Source: https://www.federalregister.gov/documents/2018/11/28/2018-25660/rules-of-practice-and-procedure
Timestamp: 2018-12-16 20:48:12
Document Index: 404178296

Matched Legal Cases: ['art 308', 'art 308', 'arts 308', 'arts 308', '§\u2009308', '§\u2009308', '§\u2009308', '§\u2009308']

A Rule by the Federal Deposit Insurance Corporation on 11/28/2018
83 FR 61111
III. Description and Expected Effects of the Rule
https://www.federalregister.gov/d/2018-25660 https://www.federalregister.gov/d/2018-25660
Start Preamble Start Printed Page 61111
The Federal Deposit Insurance Corporation (FDIC) is amending its rules of practice and procedure to remove duplicative, descriptive regulatory language related to civil money penalty (CMP) amounts that restates existing statutory language regarding such CMPs; codify Congress's recent change to CMP inflation-adjustments in the FDIC's regulations; and direct readers to an annually published notice in the Federal Register—rather than the Code of Federal Regulations (CFR)—for information regarding the maximum CMP amounts that can be assessed after inflation adjustments. These revisions are intended to simplify the CFR by removing unnecessary and redundant text and to make it easier for readers to locate the current, inflation-adjusted maximum CMP amounts by presenting these amounts in an annually published chart. Additionally, the FDIC is correcting four errors and revising cross-references currently found in its rules of practice and procedure.
Graham N. Rehrig, Senior Attorney, Legal Division, (202) 898-3829, grehrig@fdic.gov; or Sydney Mayer, Attorney, Legal Division, (202) 898-3669; Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
The policy objective of the Rule is to simplify the presentation of maximum CMP amounts within 12 CFR part 308 to support ease of reference and public understanding. The Rule will amend the presentation of maximum CMP limits to help ensure consistency with similar statutes of other federal financial regulators.[1] Additionally, the Rule will implement recent Office of Management and Budget (OMB) guidance on simplifying the publication of annual inflation adjustments.
The FDIC is amending its rules of practice and procedure to remove from Start Printed Page 61112the CFR descriptive regulatory language related to maximum CMP amounts that duplicates statutory language, codify the statutory formula for inflation adjustments to the maximum CMP amounts, and direct readers to a table published annually in the Federal Register, containing the inflation-adjusted maximum CMP amounts. These changes will be consistent with the OMB Guidance and the practices of other Federal regulators.
Currently, 12 CFR 308.116(b) and 308.132(d) contain the maximum CMP amounts that may be assessed for violations of various statutes, along with lengthy descriptions of these statutes. Rather than providing any interpretation of these statutes or providing guidance regarding the assessment of CMPs for violations of these statutes, the descriptive language contained in sections 308.116(b) and 308.132(d) merely restates the enabling statutory language. The FDIC's current format for identifying inflation-adjusted CMP figures differs significantly from the formats published by other prudential regulators [14] and makes it more difficult for readers to locate applicable maximum CMP amounts. Accordingly, the FDIC is removing descriptive language found in sections 308.116(b) and 308.132(d). The FDIC believes that these changes will remove unnecessary and redundant language from the CFR and improve readability.
The FDIC, however, will retain language in section 308.116(a), (c) and (d) concerning violations of the Change in Bank Control Act. These regulations, which the FDIC implemented in 1991, address requests for a hearing, mitigating factors, and the consequences of a respondent's failure to answer.[15] The language in current section 308.116(b)(1)-(3), however, repeats the relevant statutory language of 12 U.S.C. 1817(j)(16)(A)-(D). Further, current section 308.116(b)(4) merely contains inflation adjustments. Therefore, the FDIC is removing current section 308.116(b) and instead directing readers to section 308.132(d) to determine current maximum CMP amounts.
The FDIC is also keeping language concerning the late filing of Call Reports at current section 308.132(d)(1) and (d)(3). 12 U.S.C. 1817(a) provides the maximum CMP amounts for the late filing of Call Reports. In 1991, however, the FDIC issued regulations that further subdivided these amounts based upon the size of the institution and the lateness of the filing.[16] These regulations accordingly differ from other provisions found in section 308.132(d) that simply restate relevant statutory language regarding maximum CMP amounts. The Rule will merge language from current subsections 308.132(d)(1) and (d)(3) into a new section 308.132(e), since, aside from the differing penalty amounts, these two current subsections contain similar language. The new section 308.132(e) will direct readers to the Federal Register to determine the applicable inflation-adjusted penalty amounts.
The FDIC is correcting four errors currently located at section 308.132(d)(1) and (d)(3) concerning the maximum amount that generally will be assessed for violations of 12 U.S.C. 1464(v) and 1817(a) regarding the late filing of Call Reports by certain small institutions. The current text contains the inadvertent overstatement of four fractions of an institution's total assets that are paired with correctly stated basis-point figures. These corrections will align the listed fractions of an institution's total assets with the listed basis-point calculations, and these corrections will be reflected in the annual Federal Register CMP notice.[17]
Tier One CMP $3,928.
Tier Two CMP $39,278.
Tier Three CMP 19 $1,963,870.
12 U.S.C. 1467(d) $9,819.
Tier One CMP 20 $3,928.
Tier Three CMP 21 $1,963,870.
Tier One CMP $3,591.
Tier Two CMP $35,904.
Tier Three CMP 22 $1,795,216.
Tier One CMP $9,819.
Tier Two CMP $49,096.
Tier Three CMP 23 $1,963,870.
12 U.S.C. 1818(i)(2): 24
Tier Three CMP 25 $1,963,870.
12 U.S.C. 1820(e)(4) $8,977.
12 U.S.C. 1820(k)(6) $323,027.
12 U.S.C. 1828(a)(3) $122.
12 U.S.C. 1828(h): 26
For assessments <$10,000 $122.
12 U.S.C. 1829b(j) $20,521.
12 U.S.C. 1832(c) $2,852.
12 U.S.C. 1884 $285.
Tier Three CMP 27 $1,963,870.
12 U.S.C. 3909(d) $2,443.
Tier One CMP (individuals) $9,239.
Tier One CMP (others) $92,383.
Tier Two CMP (individuals) $92,383.
Tier Two CMP (others) $461,916.
Tier Three CMP (individuals) $184,767.
Tier Three penalty (others) $923,831.
First violation $11,279.
Subsequent violations $22,556.
31 U.S.C. 3802 $11,181.
42 U.S.C. 4012a(f) $2,133.
CFR citation Adjusted presumptive CMP (beginning January 15, 2018)
1 to 15 days late $538.
16 or more days late $1,078.
Institutions with less than 25 million in assets:
1 to 15 days late 28 $180.
16 or more days late 29 $359.
1 to 15 days late $897.
16 or more days late $1,795.
12 CFR 308.132(e)(2) $39,278.
Tier Three CMP 30 $1,963,870.
During preliminary discussions regarding the Rule, the FDIC considered possible alternatives to issuing the Rule. The primary alternative the FDIC considered was to maintain the current statutory language in the CFR and Federal Register as well as the CMP presentation format. This alternative (1) keeps the redundant statutory language in the CFR and Federal Register, (2) does not improve the clarity and readability of the maximum CMPs, and (3) does not address the fact that the CMP presentation format is inconsistent with the other prudential regulators. Therefore, the FDIC believes the Rule will support ease of reference and public understanding more so than the alternative.
The FDIC believes that these changes to Part 308 are ministerial and technical and that, therefore, notice-and-comment rulemaking is unnecessary. Nonetheless, in the interest of transparency, the FDIC invited comments on all aspects of the Rule in a Notice of Proposed Rulemaking, dated August 3, 2018.[31] Commenters were specifically encouraged to identify any technical issues raised by the Rule. The FDIC provided a 60-day comment period for this Rule, but the agency did not receive any comments.
Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 [32] requires that each Federal banking agency, in determining the effective date and administrative compliance requirements Start Printed Page 61114for 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, in order to provide an adequate transition period, new regulations that impose additional reporting, disclosures, or other new requirements on IDIs 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 form.
The Rule will not impose any new or additional reporting, disclosures, or other requirements on insured depository institutions. Therefore, the Rule is not subject to the requirements of this statute.
The Regulatory Flexibility Act (RFA) generally requires that, in connection with a rulemaking, an agency prepare and make available for public comment a final regulatory flexibility analysis describing the impact of the rulemaking on small entities.[33] A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets less than or equal to $550 million.[34] The FDIC supervises 3,575 depository institutions,[35] of which 2,763 are defined as small banking entities by the terms of the RFA.[36] For the reasons described below and under section 605(b) of the RFA, the FDIC certifies that the Rule will not have a significant economic impact on a substantial number of small entities.
The FDIC believes the amendments to 12 CFR parts 308 and 327 will have a negligible impact on small entities. For a detailed description of the Rule and its expected effects, please review Section III above. The revisions are intended to simplify the text of the CFR by removing unnecessary and redundant text in order to make it easier for readers to reference and understand the current maximum CMP amounts.
The OMB has determined that the Rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement Act of 1996 (SBREFA).[37] As required by the SBREFA, the FDIC will submit the Rule and other appropriate reports to Congress and the Government Accountability Office for review.
The FDIC determined that the Rule will not affect family wellbeing within the meaning of section 654 of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999.[38]
The Rule does not create any new, or revise any existing, collections of information under section 3504(h) of the Paperwork Reduction Act of 1980.[39] Consequently, no information-collection request will be submitted to the OMB for review.
Section 722 of the Gramm-Leach-Bliley Act requires the FDIC to use plain language in all proposed and final rules published after January 1, 2000.[40] Accordingly, the FDIC has attempted to write the Rule in clear and comprehensible language.
For the reasons set forth in the preamble, the FDIC amends 12 CFR parts 308 and 327 to read as follows:
(b) Maximum penalty amounts. Under 12 U.S.C. 1817(j)(16), a civil money penalty may be assessed for violations of change in control of insured depository institution provisions in the maximum amounts calculated and published in accordance with § 308.132(d).
(1) Statutory formula to calculate inflation adjustments. The FDIC is required by statute to annually adjust for inflation the maximum amount of each civil money penalty within its jurisdiction to administer. The inflation adjustment is calculated by multiplying the maximum dollar amount of the civil money penalty for the previous calendar year by the cost-of-living inflation adjustment multiplier provided annually by the Office of Management and Budget and rounding the total to the nearest dollar.Start Printed Page 61115
(2) Notice of inflation adjustments. By January 15 of each calendar year, the FDIC will publish notice in the Federal Register of the maximum penalties that may be assessed after each January 15, based on the formula in paragraph (d)(1) of this section, for conduct occurring on or after November 2, 2015.
(i) First offense. Generally, in such cases, the amount assessed shall be an amount calculated and published annually in the Federal Register under paragraph (d)(2) of this section. The Federal Register notice will contain a presumptive penalty amount per day for each of the first 15 days for which the failure continues, and a presumptive amount per day for each subsequent days the failure continues, beginning on the 16th day. The annual Federal Register notice will also provide penalty amounts that generally may be assessed for institutions with less than $25,000,000 in assets.
(ii) Subsequent offense. The FDIC will calculate and publish in the Federal Register a presumptive daily Tier One penalty to be imposed where an institution has been delinquent in making or publishing its Call Report within the preceding five quarters. The published penalty shall identify the amount that will generally be imposed per day for each of the first 15 days for which the failure continues, and the amount that will generally be imposed per day for each subsequent day the failure continues, beginning on the 16th day. The annual Federal Register notice will also provide penalty amounts that generally may be assessed for institutions with less than $25,000,000 in assets.
(3) False or misleading reports or information— (i) Tier One penalties. In cases in which an institution submits or publishes any false or misleading Call Report or information, the Board of Directors or its designee may assess a Tier One civil money penalty for each day the information is not corrected, where the institution maintains procedures in place reasonably adapted to avoid inadvertent error and the violation occurred unintentionally and as a result of such error, or where the institution inadvertently transmits a Call Report or information that is false or misleading. The amount of such a penalty will not exceed the maximum amount calculated and published annually in the Federal Register under paragraph (d)(2) of this section.
(4) Mitigating factors. The amounts set forth in paragraphs (e)(1) through (e)(3) of this section may be reduced based upon the factors set forth in paragraph (b) of this section.
(6) The amount of any penalty assessed under paragraph (a)(1) of this section will be adjusted for inflation in accordance with § 308.132(d).
(4) The amount of any penalty assessed under paragraph (a)(1) of this section will be adjusted for inflation in accordance with § 308.132(d).
(d) Civil money penalties that are assessed under this subpart are subject to annual adjustments to account for inflation as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74, sec. 701, 129 Stat. 584) (see also § 308.132(d)).
(c) Necessary action, sufficient funding by institution. Each insured depository institution shall take all actions necessary to allow the Corporation to debit assessments from the insured depository institution's designated deposit account. Each insured depository institution shall, prior to each payment date indicated in paragraph (b)(2) of this section, ensure that funds in an amount at least equal to the amount on the quarterly certified statement invoice are available in the designated account for direct debit by the Corporation. Failure to take any such action or to provide such funding of the account shall be deemed to constitute nonpayment of the assessment. Penalties for failure to Start Printed Page 61116timely pay assessments will be calculated and published in accordance with 12 CFR 308.132(d).
1. See 12 CFR 19.240 (2018) and 83 FR 1657 (Jan. 12, 2018) (table containing the CMP adjustments published by the Office of the Comptroller of Currency); 12 CFR 263.65 (2018) (table containing the CMP adjustments published by the Board of Governors of the Federal Reserve System); 12 CFR 747.1001 (2018) (table containing the CMP adjustments published by the National Credit Union Association).
10. See 83 FR 1519, https://www.fdic.gov/​news/​board/​2017/​2017-12-19-notice-sum-b-fr.pdf.
12. OMB, Implementation of Penalty Inflation Adjustments for 2018, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, M-18-03 (OMB Guidance), https://www.whitehouse.gov/​wp-content/​uploads/​2017/​11/​M-18-03.pdf.
13. OMB Guidance at 4 (citing 81 FR 41438 (June 27, 2016) (Social Security Administration) (codified at 29 CFR 498.103(g) (2018))).
14. The OCC, the FRB, and the National Credit Union Association (NCUA) provide a simplified list in a tabular format, identifying each enabling statute and the associated maximum CMP amount, adjusted for inflation. See 12 CFR 19.240 (2018) and 83 FR 1657 (Jan. 12, 2018) (table containing the OCC's CMP adjustments); 12 CFR 263.65 (2018) (table containing the FRB's CMP adjustments); 12 CFR 747.1001 (2018) (table containing the NCUA's CMP adjustments).
17. For example, current section 308.132(d)(1)(i)(A) states, “the amount assessed shall be the greater of [an inflation-adjusted daily penalty] or 1/1,000th of the institution's total assets (1/10th of a basis point)” when it should read, “the amount assessed shall be the greater of [an inflation-adjusted daily penalty] or 1/100,000th of the institution's total assets (1/10th of a basis point).” (Emphasis added.)
31. See 83 FR 38080, https://www.gpo.gov/​fdsys/​pkg/​FR-2018-08-03/​pdf/​2018-16548.pdf.
34. The SBA defines a small banking organization as having $550 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.” 13 CFR 121.201 n.8 (2018). “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. . . .” 13 CFR 121.103(a)(6) (2018). Following these regulations, the FDIC uses a covered entity's affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the covered entity is “small” for the purposes of RFA.
35. FDIC-supervised institutions are listed in 12 U.S.C. 1813(q)(2).
36. Call Report: June 30, 2018.
38. Public Law 105-277, 112 Stat. 2681 (1998).
40. Public Law 106-102, 113 Stat. 1338 (Nov. 12, 1999).
[FR Doc. 2018-25660 Filed 11-27-18; 8:45 am]