58492 Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Proposed Rules 

1 Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Public Law 111–203, 124 Stat. 1376 

(2010). 

2 12 U.S.C. 5411. 

3 12 U.S.C. 5414(b). 

4 12 U.S.C. 5414(b). 

5List of Office of Thrift Supervision Regulations 

to be Enforced by the Office of the Comptroller of 

the Currency and the Federal Deposit Insurance 

Corporation Pursuant to the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 76 FR 39246 

(Jul. 6, 2011). 

6Transfer and Redesignation of Certain 

Regulations Involving State Savings Associations 

Pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010, 76 FR 47652 

(Aug. 5, 2011). 

7 12 U.S.C. 5412(b)(2)(C). 

8 12 U.S.C. 1813(q). 

9 12 CFR part 390, subpart S. 

10The transferred OTS provision governing the 

frequency of safety and soundness examinations of 

State savings associations, 12 CFR 390.351, was 

rescinded and removed by the final rule that 

amended 12 CFR 337.12 to reflect the authority of 

the FDIC under section 4(a) of HOLA to provide for 

the examination of safe and sound operation of 

State savings associations. See Expanded 

Examination Cycle for Certain Small Insured 

Depository Institutions and U.S. Branches and 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Parts 303, 326, 337, 353, 390 

RIN 3064–AF14 

Removal of Transferred OTS 

Regulations Regarding Certain 

Regulations for the Operations of State 

Savings Associations 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: In this notice of proposed 

rulemaking (NPR), the Federal Deposit 

Insurance Corporation (FDIC) proposes 

to rescind and remove certain 

regulations transferred in 2011 to the 

FDIC from the former Office of Thrift 

Supervision pursuant to the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (the Dodd-Frank Act). In 

addition to the removal of part 390, 

subpart S, the FDIC proposes to make 

technical changes to other parts of the 

FDIC’s regulations so that they may be 

applicable on their terms to State 

savings associations. Following the 

removal of the identified regulations, 

the regulations governing the operations 

of State savings associations will be 

substantially the same as those for all 

other FDIC-supervised institutions. The 

FDIC invites comments on all aspects of 

this proposed rulemaking. 

DATES: Comments must be received on 

or before December 2, 2019. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• FDIC Website: https://

www.fdic.gov/regulations/laws/federal/. 

Follow instructions for submitting 

comments on the agency website. 

• Email: Comments@fdic.gov. Include 

RIN 3064–AF14 on the subject line of 

the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street NW, Washington, DC 20429. 

• Hand Delivery to FDIC: Comments 

may be hand-delivered to the guard 

station at the rear of the 550 17th Street 

building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please include your name, affiliation, 

address, email address, and telephone 

number(s) in your comment. All 

statements received, including 

attachments and other supporting 

materials, are part of the public record 

and are subject to public disclosure. 

You should submit only information 

that you wish to make publicly 

available. 

Please note: All comments received will be 

posted generally without change to https://

www.fdic.gov/regulations/laws/federal/, 

including any personal information 

provided. Paper copies of public comments 

may be requested from the Public 

Information Center by telephone at 877–275– 

3342 or 703–562–2200. 

FOR FURTHER INFORMATION CONTACT: 

Karen J. Currie, Senior Examination 

Specialist, 202–898–3981, kcurrie@

fdic.gov, Division of Risk Management 

Supervision; Cassandra Duhaney, 

Senior Policy Analyst, 202–898–6804, 

Division of Depositor and Consumer 

Protection; Gregory Feder, Counsel, 

202–898–8724; Suzanne Dawley, 

Counsel, 202–898–6509; or Linda 

Hubble Ku, Counsel, 202–898–6634, 

Legal Division. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. The Dodd-Frank Act 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act (DoddFrank Act) 1 provided for a substantial 

reorganization of the regulation of State 

and Federal savings associations and 

their holding companies. Beginning July 

21, 2011, the transfer date established 

by section 311 of the Dodd-Frank Act,2

the powers, duties, and functions of the 

former Office of Thrift Supervision 

(OTS) were divided among the FDIC, as 

to State savings associations, the Office 

of the Comptroller of the Currency 

(OCC), as to Federal savings 

associations, and the Board of 

Governors of the Federal Reserve 

System (FRB), as to savings and loan 

holding companies. Section 316(b) of 

the Dodd-Frank Act,3 provides the 

manner of treatment for all orders, 

resolutions, determinations, regulations, 

and advisory materials that had been 

issued, made, prescribed, or allowed to 

become effective by the OTS.4 The 

section provides that if such issuances 

were in effect on the day before the 

transfer date, they continue in effect and 

are enforceable by or against the 

appropriate successor agency until they 

are modified, terminated, set aside, or 

superseded in accordance with 

applicable law by such successor 

agency, by any court of competent 

jurisdiction, or by operation of law. 

The Dodd-Frank Act directed the 

FDIC and the OCC to consult with one 

another and to publish a list of the 

continued OTS regulations to be 

enforced by each respective agency. The 

list was published by the FDIC and OCC 

as a Joint Notice in the Federal Register 

on July 6, 2011,5 and shortly thereafter, 

the FDIC published its transferred OTS 

regulations as new FDIC regulations in 

12 CFR parts 390 and 391.6 When it 

republished the transferred OTS 

regulations, the FDIC noted that its staff 

would evaluate the transferred OTS 

regulations and might later recommend 

incorporating the transferred OTS rules 

into other FDIC rules, amending them or 

rescinding them, as appropriate. 

Section 312(b)(2)(C) of the DoddFrank Act 7 amended the definition of 

‘‘appropriate Federal banking agency’’ 

contained in section 3(q) of the Federal 

Deposit Insurance Act (FDI Act) 8 to add 

State savings associations to the list of 

entities for which the FDIC is 

designated as the ‘‘appropriate Federal 

banking agency.’’ As a result, when the 

FDIC acts as the designated 

‘‘appropriate Federal banking agency’’ 

(or under similar terminology) for State 

savings associations, as it does here, the 

FDIC is authorized to issue, modify, and 

rescind regulations involving such 

associations and for State nonmember 

banks and insured branches of foreign 

banks. 

B. 12 CFR Part 390, Subpart S 

One of the rules of the former OTS 

that was transferred to the FDIC, 12 CFR 

part 563, governs many of the 

operations of State savings associations. 

The former OTS’s rule was transferred 

to the FDIC with nominal changes and 

is now found in the FDIC’s rules at part 

390, subpart S, entitled ‘‘State Savings 

Associations—Operations.’’ 9 Subpart S 

governs a wide range of operations of 

State savings associations, as further 

discussed below.10


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Agencies of Foreign Banks, 81 FR 90949 (Dec. 16, 

2016). 

11 12 U.S.C. 5414(b)(3). 

12 12 U.S.C. 1813(l). 

13 12 U.S.C. 1813(m). 

14 12 U.S.C. 1461 et seq. 

15 12 U.S.C. 1467a(s)(2). 

16 12 U.S.C. 1467a(s)(2)(B). 

17See 12 CFR 390.332(f) and (h). 

18 12 CFR 303.64(a)(3). 

19 71 FR 8789 (Feb. 21, 2006), codified at 12 CFR 

307.1 et seq. 

II. The Proposal 

Section 316(b)(3) of the Dodd-Frank 

Act in pertinent part, provides that the 

regulations of the former OTS, as they 

apply to State savings associations, will 

be enforceable by the FDIC until they 

are modified, terminated, set aside, or 

superseded in accordance with 

applicable law.11 Consistent with the 

FDIC’s stated intention to evaluate 

transferred OTS regulations before 

taking action on them, the FDIC has 

carefully reviewed the provisions of 

subpart S, and proposes to take action 

as described below with respect to 

certain sections of this subpart. 

A. Section 390.330—Chartering 

Documents 

Section 390.330 requires a de novo 

State savings association, prior to 

commencing operations, to file its 

charter and bylaws with the FDIC for 

approval. This section also requires a de 

novo State savings association to certify 

to the FDIC that its charter and bylaws 

are permissible under all applicable 

laws, rules, and regulations. In addition, 

this section requires each State savings 

association to make available to its 

accountholders a copy of its charter and 

bylaws, including amendments thereto, 

in each office or by request. 

Unlike the OCC or state banking 

supervisors, the FDIC does not charter 

insured depository institutions. Thus, as 

it does with State nonmember banks, 

the FDIC proposes to defer to state law 

as to whether and how a State savings 

association should disclose or provide 

copies of its organizational documents 

to interested parties. Consistent with 

this position, the FDIC proposes to 

rescind and remove this section of 

Subpart S. 

B. Section 390.331—Securities: 

Statement of Non-Insurance 

Section 390.331 requires that every 

security issued by a State savings 

association include in its provisions a 

clear statement that the security is not 

insured by the FDIC. Although the FDIC 

does not have an identical companion 

rule to § 390.331, provisions of the 

Federal Deposit Insurance Act (the FDI 

Act), and the FDIC regulations clarify 

(and require FDIC-supervised 

institutions to clarify) that securities are 

not deposits under the FDI Act and are 

not insured by the FDIC. 

Section 3(l) of the FDI Act defines 

‘‘deposit’’ for the purposes of the FDI 

Act and does not include any securities, 

regardless of issuer.12 The definition of 

‘‘insured deposit’’ at section 3(m) of the 

FDI Act, also does do not include 

securities, including those issued by a 

State savings association.13

Further, part 328 governs the use of 

the official sign of the FDIC and 

prescribes its use by insured depository 

institutions. It also provides the official 

advertising statement that insured 

depository institutions must include in 

their advertisements. For purposes of 

part 328, the term ‘‘insured depository 

institution’’ includes insured branches 

of a foreign depository institution, as 

well as State savings associations. In 

particular, the advertising of nondeposit products (which includes 

securities) is governed by § 328.3(e). 

That section prohibits an insured 

depository institution from including 

the official advertising statement, or any 

other statement or symbol which 

implies or suggests the existence of 

Federal deposit insurance, in any 

advertisement that relates solely to nondeposit products. 

Because § 390.331 largely is 

redundant to current FDIC rules and 

regulations that govern advertising of 

non-deposit products, including 

securities, for all insured depository 

institutions, the FDIC proposes to 

rescind and remove § 390.331. 

C. 12 CFR 390.332—Merger, 

Consolidation, Purchase or Sale of 

Assets, or Assumption of Liabilities 

Section 390.332 addresses the 

application requirements for mergers, 

consolidations, purchases or sales of 

assets, and assumptions of liabilities 

that apply to State savings associations. 

The FDIC proposes to rescind § 390.332 

and to amend 12 CFR part 303, subpart 

D, the section of the FDIC’s regulations 

governing merger transactions. The 

proposed amendments to subpart D 

would make that section applicable to 

any FDIC-supervised institution, 

including State savings associations, 

and would make other conforming 

changes. The proposed revisions to 

subpart D would make subpart D 

applicable to mergers in which the 

resulting institution is a State savings 

association, while observing the 

necessary requirements of the Bank 

Merger Act and Home Owners’ Loan Act 

(HOLA).14 The FDIC specifically 

proposes amending § 303.62(a)(1) of the 

FDIC’s regulations to clarify that this 

section applies to merger transactions in 

which the resulting institution is either 

an insured State nonmember bank or a 

State savings association. 

HOLA generally provides for a 60-day 

expedited processing period for 

applications involving State or Federal 

savings associations that acquire or are 

acquired by another insured depository 

institution.15 The FDIC proposes to 

amend § 303.64 of its regulations to 

reflect HOLA’s expedited statutory 

processing requirement as it applies to 

State savings associations. Specifically, 

a proposed new paragraph (c) of section 

303.64 would clarify that the FDIC will 

act on merger applications submitted by 

State savings associations within 60 

days after the date of the FDIC’s receipt 

of a substantially complete merger 

application, subject to the FDIC’s 

authority to extend such period by an 

additional 30 days in cases where 

material information is substantially 

inaccurate or incomplete.16 Although 

the FDIC proposes to incorporate this 

60-day processing requirement with 

respect to State savings associations, the 

FDIC proposes to rescind the provisions 

of § 390.332 that deem certain merger 

applications involving state savings 

associations to be automatically 

approved.17 The FDIC does not consider 

such provisions to be statutorily 

required by the HOLA, and their 

inclusion in subpart D would be 

inconsistent with the treatment of State 

nonmember banks under subpart D, 

which clarifies that merger applications 

processed under expedited processing 

are not deemed to be automatically 

approved upon the conclusion of the 

expedited processing period.18 After the 

proposed amendment to subpart D and 

proposed removal and rescission of 

§ 390.332, all FDIC-supervised 

institutions would be subject, in 

substantially the same manner, to the 

regulations for merger applications 

found in part 303, subpart D. 

The FDIC is including a technical 

amendment to § 303.62(b)(5) of the 

FDIC’s regulations. Currently, 

§ 303.62(b)(5) provides that an insured 

depository institution assuming deposit 

liabilities of another insured institution 

must provide certification of 

assumption of deposit liability to the 

FDIC in accordance with part 307. This 

provision no longer accurately reflects 

the requirements of part 307, which was 

amended to clarify that the transferring 

institution file the certification, rather 

than the assuming institution.19


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20 12 U.S.C. 1818. 

21 15 U.S.C. 45(a)(1). 

22FTC Policy Statement on Deception, October 

14, 1983 (appended to Cliffdale Assocs., Inc., 103 

F.T.C. 110, 174 (1984)); Novartis Corp. v. F.T.C., 

223 F.3d 783, 786 (D.C. Cir. 2000); F.T.C. v. Pantron 

I Corp., 33 F.3d 1088, 1095 (9th Cir. 1994). 

23 Director Guidelines and Certain Prohibitions 

and Disclosures, 41 FR 35812, 35814 (Aug. 24, 

1976). 

24Available at https://www.fdic.gov/regulations/ 

resources/director/pocket/index.html (last updated 

Dec. 13, 2007). See also Interagency Guidelines 

Establishing Standards for Safety and Soundness, 

12 CFR part 364, app. A. 

25 12 U.S.C. 5412(b)(2)(A). 

26See 12 CFR 238.7. 

27 12 U.S.C. 1464(q). 

28 12 U.S.C. 1464(d). 

29 12 U.S.C. 1464(a). 

30 12 U.S.C. 1831g. 

D. 12 CFR 390.333—Advertising 

Section 390.333 prohibits State 

savings associations from making 

inaccurate representations about 

services, contracts, investments, or 

financial condition in their advertising. 

It appears that the former OTS used this 

regulation sparingly. FDIC staff 

identified only ten occasions in which 

the former OTS cited this provision in 

guidance letters and no circumstances 

in which the former OTS cited the 

regulation in an adjudicated 

enforcement proceeding. 

The prohibition of misrepresentations 

in advertising contained in § 390.333 is 

substantially similar to the more general 

prohibition of unfair or deceptive acts or 

practices under section 5(a) of the 

Federal Trade Commission Act (Section 

5). The FDIC enforces this provision 

pursuant to its authority under Section 

8 of the FDI Act.20 Section 390.333 

prohibits advertising and 

representations that are inaccurate or 

that misrepresent a State savings 

association’s services, contracts, 

investments, or financial condition. The 

prohibition contained in Section 5 is 

broader than § 390.333 because it 

prohibits all ‘‘unfair or deceptive acts or 

practices in or affecting commerce,’’ and 

it applies to all FDIC-supervised 

institutions, not only State savings 

associations.21 Because the narrower 

prohibitions of § 390.333 appear 

subsumed within the broader 

prohibitions of Section 5, the FDIC 

proposes to rescind and remove 

§ 390.333. 

In interpreting Section 5, the Federal 

Trade Commission (FTC) and the courts 

have concluded that an advertisement is 

not misleading unless the 

representation, omission, or practice is 

material, meaning that it is likely to 

affect a consumer’s decision regarding a 

product or service.22 Arguably, then, 

§ 390.333 sets a higher standard than 

Section 5 because § 390.333 lacks an 

explicit materiality requirement. That is, 

if § 390.333 is read strictly, an 

advertisement could violate that section 

even if the misrepresentation in the 

advertisement is not material. As a 

practical matter, however, it is unlikely 

that the FDIC would cite a violation of 

§ 390.333 for an immaterial 

misrepresentation. Therefore, the FDIC 

does not believe that § 390.333 provides 

additional meaningful supervisory or 

enforcement authority to regulate 

misrepresentations by State savings 

associations. As a result, the FDIC 

proposes to rescind and remove 

§ 390.333. 

E. 12 CFR 390.334—Directors, Officers, 

and Employees 

Section 390.334 limits who may serve 

on the board of directors of a State 

savings association by providing that: A 

majority of the directors must not be 

employees of the State savings 

association or its affiliates; no more than 

two directors may come from the same 

family; and no more than one director 

may be an attorney with a particular law 

firm. 

The FDIC proposes to remove and 

rescind § 390.334. The FDIC expects 

State nonmember banks to comply with 

the laws and regulations of their 

chartering authority regarding the 

composition of their boards of directors 

and will expect State savings 

associations to do the same. The 

provisions of § 390.334 are not 

statutorily mandated and were initially 

adopted in 1976 by the former OTS’ 

precursor, the Federal Home Loan Bank 

Board (FHLBB) to increase the 

independence of boards of directors of 

insured institutions.23

The FDIC expects State savings 

associations to comply with the laws of 

their chartering authorities regarding the 

composition of boards of directors and 

to look to FDIC-issued guidance for 

examples of practices that the FDIC 

considers consistent with safety-andsoundness standards or other applicable 

laws and regulations. For example, the 

FDIC’s Pocket Guide for Directors 

contains examples of appropriate 

conduct by directors’ and boards’ 

conduct.24 The FDIC believes that this 

Statement of Policy adequately 

advances the policy objectives of 

§ 390.334. Accordingly, the FDIC 

proposes to rescind and remove 

§ 390.334. 

F. 12 CFR 390.335—Tying Restriction 

Exception 

Section 390.335 is entitled ‘‘Tying 

restriction exception’’ and refers solely 

to the regulations issued by the FRB. 

This section is a re-designation of the 

former OTS regulation 12 CFR 563.36. 

That section provided for an anti-tying 

safe harbor for discounts related to a 

customer’s continued minimum balance 

in certain eligible products. This safe 

harbor was adopted to conform to a 

similar safe harbor adopted by the FRB. 

When the former OTS regulations were 

transferred to the FDIC, the FDIC 

replaced the substantive regulations of 

§ 563.36 with the following statement: 

‘‘For applicable rules, see the 

regulations issued by the Board of 

Governors of the Federal Reserve 

System.’’ This reflects the fact that 

section 312(b)(2) of the Dodd-Frank Act 

transferred the authority to grant 

exceptions from the anti-tying 

regulations of HOLA to the FRB in 

consultation with the FDIC or OCC as 

appropriate, rather than to the FDIC, 

upon the dissolution of the OTS.25

The FDIC proposes rescinding and 

removing § 390.335 because the FRB’s 

Regulation LL 26 sets forth regulatory 

exceptions to the anti-tying provisions 

of HOLA.27 The authority to grant such 

exceptions rests with the FRB, in 

consultation with the FDIC, and the 

FDIC retains the authority to enforce the 

anti-tying provisions of HOLA.28 The 

FDIC, therefore, considers it appropriate 

to rescind and remove § 390.335 from 

the FDIC’s rules and regulations. 

G. 12 CFR 390.336—Employment 

Contracts 

Section 390.336 sets forth 

requirements with which a State savings 

association must comply when entering 

into an employment contract with its 

officers and other employees. This 

section is a re-designation of the former 

OTS regulation 12 CFR 563.39, which 

relies on the general statutory authority 

in HOLA to promulgate regulations 

concerning the savings and loan 

industry.29

The FDIC proposes to rescind and 

remove § 390.336. State savings 

associations are subject to existing 

statutory authority regarding 

employment contracts with institutionaffiliated parties. For instance, section 

30 of the FDI Act prohibits an insured 

depository institution from entering into 

a contract with any person for services 

or goods if the contract would adversely 

affect the institution’s safety or 

soundness.30 Further, the FDIC expects 

that State savings associations will be 

guided by the Interagency Guidelines 

Establishing Standards for Safety and 

Soundness (the Interagency Safety and 

Soundness Guidelines) prescribed 


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31See 12 U.S.C. 1831p–1(c); 12 CFR part 364, 

App. A, § III. 

32 12 U.S.C. 1468(a). 

33 12 U.S.C. 371, 371c–1. 

34 12 U.S.C. 1468(a)(1)(A), 12 U.S.C. 1843(c). 

35 12 U.S.C. 1468(a)(1)(B). 

36 12 U.S.C. 1828(j)(1)(A). 

37 12 CFR 223.1(c). 

38 Id. 

39 12 U.S.C. 1828(j)(1)(A). 

40 12 U.S.C. 1468(a). 

41The FDIC has interpreted the language ‘‘in the 

same manner and to the same extent’’ to include the 

application of Regulation W. 

42 12 CFR 223.72. 

43 12 U.S.C. 375a. 

44 12 U.S.C. 375b. 

45 12 U.S.C. 1828(j)(2). 

46 12 U.S.C. 1468(b). 

47 12 CFR part 215. 

48 12 CFR 337.3. 

49Public Law 109–351. 

50See 71 FR 71472 (Dec. 11, 2006). See also 72 

FR 30470 (June 1, 2007). 

51See 71 FR 78337 (Dec. 29, 2006). 

pursuant to section 39 of the FDI Act, 

which apply to all insured depository 

institutions, including State savings 

associations.31 In addition, part 359 of 

the FDIC’s regulations limits and/or 

prohibits troubled institutions from 

paying and making golden parachute 

and indemnification payments to an 

institution-affiliated party. 

For the reasons stated above, the FDIC 

proposes to rescind and remove 

§ 390.336. 

H. 12 CFR 390.337—Transactions With 

Affiliates 

Section 11(a) of HOLA 32 applies 

Sections 23A and 23B of the Federal 

Reserve Act 33 to every savings 

association in the same manner and to 

the same extent as if the savings 

association were a member bank with 

two additional restrictions. The first 

restriction prohibits State and Federal 

savings associations from making a loan 

or other extension of credit to any 

affiliate unless the affiliate is engaged 

only in activities which the FRB, by 

regulation, has determined to be 

permissible for bank holding companies 

under section 4(c) of the Bank Holding 

Company Act.34 The second restriction 

prohibits State and Federal savings 

associations from entering into any 

transaction for the purchase or 

investment in securities issued by the 

affiliate with any affiliate other than 

with respect to the shares of a 

subsidiary.35

Similar to section 11 of HOLA, 

section 18(j) of the FDI Act applies 

sections 23A and 23B to every 

nonmember insured bank as if it were 

a member bank.36 The scope of the 

FRB’s affiliate transaction regulation, 

Regulation W, notes that both the FDI 

Act and HOLA make sections 23A and 

23B applicable to insured State 

nonmember banks and insured savings 

associations, respectively.37

The OTS adopted 12 CFR 563.41 to 

implement affiliate transaction 

requirements for State and Federal 

savings associations and, in the 

regulation, referenced Regulation W.38

This regulation was redesignated as 12 

CFR 390.337 in the transfer of authority 

for State savings associations from the 

OTS to the FDIC. Section 390.337 states 

only that State savings associations 

should ‘‘see the regulations issued by 

Board of Governors of the Federal 

Reserve System’’ for the applicable rules 

for transactions with affiliates. The FDIC 

does not have a regulation comparable 

to § 390.337 that applies to State 

nonmember banks because the FDI Act 

specifically states that sections 23A and 

23B of the Federal Reserve Act apply to 

State nonmember banks.39 Because 

HOLA similarly applies sections 23A 

and 23B of the Federal Reserve Act to 

State savings associations 40 and 

because the FRB’s Regulation W41

addresses the additional restrictions of 

HOLA applicable to State and Federal 

savings associations’ transactions with 

their affiliates, the FDIC believes there 

is no need to retain § 390.337.42 The 

FDIC, therefore, proposes to rescind and 

remove this section. 

I. 12 CFR 390.338—Loans by Savings 

Associations to Their Executive Officers, 

Directors and Principal Shareholders 

Section 22(g) of the Federal Reserve 

Act 43 pertains to extensions of credit to 

executive officers of banks, while 

section 22(h) of the Federal Reserve 

Act 44 deals with extensions of credit by 

member banks to their to executive 

officers, directors, and principal 

shareholders (or to related interests of 

those individuals) (insiders). Section 

18(j)(2) of the FDI Act 45 provides that 

both sections 22(g) and (h) of the 

Federal Reserve Act are applicable to 

insured nonmember banks in the same 

manner and to the same extent as if they 

were member banks. Section 11(b) of 

HOLA provides a similar result with 

respect to both State and Federal 

savings associations.46

The OTS implemented insider 

lending restrictions for savings 

associations at 12 CFR 563.43. That 

section cross-referenced the FRB’s 

Regulation O,47 with some additional 

modifications. Section 390.338 is the redesignation of 12 CFR 563.43, a 

transferred OTS regulation, and the rule 

merely directs the reader to the 

regulations issued by the FRB. Section 

337.3 of the FDIC’s regulations 48

implements these requirements in part 

by incorporation through reference to 

Regulation O, as previously 

accomplished by the OTS in § 563.43, 

and also by imposing direct regulatory 

requirements on State nonmember 

banks. 

After careful comparison of § 337.3 

with § 390.338, the FDIC has concluded 

that the transferred OTS rule governing 

insider loans is substantively 

redundant. Therefore, based on the 

foregoing, the FDIC proposes to rescind 

and remove § 390.338, to make minor 

conforming changes to § 337.3 to clarify 

its applicability to State savings 

associations, and to make technical 

amendments to § 337.3, discussed in 

further detail below. If the proposal is 

adopted in final form, FDIC-supervised 

institutions—including State savings 

associations—will be regulated in a 

uniform manner. As a result, the FDIC 

proposes to rescind and remove 

§ 390.338 in its entirety. 

The FDIC also proposes to amend 

§ 337.3 to apply to ‘‘FDIC-supervised 

institutions,’’ meaning State nonmember 

banks, State savings associations, and 

foreign banks having an insured branch, 

to conform to and reflect the scope of 

the FDIC’s current supervisory 

responsibilities as the appropriate 

Federal banking agency for both State 

savings associations and State 

nonmember banks. Finally, the proposal 

would make technical corrections and 

changes to § 337.3. Section 337.3(a) 

currently provides that, with the 

exception of certain specified sections 

(namely §§ 215.5(b), 215.5(c)(3), 

215.5(c)(4), and 215.11), insured 

nonmember banks are subject to the 

restrictions contained in subpart A of 

Regulation O to the same extent and to 

the same manner as if they were 

member banks. The citations to 

Regulation O in § 337.3(a) are no longer 

accurate, however, because the FRB 

amended Regulation O to remove 

several statutory reporting requirements 

relating to insider lending consistent 

with section 601 of the Financial 

Services Regulatory Relief Act of 

2006.49 A 2006 FRB rulemaking 

reflected these statutory amendments.50

Shortly after the FRB made amendments 

to Regulation O, the FDIC rescinded 12 

CFR part 349, the agency’s regulations 

governing reporting on lending by a 

State nonmember bank and its 

correspondent banks to executive 

officers and principal shareholders.51 In 

addition to the Regulation O citations 

related to rescinded reporting 

requirements, the FDIC’s current 

regulation contains an inaccurate 

reference to the Regulation O definition 


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52Public Law 102–242. 

53 12 CFR 364, App. A. III. 

54Public Law 93–406, 88 Stat. 829, codified in 

part at 29 U.S.C. 1001, et seq. 

55 26 U.S.C. 1, et seq. 

56 29 U.S.C. 1003; 29 CFR 4000, et seq. 

57 Interagency Statement on Retail Sales of 

Nondeposit Investment Products (Feb.15, 1994), 

https://www.fdic.gov/regulations/laws/rules/5000- 

4500.html. 

58 37 FR 21179 (Oct. 6, 1972). 

59 54 FR 49411. 

of ‘‘unimpaired capital and unimpaired 

surplus’’ in footnote 3 of § 337.3(b). The 

FDIC proposes to correct this error by 

adding a reference to the correct 

Regulation O subsection. 

In addition to these proposed 

changes, the FDIC also is proposing 

another technical, conforming change to 

§ 337.3: The elimination of transitional 

provisions that are now obsolete. These 

paragraphs were added to assist insured 

nonmember banks in complying with 

the statutory lending limits for 

executive officers of member banks, as 

required by the Federal Deposit 

Insurance Corporation Improvement Act 

of 1991 (FDICIA).52 To assist insured 

nonmember banks in making the 

transition, the FDIC specifically 

provided for the handling of loans made 

prior to application of the new 

restrictions, but which were still 

outstanding as of that event. These 

provisions are no longer needed. The 

FDIC, therefore, proposes to eliminate 

them. 

In sum, if the proposal is finalized, 

oversight of insider loans in § 337.3 

would apply to all FDIC-supervised 

institutions, including State savings 

associations; § 337.3 would reflect 

technical amendments; and § 390.338 

would be rescinded and removed 

because it is largely duplicative of those 

rules found in § 337.3. 

J. 12 CFR 390.339—Pension Plans 

Section 390.339 prohibits State 

savings associations from sponsoring an 

employee pension plan which, because 

of unreasonable costs or for any other 

reason, could lead to material financial 

loss or damage to the sponsor. It further 

requires a State savings association that 

serves as a pension plan sponsor to 

retain detailed pension plan records and 

actuarial funding reports and to provide 

advance notice of a pension plan 

termination. The FDIC proposes to 

rescind and remove § 390.339 because 

the section is substantially similar to the 

existing compensation regulations 

contained in the Interagency Safety and 

Soundness Guidelines.53

The Interagency Safety and 

Soundness Guidelines apply to all 

insured depository institutions, 

including State savings associations. 

Section III of the Interagency Safety and 

Soundness Guidelines explicitly 

prohibits compensation that could lead 

to material financial loss as an unsafe 

and unsound practice. The Interagency 

Safety and Soundness Guidelines also 

address excessive compensation as an 

unsafe and unsound practice, taking 

into account factors such as 

compensation history, the institution’s 

financial condition, comparable 

compensation practices, the projected 

costs and benefits of postemployment 

benefits, fraudulent or other 

inappropriate activity, and any other 

factors the agencies deem relevant. 

‘‘Compensation’’ is defined as ‘‘all 

direct and indirect payments or benefits, 

both cash and non-cash, granted to or 

for the benefit of any executive officer, 

employee, director, or principal 

shareholder, including but not limited 

to payments or benefits derived from an 

employment contract, compensation or 

benefit agreement, fee arrangement, 

perquisite, stock option plan, 

postemployment benefit, or other 

compensatory arrangement Moreover, 

the requirements of the Employee 

Retirement Security Act of 1974 54 and 

Internal Revenue Code 55 and the 

implementing regulations of the Pension 

Benefit Guaranty Corporation, including 

recordkeeping, would apply to any 

pension plan offered by an FDICsupervised institution.56 On this basis, 

FDIC staff proposes to rescind and 

remove § 390.339. 

K. 12 CFR 390.340—Offers and Sales of 

Securities at an Office of a Savings 

Association 

Section 390.340 generally prohibits 

the offer or sale of debt or equity 

securities issued by a State savings 

association or an affiliate of the State 

savings association at an office of the 

State savings association with the 

exception of equity securities issued in 

connection with the State savings 

association’s conversion from mutual to 

stock form in a transaction that has been 

approved by the FDIC or if the sale is 

conducted in accordance with the 

conditions set forth in § 390.340. This 

section is a re-designation of former 

OTS regulation 12 CFR 563.76. 

Section 563.76 was added to the 

former OTS’ regulations in 1992 to 

minimize potential customer confusion 

and to promote understanding of the 

nature and risks associated with 

securities sold at a State savings 

association’s offices, while still 

preserving an effective means for a State 

savings association to raise capital in 

the conversion process. The FDIC does 

not have a similar regulation but has 

published the NDIP Statement of 

Policy,57 which addresses all sales of 

nondeposit products (such as annuities, 

mutual funds, and other securities) by 

depository institutions; disclosures and 

advertising; the setting and 

circumstances of sales of securities; 

qualification and training for personnel 

who sell securities; standards for 

suitability of the products for customers 

and sales practices; compensation 

practices; and compliance policies and 

procedures. In addition, the FDIC 

Statement of Policy Regarding the Use 

of Offering Circulars in Connection with 

Public Distribution of Bank Securities 

(Offering Circular Statement of Policy) 

addresses sales and distribution of bank 

securities and disclosures that should be 

included in offering circulars for bank 

securities to ensure disclosure of 

material facts to investors. 

The content requirements in § 390.340 

that are designed to prevent consumer 

confusion are included in these two 

Statements of Policy. It is the FDIC’s 

view that specifically imposing these 

requirements on State savings 

associations through regulation is 

unnecessary. According, the FDIC 

proposes that § 390.340 be rescinded 

and removed. 

L. 12 CFR 390.341—Inclusion of 

Subordinate Debt Securities and 

Mandatorily Redeemable Preferred 

Stock as Supplementary Capital 

Section 403(b) of the National 

Housing Act, as amended, provided that 

no institution insured by the Federal 

Savings and Loan Insurance Corporation 

(FSLIC) may ‘‘issue securities which 

guarantee a definite return or which 

have a definite maturity except with the 

specific approval of the’’ FSLIC. 

Because a number of insured 

institutions had applied to the FSLIC for 

approval of the issuance of various 

types of subordinated debt securities to 

provide a broader base for capital 

operations, in 1972, the FHLBB, as the 

operating head of the FSLIC, adopted a 

number of rules to provide for uniform 

requirements for the issuance of such 

securities.58 That rule was transferred to 

the OTS pursuant to the Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA) and 

codified at 12 CFR 563.81.59

In 2007, the OTS adopted a final rule 

amending 12 CFR 563.81 to delete 

several unnecessary or outdated 

requirements and to conform certain 

regulations, such as maturity period 

requirements and purchaser restrictions, 

to the rules issued by the other Federal 


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60See 61 FR 46807 (Sept. 5, 1996). 

61See 12 CFR 324.20(d)(1). 

62 12 U.S.C. 1831o; see also 12 CFR 324.405. 

63 12 U.S.C. 1831o(d)(1)(A). 

64 12 U.S.C. 1831o(d)(1)(B). 

65 12 U.S.C. 1831o(b)(2)(B). 

66 12 CFR 303.203(a). 67 12 CFR 303.203(b). 68 Id. 69The FDIC is also aware that this proposal, as 

well as other regulatory developments, would also 

necessitate certain technical changes to the FDIC’s 

regulations related to annual independent audits 

and reporting requirements, 12 CFR part 363, 

including Table 1 to Appendix A of Part 363. The 

FDIC intends to address such technical changes in 

a separate notice. 

banking agencies. In addition, the rule 

reconciled conflicting rules, included 

appropriate statutory cross-references, 

and reflected plain language. 

Section 390.341 is the re-designation 

of § 563.81. Section 390.341 provides 

application and notice procedures and 

form and content requirements for 

subordinate debt securities and 

mandatorily redeemable preferred stock 

that a State savings association seeks to 

include in its tier 2 capital. There is no 

corresponding requirement applicable 

to State nonmember banks. For the 

following reasons, the FDIC is proposing 

to rescind § 390.341. 

The FDIC believes that it is not 

necessary for a State savings association 

to apply or provide notice to the FDIC 

before issuing subordinate debt 

securities or mandatorily redeemable 

preferred stock. Moreover, many of the 

form and content requirements in 

§ 390.341 that are designed to prevent 

consumer confusion are included in the 

FDIC’s Offering Circular Statement of 

Policy.60 It is the FDIC’s view that 

specifically imposing these 

requirements on State savings 

associations through a regulation is 

unnecessary. 

Section 390.341 also includes a 

number of criteria that subordinate debt 

securities and mandatorily redeemable 

preferred stock must satisfy in order to 

qualify as tier 2 capital. The criteria for 

inclusion in tier 2 capital are included 

in the FDIC’s capital rules in 12 CFR 

part 324.61 Accordingly, it is not 

necessary to specify them separately in 

a regulation applicable to State savings 

associations alone. Therefore, the FDIC 

proposes to rescind and remove 

§ 390.341. 

M. 12 CFR 390.342–348—Capital 

Distributions 

1. Regulations Governing Capital 

Distributions 

Sections 390.342 through 390.348 

govern capital distributions by State 

savings associations. Certain of these 

provisions were adopted by the OTS to 

implement statutory prompt corrective 

action (PCA) requirements that apply to 

all insured depository institutions, and 

others were adopted by the OTS for 

supervisory or policy reasons. The 

requirements that are statutorily 

mandated have analogous provisions in 

the FDIC’s regulations implementing 

PCA with respect to State nonmember 

banks and insured branches of foreign 

banks. Other regulatory requirements 

that the FDIC has adopted with respect 

to State nonmember banks, including 

those related to retirements and 

reductions in capital, advance some of 

the policy objectives that underlay the 

non-statutorily mandated provisions 

that were previously adopted by the 

OTS. Therefore, and as more fully 

explained below, the FDIC proposes to 

rescind the provisions of subpart S that 

govern capital requirements and to 

revise the FDIC’s regulations related to 

PCA, as well as those related to 

retirements and reductions of capital, so 

that State savings associations are 

subject to the same requirements that 

govern capital distributions by State 

nonmember banks. 

2. Other FDIC Regulations 

a. 12 CFR 303.203—Applications for 

Capital Distributions 

Part 303 of the FDIC’s regulations 

includes procedures to implement the 

filing requirements for capital 

distributions under section 38 of the FDI 

Act.62 Section 38 applies to all insured 

depository institutions, and, among 

other things, generally prohibits an 

insured depository institution from 

making a capital distribution if, after 

making the distribution, the institution 

would be undercapitalized.63 Section 38 

provides an exception to this 

prohibition that authorizes the Federal 

banking agencies to permit certain 

repurchases, redemptions, retirements, 

or other acquisitions of shares or other 

ownership interests that are made in 

connection with the issuance of 

additional shares or obligations and that 

would reduce the institution’s financial 

obligations or otherwise improve the 

institution’s financial condition.64

Section 38 defines a ‘‘capital 

distribution’’ to include certain 

dividends; repurchases, redemptions, 

retirements, or other acquisitions of 

shares or other ownership interests, 

including extensions of credit to finance 

an affiliated company’s acquisition of 

such shares; and any other transaction 

that the Federal banking agencies find to 

be in substance a distribution of 

capital.65

Section 303.203 implements the 

above provisions of section 38 by 

requiring an insured State nonmember 

bank and any insured branch of a 

foreign bank to submit an application to 

the FDIC for a capital distribution if, 

after having made a capital distribution, 

the institution would be 

undercapitalized, significantly 

undercapitalized, or critically 

undercapitalized.66 Section 303.203 sets 

forth the filing requirements for 

proposed capital distributions that are 

within the scope of section 38. 

Specifically, such filings must describe 

the nature of the proposal, including the 

shares or obligations that are the subject 

of the proposal, and must include an 

explanation of how the proposal would 

reduce the applicant institution’s 

financial obligations or otherwise 

improve its financial condition.67

Section 303.203 also clarifies that if a 

proposed action also requires an 

application under § 303.241, such an 

application should be filed concurrently 

with the application filed pursuant to 

section 38.68

Although section 38 applies to all 

insured depository institutions, Subpart 

K, including § 303.203, applies by its 

terms only to State nonmember banks 

and insured branches of foreign banks. 

As discussed below, the FDIC proposes 

to rescind the provisions related to 

capital distributions by State savings 

associations in Subpart S and to make 

State savings associations subject to the 

same capital distribution requirements 

that apply to State nonmember banks 

and insured branches of foreign banks. 

Accordingly, the FDIC proposes to 

amend § 303.203 so that it expressly 

applies to State savings associations. In 

addition, the FDIC proposes a 

corresponding technical change to the 

scope section of Subpart K, 12 CFR 

303.200, so that it applies to State 

savings associations.69 As noted, with 

respect to transactions that are subject to 

filing requirements under both section 

38 and section 18(i), § 303.203(b) 

provides that applicants should file 

such applications concurrently or as 

part of the same application. For the 

reasons described below, the FDIC 

proposes replacing the reference to 

section 18(i) with a direct reference to 

§ 303.241. 

b. 12 CFR 303.241—Reduce or Retire 

Capital Stock or Capital Debt 

Instruments 

Section 303.241 implements section 

18(i)(1) of the FDI Act. Section 18(i)(1) 

generally prohibits an insured State 

nonmember bank from reducing the 

amount or retiring any part of its 

common or preferred capital stock or 


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70 12 U.S.C. 1828(i)(1). 

71 12 U.S.C. 1828(i)(4). 

72 12 CFR 303.241(c). 

73 12 CFR 303.241(d)–(g). 

74 12 U.S.C. 1831p–1. 

75The statutory factors of section 18(i)(4) include: 

(A) The financial history and condition of the 

institution; (B) the adequacy of its capital structure; 

(C) its future earnings prospects; (D) the general 

character and fitness of its management; (E) the 

convenience and needs of the community to be 

served; and (F) whether or not its corporate powers 

are consistent with the purposes of [the FDI Act]. 

12 U.S.C. 1828(i)(4). 

76 12 CFR 390.342. 

77 12 CFR 390.343(a)(2). 

78FDI Act § 38(b)(2)(B), 12 U.S.C. 1831o(b)(2)(B). 

79 12 CFR 390.343(b). 

80 12 CFR 390.343(c). 

retiring any part of its capital notes or 

debentures, without the prior consent of 

the FDIC.70 In considering an 

application to reduce or retire such 

instruments, section 18(i)(4) directs the 

FDIC to consider various statutory 

factors, including those related to 

financial history and condition, capital 

adequacy, future earnings prospects, 

general character and fitness of 

management, the convenience and 

needs of the community to be served, 

and consistency with the purposes of 

the FDI Act.71

Section 303.241 sets forth various 

requirements related to the content of 

filings submitted to the FDIC pursuant 

to section 18(i)(1), including, where 

applicable: The type and amount of the 

change to the applicant’s capital 

structure; a schedule detailing the 

applicant’s present and proposed capital 

structure; the time period encompassed 

by the proposal; certain certifications 

related to the capital adequacy of the 

applicant; the repurchase price of 

capital instruments and the basis for 

establishing fair market value; a 

statement that the proposal is available 

to all holders of a particular class of 

instruments, and if not, the details of 

any restrictions; and the date that the 

applicant’s board of directors approved 

the proposal.72 Section 303.241 also 

authorizes the FDIC to seek additional 

information while processing 

applications under section 18(i)(1); 

permits applications that are subject to 

both section 18(i)(1) and section 38 to be 

filed concurrently, or as a single 

application; sets forth expedited 

processing procedures for eligible 

depository institutions, and provides 

that applications that qualify for, and 

are not removed from, expedited 

processing will be deemed approved 20 

days after receipt of a substantially 

complete application; and sets forth 

standard processing procedures.73

Consistent with section 18(i)(1)’s 

specific applicability to State 

nonmember banks, § 303.241 by its 

terms applies only to State nonmember 

banks. However, the FDIC believes that, 

consistent with the FDIC’s authority 

under section 39 of the FDI Act,74 it 

would be a sound operational standard 

for the FDIC to consider transactions by 

State savings associations that would 

result in the reduction or retirement of 

capital stock or capital debt 

instruments. Reviewing proposals by 

State savings associations to reduce or 

retire capital stock or debt instruments 

would preserve the FDIC’s ability to 

review such transactions by a State 

savings association, as currently 

required under § 390.345 of the FDIC’s 

regulations. Because section 18(i)(1) by 

its terms applies only to State 

nonmember banks, the FDIC proposes to 

amend § 303.241 to clarify that 

§ 303.241 applies to a State savings 

association seeking to reduce or retire 

any part of its common stock or 

preferred stock, or capital notes or 

debentures, as if the State savings 

association were a State nonmember 

bank subject to section 18(i)(1). 

Accordingly, in considering such an 

application by an insured State savings 

association, the FDIC would take into 

consideration the statutory factors 

enumerated in section 18(i)(4).75 As 

noted above, § 303.241 permits 

applications that are subject to both 

section 18(i)(1) and section 38 to be 

filed concurrently, or as a single 

application. Because State savings 

associations are not technically subject 

to section 18(i)(1) and would be made 

subject to § 303.241 by the proposed 

rule under the FDIC’s section 39 

authority, the FDIC proposes to change 

this provision so that it refers directly to 

applications subject to § 303.241, rather 

than to section 18(i)(1). Furthermore, to 

achieve consistency with the filing 

procedures set forth in § 303.203, which 

states that filings subject to §§ 303.203 

and 303.241 ‘‘should’’ be made 

concurrently or as part of the same 

application, the FDIC proposes to 

amend § 303.241 to advise institutions 

that filings subject to both §§ 303.203 

and 303.241 should be filed 

concurrently or as part of the same 

application. 

Question 1: Using the authority 

granted the FDIC as the appropriate 

Federal banking agency for State 

savings associations, is it appropriate 

for the FDIC to make § 303.241 

applicable to State savings associations? 

Would doing so effectively maintain the 

FDIC’s regulatory consideration of 

reductions or retirements of capital by 

State savings association currently 

provided for in 12 CFR 390.345? 

3. 12 CFR 390.342—Capital 

Distributions by State Savings 

Associations 

Section 390.342 states that §§ 390.342 

through 390.348 apply to capital 

distributions by a State savings 

association.76 Because the FDIC 

proposes to rescind all of these sections, 

the FDIC proposes that § 390.342 be 

rescinded and removed. 

4. 12 CFR 390.343—What is a capital 

distribution? 

Section 390.343 defines a ‘‘capital 

distribution’’ for the purposes of 

§§ 390.342–348. Section 390.343(a) 

defines a capital distribution as a 

distribution of cash or other property 

made to a savings association’s owners 

on account of their ownership, but 

excludes dividends consisting of shares 

or rights to purchase shares, and also 

excludes a payment that a mutual State 

savings association is required to make 

under the terms of a deposit instrument 

and any other amount paid on deposits 

that the FDIC determines is not a capital 

distribution.77 This prong of § 390.343’s 

definition of ‘‘capital distribution’’ is 

mirrored in section 38’s definition of 

‘‘capital distribution.’’ 78

Section 390.343(b) includes within 

the definition of ‘‘capital distribution’’ a 

payment to repurchase, redeem, retire, 

or otherwise acquire any of a State 

savings association’s shares or other 

ownership interests, any payment to 

repurchase, redeem, retire, or otherwise 

acquire debt instruments included in a 

savings association’s total capital, and 

any extension of credit to finance an 

affiliate’s acquisition of a State savings 

association’s shares or interests.79 This 

prong is also mirrored in section 38, 

except that section 38’s analogous 

provision does not expressly extend to 

debt instruments that are included in an 

institution’s total capital. 

Section 390.343(c) further defines 

‘‘capital distribution’’ to include any 

direct or indirect payment of cash or 

other property to owners or affiliates 

made in connection with a corporate 

restructuring, including the payment of 

cash or property to shareholders of 

another savings association of its 

holding company to acquire ownership 

in that savings association, other than 

by a distribution of shares.80 This prong 

of § 390.343’s definition of ‘‘capital 

distribution’’ is not matched by an 

analogous prong in section 38. The OTS 

adopted this provision pursuant to the 


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81 63 FR 1044, 1046 (Jan. 7, 1998). 

82 Id. 

83 12 CFR 390.343(d). 

84 64 FR 2805, 2806 (Jan. 19, 1999). 

85 12 CFR 390.343(e), 12 U.S.C. 

1831o(b)(2)(B)(iii). 86 12 CFR 390.344. 

87 12 CFR 390.345(a). 

88 12 CFR 390.345(b). 

89See 12 CFR 324.405. 

authority under section 38(b)(2)(B)(iii), 

which authorizes the Federal banking 

agencies to, by order or regulation, 

consider a transaction that is in 

substance a distribution of capital to be 

deemed a ‘‘capital distribution’’ for the 

purposes of section 38.81 OTS adopted 

this provision in order to capture certain 

corporate restructurings, such as cashout mergers, based on the rationale that 

such transactions are in substance 

distributions of capital.82

Section 390.343(d) captures as a 

‘‘capital distribution’’ any capital 

distribution that is charged against a 

State savings association’s capital 

accounts if the State savings association 

would not be well capitalized following 

the distribution.83 As with payments 

made in connection with a corporate 

restructuring, this element of § 390.343’s 

regulatory definition is not expressly 

addressed in section 38. The OTS 

adopted this prong in its regulatory 

definition of ‘‘capital distribution’’ in 

order to capture distributions by a 

savings association’s operating 

subsidiary to minority shareholders that 

would affect the capital accounts of the 

savings association.84

Lastly, § 390.343(e) incorporates FDI 

Act section 38(b)(2)(B)(iii), which 

authorizes the Federal banking agencies 

to, by order or regulation, deem as a 

‘‘capital distribution’’ any transaction 

that the FDIC determines to be in 

substance a distribution of capital.85

The FDIC’s PCA capital distribution 

filing procedures, 12 CFR 303, subpart 

K, do not adopt a regulatory definition 

of ‘‘capital distribution’’ specific to 

subpart K, but instead directly rely on 

the statutory definition of ‘‘capital 

distribution’’ found in section 

38(b)(2)(B) of the FDI Act. As described 

above, the regulatory definition of 

‘‘capital distribution’’ applicable to 

State savings associations found in 

§ 390.343 incorporates all of the 

elements of the statutory definition of 

‘‘capital distribution.’’ In addition, 

§ 390.343’s definition of ‘‘capital 

distribution’’ expressly extends to 

certain transactions not specifically 

addressed in section 38, such as: 

Repurchases, redemptions, retirements, 

or other acquisitions of debt 

instruments; payments made in 

connection with corporate 

restructurings; or other distributions 

that would be charged against a State 

savings association’s capital accounts 

and that would cause the association to 

be less than well capitalized. The FDIC 

does not propose to adopt a regulatory 

definition of ‘‘capital distribution’’ 

specific to subpart K and proposes to 

continue to directly rely on the statutory 

definition of ‘‘capital distribution’’ 

found in section 38(b)(2)(B). Therefore, 

the FDIC proposes to rescind and 

remove § 390.343. 

Question 2: Should the FDIC adopt a 

regulatory definition of ‘‘capital 

distribution’’ in its PCA regulation, 12 

CFR 303.203? In addition to 

incorporating the elements of section 

38’s definition of ‘‘capital distribution,’’ 

should the FDIC exercise its authority 

under section 38(b)(2)(B)(iii) to adopt by 

regulation certain provisions that are 

not specifically addressed in the 

statutory definition of ‘‘capital 

distribution,’’ such as: Repurchases, 

redemptions, retirements, or other 

acquisitions of debt instruments; 

payments made in connection with 

corporate restructurings; or other 

distributions that would be charged 

against an institution’s capital accounts 

and that would cause the institution to 

be less than well capitalized? Should 

such a definition apply to all FDICsupervised institutions? 

5. 12 CFR 390.344—Definitions 

Applicable to Capital Distributions 

Section 390.344 adopts additional 

definitions specifically for the capital 

distribution provisions of §§ 390.342 

through 390.348.86 These defined terms 

include affiliate, capital, net income, 

retained net income, and shares. 

Because the FDIC proposes to rescind 

§§ 390.342 through 390.348, this 

definition section would no longer be 

necessary. Accordingly, the FDIC 

proposes to rescind and remove 

§ 390.344. 

6. 12 CFR 390.345—Must I file with the 

FDIC? 

Under § 390.345, a State savings 

association is required to file an 

application for a proposed capital 

distribution in certain circumstances, 

and in others is required to file a notice. 

An application is required under 

§ 390.345(a)(1) through (4) in cases 

where: (1) A State savings association is 

not eligible for expedited processing 

under § 390.101; (2) the total amount of 

all capital distributions by a State 

savings association for the applicable 

calendar year exceeds the association’s 

net income for that year to date plus 

retained net income for the preceding 

two years; (3) a State savings association 

would not be at least adequately 

capitalized following the distribution; or 

(4) a State savings association’s 

proposed capital distribution would 

violate a prohibition contained in any 

applicable statute, regulation, or 

agreement with the FDIC, or violate a 

condition imposed on the State savings 

association in an FDIC-approved 

application or notice.87 A notice is 

required under § 390.345(b)(1)–(2) in 

cases where: (1) A State savings 

association would not be well 

capitalized following the distribution; or 

(2) a State savings association’s 

proposed capital distribution would 

reduce the amount of or retire any part 

of the association’s common or 

preferred stock or retire any part of debt 

instruments included in capital.88

The FDIC proposes to make capital 

distributions by State savings 

associations subject to the same 

requirements that govern capital 

distributions by State nonmember 

banks. As discussed above, the 

requirements applicable to State 

nonmember banks are those imposed by 

section 38 of the FDI Act, implemented 

at § 303.203 of the FDIC’s regulations,89

and by FDI Act section 18(i), 

implemented at § 303.241 of the FDIC’s 

regulations. 

The application requirements of 

§ 303.203 are analogous to those 

imposed on State savings associations 

by § 390.345(a)(3), as both sections 

require applications to the FDIC in cases 

where an institution would be 

undercapitalized following a capital 

distribution, as mandated by section 38 

of the FDI Act. Because section 38 

prohibits capital distributions in cases 

where an insured depository institution 

would be undercapitalized, the 

substantive requirements of 

§ 390.345(a)(3) would be preserved by 

making § 303.203 applicable to State 

savings associations. Accordingly, the 

FDIC proposes to rescind and remove 

§ 390.345(a)(3) and, as noted above, the 

FDIC also proposes to amend § 303.241 

so that it applies to State savings 

associations. This proposal would 

preserve the regulatory consideration 

that is required under section 38 and 

would provide for consistency of 

treatment between State nonmember 

banks and State savings associations 

with respect to capital distributions. 

The application requirements of 

§ 303.241 are analogous to the notice 

requirements imposed on State savings 

associations by § 390.345(b)(2), as both 

sections require regulatory 

consideration of transactions that would 


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90State savings associations also may be subject 

to capital distribution requirements or restrictions 

under applicable state law or as required by the 

appropriate State supervisor. 

91 12 CFR 390.346. 

92 12 CFR 390.347. 

93See 12 CFR 303.203(b) and 12 CFR 303.241(e). 

94 12 CFR 390.348(a). This statutory exception 

under section 38(d)(1)(B) authorizes the FDIC to 

permit a capital distribution that would otherwise 

be prohibited by section 38 if such a distribution 

is made in connection with the issuance of 

additional shares of obligations and would reduce 

the institution’s financial obligations or otherwise 

improve the institution’s financial condition. 12 

U.S.C. 1831o(d)(1)(B). 

95The statutory factors of section 18(i)(4): (A) The 

financial history and condition of the institution; 

(B) the adequacy of its capital structure; (C) its 

future earnings prospects; (D) the general character 

and fitness of its management; (E) the convenience 

and needs of the community to be served; and (F) 

whether or not its corporate powers are consistent 

with the purposes of the FDI Act. 12 U.S.C. 

1828(i)(4). 

96 12 U.S.C. 1463(a). 

97 12 U.S.C. 1831p–1. 

reduce or retire common or preferred 

stock or capital notes or debentures. 

Although § 303.241 implements section 

18(i) of the FDI Act, which applies by 

its terms only to State nonmember 

banks, the FDIC believes that it would 

be advisable to use its authority under 

section 39 to maintain a regulatory filing 

requirement for a capital distribution by 

a State savings association that would 

reduce or retire the association’s capital. 

Accordingly, the FDIC proposes to 

rescind and remove § 390.345(b)(2) and, 

as noted above, the FDIC also proposes 

to amend § 303.241 so that it applies to 

State savings associations. Doing so 

would preserve the regulatory 

consideration that applies to reductions 

or retirements of capital by State savings 

associations, and would achieve 

consistency of treatment between State 

nonmember banks and State savings 

associations with respect to capital 

distributions. 

The FDIC proposes to rescind and 

remove § 390.345 in its entirety, which 

would effectively eliminate application 

requirements for capital distributions in 

cases where: A State savings association 

is not eligible for expedited processing 

under § 390.101; the total amount of all 

capital distributions by a State savings 

association for the applicable calendar 

year exceeds the association’s net 

income for that year to date plus 

retained net income for the preceding 

two years; and where a State savings 

association’s proposed capital 

distribution would violate a prohibition 

contained in any applicable statute, 

regulation, or agreement with the FDIC, 

or violate a condition imposed on the 

State savings association in an FDICapproved application or notice. The 

rescission and removal of § 390.345 

would also effectively eliminate the 

notice requirements for capital 

distributions in cases where a State 

savings association would not be well 

capitalized following the distribution. 

The FDIC believes that making 

§§ 303.203 and 303.241 applicable to 

State savings associations would 

preserve adequate regulatory 

consideration over capital distributions 

by State savings associations, and 

therefore proposes to rescind and 

remove § 390.345 in order to achieve 

consistency of treatment between State 

nonmember banks and State savings 

associations with respect to capital 

distributions.90

7. 12 CFR 390.346—How do I file with 

the FDIC? 

Section 390.346 provides filing 

instructions for capital distributions that 

are subject to application or notice 

requirements under § 390.345, including 

instructions concerning a filing’s 

content, schedules, and timing.91

Because the FDIC proposes to rescind 

and remove § 390.345, these provisions 

would no longer be applicable. 

Therefore, the FDIC proposes to rescind 

and remove § 390.346. As described 

above, the FDIC also proposes to make 

§§ 303.203 and 303.241 applicable to 

State savings associations, and both of 

these sections set forth requirements 

related to the content of filings. 

Furthermore, certain rules of general 

applicability, including those related to 

processing, are set forth in subpart A of 

part 303 of the FDIC’s regulations and 

would apply to filings made by State 

savings associations under §§ 303.203 

and 303.241. 

8. 12 CFR 390.347—May I combine my 

notice or application with other notices 

or applications? 

Section 390.347 authorizes a State 

savings association to combine a notice 

or application required under § 390.345 

with another related notice or 

application.92 Because the FDIC 

proposes rescinding § 390.345, these 

provisions would no longer be 

applicable. Therefore, the FDIC 

proposes to rescind and remove 

§ 390.347. As noted above, by making 

State savings associations subject to 

§§ 303.203 and 303.241, as proposed, 

State savings associations should file 

applications that are subject to both 

sections as a single filing or 

concurrently with other filings.93

9. 12 CFR 390.348—Will the FDIC 

permit my capital distribution? 

Section 390.348 sets forth the bases 

on which the FDIC may deny, in whole 

or in part, a notice or application filed 

under § 390.345. Section 390.348(a) 

states that if a State savings association 

would be undercapitalized, significantly 

undercapitalized, or critically 

undercapitalized following a capital 

distribution, the FDIC will determine if 

the distribution would be permitted 

under the exemption authorized in 

section 38(d)(1)(B) of the FDI Act.94

Section 390.348(b) states that the FDIC 

may deny a notice or application for a 

capital distribution that raises safety 

and soundness concerns. Section 

390.348(c) states that the FDIC may 

deny a capital distribution if it would 

violate a prohibition contained in any 

statute, regulation, or condition 

imposed on the applicant State savings 

association. Because the FDIC proposes 

to rescind and remove § 390.345, these 

provisions would no longer be 

applicable. Furthermore, the statutory 

exception that applies to capital 

distributions subject to section 38 

would continue to apply to capital 

distributions by State savings 

associations that are subject to section 

38. In addition, because the proposal 

would make reductions or retirements 

of capital by State savings associations 

subject to the application requirements 

of § 303.241, the FDIC would evaluate 

such applications in light of the 

statutory factors enumerated in section 

18(i)(4) of the FDI Act, and the bases 

identified in §§ 390.348(b) and 

390.348(c) would be preserved insofar 

as they would be inherent in how the 

FDIC would review applications in light 

of the statutory factors of section 

18(i)(4).95 For these reasons, the FDIC 

proposes to rescind and remove 

§ 390.348 in its entirety. 

N. 12 CFR 390.349—Management and 

Financial Policies 

Section 390.349 implements the 

statutory requirement of section 4 of 

HOLA. That section requires each State 

savings association to be operated in a 

safe and sound manner and encourages 

State savings associations to provide 

credit for housing safely and soundly.96

In particular, § 390.349 includes explicit 

safety and soundness requirements 

relating to liquidity and compensation 

to officers, directors, employees, and 

consultants. Section 39 of the FDI Act,97

requires the Federal banking agencies to 

prescribe safety and soundness 

standards for internal controls, 

information systems, and internal audit 

systems; loan documentation; credit 

underwriting; interest rate exposure; 

asset growth; compensation, fees, and 


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98 12 CFR 364.101. In 2015, 12 CFR 364.101 was 

amended to apply to both state nonmember banks 

and state savings associations. See Removal of 

Transferred OTS Regulations Regarding Safety and 

Soundness Guidelines and Compliance Procedures; 

Rules on Safety and Soundness, 80 FR 65903 (Oct. 

28, 2015). 

99 12 U.S.C. 1820. 

100 12 U.S.C. 1463. 

101Public Law 101–73, 103 Stat. 183; codified at 

12 U.S.C. 3331 et seq. 

102Section 390.350(b) contains a cost allocation 

provision and a timeframe within which appraisals 

must be provided. These provisions are 

unnecessary because it is unlikely that the FDIC 

would purchase an appraisal and seek 

reimbursement. If the FDIC determines that an 

appraisal is needed, it will be made in a supervisory 

recommendation in a report of examination and the 

response time would be requested in the report 

transmittal letter or the request would be made as 

part of an enforcement action with a required 

timeframe. 

103See the section entitled ‘‘Preparation of the 

Reports’’ contained in the General Instructions 

portion of Call Report Instructions for the FFIEC 

031, 041 and 051 Report Forms and the section 

entitled ‘‘Preparation of Information to be 

Reported’’ in the General Instructions portion of the 

Report of Assets and Liabilities of U.S. Branches 

and Agencies of Foreign Banks (FFIEC 002 Report 

Form). 

104 12 U.S.C. 1831(n); See the section entitled 

‘‘Applicability of U.S. Generally Accepted 

Accounting Principles to Regulatory Reporting 

Requirements’’ contained in the General 

Instructions portion of Call Report Instructions for 

the FFIEC 031, 041 and 051 Report Forms and the 

section entitled ‘‘Accounting Basis’’ in the General 

Instructions portion of the FFIEC 002 Report Form. 

105 12 CFR 364.101. Part 364 and its appendices 

implement section 39(a) of the FDI Act. 12 U.S.C. 

1831p–1. Taken together, part 364 and Appendix A 

reflect the FDIC’s longstanding expectations for all 

prudently managed FDIC-supervised institutions 

while generally leaving the specific methods of 

achieving these objectives to each institution. 

106 12 CFR part 364, App. A, § II. 

benefits; and such other operational and 

managerial standards as the agency 

determines to be appropriate. To this 

end, the FDIC has adopted part 364 and 

the related appendices. Part 364 

establishes compensation-related 

standards and provides for other safetyand soundness-related guidelines which 

apply to all insured State nonmember 

banks, to state-licensed insured 

branches of foreign banks, and to State 

savings associations.98 As such, the 

safety and soundness standards in 

§ 390.349 are generally duplicative of 

the standards implemented through part 

364. To ensure consistent treatment of 

State nonmember banks and State 

savings associations, FDIC staff 

proposes to eliminate the distinct safety 

and soundness requirements for State 

savings associations found in § 390.349, 

because part 364, as amended, provides 

consistent safety and soundness 

standards for both State nonmember 

banks and State savings associations. 

These standards help to ensure that 

State savings associations are operated 

in a safe and sound manner, enabling 

them to provide credit for housing 

safely and soundly. For these reasons, 

the FDIC proposes to rescind and 

remove § 390.349. 

O. 12 CFR 390.350—Examinations and 

Audits; Appraisals; Establishment and 

Maintenance of Records 

Section 390.350 contains 

requirements regarding examinations, 

appraisals, establishing and maintaining 

books and records, and using data 

processing services for maintenance of 

records. The proposed rule would 

rescind and remove all of § 390.350. The 

FDIC believes that examination and 

appraisal requirements should be 

consistent between State savings 

associations and State nonmember 

banks because they are based on the 

same or similar statutory authority, as 

described below. 

Section 390.350(a) states that each 

State savings association and affiliate 

will be examined periodically and may 

be examined anytime by the FDIC and 

that appraisals may be required as part 

of the examination. Section 337.12 

states that the FDIC examines State 

nonmember banks pursuant to section 

10 of the FDI Act,99 State savings 

associations pursuant to section 10 of 

the FDI Act and section 4 of HOLA,100

and implements the frequency of 

examinations specified by section 10 for 

insured depository institutions, 

including State savings associations. 

Because the examination requirements 

of §§ 390.350(a) and 337.12 are similar 

and both based on section 10 of the 

FDIA, the FDIC proposes to rescind 

§ 390.350(a). 

Section 390.350(a) allows the FDIC to 

require an appraisal during an 

examination if it is deemed advisable. 

Section 390.350(b) permits the FDIC to 

select appraisers in connection with an 

examination, requires State savings 

associations to pay for such an 

appraiser, and mandates that the FDIC 

furnish the appraisal report to the State 

savings association within 90 days 

following the filing of the report to the 

FDIC. Part 323 of the FDIC’s regulations 

implements Title XI of FIRREA,101

which requires written appraisals in 

connection with certain federally 

related transactions entered into by 

institutions regulated by the FDIC. 

Section 323.3(c), which applies to all 

FDIC-supervised institutions, including 

State savings associations, allows the 

FDIC to require an appraisal whenever 

the agency believes it is necessary to 

address safety and soundness concerns, 

which would include during an 

examination. The FDIC believes the 

appraisal provisions of § 390.350(a) and 

(b) are unnecessary because they are 

duplicative of the FDIC’s reservation of 

authority found in § 323.3(c), which 

allows the FDIC to require an appraisal 

whenever the agency believes it is 

necessary to address safety and 

soundness concerns.102

Section 390.350(c) requires each State 

savings association and its affiliates to 

establish and maintain such accounting 

and other records as will provide an 

accurate and complete record of all 

business it transacts to enable the 

examination of the State savings 

association and its affiliates by the 

FDIC. The documents, files, and other 

material or property comprising said 

records shall at all times be available for 

such examination and audit wherever 

any of said records, documents, files, 

material, or property may be. 

State savings associations are already 

subject to other FDIC regulations that 

achieve the purposes of § 390.350(c). 

For example, as recognized by § 304.3 of 

the FDIC’s regulations, all insured 

depository institutions, including State 

savings associations, are required to file 

quarterly Consolidated Reports of 

Condition and Income (Call Reports). 

Under § 304.3(a), all insured depository 

institutions must prepare the Call 

Report in accordance with the 

instructions for the report (Call Report 

Instructions), which in turn require the 

institutions to maintain their business 

records in a manner that supports and 

reconciles to the contents of the Call 

Report.103 In addition, portions of the 

Call Report also are required to be 

prepared in accordance with GAAP.104

In addition, all State savings 

associations and other FDIC-supervised 

institutions are subject to 12 CFR part 

364 (including its Appendix A).105 This 

part requires FDIC-supervised 

institutions to have internal controls 

and information systems that are 

appropriate to their size and the risks 

posed by their activities and that 

provide for, among other things: ‘‘timely 

and accurate financial, operational and 

regulatory reports.’’ 106 Because accurate 

and complete business records are the 

very foundation of accurate regulatory 

and financial reporting, State savings 

associations must, therefore, maintain 

accurate and complete records of their 

business transactions supporting, and 

readily reconcilable to, the associations’ 

regulatory and financial reports. In the 

event an FDIC-supervised institution 

fails to create and maintain the required 

internal controls and information 

systems, the FDIC may require the 

institution to submit a safety and 


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107See 12 U.S.C. 1831p–1(e); 12 CFR 308.300, et 

seq.; 12 CFR part 364, App. A. 

108 12 U.S.C. 1867. 

109 12 U.S.C. 1831e(a). 110See 12 CFR 362.9–.15. 111See 12 CFR 362.9(a). 112See 12 CFR 163.172. 113The SAIF provided deposit insurance to 

depositors of federally insured savings associations 

until it was merged into the Bank Insurance Fund 

(BIF), which similarly insured depositors of 

federally insured banks. The merged fund, the 

Deposit Insurance Fund (DIF) became effective on 

March 31, 2006, consistent with § 2102(a) of the 

Federal Deposit Insurance Reform Act of 2005. As 

a result of this action, both the SAIF and BIF were 

abolished. See 49 FR 19307 (May 7, 1984) 

(proposed rule); 49 FR 27295 (July 3, 1984) (final 

rule). 

114 54 FR 49411 (Nov. 30, 1989). 

115 12 CFR part 364, App. A, § II.E. 

116Section 305 of FDICIA required the Federal 

banking agencies to revise their risk-based capital 

standards to take into account interest rate risk. See 

12 U.S.C. 1828 nt.; see also 12 CFR 324.63, Table 

10; 12 CFR 324.173, Table 12. 

117 12 CFR 326.8, 326.1(a). 

soundness plan designed to correct the 

deficiencies and, if necessary, compel 

compliance by means of order.107

Section 390.350(d) prohibits State 

savings associations from transferring 

the location of any of its general 

accounting or control records, or the 

maintenance thereof, from its home 

office to a branch or service office, or 

from a branch or service office to its 

home office or to another branch or 

service office unless prior to the date of 

transfer its board of directors has 

authorized the transfer by resolution 

and notified the appropriate regional 

director. The FDIC has not promulgated 

a similar rule for State nonmember 

banks. Generally, state laws or 

regulations of the state chartering 

authority provide for the location of 

records. The FDIC generally conducts 

examinations at the home office of 

FDIC-supervised institutions and 

requires that records be produced upon 

request in connection with any 

examination or investigation under 

section 10(c) or section 8(n) of the FDI 

Act. The removal of § 390.350(d) will 

provide relief to State savings 

association by not having to notify the 

appropriate regional director of its 

intention to relocate records from its 

home office to a branch or service office 

and will provide parity with State 

nonmember banks which do not provide 

the FDIC with prior notification of 

transferring records from one location to 

another. 

Section 390.350(e) requires that when 

a State savings association maintains 

any of its records by means of data 

processing services, it will notify the 

appropriate regional director for the 

region in which the principal office of 

such State savings association is 

located, in writing, at least 90 days prior 

to the date on which such maintenance 

of records will begin. Section 304.3(d), 

implementing section 7 of the Bank 

Service Company Act,108 already 

requires FDIC-supervised institutions, 

including State savings associations, to 

notify the FDIC about the existence of a 

service relationship within thirty days 

after the making of the contract or the 

performance of the service and provides 

for the required information either 

through a letter or FDIC Form 6120/06 

Notification of Performance of Bank 

Services. The removal of § 390.350(e) 

will eliminate conflicting requirements 

on State savings associations with 

respect to Section 7 of the Bank Service 

Company Act. 

For the foregoing reasons, the FDIC 

proposes to rescind and remove 

§ 390.350 in its entirety. 

P. 12 CFR 390.352—Financial 

Derivatives 

Section 390.352 addresses the 

permissibility of financial derivatives 

transactions, the responsibility of the 

board of directors and management of a 

State savings association with respect to 

such transactions, and recordkeeping 

requirements related to such 

transactions. The FDIC proposes to 

rescind and remove § 390.352 for the 

reasons discussed below. 

Section 28(a) of the FDI Act,109

implemented by part 362 of the FDIC’s 

regulations,110 restricts and prohibits 

State savings associations and their 

service corporations from engaging in 

activities and investments of a type that 

are not permissible for a Federal savings 

association and its service corporations. 

The term ‘‘activities permissible for a 

Federal savings association’’ means, 

among other things, activities 

recognized as permissible in OCC 

regulations.111 Section 163.172 of the 

OCC’s regulations governs the financial 

derivatives activities of Federal savings 

associations, the responsibility of the 

board of directors and management of a 

Federal savings association with respect 

to such transactions, and recordkeeping 

requirements related to such 

transactions.112 Because section 28(a) of 

the FDI Act and part 362 permit a State 

savings association to engage in 

financial derivatives activities to the 

same extent permitted by the OCC with 

respect to a Federal savings association, 

the FDIC proposes to rescind and 

remove § 390.352. 

Q. 12 CFR 390.353—Interest-Rate-RiskManagement Procedures 

Former FHLBB rules 12 CFR 571.3 

and 563.17–6, respectively, were 

intended to support responsible risk 

management within the industry, to 

facilitate the examination process, and 

to assess and reduce the impact of 

interest rate risk on the former Savings 

Association Insurance Fund (SAIF).113

The OTS redesignated § 563.17–6 as 12 

CFR 563.176.114 When the rule was 

transferred from the former OTS to the 

FDIC, the FDIC redesignated it as 12 

CFR 390.353. 

Section 390.353 requires the board of 

directors or a board committee of a State 

savings association to develop, 

implement, and review policies and 

procedures for the management of a 

State savings association’s interest-raterisk; requires the association’s 

management to report periodically to 

the board regarding implementation of 

the policy; and requires the 

association’s board of directors to adjust 

the policy as necessary, including 

adjustments to the authorized 

acceptable level of interest rate risk. For 

the reasons below, the FDIC proposes to 

rescind and remove § 390.353. 

As mentioned above, the Interagency 

Safety and Soundness Guidelines, 

promulgated pursuant to section 39 of 

the FDI Act, describe examples of safe 

and sound practices for State 

nonmember banks and State savings 

associations. The guidelines suggest that 

an institution ‘‘should manage interest 

rate risk in a manner that is appropriate 

to its size and the complexity of its 

assets and liabilities’’.115 Management 

and the board of directors should be 

provided reports regarding interest rate 

risk that are adequate to assess the level 

of risk. There is no reason to have an 

additional set of similar standards 

applicable only to State savings 

associations.116

R. 12 CFR 390.354—Procedures for 

Monitoring BSA Compliance 

Section 390.354 requires State savings 

associations to establish and maintain a 

Bank Secrecy Act (BSA) compliance 

program and a customer identification 

program. Section 390.354 also 

enumerates the four pillars required for 

a BSA compliance program. Similarly, 

§ 326.8 of the FDIC’s regulations 117

requires insured depository institutions 

for which the FDIC is the appropriate 

Federal banking agency to establish a 

BSA compliance program to include the 

same four pillars and a customer 

identification program. The proposed 

rule would rescind § 390.354 and make 

technical changes to § 326.8, which is 

currently only applicable to insured 

depository institutions for which the 


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118 12 CFR 326.8 is applicable to ‘‘all insured 

nonmember banks as defined in 12 CFR 326.1.’’ 

Section 326.1 was revised to remove the definition 

of ‘‘insured nonmember bank’’ and replace it with 

the term ‘‘FDIC-supervised institution’’ or 

‘‘institution’’, defined to mean any insured 

depository institution for which the FDIC is the 

appropriate Federal banking agency pursuant to 

section 3(q) of the FDI Act (12 U.S.C. 1813(q). 83 

FR 13839, 13842 (April 2, 2018). 

119 12 CFR 326.0–326.4 

120 83 FR at 13842–3. 

121 12 CFR 326.1 (2019). 

122The FDIC also proposes to amend the 

definition in 12 CFR 326.1 to apply to all entities 

for which the FDIC is the appropriate Federal 

banking agency pursuant to section 3(q) of the FDI 

Act. This revision would clarify that foreign banks 

having a State-chartered insured branch are also 

subject to part 326 of the FDIC’s regulations. This 

change is not substantive because the term ‘‘insured 

depository institution’’ already includes insured 

branches. See 12 U.S.C. 1813(a)(1), (c)(2), and (s)(3). 

123 12 U.S.C. 1464(v)(1). Although 12 U.S.C. 1464 

is titled ‘‘Federal savings associations’’, section 

1464(v) describes the reporting obligations of 

‘‘[e]ach association’’ and refers to the requirements 

of the ‘‘appropriate Federal banking agency’’ rather 

than only the OCC. The FDIC is the appropriate 

Federal banking agency for State savings 

associations. 12 U.S.C. 1813(q). 

124 12 U.S.C. 1817(a)(3). 

125 12 U.S.C. 1831m. 

126 12 CFR part 363. 

127 12 U.S.C. 1831n. 

FDIC is the appropriate Federal Banking 

agency.118

Section 390.354(a) states that the 

purpose of the regulation is to require 

State savings associations to establish 

and maintain procedures reasonably 

designed to assure and monitor 

compliance with the requirements of 

subchapter II of chapter 53 of title 31, 

United States Code, and the 

implementing regulations promulgated 

thereunder by the U.S. Department of 

the Treasury, 31 CFR part 103 (now 

superseded by 31 CFR chapter X), 

commonly referred to as the Bank 

Secrecy Act. Similarly, § 326.8(a) 

requires that all insured depository 

institutions for which the FDIC is the 

appropriate Federal banking agency 

establish and maintain procedures 

reasonably designed to assure and 

monitor their compliance with the same 

laws and regulations. 

Section 390.354(b) discusses the 

establishment of a BSA compliance 

program. Subparagraph (b)(1) states that 

State savings association shall develop 

and provide for the continued 

administration of a program reasonably 

designed to assure and monitor 

compliance with the recordkeeping and 

reporting requirements of the BSA. The 

compliance program must be written, 

approved by the State savings 

association’s board of directors, and 

reflected in the minutes of the State 

savings association. Subparagraph (b)(2) 

states that each State savings association 

is subject to the requirements of 31 

U.S.C. 5318(l) and its implementing 

regulations, which require the 

implementation of a customer 

identification program. Similarly, 

§ 326.8(b)(1) requires that all insured 

depository institutions for which the 

FDIC is the appropriate Federal banking 

agency have a written BSA compliance 

program, approved by the board of 

directors, and reflected in the board 

minutes. Section 326.8(b)(2) also 

requires all insured depository 

institutions for which the FDIC is the 

appropriate Federal banking agency to 

have a customer identification program. 

Section 390.354(c) states that a BSA 

compliance program shall: Provide for a 

system of internal controls; provide for 

independent testing; designate 

individual(s) responsible for BSA 

compliance; and provide training. Like 

§ 390.354, § 326.8(c) requires that all 

insured depository institutions for 

which the FDIC is the appropriate 

Federal banking agency have these same 

BSA compliance program components. 

Effective May 2, 2018, the FDIC 

amended §§ 326.0–326.4 119 and 

rescinded the corresponding OTS 

regulations.120 As of this date, the 

recently amended § 326.1 121 defines 

both ‘‘FDIC-supervised insured 

depository institution’’ and 

‘‘institution’’ as any insured depository 

institution for which the FDIC is the 

appropriate Federal banking agency 

pursuant to 12 U.S.C. 1813(q)(2). 

The proposed rule would amend 

§ 326.8 to include both insured State 

savings associations and State 

nonmember banks for all of § 326.8 by 

replacing the terms ‘‘insured 

nonmember bank’’ and ‘‘bank’’ currently 

in § 326.8 with the term ‘‘FDIC 

supervised institution’’ or ‘‘institution.’’ 

Having made the technical amendment 

to § 326.8, § 390.354 will be duplicative 

and the FDIC proposes to rescind and 

remove § 390.354.122

S. 12 CFR 390.355—Suspicious Activity 

Reports and Other Reports and 

Statements 

In order to streamline FDIC 

regulations and reduce regulatory 

burden, the FDIC proposes to rescind 

and remove § 390.355 because it is 

unnecessary, redundant, and 

duplicative. In addition, the FDIC 

proposes to make conforming changes to 

§§ 353.1 and 353.3 to make part 353 of 

the FDIC’s regulations applicable to all 

FDIC-supervised institutions. 

Section 390.355 requires State savings 

associations and service corporations to 

make certain reports. Specifically, 

subsection 390.355 (a) requires State 

savings associations to make periodic 

reports to the FDIC in such a manner 

and on such forms as the FDIC may 

prescribe. Subsection 390.355(b) 

prohibits State savings associations from 

making false or misleading statements 

or omissions. Subsection 390.355(c) 

requires a State Savings association 

maintaining bond insurance coverage to 

promptly notify its carrier and file a 

proof of loss concerning any covered 

losses more than twice the deductible 

amount. Subsection 390.355(d) requires 

State savings associations to file a 

Suspicious Activity Report (‘‘SAR’’) 

when they detect a known or suspected 

violation of Federal law or a suspicious 

transaction related to a money 

laundering activity or a violation of law 

or regulation. Subsection 390.355(e) 

requires State savings associations 

within the jurisdiction of a Federal 

Home Loan Bank (FHLB) to provide 

data from the Consolidated Reports of 

Condition or Income (Call Report) upon 

the request of the FHLB. 

1. § 390.355(a) Periodic Reports 

Section 390.355(a) requires State 

savings associations to make such 

periodic or other reports to the FDIC in 

the manner and on the forms the FDIC 

requires. The FDIC may provide that 

reports filed for other purposes may also 

satisfy requirements imposed under 

§ 390.355. 

There are a number of Federal statutes 

that require reporting by State savings 

associations. For example, section 5 of 

HOLA requires ‘‘each association to 

make reports of conditions to the 

appropriate Federal banking agency 

which shall be in a form prescribed by 

the appropriate Federal banking agency 

. . . .’’ and sets forth the type of 

information such reports shall 

contain.123 Section 7(a)(3) of the FDI Act 

requires all insured depository 

institutions to make four annual reports 

of condition to their appropriate Federal 

banking agency.124 In addition, section 

36 of the FDI Act 125 and the FDIC’s 

implementing regulations at part 363 126

require insured depository institutions 

above a specified asset threshold to have 

annual independent audits and to 

submit annual reports and audited 

financial statements to the FDIC. 

Section 37 of the FDI Act requires 

financial statements, capital standards, 

and other reports provided to the FDIC 

to be prepared in a manner consistent 

with generally accepted accounting 

procedures.127 Finally, The Interagency 

Policy Statement on External Audit 

Programs of Banks and Savings 


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128See FIL–96–99 (Oct. 25, 1999); 64 FR 57094 

(Oct. 22, 1999). 

129 18 U.S.C. 1001(a)(2) (up to 8 years if the 

offense involves terrorism). 

130See 12 U.S.C. 5412(b)(2)(B)(i)(II). 

131 76 FR 49047 (Aug. 9, 2011). 

132The FDIC is the ‘‘appropriate Federal banking 

agency’’ for any State savings association. See 12 

U.S.C. 1813(q). 

133 12 U.S.C. 1818. 

134See 12 U.S.C. 1816; FDIC Statement of Policy 

on Applications for Deposit Insurance, 63 FR 44756 

(Aug. 20, 1998), amended at 67 FR 79278 (Dec. 27, 

2002), available at https://www.fdic.gov/ 

regulations/laws/rules/5000-3000.html. 

135See Statement of Policy on Applications for 

Deposit Insurance, supra note 134 (‘‘An insured 

depository institution should maintain sufficient 

fidelity bond coverage on its active officers and 

employees to conform with generally accepted 

industry practices. Primary coverage of no less than 

$1 million is ordinarily expected. Approval of the 

application may be conditioned upon acquisition of 

adequate fidelity coverage prior to opening for 

business.’’). 

136Minimum Security Devices and Procedures, 

Reports of Suspicious Activities, and Bank Secrecy 

Act Compliance Program, 61 FR 4332 (Feb. 5, 1996). 

137Membership of State Banking Institutions in 

the Federal Reserve System; International Banking 

Operations; Bank Holding Companies and Change 

in Control; Reports of Suspicious Activities Under 

Bank Secrecy Act, 61 FR 4338 (Feb. 5, 1996). 

138Suspicious Activity Reports, 61 FR 6095 (Feb. 

16, 1996). 

139Amendment to the Bank Secrecy Act 

Regulations; Requirement to Report Suspicious 

Transactions, 61 FR 4326 (Feb. 5, 1996). 

Associations 128 provides unified 

interagency guidance regarding 

independent external auditing programs 

of insured depository institutions that 

community banks and savings 

associations that do not have to comply 

with part 363 (because they do not meet 

the size threshold) or that are not 

otherwise subject to audit requirements 

by order, agreement, statute, or FDIC 

regulations. 

For these reasons, § 390.355(a) is not 

necessary and the FDIC proposes that it 

be rescinded and removed. 

2. § 390.355(b) False or Misleading 

Statements or Omissions 

Section 390.355(b) prohibits State 

savings associations from making false 

or misleading statements or omissions 

to the FDIC and to auditors of State 

savings associations. 

By statute, whoever makes any 

materially false, fictitious, or fraudulent 

statement or representation in a matter 

involving the executive branch of the 

U.S. government, is subject to 

imprisonment for up to five years.129

In addition, the OCC has promulgated 

a rule on this topic applicable to all 

savings associations, Federal or State. 

The Dodd-Frank Act provided the OCC 

with rulemaking authority relating to 

both State and Federal savings 

associations.130 On August 9, 2011, the 

OCC published in the Federal Register 

a final rule that contained a provision, 

12 CFR 163.180(b), that is substantially 

similar to § 390.355(b) and that applies 

to both State and Federal savings 

associations.131 It prohibits all savings 

associations from knowingly making 

false or misleading statements to their 

‘‘appropriate Federal banking agency’’ 

and to those auditing the institution.132

The OCC’s prohibition at § 163.180(b) 

effectively prohibits a State savings 

association from making false or 

misleading statements to the FDIC or to 

any party auditing or preparing or 

reviewing its financial statements. 

Because the prohibition contained in 

the OCC’s regulation is applicable to all 

savings associations and is substantially 

similar to the rule found at § 390.355(b), 

and enforceable by the FDIC pursuant to 

section 8 of the FDI Act,133 the FDIC has 

concluded that § 390.355(b) is 

duplicative and unnecessary, and the 

FDIC proposes to rescind and remove 

this section. 

3. § 390.355(c) Notifications of Loss and 

Reports of Increase in Deductible 

Amount of Bond 

Subsection 390.355(c) requires a State 

Savings association maintaining bond 

insurance coverage to promptly notify 

its carrier and file a proof of loss 

concerning any covered losses more 

than twice the deductible amount. The 

FDIC generally requires fidelity bond 

insurance for insured depository 

institutions and considers whether 

fidelity bond insurance is in place when 

analyzing the general character and 

fitness of the management of a de novo 

financial institution applying for 

deposit insurance.134 However, the 

FDIC does not otherwise impose a 

reporting requirement such as the one 

contained in § 390.355(c).135 Staff was 

unable to find a provision of State law 

or in the regulations of any Federal 

banking agency containing a 

prescriptive filing requirement such as 

that contained in § 390.355(c). 

Therefore, on the basis of parity and 

reduction of the regulatory burden for 

State savings associations, the FDIC 

proposes to rescind and remove 

§ 390.355(c). 

4. § 390.355(d) Suspicious Activity 

Reports 

Subsection 563.180(d) was transferred 

to the FDIC and redesignated as 

subsection 390.355(d). The section, 

which regulates SARs, was enacted in 

concert with the other Federal banking 

agencies, including the OCC,136 the 

FRB,137 and the FDIC,138 as well as the 

Financial Crimes Enforcement Network 

(FinCEN).139 These entities issued 

substantially similar proposals, which 

became effective on April 1, 1996. The 

purpose of the OTS’s regulation was to 

revise its rule on the reporting of known 

or suspected criminal conduct and 

suspicious activities by the savings 

associations under its supervision. The 

final rule developed a single form, the 

SAR, for reporting known or suspected 

Federal criminal law violations and 

transactions that an institution suspects 

involve money laundering or violates 

the BSA. 

Paragraph (1) of § 390.355(d) states 

that the purpose and scope of the 

subsection is to ensure that State 

savings associations and service 

corporations file a SAR when they 

detect a known or suspected violation of 

Federal law or a suspicious transaction 

related to a money laundering activity 

or a violation of the BSA. Similarly, 

§ 353.1 of the FDIC regulations states 

that its purpose is to ensure that all 

insured State nonmember banks file a 

SAR pursuant to the same laws and 

regulations. 

Paragraph (2) of subsection 390.355(d) 

is a definition section similar to the 

definitional section contained in § 353.2 

of the FDIC’s regulations. 

Paragraph (3) of subsection 390.355(d) 

enumerates the four instances when a 

State savings association must file a 

SAR with FinCEN: (1) Insider abuse 

involving any amount; (2) violations 

aggregating $5,000 or more where a 

suspect can be identified; (3) violations 

aggregating $25,000 or more regardless 

of potential suspects; and (4) 

transactions aggregating $5,000 or more 

that involve potential money laundering 

or violations of the Bank Secrecy Act. 

Similarly, § 353.3 of the FDIC’s 

regulations requires State nonmember 

banks to file SARs with FinCEN in the 

same four instances. 

Paragraph (4) of subsection 390.355(d) 

is reserved. 

Paragraph (5) of subsection 390.355(d) 

states the time by which a State savings 

association is required to file a SAR in 

various circumstances after the date of 

initial detection of facts that may 

constitute a basis for filing a SAR. 

Similarly, § 353.3(b) requires State 

nonmember banks to file SARs with 

FinCEN within the same time limits. 

Paragraph (6) of subsection 390.355(d) 

encourages State savings associations to 

file a copy of the SAR with state and 

local law enforcement agencies where 

appropriate. Similarly, § 353.3(c) 

encourages State nonmember banks to 

file a copy of the SAR with state and 

local law enforcement agencies where 

appropriate. 

Paragraph (7) of subsection 390.355(d) 

indicates that a State savings association 


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140See 12 U.S.C. 1818. 

141See https://bsaefiling.fincen.treas.gov/ 

main.html. 

142See 12 U.S.C. 1437 nt. 

143See 12 U.S.C. 5412(b)(2)(B)(i)(II). 

144 76 FR 49047 (Aug. 9, 2011). 

145 12 CFR 163.180(e). 

need not file a SAR for a robbery or 

burglary committed or attempted that is 

reported to appropriate law enforcement 

authorities. Similarly, § 353.3(d) directs 

that State nonmember banks need not 

file a SAR for a robbery or burglary 

committed or attempted that is reported 

to appropriate law enforcement 

authorities. 

Paragraph (8) of subsection 390.355(d) 

states that a State savings association 

shall maintain a copy of any SAR filed 

along with supporting documentation 

for five years and shall make the 

supporting documentation available to 

appropriate law enforcement agencies 

upon request. Similarly, § 353.3(e) 

directs a State nonmember banks to 

maintain a copy of any SAR filed and 

supporting documentation for five years 

and to make supporting documentation 

available to appropriate law 

enforcement agencies upon request. 

Paragraph (9) of subsection 390.355(d) 

states that the management of a State 

savings association shall promptly 

notify its board of directors, or a 

committee of directors or executive 

officers designated by the board of 

directors to receive notice of a SAR 

filing. Similarly, § 353.3(f) directs that 

State nonmember banks shall promptly 

notify its board of directors, or a 

committee thereof, to receive notice of 

a SAR filing. 

Paragraph (9) of subsection 390.355(d) 

also states that if the subject of the SAR 

is a director or executive officer, the 

State savings association may not notify 

the suspect, pursuant to 31 U.S.C. 

5318(g)(2), but shall notify all directors 

who are not suspects. In this 

circumstance, § 353.3 does not have 

analogous language; however, the FDIC 

relies on 31 U.S.C. 5813(g)(2) to achieve 

the same purpose. That section states: 

Reporting of suspicious transactions . . . 

(2) Notification prohibited (A) In general. If 

a financial institution or any director, officer, 

employee, or agent of any financial 

institution, voluntarily or pursuant to this 

section or any other authority, reports a 

suspicious transaction to a government 

agency (i) neither the financial institution, 

director, officer, employee, or agent of such 

institution (whether or not any such person 

is still employed by the institution), nor any 

other current or former director, officer, or 

employee of, or contractor for, the financial 

institution or other reporting person, may 

notify any person involved in the transaction 

that the transaction has been reported. . . . 

Paragraph (10) of subsection 

390.355(d) states that a State savings 

association’s failure to file a SAR in 

accordance with this section may 

subject the State savings association, its 

directors, officers, employees, agents, or 

other institution-affiliated parties to 

supervisory action. In this circumstance, 

§ 353.3 does not have analogous 

language. Although § 353.3 does not 

explicitly provide a remedy for failure 

to file a SAR, the FDIC has enforcement 

authority for violations of law or 

regulation.140 Therefore, the FDIC is 

proposing to remove subsection 

390.355(d)(10) in its entirety because it 

is unnecessary. 

Paragraph (11) of subsection 

390.355(d) states that a State savings 

association may obtain SARs and the 

instructions from the appropriate FDIC 

region as defined in § 303.2 of the 

FDIC’s regulations. In this circumstance, 

§ 353.3 does not have analogous 

language. However, FDIC-supervised 

institutions can obtain SAR forms 

electronically. Specifically, 31 CFR 

1010.306(e) states: 

Forms to be used in making the reports 

required by § 1010.311, § 1010.313, 

§ 1010.350, § 1020.315, § 1021.311, or 

§ 1021.313 of this chapter may be obtained 

from BSA E-Filing System. Forms to be used 

in making the reports required by § 1010.340 

may be obtained from the U.S. Customs and 

Boarder Protection or FinCEN. 

Since the OTS’s rule went into effect, 

FinCEN converted to the BSA E-Filing 

System for filing SARs for all financial 

institutions.141 This provision of the 

transferred OTS rule is now obsolete as 

forms are no longer available from FDIC 

regions. 

Paragraph (12) of subsection 

390.355(d) states that SARs are 

confidential and any institution or 

person subpoenaed or otherwise 

requested to disclose a SAR or the 

information contained in a SAR shall 

decline to produce the SAR or to 

provide any information that would 

disclose that a SAR has been prepared 

or filed, citing this paragraph (d), 

applicable law (e.g., 31 U.S.C. 5318(g)), 

or both, and shall notify the FDIC. 

Similarly, § 353.3(g) directs that State 

nonmember banks maintain the 

confidentiality of SARs, decline to 

disclose a SAR or the information 

contained in a SAR or information 

concerning the existence of a SAR, and 

notify the FDIC. 

Paragraph (13) of subsection 

390.355(d) states that the safe harbor 

provision of 31 U.S.C. 5318(g), which 

exempts any financial institution that 

makes a disclosure of any possible 

violation of law or regulation from 

liability under any law or regulation of 

the United States, or any constitution, 

law or regulation of any state or political 

subdivision, covers all reports of 

suspected or known criminal violations 

and suspicious activities to law 

enforcement and financial institution 

supervisory authorities, including 

supporting documentation, regardless of 

whether such reports are filed pursuant 

to this paragraph (d), or are filed on a 

voluntary basis. Similarly, § 353.3(h) 

contains similar safe harbor language. 

For the above-stated reasons, the FDIC 

proposes to rescind and remove 

§ 390.355(d). 

5. § 390.355(e) Adjustable-Rate Mortgage 

Indices 

Section 390.355(e) requires State 

savings associations within the 

jurisdiction of a FHLB to provide data 

from the Call Report upon the request of 

the FHLB. The FDIC is required under 

section 402(e)(3) of FIRREA ‘‘to take 

such action as may be required as may 

be necessary to assure that the indexes 

prepared by the . . . Federal home loan 

banks immediately prior to the 

enactment of this subsection and used 

to calculate the interest rate on 

adjustable rate mortgage instruments 

continue to be available.’’ 142 As noted 

above, the Dodd-Frank Act provided the 

OCC with rulemaking authority relating 

to both State and Federal savings 

associations.143 On August 9, 2011, the 

OCC published in the Federal Register 

a final rule that contained a provision, 

12 CFR 163.180(e), which is 

substantially similar to § 390.355(e) and 

that applies to both State and Federal 

savings associations.144 It requires all 

savings associations within the 

jurisdiction of that FHLB to report 

specified data items for the FHLB to use 

in calculating and publishing an 

adjustable-rate mortgage index.145

Because the provision contained in 

the OCC’s regulation is applicable to all 

savings associations and is substantially 

similar to the rule found at § 390.355(e), 

the FDIC has concluded that 

3§ 90.355(e) is duplicative and 

unnecessary, and the FDIC proposes to 

rescind and remove this section. 

6. Amendments to Other Rules 

The proposed rule would amend FDIC 

§§ 353.1 and 353.3 to include both 

insured State savings associations and 

State nonmember banks by replacing the 

terms ‘‘insured nonmember banks’’ and 

‘‘bank’’ currently in the regulation with 

the term ‘‘FDIC-supervised institution.’’ 

With these amendments, § 390.355 is 

unnecessary and, for the reasons stated 


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146See, e.g., Risk Management Manual of 

Examination Policies § 4.4 (Fidelity and Other 

Indemnity Protection), available at https://

www.fdic.gov/regulations/safety/manual/section4- 

4.pdf.. 

147See 12 U.S.C. 1828(e). 

148See 12 U.S.C. 1816; Statement of Policy on 

Applications for Deposit Insurance, supra note 134. 

149See Statement of Policy on Applications for 

Deposit Insurance, supra note 134. Generally, an 

order granting Federal deposit insurance would 

include fidelity coverage as a condition, but would 

not specify an amount. See also Resolution Seal No. 

071098, B(2)(a)(iii) and (d) (Dec. 3, 2002); 

Memorandum to the Board regarding Delegations of 

Authority, Ex. 1, Delegations of Authority: Notices 

and Filings, subpart B, n. B–1 6(11) (Nov. 25, 2002), 

available at https://www.fdic.gov/regulations/laws/ 

matrix/exhibit1.html. 

150 12 CFR 390.357. 

151See, e.g., Risk Management Manual of 

Examination Policies § 4.4, supra note 146. 

152State savings associations may, however, 

consult FDIC guidance concerning best practices 

regarding fidelity bond coverage. See Risk 

Management Manual of Examination Policies § 4.4, 

supra note 146. 

153 12 U.S.C. 1818(e). 

154See, e.g., 12 U.S.C. 1821(k); Atherton v. FDIC, 

519 U.S. 213 (1997); CO Rev Stat § 7–108–401 and 

§ 11–41–134 (2017); IN Code § 23–1–35–1; § 28–10– 

1–3; § 28–13–11–1 (2018); LA Rev Stat § 6:291; 

§ 12:1–830 (2018); MO Rev. Stat Title XXIV 

§ 369.109; NH Rev Stat § 293–A:8.30 (2018); NJ 

17:9A–250; NY Banking Law § 398–B (2018); Ohio 

Rev. Code 1701.59, .641, 1105.11; PA Consol. Stat, 

Title 15, § 512; SC Code § 34–28–440 (2018); WI 

Stat § 180.0828; § 215.525 (2018). 

155See supra note 154. 

156 12 U.S.C. 1818(e). 

above, the FDIC proposes to rescind and 

remove § 390.355 in its entirety. 

T. 12 CFR 390.356—Bonds for Directors, 

Officers, Employees and Agents; Form 

of and Amount of Bonds 

Section 390.356 requires fidelity bond 

coverage for directors, officers, 

employees, and agents of State savings 

associations. The FDIC proposes to 

rescind and remove § 390.356, to 

conform requirements for State savings 

associations with requirements for State 

nonmember banks, and to reduce 

regulatory burden. State savings 

associations may, however, consult 

FDIC guidance concerning best practices 

regarding fidelity bond coverage.146

Section 390.356(a) requires each State 

savings association to maintain fidelity 

bond coverage for those directors, 

officers, employees, and agents who 

have control over or access to cash, 

securities, or other property of the State 

savings association. Section 390.356(b) 

requires the management of each State 

savings association to determine the 

amount of fidelity bond coverage that 

would be considered safe and sound, 

commensurate with its assessment of 

the association’s potential risk exposure. 

Additionally, paragraph (b) requires the 

State savings association’s board of 

directors to approve the management’s 

determination. Section 390.356(c) 

provides that the State savings 

association may maintain bond coverage 

through riders, endorsements, or 

supplements, beyond that provided by 

the insurance underwriting industry’s 

standard forms if the State savings 

association’s board determines that 

additional coverage is warranted. 

Section 390.356(d) provides that the 

State savings association’s board of 

directors must approve the State savings 

association’s fidelity bond coverage, 

review such coverage annually, and 

document its review and approval in 

board meeting minutes. 

Neither the FDI Act nor the FDIC’s 

regulations for State nonmember banks 

contain similar prescriptive language 

concerning fidelity bonds that would be 

applicable to State savings associations. 

Section 18(e) of the FDI Act authorizes, 

but does not mandate, that the FDIC 

require an insured depository 

institution to ‘‘provide protection and 

indemnity against burglary, defalcation, 

and other similar insurable losses.’’ 147

The FDIC generally requires fidelity 

bond insurance for insured depository 

institutions and considers whether 

fidelity bond insurance is in place when 

analyzing the general character and 

fitness of the management of a de novo 

financial institution applying for 

deposit insurance.148 However, other 

than expressing general guidelines 

regarding the appropriate level of 

insurance coverage, the FDIC does not 

otherwise impose requirements such as 

the ones contained in § 390.356.149

There are no other relevant provisions 

concerning fidelity bond coverage or the 

use of fidelity bond proceeds. And, 

there is no analogous statutory or 

regulatory language for State 

nonmember banks that mirrors 

§ 390.356. Therefore, for supervisory 

consistency between State nonmember 

banks and State savings associations, 

and to reduce regulatory burden, the 

FDIC proposes that § 390.356 be 

rescinded and removed. 

U. 12 CFR 390.357—Bonds for Agents 

Section 390.357,150 provides that, in 

lieu of a bond for directors, officers, 

employees, and agents of State savings 

associations referenced in § 390.356, the 

State savings association’s board may 

approve a bond for its agents. This bond 

must be twice the average monthly 

collections of such agent, and the agent 

is required to settle its account with the 

State savings association at least 

monthly. 

Similar to § 390.356, there are not 

analogous statutory or regulatory 

requirements for State nonmember 

banks that resemble § 390.357. Neither 

sections 18(e) or 18(k) of the FDI Act nor 

§§ 326.2 or 326.3 of FDIC’s regulations 

require or provide for bond coverage. 

State savings associations may, 

however, consult FDIC guidance 

concerning best practices regarding 

fidelity bond coverage.151 Therefore, in 

the interest of consistency between State 

nonmember banks and State savings 

associations, and to reduce regulatory 

burden, the FDIC proposes that 

§ 390.357 be rescinded and removed.152

V. 390.358 Conflicts of Interest 

12 CFR 390.358 is the re-designation 

of the transferred OTS regulation 

prohibiting persons including directors, 

officers, or employees of State savings 

associations, or others who have power 

to direct its management or policies or 

who otherwise owe a fiduciary duty to 

a State savings association from 

advancing personal or business 

interests, or those of others, at the 

expense of the State savings association. 

The section also prescribes how these 

individuals should interact with the 

board of directors of a State savings 

association if they have an interest in a 

matter or transaction requiring board 

consideration. 

While section 8(e) of the FDI Act 153

authorizes enforcement actions against 

directors and officers who breach their 

fiduciary duties to the depository 

institution, the existence and scope of a 

fiduciary duty generally is a matter of 

state law. The FDIC proposes to rescind 

and remove § 390.358 because such 

conduct is governed by either statutory 

or common law.154

W. 390.359 Corporate Opportunity 

Section 390.359 is the re-designation 

of the OTS regulation prohibiting 

persons, including directors and officers 

or others who have power to direct its 

management or policies or who 

otherwise owe a fiduciary duty to a 

State savings association from taking 

advantage of corporate opportunities 

belonging to the State savings 

association. Such conduct is governed 

by either statutory or common law.155

While section 8(e) of the FDI Act 156

authorizes enforcement actions against 

directors and officers who breach their 

fiduciary duties to the depository 

institution, the existence and scope of a 

fiduciary duty generally is a matter of 

state law. The FDIC proposes to rescind 

and remove § 390.358 because such 

conduct is governed by either statutory 

or common law. 


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157 12 U.S.C. 1831i. 

158Public Law 104–208, 110 Stat. 3009, Sept. 30, 

1996. 

159 63 FR 51272 (Sept. 25, 1998). 

160Section 303.102(d)(1) does not specifically 

contain a fingerprinting requirement, but does 

provide that ‘‘[t]he FDIC may require additional 

information.’’ In practice, the FDIC obtains 

fingerprints to facilitate background checks 

performed in connection with applications and 

notices submitted to the FDIC, including: 

Applications for Federal deposit insurance, notices 

of acquisition of control, requests for participation 

in the banking industry by individuals with certain 

criminal convictions, and notices to replace board 

members or senior management in certain 

institutions See FIL–21–2018, Electronic 

Fingerprinting for Background Checks Related to 

Applications (Apr. 17, 2018). Thus, the FDIC is 

clarifying that fingerprints may be required in 

connection with the filings noted above. 

X. 12 CFR 390.360–.368—Change of 

Director or Senior Executive Officer 

Section 914 of FIRREA added section 

32 of the FDI Act.157 Section 32 requires 

certain insured depository institutions 

and insured depository institution 

holding companies to furnish the 

appropriate Federal banking agency 

with at least 30 days’ notice prior to 

adding any individual to the board of 

directors or employing any individual 

as a senior executive officer. Section 32 

was amended on September 30, 1996, 

by the Economic Growth and Regulatory 

Paperwork Reduction Act of 1996 

(EGRPRA).158 Section 209 of the 

EGRPRA changed the circumstances 

under which a notice must be filed and 

also permitted the appropriate Federal 

banking agency no more than 90 days to 

issue a notice of disapproval of the 

proposed addition of a director or 

employment of a senior executive 

officer. On September 25, 1998, the 

OTS, then the appropriate Federal 

banking agency for all savings 

associations, issued a final rule relating 

to the changes made to section 32 by 

EGRPRA and added implementing 

regulations which replaced 12 CFR 

574.9 with §§ 563.550 through 563.590. 

These regulations were transferred then 

to the FDIC, as the appropriate Federal 

banking agency for State savings 

associations. The implementing 

regulations are now found at §§ 390.360 

through 390.368.159

Subpart F of part 303 of the FDIC’s 

regulations imposes similar notice filing 

requirements on insured State 

nonmember banks. After careful review, 

for the reasons described below, the 

FDIC proposes to amend subpart F of 

part 303 so that it applies to State 

savings associations as well as State 

nonmember banks and to rescind and 

remove §§ 390.360 through 390.368 as 

unnecessary and duplicative. The FDIC 

believes that the section 32 of the FDI 

Act and the proposed amendments to 

subpart F of part 303 sufficiently 

address the circumstances and 

requirements for both State nonmember 

banks and State savings associations to 

provide advance notification to the 

FDIC before appointing or employing 

directors and senior executive officers. 

1. 12 CFR 390.360—Change of Director 

or Senior Executive Officer 

Section 390.360 is an introductory 

section. It describes the statutory basis 

for and the content and purpose of the 

remaining §§ 390.361 through 390.368. 

The content of this section is 

substantively identical to § 303.100. 

Therefore, the FDIC proposes that 

§ 390.360 be rescinded and removed. 

2. 12 CFR 390.361—Applicable 

Definitions 

Section 390.361 provides definitions 

of certain terms that apply to §§ 390.360 

through 390.368. This section defines 

the terms director, senior executive 

officer and troubled condition. Section 

303.101 provides substantively similar 

definitions for the same three terms. The 

FDIC does not believe § 390.361 is 

necessary in light of § 303.101, and for 

this reason, the FDIC proposes to 

rescind and remove § 390.361. 

3. 12 CFR 390.362—Who must give 

prior notice? 

Section 390.362 outlines the 

conditions under which prior 

notification must be given to the FDIC. 

Paragraph (a) requires a State savings 

association to provide notice prior to 

adding or replacing board members or 

senior executive officers if it: (1) Does 

not comply with all minimum capital 

requirements; (2) is in troubled 

condition; or (3) if it has been notified 

by the FDIC that a notice is required. 

These three conditions are substantively 

identical to those contained in 

§ 303.102, which pertains to State 

nonmember banks. When part 303, 

subpart F is amended to apply to State 

savings associations, paragraph (a) will 

become unnecessary and duplicative. 

Paragraph (b) allows an individual 

seeking election to the board of directors 

of a State savings association, without a 

nomination by the institution’s 

management, to submit an after-the-fact 

notice to the FDIC within seven days of 

being elected. Section 303.102(c)(2) 

contains a similar regulation with the 

requirement that a notice must be 

submitted within two business days 

after election. Thus paragraph (b) is 

duplicative and unnecessary. For 

foregoing reasons, the FDIC proposes to 

rescind and remove § 390.362. 

4. 12 CFR 390.363—What procedures 

govern the filing of my notice? 

Section 390.363 references the 

procedures found in §§ 390.103 through 

390.110 as governing the filing of a 

notice to the FDIC. Again, these sections 

are substantively similar to the 

procedural rules found in subpart A of 

part 303. Because subpart A of part 303 

governs general procedures for 

submitting filings, including notices, to 

the FDIC, § 390.363 is unnecessary and 

duplicative. For this reason and because 

maintaining alternative procedures for 

State savings associations and State 

nonmember banks would be confusing 

and burdensome, the FDIC proposes to 

rescind and remove § 390.363. 

5. 12 CFR 390.364—What information 

must I include in my notice? 

Section 390.364 establishes the 

required content for prior notices filed 

pursuant to section 32 of the FDI Act. 

Paragraph (a) requires the submission of 

certain biographical information, a set of 

fingerprints and any other information 

that the FDIC requires. Paragraph (d)(1) 

of § 303.102 requires substantively 

similar information.160

Paragraph (b) of § 390.364 allows the 

FDIC to modify the requirements listed 

in paragraph (a), similar to paragraph 

(d)(2) of § 303.102. Amending § 303.102 

to also apply to State savings 

associations will make § 390.364 

unnecessary and duplicative. For this 

reason, the FDIC proposes to rescind 

and remove § 390.364. 

6. 12 CFR 390.365—What procedures 

govern the FDIC’s review of my notice 

for completeness? 

Section 390.365 outlines the 

procedures and timelines the FDIC will 

follow in reviewing a notice of change 

of director or senior officer. Paragraph 

(a) states that the FDIC will notify the 

applicant in writing of the date on 

which the FDIC received a complete 

notice. This provision is substantively 

similar to paragraph (a) of § 303.103. 

Paragraph (b) of § 390.365 states that an 

applicant may be asked to provide 

additional information before an 

application is deemed complete, and 

failure to provide such information may 

cause the notice filing to be deemed 

withdrawn. This provision is 

substantively similar to § 303.11. If 

subpart F of part 303 is amended to 

apply to State savings associations, 

§ 390.365 will become duplicative and 

unnecessary. For this reason, the FDIC 

proposes to rescind and remove 

§ 390.365. 


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161 44 U.S.C. 3501, et seq. 

162 5 U.S.C. 601, et seq. 

163The SBA defines a small banking organization 

as having $600 million or less in assets, where ‘‘a 

financial institution’s assets are determined by 

averaging the assets reported on its four quarterly 

financial statements for the preceding year.’’ See 13 

CFR 121.201 (as amended by 84 FR 34261, effective 

August 19, 2019). ‘‘SBA counts the receipts, 

employees, or other measure of size of the concern 

whose size is at issue and all of its domestic and 

foreign affiliates.’’ See 13 CFR 121.103. Following 

these regulations, the FDIC uses a covered entity’s 

affiliated and acquired assets, averaged over the 

preceding four quarters, to determine whether the 

FDIC-supervised institution is ‘‘small’’ for the 

purposes of RFA. 

164Based on data from the June 30, 2019, Call 

Report and Report of Assets and Liabilities of U.S. 

Branches and Agencies of Foreign Banks. 

7. 12 CFR 390.366—What standards and 

procedures will govern the FDIC review 

of the substance of my notice? 

Section 390.366 outlines the 

standards and procedures under which 

a notice of change of director or senior 

officer will be reviewed by the FDIC. 

This section is substantively identical to 

paragraph (c) of § 303.103. If subpart F 

of part 303 is amended to apply to State 

savings associations, § 390.366 will 

become duplicative and unnecessary. 

For this reason, the FDIC proposes to 

rescind and remove § 390.366. 

8. 12 CFR 390.367—When may a 

proposed director or senior executive 

officer begin service? 

Section 390.367 establishes the 

conditions and timelines for a proposed 

director or senior executive officer to 

begin service. Paragraph (a) establishes 

that a director or senior executive officer 

may begin service 30 days after the FDIC 

receives all required information, unless 

the FDIC has disapproved the notice or 

the FDIC has extended its review 

period. Paragraph (b) establishes that a 

director or senior executive officer may 

begin service any time after the FDIC 

provides notice that it will not 

disapprove the notice. Both of these 

paragraphs are substantively similar to 

the conditions and timelines established 

under paragraphs (a) and (b) of 

§ 303.103. If subpart F of part 303 is 

amended to apply to State savings 

associations, § 390.367 will become 

duplicative and unnecessary. For this 

reason, the FDIC proposes to rescind 

and remove § 390.367. 

9. 12 CFR 390.368—When will the FDIC 

waive the prior notice requirement? 

Section 390.398 outlines the 

conditions under which the FDIC may 

waive the prior notification 

requirement. Paragraph (a) establishes 

that the FDIC may provide a waiver of 

prior notice if it issues a written finding 

that a delay would (1) threaten the 

safety or soundness of the institution, 

(2) not be in the public interest, or (3) 

that extraordinary circumstances exist 

to justify a waiver. Paragraph (b) allows 

for an automatic waiver under certain 

circumstances for directors elected 

without the nomination of management. 

Paragraph (c) allows for the FDIC to 

subsequently deny a notice filed after a 

waiver within 30 days. Paragraph (c) of 

§ 303.102 provides for substantively 

identical criteria for the waiver of prior 

notice for State nonmember banks. If 

subpart F of part 303 is amended to 

apply to State savings associations, 

§ 390.368 will become duplicative and 

unnecessary. For this reason, the FDIC 

proposes to rescind and remove 

§ 390.368. 

III. Request for Comments 

The FDIC invites comments on all 

aspects of this proposed rulemaking, 

and specifically requests comments on 

the following: 

Question 3: What impact, positive or 

negative, can you foresee in the FDIC’s 

proposal to rescind certain provisions of 

Subpart S? Please substantiate your 

response. 

Written comments must be received 

by the FDIC no later than December 2, 

2019. 

IV. Regulatory Analysis and Procedure 

A. The Paperwork Reduction Act 

In accordance with the requirements 

of the Paperwork Reduction Act 

(PRA),161 the FDIC may not conduct or 

sponsor, and the respondent is not 

required to respond to, an information 

collection unless it displays a currently 

valid Office of Management and Budget 

(OMB) control number. 

The proposed rule would rescind and 

remove from the FDIC’s regulations part 

390, subpart S. The proposed rule will 

not create any new or revise any 

existing information collections 

pursuant to the PRA. Therefore, no 

information collection request will be 

submitted to the OMB for review. 

B. The Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that, in connection with a 

notice of proposed rulemaking, an 

agency prepare and make available for 

public comment an initial regulatory 

flexibility analysis that describes the 

impact of the proposed rule on small 

entities.162 However, a regulatory 

flexibility analysis 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, together with the rule. 

The Small Business Administration 

(SBA) has defined ‘‘small entities’’ to 

include banking organizations with total 

assets of less than or equal to $600 

million.163 Generally, the FDIC 

considers a significant effect to be a 

quantified effect in excess of 5 percent 

of total annual salaries and benefits per 

institution, or 2.5 percent of total 

noninterest expenses. The FDIC believes 

that effects in excess of these thresholds 

typically represent significant effects for 

FDIC-supervised institutions. For the 

reasons provided below, the FDIC 

certifies that the proposed rule, if 

adopted in final form, would not have 

a significant economic impact on a 

substantial number of small banking 

organizations. Accordingly, a regulatory 

flexibility analysis is not required. 

As of June 30, 2019, the FDIC 

supervised 3,424 insured depository 

institutions, of which 2,665 are 

considered small banking organizations 

for the purposes of RFA. The proposed 

rule primarily affects regulations that 

govern State savings associations. There 

are 36 State savings associations 

considered to be small banking 

organizations for the purposes of the 

RFA.164

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.330 requires a de novo State 

savings association, prior to 

commencing operations, to file its 

charter and bylaws with the FDIC for 

certification. The FDIC does not charter 

depository institutions, therefore the 

certification authority outlined in 

§ 390.330 does not conform with the 

FDIC’s general authority. The OCC or 

State banking supervisors do charter 

depository institutions and therefore, 

may have similar charter and bylaw 

certification requirements for de novo 

savings associations. If the OCC or a 

State banking supervisor does not have 

similar charter and bylaw certification 

requirements for de novo savings 

associations, this aspect of the proposed 

rule could reduce recordkeeping and 

reporting requirements for future de 

novo savings associations. However, an 

analysis of de novo activity for savings 

associations shows that there has been 

only one in the last eleven years. The 

proposed rule would also eliminate the 

federal requirement for a state savings 

association to make available to its 

accountholders, on request, a copy of its 

bylaws. The nature of the requirements 

contained in § 390.330 are typically 

addressed by state law. Depending on 

the state, elimination of this section 

could result in a small reduction in 

expenses. Therefore, this aspect of the 


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165 12 U.S.C. 1818. 

166 15 U.S.C. 45(a)(1). 

167 12 U.S.C. 5412(b)(2)(A). 

168 12 U.S.C. 1468(a). 

169The FDIC has interpreted the language ‘‘in the 

same manner and to the same extent’’ to include the 

application of Regulation W. 

170 12 CFR part 215. 

proposed rule is unlikely to pose 

significant effects on a substantial 

number of small, FDIC-supervised state 

savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.331 requires that every security 

issued by a State savings association 

include in its provisions a clear 

statement that the security is not 

insured by the FDIC. Although, the 

FDIC does not have a companion rule 

that requires state nonmember 

institutions to clearly state that a 

security is not insured by the FDIC, 

provisions of the FDI Act, FDIC 

regulations, and Statements of Policy 

clarify that securities are not insured by 

the FDIC. Moreover, the FDIC has issued 

two Statements of Policy, one regarding 

the sale of nondeposit investment 

products and one regarding the use of 

offering circulars, that are intended to 

prevent confusion on the part of 

customers and investors regarding these 

matters. Therefore, rescission of 

§ 390.331 would not substantively 

change deposit insurance coverage for 

state savings associations, or security 

disclosure practices. This aspect of the 

proposed rule is unlikely to pose 

significant effects on small, FDICsupervised state savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.332 addresses the application 

requirements for mergers, 

consolidations, purchases or sales of 

assets, and assumptions of liabilities 

that apply to State savings associations. 

The FDIC proposes to rescind § 390.332 

and to amend 12 CFR part 303, subpart 

D, the section of the FDIC’s regulations 

governing merger transactions. The 

proposed amendments to subpart D 

would make that section applicable to 

any FDIC-supervised institution, 

including State savings associations, 

and would make other conforming 

changes. Because the proposed changes 

would not affect the application 

requirements and application content 

this aspect of the proposed rule is 

unlikely to pose any effects on small, 

FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.333 prohibits State savings 

associations from making inaccurate 

representations about services, 

contracts, investments, or financial 

condition in their advertising. The 

prohibition of misrepresentations in 

advertising contained in § 390.333 is 

substantially similar to the more general 

prohibition of unfair or deceptive acts or 

practices under section 5(a) of the 

Federal Trade Commission Act (section 

5). The FDIC enforces this provision 

pursuant to its authority under section 

8 of the FDI Act.165 The prohibition 

contained in section 5 is broader than 

§ 390.333 because it prohibits all ‘‘unfair 

or deceptive acts or practices in or 

affecting commerce,’’ and it applies to 

all FDIC-supervised institutions, not 

only State savings associations.166

Because the narrower prohibitions of 

§ 390.333 appear subsumed within the 

broader prohibitions of Section 5, the 

FDIC believes that this aspect of the 

proposed rule will not have any 

substantive effect on small, FDICsupervised state savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.334 limits who may serve on the 

board of directors of a State savings 

association by providing that: A 

majority of the directors must not be 

employees of the State savings 

association or its affiliates; no more than 

two directors may come from the same 

family; and no more than one director 

may be an attorney with a particular law 

firm. This aspect of the proposed rule 

could reduce compliance requirements 

on small, FDIC-supervised state savings 

associations by enabling them to make 

changes to the composition of their 

board of directors if they so choose. 

Such a reduction of compliance 

requirements could benefit covered 

entities by enabling them to choose a 

board that best executes the fiduciary 

powers of the board of directors, and 

more effectively supports the financial 

health of the institution. However, 

rescinding § 390.334 also potentially 

reduces the independence of boards of 

directors for small State savings 

associations thereby increasing risks to 

safety and soundness. The FDIC 

believes that the potential risks to safety 

and soundness for small FDIC-insured 

state savings associations that might 

result from rescinding § 390.334 is 

ameliorated by periodic examinations of 

safety and soundness risk in 

management for covered institutions. 

Therefore, the FDIC believes that this 

aspect of the proposed rule will not 

have any significant effects on small, 

FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.335 is entitled ‘‘Tying restriction 

exception’’ and refers solely to the 

regulations issued by the FRB. Section 

312(b)(2) of the Dodd-Frank Act 

transferred the authority to grant 

exceptions from the anti-tying 

regulations of HOLA to the FRB, rather 

than to the FDIC, upon the dissolution 

of the OTS.167 Therefore, rescinding 

§ 390.335 would align the FDIC’s 

regulations with the FDIC’s general 

authority. Additionally, because the 

FRB maintains the authority to grant 

exceptions from the anti-tying 

regulations for Federal and State savings 

associations, this aspect of the proposed 

rule will have no substantive effect on 

small, FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.336 sets forth requirements with 

which a State savings association must 

comply when entering into an 

employment contract with its officers 

and other employees. Although there 

are no similar regulations for FDICsupervised institutions, existing 

statutes, guidelines, and regulations 

have a similar effect on FDIC-supervised 

institutions, including State savings 

associations. Therefore, removal of 

§ 390.336 is unlikely to have any 

substantive effect on small, FDICsupervised State savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.337 states only that State savings 

associations should ‘‘see the regulations 

issued by Board of Governors of the 

Federal Reserve System’’ for the 

applicable rules for transactions with 

affiliates. Because HOLA applies 

sections 23A and 23B of the Federal 

Reserve Act to State savings 

associations 168 and because the FRB’s 

Regulation W169 addresses the 

additional restrictions of HOLA 

applicable to State and Federal savings 

associations’ transactions with their 

affiliates, the FDIC believes that this 

aspect of the proposed rule will not 

have any substantive effects on small, 

FDIC-supervised institutions. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.338 cross-referenced the FRB’s 

Regulation O,170 with some additional 

modifications. Section 337.3 of the 

FDIC’s regulations reference Regulation 

O to impose similar direct regulatory 

requirements on State nonmember 

banks. The FDIC proposes to rescind 

and remove § 390.338, to make minor 

conforming changes to § 337.3 to clarify 

its applicability to State savings 

associations, and to make technical 

amendments to § 337.3. Therefore, this 

aspect of the proposed rule is unlikely 


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171Public Law 109–280, 120 Stat. 780, 29 U.S.C. 

1301 et seq. 

172See supra note 12. 

173See 12 CFR 324.20(d)(1). 

174 12 CFR 390.342. 

175 12 U.S.C. 1831o. 

176 12 U.S.C. 1831o(b)(2)(B). 

177 12 CFR 390.343(e), 12 U.S.C. 

1831o(b)(2)(B)(iii). 

178 12 CFR 390.343(c). 

179 12 CFR 390.343(d). 

to have any effect on small, FDICsupervised institutions. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.339 prohibits State savings 

associations from sponsoring an 

employee pension plan which, because 

of unreasonable costs or for any other 

reason, could lead to material financial 

loss or damage to the sponsor. The 

section further requires a State savings 

association that serves as a pension plan 

sponsor to retain detailed pension plan 

records and actuarial funding reports 

and to provide advance notice of a 

pension plan termination. The 

Interagency Safety and Soundness 

Guidelines explicitly identify 

compensation that could lead to 

material financial loss as an unsafe and 

unsound practice. Additionally, 

regulations on recordkeeping by the 

Pension Benefit Guaranty Corporation 

would apply to any pension plan 

offered by an FDIC-supervised 

institution.171 Because FDIC-supervised 

institutions, including State savings 

associations, will continue to be subject 

to the Interagency Safety and Soundness 

Guidelines, as well as PBCG regulations, 

rescinding § 390.339 is unlikely to 

substantively effect small, FDICsupervised institutions. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.340 generally prohibits the offer or 

sale of debt or equity securities issued 

by a State savings association or an 

affiliate of the State savings association 

at an office of the State savings 

association with the exception of equity 

securities issued in connection with the 

State savings association’s conversion 

from mutual to stock form in a 

transaction that has been approved by 

the FDIC or if the sale is conducted in 

accordance with the conditions set forth 

in § 390.340. The NDIP Statement of 

Policy 172 provides guidelines for all 

sales of nondeposit products (such as 

annuities, mutual funds, and other 

securities) by depository institutions, 

including State savings associations. 

Additionally, the Offering Circular 

Statement of Policy provides guidelines 

for sales and distribution of bank 

securities. Therefore, the FDIC believes 

that rescission of § 390.340 will not 

substantively change the offer or sale of 

debt or equity securities issued by a 

State savings associations or their 

subsidiaries. Therefore, this aspect of 

the proposed rule is unlikely to pose 

significant effects on small, FDICsupervised state savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.341 provides application and 

notice procedures and form and content 

requirements for subordinate debt 

securities and mandatorily redeemable 

preferred stock that a State savings 

association seeks to include in its tier 2 

capital. There is no corresponding 

requirement applicable to State 

nonmember banks. Many of the form 

and content requirements in § 390.341 

that are designed to prevent consumer 

confusion are included in the FDIC’s 

Offering Circular Statement of Policy 

which covers FDIC-supervised 

institutions, including State savings 

associations. Small FDIC-supervised 

institutions, including State savings 

associations, are governed by the criteria 

for inclusion in tier 2 capital are 

included in the FDIC’s capital rules in 

12 CFR part 324.173 Therefore, this 

aspect of the proposed rule is unlikely 

to pose significant effects on small, 

FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.342 states that §§ 390.342 through 

390.348 apply to capital distributions by 

a State savings association.174 Because 

the proposed rule would rescind 

§§ 390.342 through 390.348, and would 

amend other FDIC regulations to make 

them applicable to State savings 

associations, the removal of § 390.342 

will not have any substantive effects on 

small, FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.343 defines a ‘‘capital 

distribution’’ for the purposes of 

§§ 390.342–348. Section 38 of the FDI 

Act 175 applies to all insured depository 

institutions, and, among other things, 

generally prohibits an insured 

depository institution from making a 

capital distribution if, after making the 

distribution, the institution would be 

undercapitalized. Section also 38 

defines a ‘‘capital distribution’’ to 

include certain dividends; repurchases, 

redemptions, retirements, or other 

acquisitions of shares or other 

ownership interests, including 

extensions of credit to finance an 

affiliated company’s acquisition of such 

shares; and any other transaction that 

the Federal banking agencies find to be 

in substance a distribution of capital.176

Part 303 of the FDIC’s regulations 

implements the PCA provisions of 

section 38 for insured State nonmember 

banks and insured branches of foreign 

banks. The proposed rule would amend 

§ 303.203 so that it expressly applies to 

State savings associations. The 

requirements of §§ 390.343(a) and (b) 

are substantively similar to 

requirements in section 38 and the 

current, analogous FDIC regulations at 

§ 303.203. Section 390.343(e) 

incorporates FDI Act section 

38(b)(2)(B)(iii), which authorizes the 

Federal banking agencies to, by order or 

regulation, deem as a ‘‘capital 

distribution’’ any transaction that the 

FDIC determines to be in substance a 

distribution of capital.177 Therefore, the 

proposed rule’s rescission of these 

elements and amendments to § 303.203 

will have no effects on small, FDICsupervised state savings associations. 

Section 390.343(c) further defines 

‘‘capital distribution’’ to include any 

direct or indirect payment of cash or 

other property to owners or affiliates 

made in connection with a corporate 

restructuring, including the payment of 

cash or property to shareholders of 

another savings association of its 

holding company to acquire ownership 

in that savings association, other than 

by a distribution of shares.178 This 

prong of § 390.343’s definition of 

‘‘capital distribution’’ is not matched by 

an analogous prong in section 38. 

Additionally, § 390.343(d) captures as a 

‘‘capital distribution’’ any capital 

distribution that is charged against a 

State savings association’s capital 

accounts if the State savings association 

would not be well capitalized following 

the distribution.179 As with payments 

made in connection with a corporate 

restructuring, this element of § 390.343’s 

regulatory definition is not expressly 

addressed in section 38. The proposed 

rule would rescind these requirements 

for small, FDIC-supervised state savings 

associations. The FDIC believes that this 

aspect of the proposed rule is unlikely 

to substantively effect small, FDICsupervised institutions. Additionally, 

the FDIC believes that small, FDICsupervised savings association would 

benefit from the establishment of equal 

treatment of capital distributions for 

State nonmember banks and State 

savings associations. However, it is 

difficult to estimate these effects 

because it depends on the financial 

condition of, and future decisions of 


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180 12 CFR 390.344. 

181 12 U.S.C. 1831o. 

182 12 U.S.C. 1831o(b)(2)(B). 

183 12 CFR 390.346. 

184 12 CFR 390.347. 

185See 12 CFR 303.203(b) and 12 CFR 303.241(e). 

senior management at, small FDICsupervised savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.344 adopts additional definitions 

specifically for the capital distribution 

provisions of §§ 390.342 through 

390.348.180 Section 38 of the FDI Act 181

applies to all insured depository 

institutions, and, among other things, 

generally prohibits an insured 

depository institution from making a 

capital distribution if, after making the 

distribution, the institution would be 

undercapitalized. Section 38 also 

defines a ‘‘capital distribution’’ to 

include certain dividends; repurchases, 

redemptions, retirements, or other 

acquisitions of shares or other 

ownership interests, including 

extensions of credit to finance an 

affiliated company’s acquisition of such 

shares; and any other transaction that 

the Federal banking agencies find to be 

in substance a distribution of capital.182

Part 303 of the FDIC’s regulations 

implements the PCA provisions of 

section 38 for insured state nonmember 

banks and insured branches of foreign 

banks, and definitions of terms for 

capital distribution provisions are 

contained in the FDIC’s capital rules. 

The proposed rule would amend 

§ 303.203 so that it expressly applies to 

State savings associations. Therefore, 

the rescinding § 390.344 is unlikely to 

have any substantive effects on small, 

FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.345 establishes that a State savings 

association is required to file an 

application for a proposed capital 

distribution in certain circumstances, 

and in others is required to file a notice. 

The application requirements of 

§ 303.203 are analogous to those 

imposed on State savings associations 

by § 390.345(a)(3), as both sections 

require applications to the FDIC in cases 

where an institution would be 

undercapitalized following a capital 

distribution, as mandated by section 38 

of the FDI Act. Because section 38 

prohibits capital distributions in cases 

where an insured depository institution 

would be undercapitalized, the 

substantive requirements of 

§ 390.345(a)(3) would be preserved by 

making § 303.203 applicable to State 

savings associations. The application 

requirements of § 303.241 are analogous 

to the notice requirements imposed on 

State savings associations by 

§ 390.345(b)(2), as both sections require 

regulatory consideration of transactions 

that would reduce or retire common or 

preferred stock or capital notes or 

debentures. Accordingly, the FDIC 

proposes to rescind §§ 390.345(a)(3) and 

390.345(b)(2) and, as noted above, the 

FDIC also proposes to amend § 303.241 

so that it applies to State savings 

associations. 

The FDIC proposes to rescind the 

entirety of § 390.345, which would 

effectively eliminate application 

requirements for capital distributions in 

cases where: A State savings association 

is not eligible for expedited processing 

under § 390.101; the total amount of all 

capital distributions by a State savings 

association for the applicable calendar 

year exceeds the association’s net 

income for that year to date plus 

retained net income for the preceding 

two years; and where a State savings 

association’s proposed capital 

distribution would violate a prohibition 

contained in any applicable statute, 

regulation, or agreement with the FDIC, 

or violate a condition imposed on the 

State savings association in an FDICapproved application or notice. The 

rescission of § 390.345 would also 

effectively eliminate the notice 

requirements for capital distributions in 

cases where a State savings association 

would not be well capitalized following 

the distribution. The prompt corrective 

action provisions of section 38 of the 

FDI Act, however, which apply to all 

insured institutions, would address 

such situations. This aspect of the 

proposed rule is expected to reduce 

compliance costs for small, FDICsupervised state savings associations. 

Although reducing notice requirements 

for these capital distribution activities 

could potentially increase the frequency 

of this activity for small, FDICsupervised state savings associations, 

the FDIC believes such effects are likely 

to be relatively small. However, it is 

difficult to estimate these effects 

because it depends on the financial 

condition of, and future decisions of 

senior management at, small, FDICsupervised savings associations. 

Additionally, the FDIC believes that 

small, FDIC-supervised savings 

association would benefit from the 

establishment of equal treatment for 

application and notification 

requirements of capital distributions for 

State nonmember banks and State 

savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.346 provides filing instructions for 

capital distributions that are subject to 

application or notice requirements 

under § 390.345, including instructions 

concerning a filing’s content, schedules, 

and timing.183 Because the FDIC 

proposes rescinding § 390.345, these 

provisions would no longer be 

applicable. Therefore, the FDIC 

proposes to rescind § 390.346. As 

described above, the FDIC also proposes 

to make §§ 303.203 and 303.241 

applicable to State savings associations, 

and both of these sections set forth 

requirements related to the content of 

filings. Furthermore, certain rules of 

general applicability, including those 

related to processing, are set forth in 

subpart A of part 303 of the FDIC’s 

regulations and would apply to filings 

made by State savings associations 

under §§ 303.203 and 303.241. Based on 

this information, the FDIC believes that 

this aspect of the proposed rule is 

unlikely to have any effect on small, 

FDIC-supervised State savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.347 authorizes a State savings 

association to combine a notice or 

application required under § 390.345 

with another related notice or 

application.184 Because the FDIC 

proposes rescinding § 390.345, these 

provisions would no longer be 

applicable. Therefore, the FDIC 

proposes to rescind § 390.347. As noted 

above, by making State savings 

associations subject to §§ 303.203 and 

303.241, as proposed, State savings 

associations would be permitted to file 

applications that are subject to both 

sections as a single filing or 

concurrently with other filings.185

Therefore, the FDIC believes that this 

aspect of the proposed rule is unlikely 

to have any effect on small, FDICsupervised state savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.348 sets forth the bases on which 

the FDIC may deny, in whole or in part, 

a notice or application filed under 

§ 390.345. Because the FDIC proposes to 

rescind § 390.345, these provisions 

would no longer be applicable. 

Furthermore, the statutory exception 

that applies to capital distributions 

subject to section 38 of the FDI Act 

would continue to apply to capital 

distributions by State savings 

associations that are subject to section 

38. In addition, because the proposal 

would make reductions or retirements 

of capital by State savings associations 

subject to the application requirements 

of § 303.241, the FDIC would evaluate 

such applications in light of the 


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186The statutory factors of section 18(i)(4): (A) 

The financial history and condition of the 

institution; (B) the adequacy of its capital structure; 

(C) its future earnings prospects; (D) the general 

character and fitness of its management; (E) the 

convenience and needs of the community to be 

served; and (F) whether or not its corporate powers 

are consistent with the purposes of the FDI Act. 12 

U.S.C. 1828(i)(4). 

187 12 U.S.C. 1463(a). 

188 12 U.S.C. 1831p–1. 

189 12 CFR 364.101. In 2015, 12 CFR 364.101 was 

amended to apply to both state nonmember banks 

and state savings associations. See Removal of 

Transferred OTS Regulations Regarding Safety and 

Soundness Guidelines and Compliance Procedures; 

Rules on Safety and Soundness, 80 FR 65903 (Oct. 

28, 2015). 

190 12 U.S.C. 1820. 

191 12 U.S.C. 1463. 

192Public Law 101–73, 103 Stat. 183; codified at 

12 U.S.C. 3331 et seq. 193 12 U.S.C. 1867. 

statutory factors enumerated in section 

18(i)(4) of the FDI Act, and the bases 

identified in §§ 390.348(b) and 

390.348(c) would be preserved insofar 

as they would be inherent in how the 

FDIC would review applications in light 

of the statutory factors of section 

18(i)(4).186 Therefore, the FDIC believes 

that this aspect of the proposed rule is 

unlikely to have any effect on small 

FDIC-supervised State savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.349 implements the statutory 

requirement of section 4 of the HOLA. 

That section requires each State savings 

association to be operated in a safe and 

sound manner and encourages State 

savings associations to provide credit 

for housing safely and soundly.187 In 

particular, § 390.349 includes explicit 

safety and soundness requirements 

relating to liquidity and compensation 

to officers, directors, employees, and 

consultants. Section 39 of the FDI 

Act 188 requires the Federal banking 

agencies to prescribe safety and 

soundness standards for internal 

controls, information systems, and 

internal audit systems; loan 

documentation; credit underwriting; 

interest rate exposure; asset growth; 

compensation, fees, and benefits; and 

such other operational and managerial 

standards as the agency determines to 

be appropriate. To this end, the FDIC 

has adopted part 364 and the related 

appendices. Part 364 establishes 

compensation-related standards and 

provides for other safety- and 

soundness-related guidelines which 

apply to all insured State nonmember 

banks, to state-licensed insured 

branches of foreign banks, and to State 

savings associations.189 As such, the 

safety and soundness standards in 

§ 390.349 are generally duplicative of 

the standards implemented through part 

364. Part 364, as amended, provides 

consistent safety and soundness 

standards for both State nonmember 

banks and State savings associations. 

Therefore, the FDIC believes that this 

aspect of the proposed rule will have no 

substantive effects on small, FDICsupervised institutions. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.350 contains requirements 

regarding examinations, appraisals, 

establishing and maintaining books and 

records, and using data processing 

services for maintenance of records. The 

proposed rule would rescind paragraphs 

(a), pertaining to examinations and 

audits, and (b), pertaining to appraisals. 

Section 390.350(a) states that each State 

savings association and affiliate will be 

examined periodically and may be 

examined anytime by the FDIC and that 

appraisals may be required as part of the 

examination. Section 337.12 states that 

the FDIC examines State nonmember 

banks pursuant to section 10 of the FDI 

Act,190 State savings associations 

pursuant to section 10 of the FDI Act 

and section 4 of HOLA,191 and 

implements the frequency of 

examinations specified by section 10 for 

insured depository institutions, 

including State savings associations. 

Section 390.350(b) permits the FDIC to 

select appraisers in connection with an 

examination, requires State savings 

associations to pay for such an 

appraiser, and mandates that the FDIC 

furnish the appraisal report to the State 

savings association within 90 days 

following the filing of the report to the 

FDIC. Part 323 of the FDIC’s regulations 

implements Title XI of FIRREA,192

which requires written appraisals in 

connection with certain federally 

related transactions entered into by 

institutions regulated by the FDIC. 

Section 323.3(c), which applies to all 

FDIC-supervised institutions, including 

State savings associations, allows the 

FDIC to require an appraisal whenever 

the agency believes it is necessary to 

address safety and soundness concerns, 

which would include during an 

examination. 

Section 390.350(c) requires each State 

savings association and its affiliates to 

establish and maintain such accounting 

and other records as will provide an 

accurate and complete record of all 

business it transacts to enable the 

examination of the State savings 

association and its affiliates by the 

FDIC. The documents, files, and other 

material or property comprising said 

records shall at all times be available for 

such examination and audit wherever 

any of said records, documents, files, 

material, or property may be. 

State savings associations are already 

subject to other FDIC regulations that 

achieve the purposes of § 390.350(c). 

For example, as recognized by § 304.3 of 

the FDIC’s regulations, all insured 

depository institutions, including State 

savings associations, are required to file 

quarterly Consolidated Reports of 

Condition and Income (Call Reports). 

Section 390.350(d) prohibits State 

savings associations from transferring 

the location of any of its general 

accounting or control records, or the 

maintenance thereof, from its home 

office to a branch or service office, or 

from a branch or service office to its 

home office or to another branch or 

service office unless prior to the date of 

transfer its board of directors has 

authorized the transfer by resolution 

and notified the appropriate regional 

director. The FDIC has not promulgated 

a similar rule for State nonmember 

banks. The removal of § 390.350(d) will 

provide relief to State savings 

association by not having to notify the 

appropriate regional director of its 

intention to relocate records from its 

home office to a branch or service office 

and will provide parity with State 

nonmember banks which do not provide 

the FDIC with prior notification of 

transferring records from one location to 

another. 

Section 390.350(e) requires that when 

a State savings association maintains 

any of its records by means of data 

processing services, it will notify the 

appropriate regional director for the 

region in which the principal office of 

such State savings association is 

located, in writing, at least 90 days prior 

to the date on which such maintenance 

of records will begin. Section 304.3(d), 

implementing section 7 of the Bank 

Service Company Act,193 already 

requires FDIC-supervised institutions, 

including State savings associations, to 

notify the FDIC about the existence of a 

service relationship within thirty days 

after the making of the contract or the 

performance of the service and provides 

for the required information either 

through a letter or FDIC Form 6120/06 

Notification of Performance of Bank 

Services. Therefore, the FDIC believes 

that rescinding § 390.350 is unlikely to 

have any substantive effects on small, 

FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.352 addresses the permissibility of 

financial derivatives transactions, the 

responsibility of the board of directors 


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194 12 U.S.C. 1831e(a). 

195See 12 CFR 362.9–.15. 

196See 12 CFR 362.9(a). 

197See 12 CFR 163.172. 

198 12 CFR part 364, App. A, § II.E. 

199 12 CFR 326.8, 326.1(a). 

200 12 CFR 326.8 is applicable to ‘‘all insured 

nonmember banks as defined in 12 CFR 326.1.’’ 

Section 326.1 was revised to remove the definition 

of ‘‘insured nonmember bank’’ and replace it with 

the term ‘‘FDIC-supervised institution’’ or 

‘‘institution’’, defined to mean any insured 

depository institution for which the FDIC is the 

appropriate Federal banking agency pursuant to 

section 3(q) of the FDI Act (12 U.S.C. 1813(q). 83 

FR 13839, 13842 (April 2, 2018). 

201See 12 U.S.C. 5412(b)(2)(B)(i)(II). 

202 76 FR 49047 (Aug. 9, 2011). 

203The FDIC is the ‘‘appropriate Federal banking 

agency’’ for any State savings association. See 12 

U.S.C. 1813(q). 

204See 12 U.S.C. 1816; FDIC Statement of Policy 

on Applications for Deposit Insurance, 63 FR 44756 

(Aug. 20, 1998), amended at 67 FR 79278 (Dec. 27, 

2002), available at https://www.fdic.gov/ 

regulations/laws/rules/5000-3000.html. 

205 Id. (‘‘An insured depository institution should 

maintain sufficient fidelity bond coverage on its 

active officers and employees to conform with 

generally accepted industry practices. Primary 

coverage of no less than $1 million is ordinarily 

expected. Approval of the application may be 

conditioned upon acquisition of adequate fidelity 

coverage prior to opening for business.’’). 

and management of a State savings 

association with respect to such 

transactions, and recordkeeping 

requirements related to such 

transactions. Section 28(a) of the FDI 

Act,194 implemented by Part 362 of the 

FDIC’s regulations,195 restricts and 

prohibits State savings associations and 

their service corporations from engaging 

in activities and investments of a type 

that are not permissible for a Federal 

savings association and its service 

corporations. The term ‘‘activities 

permissible for a Federal savings 

association’’ means, among other things, 

activities recognized as permissible in 

OCC regulations.196 Section 163.172 of 

the OCC’s regulations governs the 

financial derivatives activities of 

Federal savings associations, the 

responsibility of the board of directors 

and management of a Federal savings 

association with respect to such 

transactions, and recordkeeping 

requirements related to such 

transactions.197 Because section 28(a) of 

the FDI Act and part 362 establish 

requirements that are duplicative of 

390.352, the FDIC believes that 

rescinding § 390.352 is unlikely to have 

any effect on small, FDIC-supervised 

state savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.353 requires the board of directors 

or a board committee of a State savings 

association to develop, implement, and 

review policies and procedures for the 

management of a State savings 

association’s interest-rate-risk; requires 

the association’s management to report 

periodically to the board regarding 

implementation of the policy; and 

requires the association’s board of 

directors to adjust the policy as 

necessary, including adjustments to the 

authorized acceptable level of interest 

rate risk. As mentioned above, the 

Interagency Safety and Soundness 

Guidelines, promulgated pursuant to 

section 39 of the FDI Act, describe 

examples of safe and sound practices for 

State nonmember banks and State 

savings associations. The Guidelines 

provide that an institution ‘‘should 

manage interest rate risk in a manner 

that is appropriate to its size and the 

complexity of its assets and 

liabilities’’.198 Management and the 

board of directors should be provided 

reports regarding interest rate risk that 

are adequate to assess the level of risk. 

Because the requirements outlined in 

§ 390.353 are similar to the safety and 

soundness practices outlined in 

established Guidelines that already 

apply to small, FDIC-supervised state 

savings associations, the FDIC believes 

that this aspect of the proposed rule is 

unlikely to have any substantive effects 

on small, FDIC-supervised state savings 

associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.354 requires State savings 

associations to establish and maintain a 

BSA compliance program and a 

customer identification program. 

Section 390.354 also enumerates the 

four pillars required for a BSA 

compliance program. Similarly, § 326.8 

of the FDIC’s regulations 199 requires 

insured depository institutions for 

which the FDIC is the appropriate 

Federal banking agency to establish a 

BSA compliance program to include the 

same four pillars and a customer 

identification program. The proposed 

rule would rescind § 390.354 and make 

technical changes to § 326.8, which is 

currently only applicable to insured 

depository institutions for which the 

FDIC is the appropriate Federal banking 

agency.200 Because the amended § 326.8 

would be duplicative of § 390.354 the 

FDIC believes that this aspect of the 

proposed rule is unlikely to have any 

effect on small, FDIC-supervised state 

savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.355 requires State savings 

associations and service corporations to 

make certain reports. Subsection 

390.355 (a) requires State savings 

associations to make periodic reports to 

the FDIC in such a manner and on such 

forms as the FDIC may prescribe. 

Statutory authorities enable the FDIC to 

require reports be filed by small, FDICsupervised state savings associations. 

Subsection 390.355(b) prohibits State 

savings associations from making false 

or misleading statements or omissions 

to the FDIC and to auditors of State 

savings associations. The Dodd-Frank 

Act provided the OCC with rulemaking 

authority relating to both State and 

Federal savings associations.201 On 

August 9, 2011, the OCC published in 

the Federal Register a final rule that 

contained a provision, 12 CFR 

163.180(b), that is substantially similar 

to § 390.355(b) and that applies to both 

State and Federal savings 

associations.202 It prohibits all savings 

associations from knowingly making 

false or misleading statements to their 

‘‘appropriate Federal banking agency’’ 

and to those auditing the institution.203

The OCC’s prohibition at § 163.180(b) 

effectively prohibits a State savings 

association from making false or 

misleading statements to the FDIC or to 

any party auditing or preparing or 

reviewing its financial statements. 

Therefore, the FDIC believes that 

rescinding this subsection will have no 

effect on small, FDIC-supervised state 

savings associations. 

Subsection 390.355(c) requires a State 

Savings association maintaining bond 

insurance coverage to promptly notify 

its carrier and file a proof of loss 

concerning any covered losses more 

than twice the deductible amount. The 

FDIC generally requires fidelity bond 

insurance for insured depository 

institutions and considers whether 

fidelity bond insurance is in place when 

analyzing the general character and 

fitness of the management of a de novo 

financial institution applying for 

deposit insurance.204 However, the 

FDIC does not otherwise impose a 

reporting requirement such as the one 

contained in § 390.355(c).205 This aspect 

of the proposed rule potentially reduces 

reporting requirements on small, FDICsupervised state savings associations. 

The FDIC believes that these potential 

effects are likely to be relatively small. 

However, it is difficult to estimate these 

effects because it depends on the 

financial condition of, and future 

decisions of senior management at, 

small, FDIC-supervised savings 

associations. 

Subsection § 390.355(d) regulates 

SARs for state savings associations, was 

enacted in concert with the other 

Federal banking agencies, including the 


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206Minimum Security Devices and Procedures, 

Reports of Suspicious Activities, and Bank Secrecy 

Act Compliance Program, 61 FR 4332 (Feb. 5, 1996). 

207Membership of State Banking Institutions in 

the Federal Reserve System; International Banking 

Operations; Bank Holding Companies and Change 

in Control; Reports of Suspicious Activities Under 

Bank Secrecy Act, 61 FR 4338 (Feb. 5, 1996). 

208Suspicious Activity Reports, 61 FR 6095 (Feb. 

16, 1996). 

209Amendment to the Bank Secrecy Act 

Regulations; Requirement to Report Suspicious 

Transactions, 61 FR 4326 (Feb. 5, 1996). 

210See 12 U.S.C. 1818. 

211See https://bsaefiling.fincen.treas.gov/ 

main.html. 

212See 12 U.S.C. 1437 nt. 

213See 12 U.S.C. 5412(b)(2)(B)(i)(II). 

214 76 FR 49047 (Aug. 9, 2011). 

215 12 CFR 163.180(e). 

216See 12 U.S.C. 1828(e). 

217See 12 U.S.C. 1816; Statement of Policy on 

Applications for Deposit Insurance. 

218See Statement of Policy on Applications for 

Deposit Insurance (‘‘An insured depository 

institution should maintain sufficient fidelity bond 

coverage on its active officers and employees to 

conform with generally accepted industry practices. 

Primary coverage of no less than $1 million is 

ordinarily expected. Approval of the application 

may be conditioned upon acquisition of adequate 

fidelity coverage prior to opening for business.’’). 

OCC,206 the FRB,207 and the FDIC,208 as 

well as the Financial Crimes 

Enforcement Network (FinCEN).209

These entities issued substantially 

similar proposals, which became 

effective on April 1, 1996. As mentioned 

earlier, paragraphs (1)–(8), (12), and (13) 

of § 390.355(d) mirror § 353.3 for state 

nonmember banks. The notification 

requirements for board of directors, or a 

committee of directors or executive 

officers of state savings associations 

outlined paragraph (9) of subsection 

390.355(d) also mirror notifications 

requirements in § 353.3. Paragraph (9) of 

subsection 390.355(d) also states that if 

the subject of the SAR is a director or 

executive officer, the State savings 

association may not notify the suspect, 

pursuant to 31 U.S.C. 5318(g)(2), but 

shall notify all directors who are not 

suspects. In this circumstance, § 353.3 

does not have analogous language; 

however, the FDIC relies on 31 U.S.C. 

5813(g)(2) to achieve the same purpose. 

Paragraph (10) of subsection 390.355(d) 

states that a State savings association’s 

failure to file a SAR in accordance with 

this section may subject the State 

savings association, its directors, 

officers, employees, agents, or other 

institution-affiliated parties to 

supervisory action. In this circumstance, 

§ 353.3 does not have analogous 

language. Although § 353.3 does not 

explicitly provide a remedy for failure 

to file a SAR, the FDIC has enforcement 

authority for violations of law or 

regulation.210 Therefore, the FDIC 

proposes to rescind subsection 

390.355(d)(10) in its entirety because it 

is unnecessary. Paragraph (11) of 

subsection 390.355(d) states that a State 

savings association may obtain SARs 

and the instructions from the 

appropriate FDIC region as defined in 

§ 303.2 of the FDIC’s regulations. In this 

circumstance, § 353.3 does not have 

analogous language. However, FDICsupervised institutions can obtain SAR 

forms electronically. FinCEN converted 

to the BSA E-Filing System for filing 

SARs for all financial institutions; 211

therefore this provision is now obsolete 

as forms are no longer available from 

FDIC regions. With this proposed rule 

the FDIC proposes to make conforming 

changes to §§ 353.1 and 353.3 to make 

part 353 of the FDIC’s regulations 

applicable to all FDIC-supervised 

institutions, including state savings 

associations. Therefore, the FDIC 

believes that rescinding this subsection 

of § 390.355 will have no effect on 

small, FDIC-supervised state savings 

associations. 

Subsection 390.355(e) requires State 

savings associations within the 

jurisdiction of a FHLB to provide data 

from the Call Report upon the request of 

the FHLB. The FDIC is required under 

section 402(e)(3) of FIRREA ‘‘to take 

such action as may be required as may 

be necessary to assure that the indexes 

prepared by the . . . Federal home loan 

banks immediately prior to the 

enactment of this subsection and used 

to calculate the interest rate on 

adjustable rate mortgage instruments 

continue to be available.’’ 212 As noted 

above, the Dodd-Frank Act provided the 

OCC with rulemaking authority relating 

to both State and Federal savings 

associations.213 On August 9, 2011, the 

OCC published in the Federal Register 

a final rule that contained a provision, 

§ 163.180(e), that is substantially similar 

to § 390.355(e) and that applies to both 

State and Federal savings 

associations.214 It requires all savings 

associations within the jurisdiction of 

that FHLB to report specified data items 

for the FHLB to use in calculating and 

publishing an adjustable-rate mortgage 

index.215 Because the provision 

contained in the OCC’s regulation is 

applicable to all savings associations 

and is substantially similar to the rule 

found at § 390.355(e), the FDIC believes 

that rescinding this subsection will not 

have any effect on small, FDICsupervised state savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.356 requires fidelity bond 

coverage for directors, officers, 

employees, and agents of State savings 

associations. Neither the FDI Act nor the 

FDIC’s regulations for State nonmember 

banks contain similar prescriptive 

language concerning fidelity bonds that 

would be applicable to State savings 

associations. Section 18(e) of the FDI 

Act authorizes, but does not mandate, 

that the FDIC to require an insured 

depository institution to ‘‘provide 

protection and indemnity against 

burglary, defalcation, and other similar 

insurable losses.’’ 216 The FDIC 

generally requires fidelity bond 

insurance for insured depository 

institutions and considers whether 

fidelity bond insurance is in place when 

analyzing the general character and 

fitness of the management of a de novo 

financial institution applying for 

deposit insurance.217 However, other 

than expressing general guidelines 

regarding the appropriate level of 

insurance coverage, the FDIC does not 

otherwise impose requirements such as 

the ones contained in § 390.356.218

There are no other relevant provisions 

concerning fidelity bond coverage or the 

use of fidelity bond proceeds. And, 

there is no analogous statutory or 

regulatory language for State 

nonmember banks that mirrors 

§ 390.356. Therefore, rescinding 

§ 390.356 could potentially reduce 

compliance costs for small, FDICsupervised state savings associations if 

they choose to make changes to their 

fidelity bond coverage. The FDIC 

believes that this aspect of the proposed 

rule is likely to pose relatively small 

effects on small, FDIC-supervised state 

savings associations. However, it is 

difficult to estimate these effects 

because it depends on the decisions of 

senior management at small, FDICsupervised savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.357 provides that, in lieu of a 

bond for directors, officers, employees, 

and agents of State savings associations 

referenced in § 390.356, the State 

savings association’s board may approve 

a bond for its agents. This bond must be 

twice the average monthly collections of 

such agent, and the agent is required to 

settle its account with the State savings 

association at least monthly. Similar to 

§ 390.356, there are not analogous 

statutory or regulatory requirements for 

State nonmember banks that resemble 

§ 390.357. Therefore, rescinding 

§ 390.357 could potentially reduce 

compliance costs for small, FDICsupervised state savings associations to 

the extent that they were engaging in 

such bond coverage practices and 

choose to make changes. The FDIC 

believes that this aspect of the proposed 

rule is likely to pose relatively small 


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219Public Law 104–208, 110 Stat. 3009 (1996). 

220Public Law 104–208, 110 Stat. 3009 (1996). 

221Public Law 106–102, 113 Stat. 1338, 1471 

(codified at 12 U.S.C. 4809). 

effects on small, FDIC-supervised state 

savings associations. However, it is 

difficult to estimate these effects 

because it depends on the decisions of 

senior management at small, FDICsupervised savings associations. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.358 prohibits persons including 

directors, officers, or employees of State 

savings associations, or others who have 

power to direct its management or 

policies or who otherwise owe a 

fiduciary duty to a State savings 

association from advancing personal or 

business interests, or those of others, at 

the expense of the State savings 

association. The section also prescribes 

how these individuals should interact 

with the board of directors of a State 

savings association if they have an 

interest in a matter or transaction 

requiring board consideration. While 

section 8(e) of the FDI Act authorizes 

enforcement actions against directors 

and officers who breach their fiduciary 

duties to the depository institution, the 

existence and scope of a fiduciary duty 

is a matter of State law. Therefore, 

rescinding § 390.358 is not likely to 

have a substantive effect on small, FDICsupervised State savings associations 

because applicable State laws will 

continue to govern conflicts of interest 

and fiduciary duties, relevant FDIC 

guidance on boards of director will 

continue to apply, and the FDIC will 

have the same enforcement authority for 

violations of law in this area. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§ 390.359 prohibits persons, including 

directors and officers or others who 

have power to direct its management or 

policies or who otherwise owe a 

fiduciary duty to a State savings 

association from taking advantage of 

corporate opportunities belonging to the 

State savings association. Such conduct 

is governed by either statutory or 

common law. While section 8(e) of the 

FDI Act authorizes enforcement actions 

against directors and officers who 

breach their fiduciary duties to the 

depository institution, the existence and 

scope of a fiduciary duty is a matter of 

state law. Therefore, rescinding 

§ 390.359 is not likely to have a 

substantive effect on small, FDICsupervised State savings associations 

because applicable State laws will 

continue to govern conflicts of interest 

and fiduciary duties, relevant FDIC 

guidance on boards of director will 

continue to apply, and the FDIC will 

have the same enforcement authority for 

violations of law in this area. 

As discussed previously in the 

SUPPLEMENTARY INFORMATION section, 

§§ 390.360 through 390.368 require 

certain insured depository institutions 

and insured depository institution 

holding companies to furnish the 

appropriate Federal banking agency 

with at least 30 days’ notice prior to 

adding any individual to the board of 

directors or employing any individual 

as a senior executive officer. It also 

permits the appropriate Federal banking 

agency no more than 90 days to issue a 

notice of disapproval of the proposed 

addition of a director or employment of 

a senior executive officer. Subpart F of 

Part 303 of the FDIC’s regulations 

imposes similar notice filing 

requirements on insured State 

nonmember banks. After careful review, 

for the reasons described above in 

Section X. of the SUPPLEMENTARY

INFORMATION section, the FDIC proposes 

to amend subpart F of Part 303 so that 

it applies to State savings associations 

as well as State nonmember banks and 

to rescind and remove §§ 390.360 

through 390.368. Therefore, the FDIC 

believes that rescinding §§ 390.360 

through 390.368 is unlikely to have any 

effect on small, FDIC-supervised state 

savings associations. 

Based on the information above, the 

FDIC certifies that the proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities. The FDIC invites comments on 

all aspects of the supporting information 

provided in this RFA section. In 

particular, would this rule have any 

significant effects that the FDIC has not 

identified on small entities? 

C. The Economic Growth and 

Regulatory Paperwork Reduction Act 

Under section 2222 of the Economic 

Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA),219 the 

FDIC is required to review all of its 

regulations at least once every 10 years, 

in order to identify any outdated or 

otherwise unnecessary regulations 

imposed on insured institutions.220 The 

FDIC, along with the other Federal 

banking agencies, submitted a Joint 

Report to Congress on March 21, 2017, 

(‘‘EGRPRA Report’’) discussing how the 

review was conducted, what has been 

done to date to address regulatory 

burden, and further measures that will 

be taken to address issues that were 

identified. As noted in the EGRPRA 

Report, the FDIC is continuing to 

streamline and clarify its regulations 

through the OTS rule integration 

process. By removing outdated or 

unnecessary regulations, such as Part 

390, subpart S, this Proposed Rule 

complements other actions the FDIC has 

taken, separately and with the other 

Federal banking agencies, to further the 

EGRPRA mandate. 

D. Plain Language 

Section 722 of the Gramm-LeachBliley Act 221 requires each Federal 

banking agency to use plain language in 

all of its proposed and final rules 

published after January 1, 2000. As a 

Federal banking agency subject to the 

provisions of this section, the FDIC has 

sought to present the Proposed Rule in 

a simple and straightforward manner. 

The FDIC invites comments on whether 

the Proposed Rule is clearly stated and 

effectively organized, and how the FDIC 

might make it easier to understand. For 

example: 

• Has the FDIC organized the material 

to suit your needs? If not, how could it 

present the rule more clearly? 

• Have we clearly stated the 

requirements of the rule? If not, how 

could the rule be more clearly stated? 

• Does the rule contain technical 

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 make the regulation 

easier to understand? 

• What else could we do to make the 

regulation easier to understand? 

E. Riegle Community Development and 

Regulatory Improvement Act of 1994 

The Riegle Community Development 

and Regulatory Improvement Act of 

1994 (RCDRIA) requires that each 

Federal banking agency, in determining 

the effective date and administrative 

compliance requirements for new 

regulations that impose additional 

reporting, disclosure, or other 

requirements on insured depository 

institutions, consider, consistent with 

principles of safety and soundness and 

the public interest, any administrative 

burdens that such regulations would 

place on depository institutions, 

including small depository institutions, 

and customers of depository 

institutions, as well as the benefits of 

such regulations. In addition, new 

regulations and amendments to 

regulations that impose additional 

reporting, disclosure, or other new 

requirements on insured depository 

institutions generally must take effect 

on the first day of a calendar quarter 

that begins on or after the date on which 

the regulations are published in final 


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222 12 U.S.C. 4802. 

form.222 The FDIC invites comments 

that further will inform its consideration 

of RCDRIA. 

List of Subjects 

12 CFR Part 303 

Administrative practice and 

procedure, Bank deposit insurance, 

Banks, banking, Reporting and 

recordkeeping requirements, Savings 

associations. 

12 CFR Part 326 

Banks, banking, Currency, Reporting 

and recordkeeping requirements, 

Security measures. 

12 CFR Part 337 

Banks, banking, Reporting and 

recordkeeping requirements, Savings 

associations, Securities. 

12 CFR Part 353 

Banks, banking, Crime, Reporting and 

recordkeeping requirements. 

12 CFR Part 390 

Administrative practice and 

procedure, Advertising, Aged, Civil 

rights, Conflict of interests, Credit, 

Crime, Equal employment opportunity, 

Fair Housing, Government employees, 

Individuals with disabilities, Reporting 

and recordkeeping requirements, 

Savings associations. 

For the reasons stated in the preamble 

and under the authority of 12 U.S.C. 

5412, the Federal Deposit Insurance 

Corporation proposes to amend parts 

303, 326, 337, 353 and 390 of title 12 of 

the Code of Federal Regulations as 

follows: 

PART 303—FILING PROCEDURES 

■ 1. The authority citation for 12 CFR 

Part 303 is revised to read as follows: 

Authority: 12 U.S.C. 378, 478, 1463, 1813, 

1815, 1817, 1818, 1819 (Seventh and Tenth), 

1820, 1823, 1828, 1831z, 1831e, 1831o, 

1831p–1, 1831w, 1835a, 1843(l), 3104, 3105, 

3108, 3207, 5412; 15 U.S.C. 1601–1607. 

■ 2. Amend § 303.2 by redesignating 

paragraphs (s) through (ff) as paragraphs 

(t) through (gg) and adding a new 

paragraph (s) to read as follows: 

* * * * * 

(s) FDIC-supervised institution means 

any entity for which the FDIC is the 

appropriate Federal banking agency 

pursuant to section 3(q) of the FDI Act, 

12 U.S.C. 1813(q). 

* * * * * 

■ 3. Revise § 303.62 to read as follows: 

§ 303.62 Transactions requiring prior 

approval. 

(a) Merger transactions. The following 

merger transactions require the prior 

written approval of the FDIC under this 

subpart: 

(1) Any merger transaction, including 

any corporate reorganization, interim 

merger transaction, or optional 

conversion, in which the resulting 

institution is to be an FDIC-supervised 

institution; and 

(2) Any merger transaction, including 

any corporate reorganization, or interim 

merger transaction, that involves an 

uninsured bank or institution. 

(b) Related regulations. Transactions 

covered by this subpart also may be 

subject to other regulations or 

application requirements, including the 

following: 

(1) Interstate merger transactions. 

Merger transactions between insured 

banks that are chartered in different 

states are subject to the regulations of 

section 44 of the FDI Act (12 U.S.C. 

1831u). In the case of a merger 

transaction that consists of the 

acquisition by an out of state bank of a 

branch without acquisition of the bank, 

the branch is treated for section 44 

purposes as a bank whose home state is 

the state in which the branch is located. 

(2) Deposit insurance. An application 

for deposit insurance will be required in 

connection with a merger transaction 

between a state-chartered interim 

institution and an insured depository 

institution if the related merger 

application is being acted upon by a 

Federal banking agency other than the 

FDIC. If the FDIC is the Federal banking 

agency responsible for acting on the 

related merger application, a separate 

application for deposit insurance is not 

necessary. Procedures for applying for 

deposit insurance are set forth in 

subpart B of this part. An application for 

deposit insurance will not be required 

in connection with a merger transaction 

(other than a purchase and assumption 

transaction) of a federally-chartered 

interim institution and an insured 

institution, even if the resulting 

institution is to operate under the 

charter of the Federal interim 

institution. 

(3) Branch closings. Branch closings 

in connection with a merger transaction 

are subject to the notice requirements of 

section 42 of the FDI Act (12 U.S.C. 

1831r–1), including requirements for 

notice to customers. These requirements 

are addressed in the ‘‘Interagency Policy 

Statement Concerning Branch Closings 

Notices and Policies’’ (1 FDIC Law, 

Regulations, Related Acts (FDIC) 5391; 

see § 309.4(a) and (b) of this chapter for 

availability). 

(4) Undercapitalized institutions. 

Applications for a merger transaction by 

applicants subject to section 38 of the 

FDI Act (12 U.S.C. 1831o) should also 

provide the information required by 

§ 303.204. Applications pursuant to 

sections 38 and 18(c) of the FDI Act (12 

U.S.C, 1831o and 1828(c)) may be filed 

concurrently or as a single application. 

(5) Certification of assumption of 

deposit liability. Whenever all of the 

deposit liabilities of an insured 

depository institution are assumed by 

one or more insured depository 

institutions by merger, consolidation, 

other statutory assumption, or by 

contract, the transferring insured 

depository institution, or its legal 

successor, shall provide an accurate 

written certification to the FDIC that its 

deposit liabilities have been assumed, in 

accordance with 12 CFR part 307. 

■ 4. Revise § 303.64 to read as follows: 

§ 303.64 Processing 

(a) Expedited processing for eligible 

depository institutions—(1) General. An 

application filed under this subpart by 

an eligible depository institution as 

defined in § 303.2(r) and which meets 

the additional criteria in paragraph 

(a)(4) of this section will be 

acknowledged by the FDIC in writing 

and will receive expedited processing, 

unless the applicant is notified in 

writing to the contrary and provided 

with the basis for that decision. The 

FDIC may remove an application from 

expedited processing for any of the 

reasons set forth in § 303.11(c)(2). 

(2) Under expedited processing, the 

FDIC will take action on an application 

by the date that is the latest of: 

(i) 45 days after the date of the FDIC’s 

receipt of a substantially complete 

merger application; or 

(ii) 10 days after the date of the last 

notice publication required under 

§ 303.65 of this subpart; or 

(iii) 5 days after receipt of the 

Attorney General’s report on the 

competitive factors involved in the 

proposed transaction; or 

(iv) For an interstate merger 

transaction subject to the provisions of 

section 44 of the FDI Act (12 U.S.C. 

1831u), 5 days after the FDIC receives 

confirmation from the host state (as 

defined in § 303.41(e)) that the applicant 

has both complied with the filing 

requirements of the host state and 

submitted a copy of the FDIC merger 

application to the host state’s bank 

supervisor. 

(3) Notwithstanding paragraphs (a)(1) 

or (2) of this section, if the FDIC does 

not act within the expedited processing 

period, it does not constitute an 

automatic or default approval. 


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(4) Criteria. The FDIC will process an 

application using expedited procedures 

if: 

(i) Immediately following the merger 

transaction, the resulting institution will 

be ‘‘well-capitalized’’ pursuant to 

subpart H of part 324 of this chapter (12 

CFR part 324), as applicable; and 

(ii)(A) All parties to the merger 

transaction are eligible depository 

institutions as defined in § 303.2(r); or 

(B) The acquiring party is an eligible 

depository institution as defined in 

§ 303.2(r) and the amount of the total 

assets to be transferred does not exceed 

an amount equal to 10 percent of the 

acquiring institution’s total assets as 

reported in its report of condition for 

the quarter immediately preceding the 

filing of the merger application. 

(b) Standard processing. For those 

applications not processed pursuant to 

the expedited procedures, the FDIC will 

provide the applicant with written 

notification of the final action taken by 

the FDIC on the application when the 

decision is rendered. 

(c) Processing for State savings 

associations. Notwithstanding 

paragraphs (a) and (b) of this section, 

the FDIC will approve or disapprove an 

application filed by a State savings 

association to acquire or be acquired by 

another insured depository institution 

that is required to be filed with the FDIC 

within 60 days after the date of the 

FDIC’s receipt of a substantially 

complete merger application, subject to 

the FDIC’s discretion to extend such 

period by an additional 30 days if any 

material information submitted is 

substantially inaccurate or incomplete. 

(1) The FDIC shall notify an applicant 

that is a State savings association in 

writing of the date the application is 

deemed substantially complete. The 

FDIC may request additional 

information at any time. 

(2) Notwithstanding paragraph (c) of 

this section, if the FDIC does not 

approve or disapprove an application 

within the 60-day or extended 

processing period it does not constitute 

an automatic or default approval. 

■ 5. Revise § 303.100 to read as follows: 

§ 303.100 Scope 

This subpart sets forth the 

circumstances under which an FDICsupervised institution must notify the 

FDIC of a change in any member of its 

board of directors or any senior 

executive officer and the procedures for 

filing such notice. This subpart 

implements section 32 of the FDI Act 

(12 U.S.C. 1831i). 

■ 6. Amend § 303.101 by revising 

paragraph (a) introductory text, 

paragraph (b) introductory, paragraph 

(c) introductory text and paragraphs 

(c)(3), (c)(4) and (d) to read as follows: 

§ 303.101 Definitions 

(a) Director means a person who 

serves on the board of directors or board 

of trustees of an FDIC-supervised 

institution, except that this term does 

not include an advisory director who: 

* * * * * 

(b) Senior executive officer means a 

person who holds the title of president, 

chief executive officer, chief operating 

officer, chief managing official (in an 

insured state branch of a foreign bank), 

chief financial officer, chief lending 

officer, chief investment officer, or, 

without regard to title, salary, or 

compensation, performs the function of 

one or more of these positions. Senior 

executive officer also includes any other 

person identified by the FDIC, whether 

or not hired as an employee, with 

significant influence over, or who 

participates in, major policymaking 

decisions of the FDIC-supervised 

institution. 

(c) Troubled condition means any 

FDIC-supervised institution that: 

* * * * * 

(3) Is subject to a cease-and-desist 

order or written agreement issued by 

either the FDIC or the appropriate state 

banking authority that requires action to 

improve the financial condition of the 

FDIC-supervised institution or is subject 

to a proceeding initiated by the FDIC or 

state authority which contemplates the 

issuance of an order that requires action 

to improve the financial condition of the 

FDIC-supervised institution, unless 

otherwise informed in writing by the 

FDIC; or 

(4) Is informed in writing by the FDIC 

that it is in troubled condition for 

purposes of the requirements of this 

subpart on the basis of the FDICsupervised institution’s most recent 

report of condition or report of 

examination, or other information 

available to the FDIC. 

(d) FDIC-supervised institution means 

any entity for which the FDIC is the 

appropriate Federal banking agency 

pursuant to section 3(q) of the FDI Act, 

12 U.S.C. 1813(q). 

■ 7. Amend § 303.102 by revising 

paragraph (a), paragraph (c) 

introductory text, paragraph (c)(1) 

introductory text, paragraph (c)(1)(i), 

and (c)(2) to read as follows: 

§ 303.102 Filing procedures and waiver of 

prior notice 

(a) FDIC-supervised institutions. An 

FDIC-supervised institution shall give 

the FDIC written notice, as specified in 

paragraph (c)(1) of this section, at least 

30 days prior to adding or replacing any 

member of its board of directors, 

employing any person as a senior 

executive officer of the institution, or 

changing the responsibilities of any 

senior executive officer so that the 

person would assume a different senior 

executive officer position, if the FDICsupervised institution: 

(1) Is not in compliance with all 

minimum capital requirements 

applicable to the FDIC-supervised 

institution as determined on the basis of 

the institution’s most recent report of 

condition or report of examination; 

(2) Is in troubled condition; or 

(3) The FDIC determines, in 

connection with its review of a capital 

restoration plan required under section 

38(e)(2) of the FDI Act (12 U.S.C. 

1831o(e)(2)) or otherwise, that such 

notice is appropriate. 

* * * * * 

(c) Waiver of prior notice—(1) Waiver 

requests. The FDIC may permit an 

individual, upon petition by the FDICsupervised institution to the appropriate 

FDIC office, to serve as a senior 

executive officer or director before filing 

the notice required under this subpart if 

the FDIC finds that: 

(i) Delay would threaten the safety 

and soundness of the FDIC-supervised 

institution 

* * * * * 

(2) Automatic waiver. The prior 30- 

day notice is automatically waived in 

the case of the election of a new director 

not proposed by management at a 

meeting of the shareholders of an FDICsupervised institution, and the 

individual immediately may begin 

serving, provided that a complete notice 

is filed with the appropriate FDIC office 

within two business days after the 

individual’s election. 

* * * * * 

■ 8. Revise § 303.103 to read as follows: 

§ 303.103 Processing 

(a) Processing. The 30-day notice 

period specified in § 303.102(a) shall 

begin on the date substantially all 

information required to be submitted by 

the notificant pursuant to 

§ 303.102(c)(1) is received by the 

appropriate FDIC office. The FDIC shall 

notify the FDIC-supervised institution 

submitting the notice of the date on 

which the notice is accepted for 

processing and of the date on which the 

30-day notice period will expire. If 

processing cannot be completed with 30 

days, the notificant will be advised in 

writing, prior to expiration of the 30-day 

period, of the reason for the delay in 

processing and of the additional time 

period, not to exceed 60 days, in which 

processing will be completed. 


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(b) Commencement of service—(1) At 

expiration of period. A proposed 

director or senior executive officer may 

begin service after the end of the 30-day 

period or any other additional period as 

provided under paragraph (a) of this 

section, unless the FDIC disapproves the 

notice before the end of the period. 

(2) Prior to expiration of the period. A 

proposed director or senior executive 

officer may begin service before the end 

of the 30-day period or any additional 

time period as provided under 

paragraph (a) of this section, if the FDIC 

notifies the FDIC-supervised institution 

and the individual in writing of the 

FDIC’s intention not to disapprove the 

notice. 

(c) Notice of disapproval. The FDIC 

may disapprove a notice filed under 

§ 303.102 if the FDIC finds that the 

competence, experience, character, or 

integrity of the individual with respect 

to whom the notice is submitted 

indicates that it would not be in the best 

interests of depositors of the FDICsupervised institution or in the best 

interests of the public to permit the 

individual to be employed by, or 

associated with the FDIC-supervised 

institution. Subpart L of 12 CFR part 

308 sets forth the rules of practice and 

procedure for a notice of disapproval. 

■ 9. Revise § 303.200(b) to read as 

follows: 

§ 303.200 Scope 

* * * * * 

(b) Institutions covered. Restrictions 

and prohibitions contained in subpart H 

of part 324 of this chapter apply 

primarily to FDIC-supervised 

institutions, as well as to directors and 

senior executive officers of those 

institutions. Portions of subpart H of 

part 324 of this chapter also apply to all 

insured depository institutions that are 

deemed to be critically 

undercapitalized. 

■ 10. Revise § 303.203 to read as 

follows: 

§ 303.203 Applications for capital 

distributions. 

(a) Scope. An FDIC-supervised 

institution shall submit an application 

for a capital distribution if, after having 

made a capital distribution, the 

institution would be undercapitalized, 

significantly undercapitalized, or 

critically undercapitalized. 

(b) Content of filing. An application to 

repurchase, redeem, retire, or otherwise 

acquire shares or ownership interests of 

the FDIC-supervised institution shall 

describe the proposal, the shares or 

obligations that are the subject thereof, 

and the additional shares or obligations 

of the institution that will be issued in 

at least an amount equivalent to the 

distribution. The application also shall 

explain how the proposal will reduce 

the institution’s financial obligations or 

otherwise improve its financial 

condition. If the proposed action also 

requires an application under § 303.241 

of this part regarding prior consent to 

retire capital, such application should 

be filed concurrently with, or made a 

part of, the application filed pursuant to 

section 38 of the FDI Act (12 U.S.C. 

1831o). 

■ 11. Amend § 303.241 by revising 

paragraphs (a) and (e) to read as follows: 

§ 303.241 Reduce or retire capital stock or 

capital debt instruments. 

(a) Scope. (1) Insured State 

nonmember banks. The procedures 

contained in this section are to be 

followed by an insured State 

nonmember bank to seek the prior 

approval of the FDIC to reduce the 

amount or retire any part of its common 

or preferred stock, or to retire any part 

of its capital notes or debentures 

pursuant to section 18(i)(1) of the FDI 

Act (12 U.S.C. 1828(i)(1)). 

(2) Insured State savings associations. 

The procedures contained in this 

section are to be followed by an insured 

State savings association to seek the 

prior approval of the FDIC to reduce the 

amount or retire any part of its common 

or preferred stock, or to retire any part 

of its capital notes or debentures, as if 

the insured State savings association 

were a State nonmember bank subject to 

section 18(i)(1) of the Act (12 U.S.C. 

1828(i)(1)). 

* * * * * 

(e) Undercapitalized institutions. 

Procedures regarding applications by an 

undercapitalized insured depository 

institution to retire capital stock or 

capital debt instruments pursuant to 

section 38 of the FDI Act (12 U.S.C. 

1831o) are set forth in subpart K 

(Prompt Corrective Action), § 303.203. 

Applications pursuant to section 38 and 

this section should be filed 

concurrently, or as a single application. 

* * * * * 

PART 326—MINIMUM SECURITY 

DEVICES AND PROCEDURES AND 

BANK SECRECY ACT COMPLIANCE 

■ 12. Revise the authority citation for 12 

CFR part 326 to read as follows: 

Authority: 12 U.S.C. 1813, 1815, 1817, 

1818, 1819 (Tenth), 1881–1883, 5412; 31 

U.S.C. 5311–5314, 5316–5332.2. 

■ 13. Revise § 326.1(a) to read as 

follows: 

§ 326.8 Definitions 

* * * * * 

(a) The term FDIC-supervised 

institution or institution means any 

entity for which the Federal Deposit 

Insurance Corporation is the appropriate 

Federal banking agency pursuant to 

section 3(q) of the Federal Deposit 

Insurance Act, 12 U.S.C. 1813(q). 

* * * * * 

■ 14. Revise § 326.8 to read as follows: 

§ 326.8 Bank Secrecy Act Compliance 

(a) Purpose. This subpart is issued to 

assure that all FDIC-supervised 

institutions as defined in 12 CFR 326.1 

establish and maintain procedures 

reasonably designed to assure and 

monitor their compliance with the 

requirements of subchapter II of chapter 

53 of title 31, United States Code, and 

the implementing regulations 

promulgated thereunder by the 

Department of Treasury at 31 CFR 

Chapter X. 

(b) Compliance procedures—(1) 

Program requirement. Each institution 

shall develop and provide for the 

continued administration of a program 

reasonably designed to assure and 

monitor compliance with recordkeeping 

and reporting requirements set forth in 

subchapter II of chapter 53 of title 31, 

United States Code, and the 

implementing regulations issued by the 

Department of Treasury at 31 CFR 

Chapter X. The compliance program 

shall be written, approved by the 

institution’s board of directors, and 

noted in the minutes. 

(2) Customer identification program. 

Each institution is subject to the 

requirements of 31 U.S.C. 5318(l) and 

the implementing regulation jointly 

promulgated by the FDIC and the 

Department of the Treasury at 31 CFR 

1020.220. 

(c) Contents of compliance program. 

The compliance program shall, at a 

minimum: 

(1) Provide for a system of internal 

controls to assure ongoing compliance; 

(2) Provide for independent testing for 

compliance to be conducted by 

institution personnel or by an outside 

party; 

(3) Designate an individual or 

individuals responsible for coordinating 

and monitoring day-to-day compliance; 

and 

(4) Provide training for appropriate 

personnel. 

PART 337—UNSAFE AND UNSOUND 

BANKING PRACTICES 

■ 15. Revise the authority citation for 12 

CFR 337 to read as follows: 

Authority: 12 U.S.C. 375a(4), 375b, 1463, 

1464, 1816, 1818(a), 1818(b), 1819, 1820(d), 

1821(f), 1828(j)(2), 1831, 1831f, 1831g, 5412. 


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3For the purposes of section 337.3, an FDICsupervised institution’s unimpaired capital and 

unimpaired surplus shall have the same meaning as 

found in section 215.2(i) of Federal Reserve Board 

Regulation O (12 CFR 215.2(i)). 

■ 16. Revise § 337.3 to read as follows: 

§ 337.3 Limits on extensions of credit to 

executive officers, directors, and principal 

shareholders of FDIC-supervised 

institutions. 

(a) With the exception of 12 CFR 

215.5(b), 215.5(c)(3), and 215.5(c)(4), 

FDIC-supervised institutions are subject 

to the restrictions contained in Federal 

Reserve Board Regulation O (12 CFR 

part 215) to the same extent and to the 

same manner as though they were 

member banks. 

(b) For the purposes of compliance 

with § 215.4(b) of Federal Reserve Board 

Regulation O, no FDIC-supervised 

institution may extend credit or grant a 

line of credit to any of its executive 

officers, directors, or principal 

shareholders or to any related interest of 

any such person in an amount that, 

when aggregated with the amount of all 

other extensions of credit and lines of 

credit by the FDIC-supervised 

institution to that person and to all 

related interests of that person, exceeds 

the greater of $25,000 or five percent of 

the FDIC-supervised institution’s 

unimpaired capital and unimpaired 

surplus,3 or $500,000 unless: 

(1) The extension of credit or line of 

credit has been approved in advance by 

a majority of the entire board of 

directors of that FDIC-supervised 

institution and 

(2) the interested party has abstained 

from participating directly or indirectly 

in the voting. 

(c)(1) No FDIC-supervised institution 

may extend credit in an aggregate 

amount greater than the amount 

permitted in paragraph (c)(2) of this 

section to a partnership in which one or 

more of the FDIC-supervised 

institution’s executive officers are 

partners and, either individually or 

together, hold a majority interest. For 

the purposes of paragraph (c)(2) of this 

section, the total amount of credit 

extended by an FDIC-supervised 

institution to such partnership is 

considered to be extended to each 

executive officer of the FDIC-supervised 

institution who is a member of the 

partnership. 

(2) An FDIC-supervised institution is 

authorized to extend credit to any 

executive officer of the bank for any 

other purpose not specified in 

§ 215.5(c)(1) and (2) of Federal Reserve 

Board Regulation O (12 CFR 215.5(c)(1) 

and (2)) if the aggregate amount of such 

other extensions of credit does not 

exceed at any one time the higher of 2.5 

percent of the FDIC-supervised 

institution’s unimpaired capital and 

unimpaired surplus or $25,000 but in no 

event more than $100,000, provided, 

however, that no such extension of 

credit shall be subject to this limit if the 

extension of credit is secured by: 

(i) A perfected security interest in 

bonds, notes, certificates of 

indebtedness, or Treasury bills of the 

United States or in other such 

obligations fully guaranteed as to 

principal and interest by the United 

States; 

(ii) Unconditional takeout 

commitments or guarantees of any 

department, agency, bureau, board, 

commission or establishment of the 

United States or any corporation wholly 

owned directly or indirectly by the 

United States; or 

(iii) A perfected security interest in a 

segregated deposit account in the 

lending FDIC-supervised institution. 

(3) For the purposes of paragraph (c) 

of this section, the definitions of the 

terms used in Federal Reserve Board 

Regulation O shall apply including the 

exclusion of executive officers of an 

FDIC-supervised institution’s parent 

bank or savings and loan holding 

company and executive officers of any 

other subsidiary of that bank or savings 

and loan holding company from the 

definition of executive officer for the 

purposes of complying with the loan 

restrictions contained in section 22(g) of 

the Federal Reserve Act. For the 

purposes of complying with § 215.5(d) 

of Federal Reserve Board Regulation O, 

the reference to ‘‘the amount specified 

for a category of credit in paragraph (c) 

of this section’’ shall be understood to 

refer to the amount specified in 

paragraph (c)(2) of this § 337.3. 

(d) Definition. For purposes of this 

section, FDIC-supervised institution 

means an entity for which the FDIC is 

the appropriate Federal banking agency 

pursuant to section 3(q) of the FDI Act, 

12 U.S.C. 1813(q). 

■ 17. Revise § 337.11 to read as follows: 

§ 337.11 Effect on other banking practices. 

(a) Nothing in this part shall be 

construed as restricting in any manner 

the Corporation’s authority to deal with 

any banking practice which is deemed 

to be unsafe or unsound or otherwise 

not in accordance with law, rule, or 

regulation; or which violates any 

condition imposed in writing by the 

Corporation in connection with the 

granting of any application or other 

request by an FDIC-Supervised 

institution, or any written agreement 

entered into by such institution with the 

Corporation. Compliance with the 

provisions of this part shall not relieve 

an FDIC-supervised institution from its 

duty to conduct its operations in a safe 

and sound manner nor prevent the 

Corporation from taking whatever action 

it deems necessary and desirable to deal 

with specific acts or practices which, 

although they do not violate the 

provisions of this part, are considered 

detrimental to the safety and sound 

operation of the institution engaged 

therein. 

(b) Definition. FDIC-supervised 

institution means an entity for which 

the FDIC is the appropriate Federal 

banking agency pursuant to section 3(q) 

of the FDI Act, 12 U.S.C. 1813(q). 

PART 353—SUSPICIOUS ACTIVITY 

REPORTS 

■ 18. Revise the authority citation for 12 

CFR part 353 to read as follows: 

Authority: 12 U.S.C. 1818, 1819; 31 U.S.C. 

5318 

§ 353.1 [Amended] 

■ 19. Amend § 353.1 by removing the 

term ‘‘insured nonmember bank’’ and 

adding in its place the term ‘‘FDICsupervised institution’’. 

■ 20. Amend § 353.2 by adding 

paragraph (c) to read as follows: 

§ 353.2 Definitions 

* * * * * 

(c) FDIC-supervised institution means 

an entity for which the FDIC is the 

appropriate Federal banking agency 

pursuant to section 3(q) of the FDI Act, 

12 U.S.C. 1813(q). 

§ 353.3 [Amended] 

■ 21. Amend § 353.3 by: 

■ a. Removing the term ‘‘insured 

nonmember bank’’ and adding in its 

place the term ‘‘FDIC-supervised 

institution’’; 

■ b. Removing the term ‘‘bank’’ and 

adding in its place the term 

‘‘institution’’. 

PART 390—REGULATIONS 

TRANSFERRED FROM THE OFFICE OF 

THRIFT SUPERVISION 

■ 22. The authority citation for part 390 

continues to read as follows: 

Authority: 12 U.S.C. 1819. 

Subpart S—[Removed] 

■ 23. Remove subpart S consisting of 

§§ 390.330 through 390.368 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 


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58520 Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Proposed Rules 

Dated at Washington, DC, on October 15, 

2019. 

Annmarie H. Boyd, 

Assistant Executive Secretary. 

[FR Doc. 2019–23115 Filed 10–30–19; 8:45 am] 

BILLING CODE 6714–01–P 


khammond on DSKJM1Z7X2PROD with PROPOSALS2