is revised to read as

follows:

§ 7.4002 National bank charges.

(a) Authority to impose charges and

fees. A national bank may charge its

customers non-interest charges and fees,

including deposit account service

charges.

(b) Considerations. (1) All charges and

fees should be arrived at by each bank

on a competitive basis and not on the

basis of any agreement, arrangement,

undertaking, understanding, or

discussion with other banks or their

officers.

(2) The establishment of non-interest

charges and fees, their amounts, and the

method of calculating them are business

decisions to be made by each bank, in

its discretion, according to sound

banking judgment and safe and sound

banking principles. A national bank

establishes non-interest charges and fees

in accordance with safe and sound

banking principles if the bank employs

a decision-making process through

which it considers the following factors,

among others:

(i) The cost incurred by the bank in

providing the service;

(ii) The deterrence of misuse by

customers of banking services;

8184 Federal Register / Vol. 66, No. 20 / Tuesday, January 30, 2001 / Proposed Rules

(iii) The enhancement of the

competitive position of the bank in

accordance with the bank’s business

plan and marketing strategy; and

(iv) The maintenance of the safety and

soundness of the institution.

(c) Interest. Charges and fees that are

‘‘interest’’ within the meaning of 12

U.S.C. 85 are governed by § 7.4001 and

not by this section.

(d) State law. Preemption principles

derived from the United States

Constitution, as interpreted through

judicial precedent, govern

determinations regarding the

applicability of State law to fees

described in this section.

(e) National bank as fiduciary. This

section does not apply to charges

imposed by a national bank in its

capacity as a fiduciary, which are

governed by 12 CFR part 9.

8. A new § 7.4006 is added to read as

follows:

§ 7.4006 Applicability of State law to

national bank operating subsidiaries.

Unless otherwise provided by Federal

law or OCC regulation, State laws apply

to national bank operating subsidiaries

to the same extent that those laws apply

to the parent national bank.

PART 23—LEASING

9. The authority citation for part 23

continues to read as follows:

Authority: 12 U.S.C. 1 et seq., 24 (Seventh),

24 (Tenth), and 93a.

Subpart C—Section 24(Seventh)

Leases

10. In § 23.21, current paragraph (a)(2)

is revised to read as follows:

§ 23.21 Estimated residual value.

* * * * *

(a) * * *

(2) Any unguaranteed amount must

not exceed 25 percent of the original

cost of the property to the bank or the

percentage for a particular type of

property specified in published OCC

guidance.

* * * * *

Dated: January 8, 2001.

John D. Hawke, Jr.,

Comptroller of the Currency.

[FR Doc. 01–1614 Filed 1–29–01; 8:45 am]

BILLING CODE 4810–33–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 2000–SW–40–AD]

RIN 2120–AA64

Airworthiness Directives; Sikorsky

Aircraft Corporation Model S–76A

Helicopters

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes

revising an existing airworthiness

directive (AD) for Sikorsky Aircraft

Corporation (Sikorsky) Model S–76A

helicopters. That AD currently requires

a one-time inspection of the tail rotor

blade (blade) spar elliptical centering

plug (centering plug) for disbonding and

the addition of a retaining pad on the

pitch change shaft between the output

tail rotor gearbox flange and the inboard

tail rotor spar. This action would

contain the same requirements as the

existing AD but would clarify that the

500-hour time-in-service (TIS) repetitive

inspections, which could cause

inadvertent damage, are not required.

This AD would also incorporate by

reference a revised alert service bulletin

(ASB) that does not include the 500-

hour TIS repetitive inspections. This

proposal is prompted by operator

confusion about whether the current AD

continues to require the 500-hour TIS

repetitive inspections. The proposed AD

is intended to verify that the FAA has

determined that the 500-hour TIS

repetitive inspections are not required

to prevent the centering plug from

disbonding and moving out of position,

loss of tail rotor control, and subsequent

loss of control of the helicopter.

DATES: Comments must be received on

or before April 2, 2001.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Office of the

Regional Counsel, Southwest Region,

Attention: Rules Docket No. 2000–SW–

40–AD, 2601 Meacham Blvd., Room

663, Fort Worth, Texas 76137. You may

also send comments electronically to

the Rules Docket at the following

address: 9-asw-adcomments@faa.gov.

Comments may be inspected at the

Office of the Regional Counsel between

9 a.m. and 3 p.m., Monday through

Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Richard Noll, Aviation Safety Engineer,

Boston Aircraft Certification Office, 12

New England Executive Park,

Burlington, MA 01803, telephone (781)

238–7160, fax (781) 238–7199.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Communications

should identify the Rules Docket

number and be submitted in triplicate to

the address specified above. All

communications received on or before

the closing date for comments will be

considered before taking action on the

proposed rule. The proposals contained

in this document may be changed in

light of the comments received.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the proposed rule. All comments

submitted will be available in the Rules

Docket for examination by interested

persons. A report summarizing each

FAA-public contact concerned with the

substance of this proposal will be filed

in the Rules Docket.

Commenters wishing the FAA to

acknowledge receipt of their mailed

comments submitted in response to this

proposal must submit a self-addressed,

stamped postcard on which the

following statement is made:

‘‘Comments to Docket No. 2000–SW–

40–AD.’’ The postcard will be date

stamped and returned to the

commenter.

Availability of NPRMs

Any person may obtain a copy of this

NPRM by submitting a request to the

FAA, Office of the Regional Counsel,

Southwest Region, Attention: Rules

Docket No. 2000–SW–40–AD, 2601

Meacham Blvd., Room 663, Fort Worth,

Texas 76137.

Discussion

On June 30, 1994, the FAA issued AD

94–14–20, Amendment 39–8969 (59 FR

41238, August 11, 1994), to require

inspecting each blade centering plug for

disbonding; adding a retaining pad on

the pitch change shaft between the tail

rotor output gearbox flange and the

inboard blade spar; and removing the

500-hour repetitive inspection. That

action was prompted by successful

service experience and an improved

bonding procedure. The requirements of

that AD are intended to prevent the

centering plug from disbonding and

moving out of position, loss of tail rotor

control, and subsequent loss of control

of the helicopter.