[Federal Register Volume 60, Number 237 (Monday, December 11, 1995)]
[Proposed Rules]
[Pages 63461-63465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30028]



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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 31

[Docket No. 95-29]
RIN 1557-AB40


Extensions of Credit to Insiders and Transactions With Affiliates

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) proposes 
to revise its rules governing extensions of credit to national bank 
insiders and to relocate to part 31 several interpretive rulings 
dealing with transactions with affiliates. This proposal is another 
component of the OCC's Regulation Review Program to update and 
streamline OCC regulations and to reduce unnecessary regulatory costs 
and other burdens. The proposal modernizes and clarifies the insider 
lending rules and reduces unnecessary regulatory burdens where 
feasible, consistent with statutory requirements.

DATES: Comments must be received by February 9, 1996.

ADDRESSES: Comments should be directed to: Office of the Comptroller of 
the Currency, Communications Division, 250 E Street, SW, Washington, DC 
20219, Attention: Docket No. 95-29. Comments will be available for 
public inspection and photocopying at the same location. In addition, 
comments may be sent by facsimile transmission to FAX number (202) 874-
5274 or by electronic mail to <a href="/cdn-cgi/l/email-protection#176572703974787a7a727963645778747439636572766439707861"><span class="__cf_email__" data-cfemail="a2d0c7c58cc1cdcfcfc7ccd6d1e2cdc1c18cd6d0c7c3d18cc5cdd4">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Aline Henderson, Senior Attorney, Bank 
Activities and Structure (202) 874-5300; Emily McNaughton, National 
Bank Examiner, Credit & Management Policy (202) 874-5170; or Mark 
Tenhundfeld, Senior Attorney, Legislative and Regulatory Activities 
(202) 874-5090.

SUPPLEMENTARY INFORMATION:

Background

Summary of Regulation Review Program

    The OCC proposes to revise 12 CFR part 31 as another component of 
its Regulation Review Program (Program). The goal of the Program is to 
review all of the OCC's rules and to eliminate provisions that do not 
contribute significantly to maintaining the safety and soundness of 
national banks or to accomplishing the OCC's other statutory 
responsibilities. Another goal of the Program is to clarify regulations 
so that they more effectively convey the standards the OCC seeks to 
apply. 

[[Page 63462]]

    The OCC intends for this proposal to reduce regulatory costs and 
other burdens on national banks by eliminating regulatory requirements 
that are neither essential to maintaining the safety and soundness of 
national banks nor needed to accomplish the OCC's statutory 
responsibilities. The proposal also seeks comments on whether it would 
be useful for the OCC to issue additional guidance on the differences 
between the requirements of part 31 and 12 CFR part 32 (Lending 
Limits).

Discussion

    Current part 31 contains two subparts. Subpart A implements 12 
U.S.C. 375a(4) and 375b(3) by setting a limit on the amount that a 
national bank may lend to any one of its executive officers other than 
for housing- and education-related loans and by establishing a 
threshold above which approval of the bank's board of directors is 
required for any loan to an insider. Subpart B implements 12 U.S.C. 
1817(k) and 1972(2)(G)(ii) by requiring a national bank to disclose, 
upon request, the names of its executive officers and principal 
shareholders who borrow more than specified amounts from the bank 
itself or the bank's correspondent banks and to maintain records 
related to requests for this information. Subpart B also implements 12 
U.S.C. 1972(2)(G)(i), which requires a national bank's executive 
officers and principal shareholders to report on loans they or their 
related interests receive from the bank's correspondent banks.
    This proposal creates three exceptions to the limit on loans that a 
national bank may make to its executive officers for situations where 
the lending bank's position is clearly protected by virtue of the type 
of collateral involved. It also clarifies and simplifies the current 
rule by removing provisions that are no longer necessary. Finally, it 
invites comments on whether guidance would be helpful on the 
differences between the insider lending limits and the loans-to-one-
borrower limits and, if so, the areas where clarification may be most 
needed.
    The following discussion identifies and explains material proposed 
changes to part 31. The OCC invites general comments on the proposed 
regulation as well as specific comments on the areas identified.

Title of Regulation

    The current rule is titled ``Extensions of Credit to National Bank 
Insiders.''
    The proposed rule changes the title to ``Extensions of Credit to 
Insiders and Transactions with Affiliates.'' This change reflects the 
proposed relocation to 12 CFR part 31 of several interpretations 
regarding transactions with affiliates that currently are set out in 
part 7. (See ``Interpretations'' and text that follows for further 
discussion of the relocation.)

Subpart A--Loans to Insiders

Definitions (Proposed Sec. 31.2)

    Current Sec. 31.3 states that the definitions contained in 
Secs. 215.2 and 215.3 of Regulation O (12 CFR part 215) apply to 
subpart A of part 31.
    Proposed Sec. 31.2 also states that the definitions used in 
Secs. 215.2 and 215.3 of Regulation O apply. However, because proposed 
Sec. 31.3 uses a term (capital and surplus) that is Not defined in 
Regulation O, proposed Sec. 31.2 states that ``capital and surplus'' 
will be defined in the same way as that term is defined in part 32 
(Lending Limits) (12 CFR 32.2(b)). This clarifies that national banks 
calculate their loans-to-one-borrower lending limits and their insider 
lending limits using the same capital base.<SUP>1

    \1\ Regulation O uses the term ``unimpaired capital and 
unimpaired surplus.'' See 12 CFR 215.2(i). The Board of Governors of 
the Federal Reserve System (Board) recently amended Regulation O to 
conform the definition of ``unimpaired capital and unimpaired 
surplus'' to the definition of ``capital and surplus'' as defined in 
part 32 (60 FR 31053, June 13, 1995). Accordingly, the capital base 
from which different limits are measured now is the same, despite 
the different terminology.
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Loan Limits (Proposed Sec. 31.3)

    Current Sec. 31.2(a) prohibits a national bank from making a loan 
to an executive officer if the loan, when aggregated with all other 
loans outstanding from the bank to the officer, would exceed the higher 
of $25,000 or 2.5 percent of the bank's capital and unimpaired surplus, 
up to $100,000. However, the current rule exempts home mortgage and 
educational loans from this limit pursuant to sections 22(g)(2) and 
22(g)(3) of the Federal Reserve Act (12 U.S.C. 375a (2) and (3)).<SUP>2 
Loans that do not comply with sections 22(g)(2) or 22(g)(3) often are 
referred to as ``other purpose loans,'' because they are for purposes 
other than those identified in those sections of the Federal Reserve 
Act.

    \2\ Section 22(g)(2) of the Federal Reserve Act permits a member 
bank (and, therefore, a national bank) to make a loan to one of its 
executive officers if the loan is secured by a first lien on a 
dwelling that the officer will own and use as his or her residence 
after the loan is made. Section 22(g)(3) permits a member bank to 
make a loan to an executive officer to finance the education of the 
officer's children.
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    Pursuant to the rulemaking authority in 12 U.S.C. 375(a)(4), 
proposed Sec. 31.3(a) exempts a loan from the limits applicable to 
``other purpose loans'' if the loan is secured by United States 
obligations, obligations guaranteed by a Federal agency, or a 
segregated deposit account.<SUP>3 The proposal effects this change by 
incorporating the exceptions set forth in the OCC's Lending Limits 
regulation at 12 CFR 32.3(c)(3), (c)(4)(ii), and (c)(6). The proposal 
also clarifies that the limits prescribed by Sec. 31.3(a) do not apply 
to executive officers of affiliates of the lending bank.

    \3\ The OCC currently exempts these loans from the limits on 
loans to one borrower. See 12 CFR 32.3(c)(3), (4), and (6). The only 
difference between the exceptions in proposed part 31 and the 
exceptions currently available under part 32 is that the proposal 
does not include the exemption for loans to a Federal agency (12 CFR 
32.3(c)(4)(i)), given that this exemption does not apply to loans to 
executive officers.
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    The OCC believes that the proposed exceptions, which entail 
situations where the lending bank's position is secure by the nature of 
the collateral required, are consistent with safe and sound banking 
practices and would eliminate unnecessary restrictions on lending by 
national banks. Moreover, in the insider lending context, loans that 
qualify for the exceptions remain subject to the safeguards found in 
sections 22(g)(1) and 22(h)(2) of the Federal Reserve Act (12 U.S.C. 
375a(1) and 375b(2)), thereby providing additional protection against 
abuse.<SUP>4

    \4\ Section 22(g)(1) of the Federal Reserve Act requires that 
any loan by a member bank to one of its executive officers be 
promptly reported to the bank's board of directors. The bank may 
make the loan to the executive officer only if it is authorized to 
make the loan to borrowers other than its officers, the loan is on 
terms not more favorable than those afforded other borrowers, and 
the officer has submitted a detailed current financial statement. 
Section 22(h)(2) authorizes a member bank to make a loan to a bank 
insider only if the loan is made on substantially the same terms as 
those prevailing at the time for comparable transactions by the bank 
with persons who are not insiders, the loan does not involve more 
than the normal risk of repayment or present other unfavorable 
features, and the bank follows credit underwriting procedures that 
are not less stringent than those applicable to comparable 
transactions by the bank with non-insiders.
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    Both the Federal Deposit Insurance Corporation (FDIC) and the Board 
have amended their insider lending rules to include exemptions similar 
to those noted above. See 59 FR 66666 (December 28, 1994) (amending the 
FDIC's rule at 12 CFR 337.3) and 59 FR 8831 (February 24, 1994) 
(amending the Board's rule at 12 CFR 215.5).<SUP>5 The OCC 

[[Page 63463]]
believes the disparity between its rule and those of the other Federal 
banking agencies is both unnecessary and inconsistent with section 303 
of the Riegle Community Development and Regulatory Improvement Act of 
1994 (CDRI) (12 U.S.C. 4803), which requires each agency to work with 
the other Federal banking agencies to make uniform all regulations and 
guidelines implementing common statutory or supervisory policies. CDRI, 
section 303(a)(2).

    \5\ The Office of Thrift Supervision's regulation automatically 
applies the Board's insider lending rule to thrifts. See 12 CFR 
563.43. Accordingly, the amendment to 12 CFR 215.5 also applies to 
thrifts. The OCC also believes that the current restrictions run 
counter to section 303(a)(1)(A) of the CDRI, which requires the 
Federal banking agencies to eliminate unwarranted constraints on 
credit availability. The OCC has observed no significant problems 
arising from the exemptions in the loans-to-one-borrower context. 
This experience, coupled with the safeguards provided by sections 
22(g) and 22(h), leads the OCC to conclude that limiting the amount 
of loans secured in the manner in question is unwarranted.
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    For these reasons, the OCC proposes to eliminate the special 
restrictions on extensions of credit by national banks to their 
executive officers, provided the loans are secured in the manner 
previously described. The OCC seeks comment on whether interested 
parties agree that the exemptions are appropriate for national banks.
    Current Sec. 31.2(b) requires a majority of the directors of a 
national bank to approve in advance a loan to one of the bank's 
executive officers, principal shareholders, or directors (or to any 
related interest of such persons) if the amount of the loan, when 
aggregated with other loans outstanding to that insider and his or her 
related interests, exceeds the higher of $25,000 or 5 percent of the 
bank's capital and surplus. In no event may a national bank lend more 
than $500,000 to an insider and his or her related interests without 
the majority of the bank's board first approving the loan. Interested 
directors must abstain from the voting.
    Proposed Sec. 31.3(b) amends the OCC's rule to conform to recent 
changes made to the definitions of ``director,'' ``executive officer,'' 
and ``principal shareholder'' in Regulation O (12 CFR 215.2(d), (e), 
and (m), respectively). The Board narrowed these definitions so that 
they generally apply just to insiders of the bank and not to its 
affiliates. At the same time the Board narrowed these definitions, it 
also clarified, in 12 CFR 215.4(b)(1), that the prior approval 
requirements continue to apply to insiders of the bank as well as 
insiders of the bank's affiliates. Proposed Sec. 31.3(b) also makes 
this clarification.
    It should be noted that the exemptions set forth in proposed 
Sec. 31.3(a) do not apply to proposed Sec. 31.3(b). Thus, a loan 
secured, for instance, by a segregated deposit account still must be 
counted for purposes of determining whether prior approval is required 
under proposed Sec. 31.3(b). This provides an additional protection 
against insider abuse by insuring that a bank's directors will have the 
opportunity to review loans to insiders in amounts that exceed the 
specified thresholds.

Subpart B--Reports and Public Disclosure

Authority and OMB Control Number (Sec. 31.4)

    Current Sec. 31.4 states the authority pursuant to which subpart B 
is issued and sets forth the Office of Management and Budget (OMB) 
control number.
    The proposed rule removes the statement of the OMB control number 
from part 31 but retains the statement of authority. In a separate 
rulemaking, the OCC will relocate all OMB control numbers to 12 CFR 
part 4.

Definitions (Proposed Sec. 31.5)

    Current Sec. 31.5(d) states, as a general matter, that the 
definitions found in subpart B of Regulation O (12 CFR 215.20 through 
215.23) apply to subpart B of part 31. Current Sec. 31.5(d) also states 
that, for purposes of the requirement governing reports of loans to 
insiders from the insider's bank, the term ``bank'' means Federally-
chartered insured bank.
    The proposal relocates the definition section to proposed Sec. 31.5 
and incorporates into subpart B of part 31 the definitions found in 
subpart B of Regulation O. The proposal also clarifies, for the reasons 
stated in the discussion of proposed Sec. 31.2, that the term ``capital 
and surplus'' in part 31 has the same meaning as ``capital and 
surplus'' as that term is used in 12 CFR part 32. The proposal also 
removes an obsolete reference to 12 U.S.C. 1817.

Disclosure of Insider Indebtedness (Proposed Sec. 31.6)

    Current Sec. 31.5 requires a national bank to disclose, if 
requested, the names of each executive officer and principal 
shareholder whose aggregate indebtedness (including debt of the 
insider's related interests) from either the bank or its correspondent 
banks equals or exceeds the lesser of 5 percent of the bank's capital 
and unimpaired surplus or $500,000.<SUP>6 The current rule also 
requires a national bank to maintain records of requests for 
information for two years following the request.

    \6\ This requirement applies only to aggregate indebtedness that 
exceeds $25,000.
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    Proposed Sec. 31.6 makes no substantive change, but revises the 
current section's style in order to improve clarity. Proposed 
Sec. 31.6(a) uses the term ``capital and surplus'' instead of ``capital 
and unimpaired surplus,'' which is used in the current regulation. This 
change conforms subpart B of part 31 to subpart A. The proposal also 
clarifies, in Sec. 31.6(c), that the two-year period for retaining 
records of requests and the disposition of requests begins on the date 
of the request.

Reports by Executive Officers and Principal Shareholders (Proposed 
Sec. 31.7)

    Current Sec. 31.6 implements 12 U.S.C. 1972(2)(G)(i), which 
requires national bank executive officers and principal shareholders to 
file annual reports with their bank's board of directors showing 
indebtedness from correspondent banks to the insiders or their related 
interests. The current rule states that ``This requirement is restated 
in Regulation O, 12 CFR 215.22,'' thereby implicitly incorporating the 
provisions of the section cited.
    Proposed Sec. 31.7 clarifies that 12 U.S.C. 1972(2)(G)(i) requires 
reports only if the executive officer or principal shareholder (or 
their related interests) have credit outstanding at some point during 
the year. The proposed rule also clarifies that all of the provisions 
of 12 CFR 215.22 apply. The OCC does not intend any substantive change 
by these proposed amendments.

Interpretations

    On March 3, 1995, the OCC proposed to relocate several 
interpretations that currently appear in part 7. See 60 FR 11924, 11930 
(proposing to relocate 12 CFR 7.7355 (debts of affiliates), 7.7360 
(loans secured by stock or obligations of an affiliate), 7.7365 
(Federal funds transactions between affiliates), and 7.7370 (deposits 
between affiliated banks)). The OCC proposed to relocate these 
interpretations to part 31 because the interpretations and part 31 stem 
from the same concern about persons or entities taking undue advantage 
of positions of influence and thereby adversely affecting the safety 
and soundness of a national bank. Given the similarities in the 
supervisory concerns that prompted both part 31 and the 
interpretations, the OCC believes that it is more appropriate to 
include the interpretations in part 31 rather than in a collection of 
unrelated interpretations. The OCC also believes that relocating the 
interpretations to part 31 will make them easier to find.
    The proposed rule restates the latter three of these 
interpretations at new Secs. 31.100-31.102. Current Sec. 7.7355, which 
interprets the prohibition against a national bank withdrawing its 
capital, will be relocated to part 5 to consolidate all provisions 
related to changes in a national bank's equity capital. The OCC 

[[Page 63464]]
invites comments on these interpretations.

Additional Guidance Regarding Differences Between Lending Limits and 
Insider Lending Standards

    The OCC seeks comment on whether it would be useful for the OCC to 
issue guidance clarifying the differences between the loans-to-one-
borrower limits (12 CFR part 32) and the insider lending limits (part 
31). For instance, the attribution rules and the definition of 
``extension of credit'' applied by the OCC in the two regulations are 
similar but sufficiently different that a banker or bank counsel must 
keep straight two different sets of rules that often will apply to the 
same transaction. In many cases, these differences are compelled by 
differences in the underlying statutory authority for the two parts. 
The OCC requests that commenters who believe that this type of guidance 
would be helpful also identify areas where the intersection of the two 
rules gives rise to the most uncertainty. In this way, the OCC can 
focus any guidance it provides on those areas where help is most 
needed. The OCC also requests comment on whether the guidance should 
appear in an appendix to part 31, as an OCC bulletin, or in some other 
format.
    The following table directs readers to the provision(s) of the 
current regulation, if any, upon which the proposed provision is based, 
and identifies generally the action taken.

                            Derivation Table                            
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    Revised section          Original section            Comments       
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31.1...................  31.1...................  No change.            
31.2...................  31.3...................  Relocated and         
                                                   modified.            
31.3(a)(1).............  31.2(a)................  Modified.             
31.3(a)(2).............  .......................  Added.                
31.3(b)................  31.2(b)................  Modified.             
31.4...................  31.4...................  Modified.             
31.5...................  31.5(d)................  Relocated and         
                                                   modified.            
31.6(a)................  31.5(a)................  Modified.             
31.6(b)................  31.5(b)................  Modified.             
31.6(c)................  31.5(c)................  Modified.             
31.7...................  31.6...................  Modified.             
31.100.................  7.7360.................  Relocated and         
                                                   modified.            
31.101.................  7.7365.................  Relocated.            
31.102.................  7.7370.................  Relocated and         
                                                   modified.            
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Regulatory Flexibility Act

    It is hereby certified that this regulation will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, a regulatory flexibility analysis is not required. This 
regulation will reduce the regulatory burden on national banks, 
regardless of size, by eliminating and clarifying current regulatory 
requirements.

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 Act of 1995 (Unfunded Mandates 
Act) requires that an agency prepare a budgetary impact statement 
before promulgating a proposal likely to result in a rule that includes 
a Federal mandate that may result in the annual expenditure of $100 
million or more in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
requires an agency to identify and consider a reasonable number of 
alternatives before promulgating a proposal. The OCC has determined 
that the proposal, if adopted, will not result in expenditures by 
State, local, and tribal governments, or by the private sector, of more 
than $100 million in any one year. Accordingly, the OCC has not 
prepared a budgetary impact statement or specifically addressed the 
regulatory alternatives considered.

List of Subjects in 12 CFR Part 31

    Credit, Disclosure, Executive officers, National banks, Principal 
shareholders, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set out in the preamble, the OCC proposes to revise 
part 31 of chapter I of title 12 of the Code of Federal Regulations as 
set forth below:

PART 31--EXTENSIONS OF CREDIT TO INSIDERS AND TRANSACTIONS WITH 
AFFILIATES

Subpart A--Loans to Insiders

Sec.
31.1  Authority.
31.2  Definitions.
31.3  Loan limits.

Subpart B--Reports and Public Disclosure

31.4  Authority.
31.5  Definitions.
31.6  Disclosure of insider indebtedness.
31.7  Reports by executive officers and principal shareholders.

Interpretations

31.100  Loans secured by stock or obligations of an affiliate.
31.101  Federal funds transactions between affiliates.
31.102  Deposits between affiliated banks.

    Authority: 12 U.S.C. 375a(4), 375b(3), 1817(k), and 
1972(2)(G)(ii), as amended.

Subpart A--Loans to Insiders


Sec. 31.1  Authority.

    The part is issued by the Comptroller of the Currency pursuant to 
12 U.S.C. 375a(4) and 375b(3), as amended.


Sec. 31.2  Definitions.

    For the purposes of this subpart, the definitions of the terms 
contained in Regulation O, 12 CFR 215.2 and 215.3, apply, except that 
the term ``capital and surplus'' as used in this subpart has the same 
meaning as ``capital and surplus'' as defined in 12 CFR 32.2(b).


Sec. 31.3  Loan limits.

    (a) Lending limit on loans to executive officer--(1) General limit. 
Except as provided in paragraph (a)(2) of this section, a national bank 
may not extend credit to an executive officer of the bank in an amount 
that, when aggregated with all other outstanding extensions of credit 
to that officer, exceeds the greater of $25,000 or 2.5 percent of the 
bank's capital and surplus, or in any event $100,000. The restrictions 
of this section apply only to executive officers of the national bank 
and not to executive officers of its affiliates.
    (2) Exceptions. The general limit specified in paragraph (a)(1) of 
this section does not apply to the following:
    (i) A loan made for the purpose described in 12 U.S.C. 375a(2) 
(housing-related loans) or 12 U.S.C. 375a(3) (loans made to finance the 
education of the officer's children); and
    (ii) A loan secured in a manner described in 12 CFR 32.3(c)(3) 
(secured by United States obligations), 12 CFR 32.3(c)(4)(ii) (secured 
by obligations guaranteed by a Federal agency), or 12 CFR 32.3(c)(6) 
(secured by a segregated deposit account).
    (b) Approval limits on all loans to an insider. Notwithstanding 
paragraph (a) of this section, a national bank may not extend credit to 
an insider of the bank or insider of its affiliates in an amount that, 
when aggregated with all other extensions of credit to that insider, 
exceeds the greater of $25,000 or 5 percent of the bank's capital and 
surplus, or in any event $500,000, unless:
    (1) A majority of the lending bank's entire board of directors 
approves the loan in advance; and
    (2) The interested party abstains from participating directly or 
indirectly in the vote. 

[[Page 63465]]


Subpart B--Reports and Public Disclosure


Sec. 31.4  Authority.

    This subpart is issued by the Comptroller of the Currency pursuant 
to 12 U.S.C. 1817(k) and 12 U.S.C. 1972(2)(G)(ii), as amended.


Sec. 31.5  Definitions.

    The definitions set forth in 12 CFR 215.21 apply to this subpart, 
except that ``capital and surplus'' has the same meaning as ``capital 
and surplus'' as defined in 12 CFR 32.2(b), and, for purposes of 
Sec. 31.5(a)(1), ``bank'' means an insured national bank.


Sec. 31.6  Disclosure of insider indebtedness.

    (a) Upon receipt of a written request, a national bank shall 
disclose the name of each of its executive officers and principal 
shareholders whose aggregate indebtedness (including indebtedness of 
related interests of such persons) from either--
    (1) The insider's bank as of the latest calendar quarter, or
    (2) The bank's correspondent banks at any time during the previous 
calendar year, equals or exceeds the lesser of 5 percent of the bank's 
capital and surplus or $500,000. This requirement applies only if the 
insider's (and his or her related interest's) aggregate indebtedness 
described in paragraphs (a)(1) or (a)(2) of this section exceeds 
$25,000.
    (b) A national bank need not disclose additional information 
concerning indebtedness of its executive officers and principal 
shareholders. The bank may base its disclosure under paragraph (a)(1) 
of this section on the bank's most recent Consolidated Report of 
Condition and Income. The bank may base its disclosure under paragraph 
(a)(2) of this section on information contained in the reports referred 
to in Sec. 31.6.
    (c) A national bank shall maintain records of any requests for 
information under paragraph (a) of this section and records of the 
disposition of these requests for two years from the date of the 
request.


Sec. 31.7  Reports by executive officers and principal shareholders.

    Pursuant to 12 U.S.C. 1972(2)(G)(i), each executive officer and 
principal shareholder of a national bank shall report annually to the 
bank's board of directors his or her indebtedness, and the indebtedness 
of his or her related interests, from correspondent banks of the 
insider's bank. For purposes of this section, the requirements stated 
in 12 CFR 215.22 (which implements the insider reporting requirements 
imposed by 12 U.S.C. 1972(2)(G)(i)) apply.

Interpretations


Sec. 31.100  Loans secured by stock or obligations of an affiliate.

    If a loan to an affiliate is otherwise adequately secured in 
compliance with 12 U.S.C. 371c(c), a national bank may take a security 
interest in the securities of an affiliate as additional collateral 
without the loan being considered a covered transaction for purposes of 
the limits on transactions with affiliates in 12 U.S.C. 371c(a)(1) (A) 
and (B).


Sec. 31.101  Federal funds transactions between affiliates.

    The limitations contained in 12 U.S.C. 371c apply to the sale of 
federal funds by a national bank to an affiliate of the bank.


Sec. 31.102  Deposits between affiliated banks.

    (a) General rule. The OCC considers a deposit made by a bank in an 
affiliated bank to be a loan or extension of credit to the affiliate 
under 12 U.S.C. 371c. These deposits must be secured in accordance with 
12 U.S.C. 371c(c). However, a national bank may not pledge assets to 
secure private deposits unless otherwise permitted by law (see, e.g., 
12 U.S.C. 90 (permitting collateralization of deposits of public 
funds); 12 U.S.C. 92a (trust funds); and 25 U.S.C. 156 and 162a (Native 
American funds)). Thus, unless one of the exceptions to 12 U.S.C. 371c 
noted in paragraph (b), of this section, applies or unless another 
exception applies that enables a bank to meet the collateral 
requirements of 12 U.S.C. 371c(c), a national bank may not:
    (1) Make a deposit in an affiliated national bank;
    (2) Make a deposit in an affiliated State-chartered bank unless the 
affiliated State-chartered bank can legally offer collateral for the 
deposit in conformance with applicable State law and 12 U.S.C. 371c; or
    (3) Receive deposits from an affiliated bank.
    (b) Exceptions. The restrictions of 12 U.S.C. 371c (other than 12 
U.S.C. 371c(a)(4), which requires affiliate transactions to be 
consistent with safe and sound banking practices) do not apply to 
deposits:
    (1) Made in the ordinary course of correspondent business; or
    (2) Made in an affiliate that qualifies as a ``sister bank'' under 
12 U.S.C. 371c(d)(1).

    Dated: November 28, 1995.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 95-30028 Filed 12-8-95; 8:45 am]
BILLING CODE 4810-33-P

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