Opinion ID: 3033121
Heading Depth: 3
Heading Rank: 3

Heading: The OCC’s Authority To Regulate Operating

Text: Subsidiaries That the Bank Act may be construed as allowing private national banks to conduct business through operating subsidiaries does not, however, necessarily resolve whether the Act also delegates to the OCC the authority to regulate such entities. That is to say, § 24(Seventh) concerns the incidental powers of national banks, not the extent of the OCC’s regulatory authority. Determining the reach of that authority is a separate question, involving the interpretation of 12 U.S.C. § 93a. Section 93a, like the rest of the Bank Act, is silent as to the OCC’s authority to regulate operating subsidiaries. This court has recognized, however, that the OCC’s authority to interpret the reach of the “incidental powers” conferred by § 24(Seventh) necessarily includes the authority to regulate the exercise of those powers to assure that they remain “incidental” to the “business of banking.” We so held in M & M Leasing, in which the central question was whether the leasing of automobiles by national banks was within the “incidental powers” of such banks, as the Comptroller had determined. After determining that, within limits, it is, we made clear that the Comptroller has both the authority and the “duty” “to promulgate reasonably detailed regulations which will confine leasing within the channels of the ‘business of banking.’ ” 563 F.2d at 1384. M & M Leasing’s conclusion that “[p]reparation of a comprehensive charter [for the exercise of “incidental powers”] is a function that belongs to the Comptroller,” id., necessarily makes the promulgation of such regulations one of the “responsibilities of the office” contemplated by § 93a, as to which the Commissioner has rulemaking power. [7] M & M Leasing’s logic applies here. Just as the Comptroller’s authority to regulate national banks’ leasing activities WELLS FARGO BANK v. BOUTRIS 10473 is inherent in his authority to interpret the “incidental powers” provision to allow such leasing in the first place, his authority to regulate operating subsidiaries also follows from the OCC’s authority to allow such entities. Further, the OCC operating subsidiary regulations most pertinent to the present inquiry quite directly address the reach of the national banks’ “incidental powers” authority to create and conduct their business through such entities. Those regulations, quoted above, restrict the range of activities that operating subsidiaries may conduct to those in which their parent banks may engage, see 12 C.F.R. §§ 5.34(e), 5.39(d)(6)(i), and state that such subsidiaries are subject to the same federal rules and standards “that apply to the conduct of such activities by its parent national bank.” Id. § 5.34(e)(3). These provisions ensure that the decision to conduct banking activities through subsidiaries neither expands the national banks’ scope of activities nor undermines the authority of the OCC to regulate those activities. By establishing these principles, the regulations circumscribe the decision to use operating subsidiaries so that it remains only “incidental” to the “business of banking.” In regulating the conduct of operating subsidiaries, moreover, the OCC is regulating only those activities it is explicitly authorized to regulate under the Bank Act. For federal regulatory purposes, in other words, the OCC is treating each operating subsidiary for the most part as if it were a national bank itself, conducting the same activities. In the latter instance, of course, the OCC’s regulatory authority is unquestioned. As we concluded twenty-eight years ago, “whatever the scope of such [incidental] powers may be, we believe the powers of national banks must be construed so as to permit the use of new ways of conducting the very old business of banking.” M & M Leasing, 563 F.2d at 1382. [8] We conclude that the OCC has permissibly applied 12 U.S.C. § 93a to regulate operating subsidiaries of national banks. 10474 WELLS FARGO BANK v. BOUTRIS