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

75759 

Vol. 79, No. 244 

Friday, December 19, 2014 

1 78 FR 62018 (October 11, 2013) (codified at 12 

part CFR 217). 

2 12 CFR part 208, appendices A, B, and E. 

3 12 CFR part 225, appendices A, D, and E. 4 12 CFR 217.20(b); 78 FR 62018, 62044. 

FEDERAL RESERVE SYSTEM 

12 CFR Part 217 

[Docket No. R–1506] 

RIN 7100–AE 27 

Regulatory Capital Rules: Regulatory 

Capital, Proposed Rule Demonstrating 

Application of Common Equity Tier 1 

Capital Qualification Criteria; 

Regulation Q 

AGENCY: Board of Governors of the 

Federal Reserve System (Board). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Board is inviting public 

comment on amendments to the Board’s 

revised capital framework (Regulation 

Q) that would illustrate how the Board 

would apply the common equity tier 1 

capital qualification criteria to 

depository institution holding 

companies that are organized in forms 

other than as stock corporations 

(‘‘proposed rule’’). The proposed rule 

discusses some of the qualification 

criteria for common equity tier 1 capital 

under Regulation Q and provides 

examples of how the Board would apply 

the criteria in specific situations 

involving partnerships and limited 

liability companies. In addition, the 

proposed rule would amend Regulation 

Q to address unique issues presented by 

certain savings and loan holding 

companies that are trusts and by 

depository institution holding 

companies that are employee stock 

ownership plans. 

DATES: Comments must be received by 

February 28, 2015. 

ADDRESSES: You may submit comments, 

identified by Docket No. R–1506 and 

RIN 7100–AE 27 ‘‘Regulatory Capital, 

Application of Common Equity Tier 1 

Capital Qualification Criteria,’’ by any 

of the following methods: 

Board of Governors of the Federal 

Reserve System: 

• Agency Web site: http://www.

federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/apps/

foia/proposedregs.aspx. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: regs.comments@federal

reserve.gov. Include the Board’s docket 

number in the subject line of the 

message. 

• Facsimile: (202) 452–3819 or (202) 

452–3102. 

• Mail: Robert deV. Frierson, 

Secretary, Board of Governors of the 

Federal Reserve System, 20th Street and 

Constitution Avenue NW., Washington, 

DC 20551. 

• Instructions: All public comments 

are available from the Board’s Web site 

at http://www.federalreserve.gov/apps/

foia/proposedregs.aspx as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

also may be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Streets NW.) between 9:00 a.m. and 5 

p.m. on weekdays. 

FOR FURTHER INFORMATION CONTACT: 

Alison Thro, Assistant General Counsel, 

(202) 452–3236, Christine Graham, 

Counsel, (202) 452–3005, or Mark 

Buresh, Attorney, (202) 452–5270, Legal 

Division; or Thomas Boemio, Manager, 

(202) 452–2982, Juan Climent, Manager, 

(202) 872–7526, or Page Conkling, 

Supervisory Financial Analyst, (202) 

912–4647, Division of Banking 

Supervision and Regulation, Board of 

Governors of the Federal Reserve 

System, 20th Street and Constitution 

Avenue NW., Washington, DC 20551. 

Users of Telecommunication Device for 

Deaf (TDD) only, call (202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In July 2013, the Board approved a 

final rule 1 (Regulation Q) that enhances 

and replaces the capital adequacy 

guidelines for state member banks 2 and 

bank holding companies 3 (collectively, 

capital adequacy guidelines), and 

implements capital adequacy rules for 

savings and loan holding companies 

(other than those substantially engaged 

in commercial activities or insurance 

underwriting activities). Regulation Q 

increases the quality and quantity of 

capital that must be maintained by 

institutions subject to the rule by raising 

the minimum capital ratios and 

imposing more stringent criteria for 

capital instruments that are intended to 

qualify as regulatory capital. The 

definition of common equity tier 1 

capital in Regulation Q is designed to 

ensure that qualifying instruments do 

not include features that would cause an 

organization’s condition to weaken 

during a period of significant financial 

and economic stress.4

A. Description of the Proposed Rule 

The proposed rule describes how the 

Board would apply the qualification 

criteria for common equity tier 1 capital 

under Regulation Q to instruments 

issued by bank holding companies and 

savings and loan holding companies 

(holding companies) that are organized 

as legal entities other than stock 

corporations. 

The proposed rule focuses in 

particular on the qualification criteria 

that relate to the economic rights of 

common equity tier 1 capital 

instruments relative to the capital 

instruments issued by holding 

companies organized in forms other 

than as stock corporations. The 

proposed rule provides examples of 

instruments issued by limited liability 

companies and partnerships, discusses 

features that would prevent certain 

instruments from qualifying as common 

equity tier 1 capital, and offers potential 

solutions for holding companies to 

resolve these qualification issues. The 

examples provided in the proposed rule 

are based on structures that have been 

reviewed by the Board and demonstrate 

how the Board would apply the 

common equity tier 1 capital 

qualification criteria to capital 

instruments with the same or similar 

features. Holding companies should 

review their organizational documents 

consistent with this proposed rule in 

order to determine whether their capital 

instruments comply with the Regulation 

Q qualification criteria. If a holding 

company determines that some or all of 

its capital instruments do not meet the 

specific qualification criteria under 

Regulation Q, the company may need to 

take steps to ensure that it is in 

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75760 Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Proposed Rules 

5Entities whose capital instruments do not meet 

the qualification criteria under Regulation Q could 

potentially meet the minimum capital ratios in 

other ways, such as through retained earnings. See 

e.g., 12 CFR 217.20(b)(2) through (5). 

6See 12 U.S.C. 1467a(a)(3)(B); 12 U.S.C. 1841(b); 

12 CFR 238.2(m)(2); 12 CFR 225.2(d)(3) 

(testamentary trust exemption). 

7See the American Institute of Certified Public 

Accountants (AICPA) Statement of Position 93–6. 

8See 13 CFR 121.201. Effective July 14, 2014, the 

Small Business Administration revised the size 

standards for banking organizations to $550 million 

in assets from $500 million in assets. 79 FR 33647 

(June 12, 2014). 

9See 12 CFR 217.1. 

compliance with Regulation Q, 

including modifying its capital structure 

or the governing documentation of 

specific capital instruments.5

B. Timeframe for Implementation 

Because the proposed rule provides 

specific guidance on the application of 

the qualification criteria to particular 

structures, the Board recognizes that 

some entities may need time to evaluate 

or revise their capital instruments. 

Therefore, the Board would expect that 

all holding companies organized in 

forms other than as stock corporations 

that are subject to Regulation Q and 

have issued capital instruments that 

would not qualify as common equity 

tier 1 capital due to § 217.20 because of 

the requirements set forth in proposed 

§ 217.501 would be in compliance with 

the proposed rule by January 1, 2016, 

except as discussed below. The 

proposed rule would provide this 

temporary exemption to allow 

companies to make necessary changes to 

comply with Regulation Q. 

C. Inapplicability of the Requirements to 

Estate Trust Savings and Loan Holding 

Companies 

As noted above, Regulation Q 

implements capital adequacy rules for 

savings and loan holding companies 

(other than those substantially engaged 

in commercial activities or insurance 

underwriting activities). Approximately 

120 personal or family trusts 

(collectively, ‘‘estate trusts’’) qualify as 

saving and loan holding companies and 

would be subject to Regulation Q 

beginning on January 1, 2015.6

The Board understands that many of 

the estate trust SLHCs do not issue 

capital instruments and would be 

unable to meet the minimum regulatory 

capital ratios under Regulation Q. 

Further, the Board understands that 

many of the estate trust SLHCs do not 

hold retained earnings due to their 

nature as non-business personal or 

family trusts. In order to comply with 

the technical requirements of Regulation 

Q, estate trust SLHCs would likely 

entail significant burden and expense to 

develop and implement the 

management information systems 

necessary to prepare financial 

statements. 

To address these issues, the Board is 

developing a proposal to apply 

alternative regulatory capital 

requirements to estate trust SLHCs that 

take into account their existing capital 

structure and activities, consistent with 

section 171 of the Dodd-Frank Act. 

Until the Board adopts such a proposal 

or until further notice, the Board will 

not require estate trust SLHCs to comply 

with Regulation Q. The proposed rule 

would temporarily exempt estate trusts 

from the requirements of Regulation Q 

until the Board adopts alternative 

regulatory requirements. 

D. Inapplicability of the Requirements to 

Employee Stock Ownership Plans That 

Are Depository Institution Holding 

Companies 

Employee Stock Ownership Plans 

(ESOPs) are entities created as part of 

employee benefits arrangements that 

hold shares of the sponsoring entities’ 

stock. There are ESOPs that are bank 

holding companies and savings and 

loan holding companies (ESOP holding 

companies), generally due to their 

ownership interest in the banking 

organization that sponsors the ESOP. 

Under generally accepted accounting 

principles, the assets and liabilities of 

ESOP holding companies are 

consolidated onto the balance sheet of 

the organization that sponsors the 

ESOP, which would be either a 

depository institution or a holding 

company that may be subject to 

Regulation Q.7 The Board is developing 

a proposal to revise Regulation Q to 

clarify the treatment of ESOP holding 

companies under the regulatory capital 

rules. Until the Board adopts such a 

proposal or until further notice, the 

Board will evaluate the compliance of 

the ESOP with Regulation Q by looking 

to the regulatory capital of the sponsor 

banking organization. The proposed rule 

would temporarily exempt ESOP 

holding companies from Regulation Q 

until the Board finalizes the clarifying 

revisions. 

II. Request for Comment 

The Board invites comment on the 

proposed rule and specifically invites 

comment on following aspects of the 

proposed rule: 

1. What features of capital 

instruments that are not described in the 

proposed rule could affect whether a 

capital instrument of a non-stock 

corporation qualifies as common equity 

tier 1 capital? 

2. What features of capital 

instruments issued by non-stock 

corporations could raise issues with 

qualification as additional tier 1 or tier 

2 capital similar to the issues related to 

qualification as common equity tier 1 

capital discussed in the proposed rule? 

3. How might the Board revise the 

proposed rule to better illustrate the 

application of the common equity tier 1 

capital qualification criteria to the 

structures discussed? 

III. Regulatory Analysis 

A. Paperwork Reduction Act (PRA) 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3506; 

5 CFR 1320, Appendix A.1), the Board 

reviewed the proposed rule under the 

authority delegated to the Board by the 

Office of Management and Budget. The 

proposed rule contains no requirements 

subject to the PRA. 

B. Regulatory Flexibility Act Analysis 

The Board is providing an initial 

regulatory flexibility analysis with 

respect to this proposed rule. As 

discussed above, the proposed rule 

describes how the Board would apply 

the qualification criteria for common 

equity tier 1 capital under Regulation Q 

to instruments issued by depository 

institution holding companies and state 

member banks that are organized as 

legal entities other than stock 

corporations. The Regulatory Flexibility 

Act, 5 U.S.C. 601 et seq. (RFA), 

generally requires that an agency 

prepare and make available an initial 

regulatory flexibility analysis in 

connection with a notice of proposed 

rulemaking. Under regulations issued by 

the Small Business Administration, a 

small entity includes a bank holding 

company, bank, or savings and loan 

holding company with assets of $550 

million or less (small banking 

organization).8 As of June 30, 2014, 

there were approximately 657 small 

state member banks, 3,719 small bank 

holding companies, and 254 small 

savings and loan holding companies. 

The proposed rule would apply to 

top-tier depository institution holding 

companies and state member banks that 

are subject to Regulation Q. As a result, 

many small bank holding companies 

would not be affected because they are 

subject to the Board’s Small Bank 

Holding Company policy statement 

rather than Regulation Q.9 Small state 

member banks and small covered 

savings and loan holding companies 

would be affected. However, the Board 

does not believe that the proposed rule 

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Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Proposed Rules 75761 

30See 12 CFR 217.1(c)(1) through (3). 

31A stock corporation’s common stock should 

satisfy the common equity tier 1 capital criteria so 

long as the common stock does not have unusual 

features, such as a limited duration. 

32Notably, voting powers or other means of 

exercising control are not relevant for purposes of 

satisfying the common equity tier 1 capital 

qualification criteria. Thus, the fact that a partner 

or member that controls a holding company as 

general partner or managing member is not material 

to this discussion. 

33Although the examples refer to specific types 

of legal entities for purposes of illustration, the 

substance of the Regulation Q criteria reflected in 

the examples applies to all types of legal entities. 

would have a significant impact on 

small banking organizations because the 

Board considers the proposed rule to 

clarify the common equity tier 1 capital 

qualification criteria, and provide 

specific guidance on the application of 

the qualification criteria to entities 

subject to Regulation Q. 

Therefore, there are no significant 

alternatives to the proposed rule that 

would have less economic impact on 

small bank holding companies. As 

discussed above, the projected 

reporting, recordkeeping, and other 

compliance requirements of the 

proposed rule are expected to be 

minimal. The Board does not believe 

that the proposed rule duplicates, 

overlaps, or conflicts with any other 

Federal rules. In light of the foregoing, 

the Board does not believe that the 

proposed rule, if adopted in final form, 

would have a significant economic 

impact on a substantial number of small 

entities. Nonetheless, the Board seeks 

comment on whether the proposed rule 

would impose undue burdens on, or 

have unintended consequences for, 

small organizations, and whether there 

are ways such potential burdens or 

consequences could be minimized in a 

manner consistent with the purpose of 

the proposed rule. A final regulatory 

flexibility analysis will be conducted 

after consideration of comments 

received during the public comment 

period. 

C. Plain Language 

Section 722 of the Gramm-LeachBliley Act requires the Board to use 

plain language in all proposed and final 

rules published after January 1, 2000. 

The Board has sought to present the 

proposed rule in a simple 

straightforward manner, and invite 

comment on the use of plain language. 

For example: 

• Have the agencies organized the 

material to suit your needs? If not, how 

could they present the proposed rule 

more clearly? 

• Are the requirements in the 

proposed rule clearly stated? If not, how 

could the proposed rule be more clearly 

stated? 

• Do the regulations contain technical 

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 would achieve that? 

• Is the section format adequate? If 

not, which of the sections should be 

changed and how? 

• What other changes can the Board 

incorporate to make the regulation 

easier to understand? 

List of Subjects in 12 CFR Part 217 

Administrative practice and 

procedure, Banks, Banking, Capital, 

Federal Reserve System, Holding 

companies, Reporting and 

recordkeeping requirements, Securities. 

Board of Governors of the Federal 

Reserve System 

12 CFR Chapter II 

Authority and Issuance 

For the reasons set forth in the 

preamble, part 217 of chapter II of title 

12 of the Code of Federal Regulations is 

proposed to be amended as follows: 

PART 217—CAPITAL ADEQUACY OF 

BANK HOLDING COMPANIES, 

SAVINGS AND LOAN HOLDING 

COMPANIES AND STATE MEMBER 

BANKS (REGULATION Q) 

■ 1. The authority citation for part 217 

continues to read as follows: 

Authority: 12 U.S.C. 248(a), 321–338a, 

481–486, 1462a, 1467a, 1818, 1828, 1831n, 

1831o, 1831p–l, 1831w, 1835, 1844(b), 1851, 

3904, 3906–3909, 4808, 5365, 5368, 5371. 

■ 2. Add subpart I to read as follows: 

Subpart I—Application of Capital Rules 

Sec. 

217.501 The Board’s Regulatory Capital 

Framework for Depository Institution 

Holding Companies Organized as NonStock Companies. 

217.502 Application of the Board’s 

Regulatory Capital Framework to 

Employee Stock Ownership Plans that 

are Depository Institution Holding 

Companies and Certain Trusts that are 

Savings and Loan Holding Companies. 

§ 217.501 The Board’s Regulatory Capital 

Framework for Depository Institution 

Holding Companies Organized as NonStock Companies. 

(a) Applicability. (1) This rule applies 

to all depository institution holding 

companies that are not organized in 

corporate form and are subject to the 

Board’s regulatory capital rules 

(Regulation Q, 12 CFR part 217).30

(2) Notwithstanding §§ 217.2 and 

217.10, a bank holding company or 

covered savings and loan holding 

company that is not organized in 

corporate form and has issued capital 

instruments that do not qualify as 

common equity tier 1 capital under 

§ 217.20 because of the requirements set 

forth in this section may treat such 

capital instruments as common equity 

tier 1 capital until January 1, 2016. 

(b) Common equity tier 1 criteria 

applied to capital instruments issued by 

non-stock companies. (1) Subpart C of 

this part provides criteria for capital 

instruments to qualify as common 

equity tier 1 capital. This section 

describes certain of these criteria and 

how the criteria apply to capital 

instruments issued by bank holding 

companies and certain savings and loan 

holding companies that are organized as 

legal entities other than stock 

corporations, such as limited liability 

companies (LLCs), partnerships, and 

similar structures. 

(2) Holding companies are organized 

using a variety of legal structures, 

including corporate forms, LLCs, 

partnerships, and similar structures.31

In the Board’s experience, some 

depository institution holding 

companies that are organized in nonstock form issue multiple classes of 

capital instruments that allocate 

distributions of profit and loss 

differently among classes, which may 

affect the ability of those classes to 

qualify as common equity tier 1 

capital.32

(3) Common equity tier 1 capital is 

defined in section 217.20(b) of this part. 

To qualify as common equity tier 1 

capital, capital instruments must satisfy 

a number of criteria. This section 

provides examples of the application of 

certain common equity tier 1 capital 

criteria that relate to the economic 

interests in the company represented by 

particular capital instruments. 

(c) Examples. The following examples 

show how the criteria for common 

equity tier 1 capital apply to particular 

partnership or LLC structures.33

(1) LLC with one class of membership 

interests. (i) An LLC issues one class of 

membership interests that provides that 

all holders of the interests bear losses 

and receive dividends proportionately 

to their levels of ownership. 

(ii) Provided that the other criteria are 

met, the membership interests would 

qualify as common equity tier 1 capital. 

(2) Partnership with limited and 

general partners. (i) A partnership has 

two classes of interests: General 

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75762 Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Proposed Rules 

partnership interests and limited 

partnership interests. The general 

partners and the limited partners bear 

losses and receive distributions 

proportionately to their capital 

contributions. In addition, the general 

partner has unlimited liability for the 

debts of the partnership. 

(ii) Provided that the other criteria are 

met, the general and limited partnership 

interests would qualify as common 

equity tier 1 capital. The fact of 

unlimited liability of the general partner 

is not relevant to the common equity 

tier 1 capital qualification criteria, 

provided that the general partner and 

limited partners share losses equally to 

the extent of the assets of the 

partnership, and the general partner is 

liable after the assets of the partnership 

are exhausted. In this regard, the general 

partner’s unlimited liability is similar to 

a guarantee provided by the general 

partner, rather than a feature of the 

partnership interest. 

(3) LLC with two classes of 

membership interests. (i) An LLC issues 

two types of membership interests, 

Class A and Class B, holders of which 

share proportionately in all losses and 

in the return of contributed capital. The 

holders of these membership interests 

also share proportionately in profit 

distributions up to the point where all 

holders receive a specific annual rate of 

return on capital contributions. To the 

extent that the company makes 

additional distributions, holders of 

Class B receive double their 

proportional share and holders of Class 

A receive the remainder of the 

distribution. 

(ii) Class A and Class B would qualify 

as common equity tier 1 capital, 

provided that under all circumstances 

they share losses proportionately for as 

long as the company controls a 

depository institution, and they satisfy 

the other criteria. Although 

distributions to holders of the classes 

can become different, this can only 

occur in a profit situation, and the 

holders bear losses equally. 

(iii) The common equity tier 1 capital 

qualification criteria in Regulation Q do 

not require that holders of all classes of 

capital instruments that qualify as 

common equity tier 1 capital share 

equally in distributions of profits, 

provided that under all circumstances 

losses are shared proportionately. 

(4) Senior and junior classes of capital 

instruments. (i) An LLC issues two types 

of membership interests, Class A and 

Class B. Holders of Class A and Class B 

participate equally in operating 

distributions and have equal voting 

rights. However, in liquidation, holders 

of Class B interests must receive their 

entire amount of contributed capital in 

order for any distributions to be made 

to holders of Class A interests. 

(ii) Class B interests have a preference 

over Class A interests in liquidation 

and, therefore, would not qualify as 

common equity tier 1 capital as they are 

not the most subordinated claim 

(criterion (i); § 217.20(b)(1)(i)) and do 

not share losses proportionately 

(criterion (viii); § 217.20(b)(1)(viii)). 

(A) If all other criteria are satisfied, 

Class A interests would qualify as 

common equity tier 1 capital. 

(B) Class B interests may qualify as 

additional tier 1 capital, or tier 2 capital, 

if the Class B interests meet the 

applicable qualification criteria. 

(5) Mandatory distributions. (i) A 

partnership agreement contains 

provisions that require distributions to 

holders of one or more classes of capital 

instruments on occurrence of particular 

events, such as upon specific dates or 

following a significant sale of assets, but 

not including final liquidating 

distributions. 

(ii) Classes of capital instruments that 

provide holders with rights to 

mandatory distributions would not 

qualify as common equity tier 1 capital 

(criterion (vi); § 217.20(b)(1)(vi)). 

Companies must ensure that they have 

a sufficient amount of capital 

instruments that do not have such 

rights, and that meet the other criteria 

of common equity tier 1 capital, in order 

to meet the requirements of Regulation 

Q. 

(6) Payment waterfalls. (i) The terms 

of Class A and Class B interests include 

a payment ‘‘waterfall’’ that differentiates 

distribution rights between holders of 

Class A and Class B interests, such that 

the Class B interests bear a 

disproportionately high level of the first 

loss in liquidation. Unlike the example 

in paragraph (c)(3) of this section, the 

different participation rights apply to 

distributions in loss situations, 

including losses at liquidation. 

(ii) Because the Class A interests do 

not bear a proportional interest in the 

losses (criterion (ii); § 217.20(b)(1)(ii)), 

they would not qualify as common 

equity tier 1 capital. 

(A) Companies with such structures 

may revise their capital structures in 

order to provide for a sufficiently large 

class of capital instruments that 

proportionally bear first losses in 

liquidation (i.e., the Class B interests in 

this example). 

(B) Alternatively, companies could 

address such issues by revising their 

capital structure to ensure that all 

classes of capital instruments that are 

intended to qualify as common equity 

tier 1 capital share equally in losses in 

liquidation consistent with criteria (i), 

(ii), (vii), and (viii) (§ 217.20(b)(1)(i), (ii), 

(vii), and (viii)), even if each class of 

capital instruments has different rights 

to distributions of profits, as in Example 

3. 

(7) Clawback features. (i) The terms of 

LLC membership interests provide that, 

under certain circumstances, holders of 

Class A interests must return a portion 

of earlier distributions, which are then 

distributed to holders of Class B 

interests (often called a ‘‘clawback’’). 

(ii) If a class of capital instruments is 

advantaged by such a provision (i.e., 

Class B in this example), such that the 

advantaged class might not bear losses 

equally and pro rata in the event of 

liquidation with the class of capital 

instruments whose holders are required 

to return earlier distributions, the 

advantaged class would not qualify as 

common equity tier 1 capital. 

(A) Companies must ensure that the 

classes of capital instruments that are 

intended to qualify as common equity 

tier 1 capital would remain the most 

subordinated classes (sharing losses on 

a pro rata basis) in liquidation under all 

circumstances (criterion (i); 

§ 217.20(b)(1)(i)). 

(B) Companies also may be able to 

satisfy the requirements of Regulation Q 

by revising the timing of distributions so 

that holders a class of capital 

instruments do not receive, and are not 

allocated, distributions that later may be 

subject to a clawback while the 

company controls or may control a 

depository institution. 

§ 217.502 Application of the Board’s 

Regulatory Capital Framework to Employee 

Stock Ownership Plans That are Depository 

Institution Holding Companies and Certain 

Trusts That are Savings and Loan Holding 

Companies. 

(a) Employee stock ownership plans. 

Notwithstanding § 217.1(c), a bank 

holding company or covered savings 

and loan holding company that is an 

employee stock ownership plan is 

exempt from this part until the Board 

adopts regulations that directly relate to 

the application of capital regulations to 

employee stock ownership plans. 

(b) Personal or family trusts. 

Notwithstanding § 217.1(c), a covered 

savings and loan holding company is 

exempt from this part if it is a personal 

or family trust and not a business trust 

until the Board adopts regulations that 

apply capital regulations to such a 

covered savings and loan holding 

company. 

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Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Proposed Rules 75763 

1 79 FR 32121 (June 4, 2014). 

2Pub. L. 104–208, Div. A, Title II, section 2222, 

110 Stat. 3009 (1996); codified at 12 U.S.C. 3311. 

3The Office of Thrift Supervision was still in 

existence at the time EGRPRA was enacted and was 

included in the listing of Agencies. Since that time, 

the OTS has been eliminated and its responsibilities 

have passed to the Agencies and the Consumer 

Financial Protection Bureau. 

4 Interpretive Ruling and Policy Statement (IRPS) 

87–2, 52 FR 35231 (Sept. 8, 1987) as amended by 

IRPS 03–2, 68 FR 32127 (May 29, 2003.) (Reflecting 

NCUA’s commitment to ‘‘periodically update, 

clarify and simplify existing regulations and 

eliminate redundant and unnecessary provisions.’’) 

5 In addition to rules that have been transferred 

to the CFPB, insured credit unions are also subject 

to certain other regulations that are not required to 

be reviewed under the EGRPRA process, such as 

regulations issued by the Department of the 

Treasury’s Financial Crimes Enforcement Network. 

Any comment received during the EGRPRA process 

that pertains to such a rule will be forwarded to the 

appropriate agency. 

By order of the Board of Governors of the 

Federal Reserve System, December 12, 2014. 

Robert deV. Frierson, 

Secretary of the Board. 

[FR Doc. 2014–29561 Filed 12–18–14; 8:45 am] 

BILLING CODE 6210–01–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Chapter VII 

Regulatory Publication and Review 

Under the Economic Growth and 

Regulatory Paperwork Reduction Act 

of 1996 

AGENCY: National Credit Union 

Administration. 

ACTION: Notice of regulatory review; 

request for comments. 

SUMMARY: The NCUA Board (Board) is 

continuing its comprehensive review of 

its regulations to identify outdated, 

unnecessary, or burdensome regulatory 

requirements imposed on federally 

insured credit unions, as contemplated 

by section 2222 of the Economic Growth 

and Regulatory Paperwork Reduction 

Act of 1996 (EGRPRA). This second 

decennial review of regulations began 

when the Board issued its first EGRPRA 

notice on May 22, 2014, covering the 

two categories of ‘‘Applications and 

Reporting’’ and ‘‘Powers and 

Activities.’’ 1 Today, the Board 

continues the review process with the 

publication of this second notice, 

covering the next three categories of 

rules: ‘‘Agency Programs,’’ ‘‘Capital,’’ 

and ‘‘Consumer Protection.’’ This 

review presents a significant 

opportunity to consider the possibilities 

for burden reduction in groups of 

similar regulations. The Board 

welcomes comment on the categories, 

the order of review, and all other 

aspects of this initiative in order to 

maximize the review’s effectiveness. 

DATES: Comment must be received on or 

before March 19, 2015. 

ADDRESSES: You may submit comments 

by any of the following methods (Please 

send comments by one method only): 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• NCUA Web site: http://www.ncua.

gov/RegulationsOpinionsLaws/

proposed_regs/proposed_regs.html. 

Follow the instructions for submitting 

comments. 

• Email: Address to regcomments@

ncua.gov. Include ‘‘[Your name] 

Comments on Regulatory Review 

pursuant to EGRPRA’’ in the email 

subject line. 

• Fax: (703) 518–6319. Use the 

subject line described above for email. 

• Mail: Address to Gerard Poliquin, 

Secretary of the Board, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428. 

• Hand Delivery/Courier: Same as 

mail address. 

Public Inspection: All public 

comments are available on the agency’s 

Web site at http://www.ncua.gov/Legal/ 

Regs/Pages/PropRegs.aspx as submitted, 

except as may not be possible for 

technical reasons. Public comments will 

not be edited to remove any identifying 

or contact information. Paper copies of 

comments may be inspected in NCUA’s 

law library at 1775 Duke Street, 

Alexandria, Virginia 22314, by 

appointment weekdays between 9:00 

a.m. and 3:00 p.m. To make an 

appointment, call (703) 518–6546 or 

send an email to OGCMail@ncua.gov. 

FOR FURTHER INFORMATION CONTACT: Ross 

P. Kendall, Special Counsel to the 

General Counsel, at the above address, 

or telephone: (703) 518–6562. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

Congress enacted EGRPRA 2 as part of 

an effort to minimize unnecessary 

government regulation of financial 

institutions consistent with safety and 

soundness, consumer protection, and 

other public policy goals. Under 

EGRPRA, the appropriate federal 

banking agencies (Office of the 

Comptroller of the Currency, Board of 

Governors of the Federal Reserve 

System, and Federal Deposit Insurance 

Corporation; herein Agencies 3) and the 

Federal Financial Institutions 

Examination Council (FFIEC) must 

review their regulations to identify 

outdated, unnecessary, or unduly 

burdensome requirements imposed on 

insured depository institutions. The 

Agencies are required, jointly or 

individually, to categorize regulations 

by type, such as ‘‘consumer regulations’’ 

or ‘‘safety and soundness’’ regulations. 

Once the categories have been 

established, the Agencies must provide 

notice and ask for public comment on 

one or more of these regulatory 

categories. 

NCUA is not technically required to 

participate in the EGRPRA review 

process, since NCUA is not an 

‘‘appropriate Federal banking agency’’ 

as specified in EGRPRA. In keeping 

with the spirit of the law, however, the 

Board has once again elected to 

participate in the review process. Thus, 

NCUA has participated along with the 

Agencies in the planning process, but 

has developed its own regulatory 

categories that are comparable with 

those developed by the Agencies. 

Because of the unique circumstances of 

federally insured credit unions and their 

members, the Board is issuing a separate 

notice from the Agencies. NCUA’s 

notice is consistent and comparable 

with the Agencies’ notice, except on 

issues that are unique to credit unions. 

In accordance with the objectives of 

EGRPRA, the Board asks the public to 

identify areas of its regulations that are 

outdated, unnecessary, or unduly 

burdensome. In addition to this second 

notice, the Board will issue two more 

notices for comment during 2015, at 

regular intervals. The EGRPRA review 

supplements and complements the 

reviews of regulations that NCUA 

conducts under other laws and its 

internal policies.4

As the Board noted in its initial 

EGRPRA notice in May 2014, the 

creation of the Consumer Financial 

Protection Bureau (CFPB) resulted in 

the transfer to CFPB of responsibility for 

certain consumer protection rules that 

had previously been the responsibility 

of the Agencies and/or NCUA, such as 

Regulation Z and rules governing 

consumer privacy. Because the CFPB is 

not covered by EGRPRA or required to 

participate in this regulatory review 

process, the Agencies and NCUA have 

excluded certain consumer protection 

regulations from the scope of the current 

review.5 In the case of rules 

implementing specific aspects of the 

Fair Credit Reporting Act, the Truth in 

Savings Act, rules pertaining to fair 

lending in the housing area, and flood 

insurance, NCUA has retained rulewriting authority. Therefore, these rules 

are retained for purposes of the EGRPRA 

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