[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2004 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

   

                    12


          Parts 300 to 499

                         Revised as of January 1, 2004

Banks and Banking





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2004
          With Ancillaries
          Published by
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register

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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2004



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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter III--Federal Deposit Insurance Corporation         3
          Chapter IV--Export-Import Bank of the United States      483
  Finding Aids:
      Table of CFR Titles and Chapters........................     559
      Alphabetical List of Agencies Appearing in the CFR......     577
      List of CFR Sections Affected...........................     587

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  12 CFR 303.0 refers 
                       to title 12, part 303, 
                       section 0.

                     ----------------------------

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2004), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

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Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
volumes. For the period beginning January 1, 2001, a ``List of CFR 
Sections Affected'' is published at the end of each CFR volume.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
info@fedreg.nara.gov.

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ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
Documents and the Privacy Act Compilation are available in electronic 
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mail, gpoaccess@gpo.gov.

[[Page vii]]

    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.archives.gov/federal--
register. The NARA site also contains links to GPO Access.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2004.

[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of seven volumes. The parts 
in these volumes are arranged in the following order: parts 1-199, 200-
219, 220-299, 300-499, 500-599, part 600-899, and 900-end. The first 
volume containing parts 1-199 is comprised of chapter I--Comptroller of 
the Currency, Department of the Treasury. The second and third volumes 
containing parts 200-299 are comprised of chapter II--Federal Reserve 
System. The fourth volume containing parts 300-499 is comprised of 
chapter III--Federal Deposit Insurance Corporation and chapter IV--
Export-Import Bank of the United States. The fifth volume containing 
parts 500-599 is comprised of chapter V--Office of Thrift Supervision, 
Department of the Treasury. The sixth volume containing parts 600-899 is 
comprised of chapter VI--Farm Credit Administration, chapter VII--
National Credit Union Administration, chapter VIII--Federal Financing 
Bank. The seventh volume containing part 900-end is comprised of chapter 
IX--Federal Housing Finance Board, chapter XI--Federal Financial 
Institutions Examination Council, chapter XIV--Farm Credit System 
Insurance Corporation, chapter XV--Department of the Treasury, chapter 
XVII--Office of Federal Housing Enterprise Oversight, Department of 
Housing and Urban Development and chapter XVIII--Community Development 
Financial Institutions Fund, Department of the Treasury. The contents of 
these volumes represent all of the current regulations codified under 
this title of the CFR as of January 1, 2004.

[[Page x]]




[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                  (This book contains parts 300 to 499)

  --------------------------------------------------------------------
                                                                    Part

chapter iii--Federal Deposit Insurance Corporation..........         303


chapter iv--Export-Import Bank of the United States.........         400

[[Page 3]]



           CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION




  --------------------------------------------------------------------

              SUBCHAPTER A--PROCEDURE AND RULES OF PRACTICE
Part                                                                Page
300-302         [Reserved]
303             Filing procedures...........................           5
304             Forms, instructions and reports.............          48
305-306         [Reserved]
307             Notification of changes of insured status...          49
308             Rules of practice and procedure.............          50
309             Disclosure of information...................         132
310             Privacy Act regulations.....................         145
311             Rules governing public observation of 
                    meetings of the Corporation's Board of 
                    Directors...............................         150
312             Assessment of fees upon entrance to or exit 
                    from the Bank Insurance Fund or the 
                    Savings Association Insurance Fund......         155
313             Procedures for corporate debt collection....         160
       SUBCHAPTER B--REGULATIONS AND STATEMENTS OF GENERAL POLICY
323             Appraisals..................................         179
324             [Reserved]
325             Capital maintenance.........................         183
326             Minimum security devices and procedures and 
                    Bank Secrecy Act compliance.............         238
327             Assessments.................................         240
328             Advertisement of membership.................         258
329             Interest on deposits........................         262
330             Deposit insurance coverage..................         265
331             [Reserved]
332             Privacy of consumer financial information...         279
333             Extension of corporate powers...............         296
334             [Reserved]
335             Securities of nonmember insured banks.......         298
336             FDIC employees..............................         304
337             Unsafe and unsound banking practices........         308
338             Fair housing................................         314

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339             Loans in areas having special flood hazards.         317
340             Restrictions on sale of assets by the 
                    Federal Deposit Insurance Corporation...         322
341             Registration of securities transfer agents..         324
342             [Reserved]
343             Consumer protection in sales of insurance...         326
344             Recordkeeping and confirmation requirements 
                    for securities transactions.............         330
345             Community reinvestment......................         338
346             Disclosure and reporting of CRA-related 
                    agreements..............................         356
347             International banking.......................         369
348             Management official interlocks..............         391
349             Reports and public disclosure of 
                    indebtedness of executive officers and 
                    principal shareholders to a State 
                    nonmember bank and its correspondent 
                    banks...................................         396
350             Disclosure of financial and other 
                    information by FDIC-insured State 
                    nonmember banks.........................         398
351             [Reserved]
352             Nondiscrimination on the basis of handicap..         401
353             Suspicious activity reports.................         405
357             Determination of economically depressed 
                    regions.................................         408
359             Golden parachute and indemnification 
                    payments................................         408
360             Resolution and receivership rules...........         415
361             Minority and Women Outreach Program 
                    Contracting.............................         421
362             Activities of insured State banks and 
                    insured savings associations............         422
363             Annual independent audits and reporting 
                    requirements............................         444
364             Standards for Safety and Soundness..........         453
365             Real Estate Lending Standards...............         458
366             Minimum standards of integrity and fitness 
                    for an FDIC contractor..................         463
367             Suspension and exclusion of contractor and 
                    termination of contracts................         467
368             Government securities sales practices.......         476
369             Prohibition against use of interstate 
                    branches primarily for deposit 
                    production..............................         479

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              SUBCHAPTER A_PROCEDURE AND RULES OF PRACTICE



                        PARTS 300-302 [RESERVED]



PART 303_FILING PROCEDURES--Table of Contents




Sec.
303.0 Scope.

                Subpart A_Rules of General Applicability

303.1 Scope.
303.2 Definitions.
303.3 General filing procedures.
303.4 Computation of time.
303.5 Effect of Community Reinvestment Act performance on filings.
303.6 Investigations and examinations.
303.7 Public notice requirements.
303.8 Public access to filing.
303.9 Comments.
303.10 Hearings and other meetings.
303.11 Decisions.
303.12 Waivers.
303.13 [Reserved]
303.14 Being ``engaged in the business of receiving deposits other than 
          trust funds.''
303.15 Certain limited liability companies deemed incorporated under 
          State law.
303.16-303.19 [Reserved]

                       Subpart B_Deposit Insurance

303.20 Scope.
303.21 Filing procedures.
303.22 Processing.
303.23 Public notice requirements.
303.24 Application for deposit insurance for an interim institution.
303.25 Continuation of deposit insurance upon withdrawing from 
          membership in the Federal Reserve System.
303.26-303.39 [Reserved]

 Subpart C_Establishment and Relocation of Domestic Branches and Offices

303.40 Scope.
303.41 Definitions.
303.42 Filing procedures.
303.43 Processing.
303.44 Public notice requirements.
303.45 Special provisions.
303.46-303.59 [Reserved]

                      Subpart D_Merger Transactions

303.60 Scope.
303.61 Definitions.
303.62 Transactions requiring prior approval.
303.63 Filing procedures.
303.64 Processing.
303.65 Public notice requirements.
303.66-303.79 [Reserved]

                    Subpart E_Change in Bank Control

303.80 Scope.
303.81 Definitions.
303.82 Transactions requiring prior notice.
303.83 Transactions not requiring prior notice.
303.84 Filing procedures.
303.85 Processing.
303.86 Public notice requirements.
303.87-303.99 [Reserved]

        Subpart F_ Change of Director or Senior Executive Officer

303.100 Scope.
303.101 Definitions.
303.102 Filing procedures and waiver of prior notice.
303.103 Processing.
303.104-303.119 [Reserved]

               Subpart G_Activities of Insured State Banks

303.120 Scope.
303.121 Filing procedures.
303.122 Processing.
303.123-303.139 [Reserved]

          Subpart H-Activities of Insured Savings Associations

303.140 Scope.
303.141 Filing procedures.
303.142 Processing.
303.143-303.159 [Reserved]

                  Subpart I_Mutual-to-Stock Conversions

303.160 Scope.
303.161 Filing procedures.
303.162 Waiver from compliance.
303.163 Processing.
303.164-303.179 [Reserved]

                     Subpart J_International Banking

303.180 Scope.
303.181 Definitions.
303.182 Establishing, moving or closing a foreign branch of a state 
          nonmember bank; Sec. 347.103.
303.183 Investmentby insured state nonmember banks in foreign 
          organizations; Sec. 347.108.
303.184 Moving an insured branch of a foreign bank.
303.185 Merger transactions involving foreign banks or foreign 
          organizations.
303.186 Exemptions from insurance requirement for a state branch of a 
          foreign bank; Sec. 347.206.

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303.187 Approval for an insured state branch of a foreign bank to 
          conduct activities not permissible for federal branches; Sec. 
          347.213
303.188-303.199 [Reserved]

                   Subpart K_Prompt Corrective Action

303.200 Scope.
303.201 Filing procedures.
303.202 Processing.
303.203 Applications for capital distribution.
303.204 Applicationsfor acquisitions, branching, and new lines of 
          business.
303.205 Applications for bonuses and increased compensation for senior 
          executive officers.
303.206 Application for payment of principal or interest on subordinated 
          debt.
303.207 Restricted activities for critically undercapitalized 
          institutions.
303.208-303.219 [Reserved]

   Subpart L_Section 19 of the FDI Act (Consent to Service of Persons 
                 Convicted of Certain Criminal Offenses)

303.220 Scope.
303.221 Filing procedures.
303.222 Service at another insured depository institution.
303.223 Applicant's right to hearing following denial.
303.224-303.239 [Reserved]

                         Subpart M_Other Filings

303.240 General.
303.241 Reduce or retire capital stock or capital debt instruments.
303.242 Exercise of trust powers.
303.243 Brokered deposit waivers.
303.244 Golden parachute and severance plan payments.
303.245 Waiver of liability for commonly controlled depository 
          institutions.
303.246 Insurance fund conversions.
303.247 Conversion with diminution of capital.
303.248 Continue or resume status as an insured institution following 
          termination under section 8 of the FDI Act.
303.249 Truth in Lending Act--Relief from reimbursement.
303.250 Management official interlocks.
303.251 Modification of conditions.
303.252 Extension of time.
303.253-303.259 [Reserved]

Subpart N [Reserved]

    Authority: 12 U.S.C. 378, 1813, 1815, 1816, 1817, 1818, 1819, 
(Seventh and Tenth), 1820, 1823, 1828, 1831e, 1831p-l, 1835a, 3104, 
3105, 3108; 3207; 15 U.S.C. 1601-1607.

    Source: 67 FR 79247, Dec. 27, 2002, unless otherwise noted.



Sec. 303.0  Scope.

    (a) This part describes the procedures to be followed by both the 
FDIC and applicants with respect to applications, requests, or notices 
(filings) required to be filed by statute or regulation. Additional 
details concerning processing are explained in related FDIC statements 
of policy.
    (b) Additional application procedures may be found in the following 
FDIC regulations:
    (1) 12 CFR part 327--Assessments (Request for review of assessment 
risk classification);
    (2) 12 CFR part 328--Advertisement of Membership (Application for 
temporary waiver of advertising requirements);
    (3) 12 CFR part 345--Community Reinvestment (CRA strategic plans and 
requests for designation as a wholesale or limited purpose institution);



                Subpart A_Rules of General Applicability



Sec. 303.1  Scope.

    Subpart A prescribes the general procedures for submitting filings 
to the FDIC which are required by statute or regulation. This subpart 
also prescribes the procedures to be followed by the FDIC, applicants 
and interested parties during the process of considering a filing, 
including public notice and comment. This subpart explains the 
availability of expedited processing for eligible depository 
institutions (defined in Sec. 303.2(r)). Certain terms used throughout 
this part are also defined in this subpart.



Sec. 303.2  Definitions.

    Except as modified or otherwise defined in this part, terms used in 
this part that are defined in the Federal Deposit Insurance Act (12 
U.S.C. 1811 et seq.) have the meanings provided in the Federal Deposit 
Insurance Act. Additional definitions of terms used in this part are as 
follows:
    (a) Act or FDI Act means the Federal Deposit Insurance Act (12 
U.S.C. 1811 et seq.).
    (b) Adjusted part 325 total assets means adjusted 12 CFR part 325 
total assets as

[[Page 7]]

calculated and reflected in the FDIC's Report of Examination.
    (c) Adverse comment means any objection, protest, or other adverse 
written statement submitted by an interested party relative to a filing. 
The term adverse comment shall not include any comment concerning the 
Community Reinvestment Act (CRA), fair lending, consumer protection, or 
civil rights that the appropriate regional director or designee 
determines to be frivolous (for example, raising issues between the 
commenter and the applicant that have been resolved). The term adverse 
comment also shall not include any other comment that the appropriate 
regional director or designee determines to be frivolous (for example, a 
non-substantive comment submitted primarily as a means of delaying 
action on the filing).
    (d) Amended order to pay means an order to forfeit and pay civil 
money penalties, the amount of which has been changed from that assessed 
in the original notice of assessment of civil money penalties.
    (e) Applicant means a person or entity that submits a filing to the 
FDIC.
    (f) Application means a submission requesting FDIC approval to 
engage in various corporate activities and transactions.
    (g) Appropriate FDIC region and appropriate regional director mean, 
respectively, the FDIC region and the FDIC regional director which the 
FDIC designates as follows:
    (1) When an institution or proposed institution that is the subject 
of a filing or administrative action is not and will not be part of a 
group of related institutions, the appropriate FDIC region for the 
institution and any individual associated with the institution is the 
FDIC region in which the institution or proposed institution is or will 
be located, and the appropriate regional director is the regional 
director for that region; or
    (2) When an institution or proposed institution that is the subject 
of a filing or administrative action is or will be part of a group of 
related institutions, the appropriate FDIC region for the institution 
and any individual associated with the institution is the FDIC region in 
which the group's major policy and decision makers are located, or any 
other region the FDIC designates on a case-by-case basis, and the 
appropriate regional director is the regional director for that region.
    (h) Associate director means any associate director of the Division 
of Supervision and Consumer Protection (DSC) or, in the event such title 
become obsolete, any official of equivalent authority within the 
division.
    (i) Book capital means total equity capital which is comprised of 
perpetual preferred stock, common stock, surplus, undivided profits and 
capital reserves, as those items are defined in the instructions of the 
Federal Financial Institutions Examination Council (FFIEC) for the 
preparation of Consolidated Reports of Condition and Income for insured 
banks.
    (j) Comment means any written statement of fact or opinion submitted 
by an interested party relative to a filing.
    (k) Corporation or FDIC means the Federal Deposit Insurance 
Corporation.
    (l) CRA protest means any adverse comment from the public related to 
a pending filing which raises a negative issue relative to the Community 
Reinvestment Act (CRA) (12 U.S.C. 2901 et seq.), whether or not it is 
labeled a protest and whether or not a hearing is requested.
    (m) Deputy director means the deputy director of the Division of 
Supervision and Consumer Protection (DSC) or, in the event such title 
become obsolete, any official of equivalent or higher authority within 
the division.
    (n) Deputy regional director means any deputy regional director of 
the Division of Supervision and Consumer Protection (DSC) or, in the 
event such title become obsolete, any official of equivalent authority 
within the same FDIC region of DSC.
    (o) Appropriate FDIC office means the office designated by the 
appropriate regional director or designee.
    (p) DSC means the Division of Supervision and Consumer Protection 
or, in the event the Division of Supervision and Consumer Protection is 
reorganized, such successor division.
    (q) Director means the Director of the Division of Supervision and 
Consumer Protection (DSC) or, in the event such title become obsolete, 
any official of

[[Page 8]]

equivalent or higher authority within the division.
    (r) Eligible depository institution means a depository institution 
that meets the following criteria:
    (1) Received an FDIC-assigned composite rating of 1 or 2 under the 
Uniform Financial Institutions Rating System (UFIRS) as a result of its 
most recent federal or state examination;
    (2) Received a satisfactory or better Community Reinvestment Act 
(CRA) rating from its primary federal regulator at its most recent 
examination, if the depository institution is subject to examination 
under part 345 of this chapter;
    (3) Received a compliance rating of 1 or 2 from its primary federal 
regulator at its most recent examination;
    (4) Is well-capitalized as defined in the appropriate capital 
regulation and guidance of the institution's primary federal regulator; 
and
    (5) Is not subject to a cease and desist order, consent order, 
prompt corrective action directive, written agreement, memorandum of 
understanding, or other administrative agreement with its primary 
federal regulator or chartering authority.
    (s) Filing means an application, notice or request submitted to the 
FDIC under this part.
    (t) General Counsel means the head of the Legal Division of the FDIC 
or any official within the Legal Division exercising equivalent 
authority for purposes of this part.
    (u) Insider means a person who is or is proposed to be a director, 
officer, organizer, or incorporator of an applicant; a shareholder who 
directly or indirectly controls 10 percent or more of any class of the 
applicant's outstanding voting stock; or the associates or interests of 
any such person.
    (v) Institution-affiliated party shall have the same meaning as 
provided in section 3(u) of the Act (12 U.S.C. 1813(u)).
    (w) NEPA means the National Environmental Policy Act of 1969 (42 
U.S.C. 4321 et seq.).
    (x) NHPA means the National Historic Preservation Act of 1966 (16 
U.S.C. 470 et seq.).
    (y) Notice means a submission notifying the FDIC that a depository 
institution intends to engage in or has commenced certain corporate 
activities or transactions.
    (z) Notice to primary regulator means the notice described in 
section 8(a)(2)(A) of the Act concerning termination of deposit 
insurance (12 U.S.C. 1818(a)(2)(A)).
    (aa) Regional counsel means a regional counsel of the Legal Division 
or, in the event the title becomes obsolete, any official of equivalent 
authority within the Legal Division.
    (bb) Regional director means any regional director in the Division 
of Supervision and Consumer Protection (DSC), or in the event such title 
become obsolete, any official of equivalent authority within the 
division.
    (cc) [Reserved]
    (dd) Standard conditions means the conditions that the FDIC may 
impose as a routine matter when approving a filing, whether or not the 
applicant has agreed to their inclusion. The following conditions, or 
variations thereof, are standard conditions:
    (1) That the applicant has obtained all necessary and final 
approvals from the appropriate federal or state authority or other 
appropriate authority;
    (2) That if the transaction does not take effect within a specified 
time period, or unless, in the meantime, a request for an extension of 
time has been approved, the consent granted shall expire at the end of 
the specified time period;
    (3) That until the conditional commitment of the FDIC becomes 
effective, the FDIC retains the right to alter, suspend or withdraw its 
commitment should any interim development be deemed to warrant such 
action; and
    (4) In the case of a merger transaction (as defined in [para] 
303.61(a) of this part), including a corporate reorganization, that the 
proposed transaction not be consummated before the 30th calendar day (or 
shorter time period as may be prescribed by the FDIC with the 
concurrence of the Attorney General) after the date of the order 
approving the merger transaction.
    (ee) Tier 1 capital shall have the same meaning as provided in 
[para] 325.2(v) of this chapter (12 CFR 325.2(v)).

[[Page 9]]

    (ff) Total assets shall have the same meaning as provided in [para] 
325.2(x) of this chapter (12 CFR 325.2(x)).

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.3  General filing procedures.

    Unless stated otherwise, filings should be submitted to the 
appropriate FDIC office. Forms and instructions for submitting filings 
may be obtained from any FDIC regional director. If no form is 
prescribed, the filing should be in writing; be signed by the applicant 
or a duly authorized agent; and contain a concise statement of the 
action requested. For specific filing and content requirements, consult 
the appropriate subparts of this part. The FDIC may require the 
applicant to submit additional information.



Sec. 303.4  Computation of time.

    For purposes of this part, and except as otherwise specifically 
provided, the FDIC begins computing the relevant period on the day after 
an event occurs (e.g., the day after a substantially complete filing is 
received by the FDIC or the day after publication begins) through the 
last day of the relevant period. When the last day is a Saturday, Sunday 
or federal holiday, the period runs until the end of the next business 
day.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.5  Effect of Community Reinvestment Act performance on filings.

    Among other factors, the FDIC takes into account the record of 
performance under the Community Reinvestment Act (CRA) of each applicant 
in considering a filing for approval of:
    (a) The establishment of a domestic branch;
    (b) The relocation of the bank's main office or a domestic branch;
    (c) The relocation of an insured branch of a foreign bank;
    (d) A transaction subject to the Bank Merger Act; and
    (e) Deposit insurance.



Sec. 303.6  Investigations and examinations.

    The FDIC may examine or investigate and evaluate facts related to 
any filing under this chapter to the extent necessary to reach an 
informed decision and take any action necessary or appropriate under the 
circumstances.



Sec. 303.7  Public notice requirements.

    (a) General. The public must be provided with prior notice of a 
filing to establish a domestic branch, relocate a domestic branch or the 
main office, relocate an insured branch of a foreign bank, engage in a 
merger transaction, initiate a change of control transaction, or request 
deposit insurance. The public has the right to comment on, or to 
protest, these types of proposed transactions during the relevant 
comment period. In order to fully apprise the public of this right, an 
applicant shall publish a public notice of its filing in a newspaper of 
general circulation. For specific publication requirements, consult 
subparts B (Deposit Insurance), C (Branches and Relocations), D (Merger 
Transactions), E (Change in Bank Control), and J (International Banking) 
of this part.
    (b) Confirmation of publication. The applicant shall mail or 
otherwise deliver a copy of the newspaper notice to the appropriate FDIC 
office as part of its filing, or, if a copy is not available at the time 
of filing, promptly after publication.
    (c) Content of notice. (1) The public notice referred to in 
paragraph (a) of this section shall consist of the following:
    (i) Name and address of the applicant(s). In the case of an 
application for deposit insurance for a de novo bank, include the names 
of all organizers or incorporators. In the case of an application to 
establish a branch, include the location of the proposed branch or, in 
the case of an application to relocate a branch or main office, include 
the current and proposed address of the office. In the case of a merger 
application, include the names of all parties to the transaction. In the 
case of a notice of acquisition of control, include the name(s) of the 
acquiring parties. In the

[[Page 10]]

case of an application to relocate an insured branch of a foreign bank, 
include the current and proposed address of the branch.
    (ii) Type of filing being made;
    (iii) Name of the depository institution(s) that is the subject 
matter of the filing;
    (iv) That the public may submit comments to the appropriate FDIC 
regional director;
    (v) The address of the appropriate FDIC office where comments may be 
sent (the same location where the filing will be made);
    (vi) The closing date of the public comment period as specified in 
the appropriate subpart; and
    (vii) That the nonconfidential portions of the application are on 
file in the appropriate FDIC office and are available for public 
inspection during regular business hours; photocopies of the 
nonconfidential portion of the application file will be made available 
upon request.
    (2) The requirements of paragraphs (c)(1)(iv) through (vii) of this 
section may be satisfied through use of the following notice:

Any person wishing to comment on this application may file his or her 
comments in writing with the regional director of the Federal Deposit 
Insurance Corporation at the appropriate FDIC office [insert address of 
office] not later than [insert closing date of the public comment period 
specified in the appropriate subpart of part 303]. The non-confidential 
portions of the application are on file at the appropriate FDIC office 
and are available for public inspection during regular business hours. 
Photocopies of the nonconfidential portion of the application file will 
be made available upon request.

    (d) Multiple transactions. The FDIC may consider more than one 
transaction, or a series of transactions, to be a single filing for 
purposes of the publication requirements of this section. When 
publishing a single public notice for multiple transactions, the 
applicant shall explain in the public notice how the transactions are 
related. The closing date of the comment period shall be the closing 
date of the longest public comment period that applies to any of the 
related transactions.
    (e) Joint public notices. For a transaction subject to public notice 
requirements by the FDIC and another federal or state banking authority, 
the FDIC will accept publication of a single joint notice containing all 
the information required by both the FDIC and the other federal agency 
or state banking authority, provided that the notice states that 
comments must be submitted to the appropriate FDIC office and, if 
applicable, the other federal or state banking authority.
    (f) Where public notice is required, the FDIC may determine on a 
case-by-case basis that unusual circumstances surrounding a particular 
filing warrant modification of the publication requirements.



Sec. 303.8  Public access to filing.

    (a) General. For filings subject to a public notice requirement, any 
person may inspect or request a copy of the non-confidential portions of 
a filing (the public file) until 180 days following final disposition of 
a filing. Following the 180-day period, non-confidential portions of an 
application file will be made available in accordance with ' 303.8(c). 
The public file generally consists of portions of the filing, supporting 
data, supplementary information, and comments submitted by interested 
persons (if any) to the extent that the documents have not been afforded 
confidential treatment. To view or request photocopies of the public 
file, an oral or written request should be submitted to the appropriate 
FDIC office. The public file will be produced for review not more than 
one business day after receipt by the appropriate FDIC office of the 
request (either written or oral) to see the file. The FDIC may impose a 
fee for photocopying in accordance with Sec. 309.5(f) of this chapter 
at the rates the FDIC publishes annually in the Federal Register.
    (b) Confidential treatment. (1) The applicant may request that 
specific information be treated as confidential. The following 
information generally is considered confidential:
    (i) Personal information, the release of which would constitute a 
clearly unwarranted invasion of privacy;
    (ii) Commercial or financial information, the disclosure of which 
could result in substantial competitive harm to the submitter; and

[[Page 11]]

    (iii) Information, the disclosure of which could seriously affect 
the financial condition of any depository institution.
    (2) If an applicant requests confidential treatment for information 
that the FDIC does not consider to be confidential, the FDIC may include 
that information in the public file after notifying the applicant. On 
its own initiative, the FDIC may determine that certain information 
should be treated as confidential and withhold that information from the 
public file.
    (c) FOIA requests. A written request for information withheld from 
the public file, or copies of the public file following closure of the 
file 180 days after final disposition, should be submitted pursuant to 
the Freedom of Information Act (5 U.S.C. 552) and part 309 of this 
chapter to the FDIC, Attn: FOIA/Privacy Group, Legal Division, 550 17th 
Street, NW., Washington, DC 20429.



Sec. 303.9  Comments.

    (a) Submission of comments. For filings subject to a public notice 
requirement, any person may submit comments to the appropriate FDIC 
regional director during the comment period.
    (b) Comment period--(1) General. Consult appropriate subparts of 
this part for the comment period applicable to a particular filing.
    (2) Extension. The FDIC may extend or reopen the comment period if:
    (i) The applicant fails to file all required information on a timely 
basis to permit review by the public or makes a request for confidential 
treatment not granted by the FDIC that delays the public availability of 
that information;
    (ii) Any person requesting an extension of time satisfactorily 
demonstrates to the FDIC that additional time is necessary to develop 
factual information that the FDIC determines may materially affect the 
application; or
    (iii) The FDIC determines that other good cause exists.
    (3) Solicitation of comments. Whenever appropriate, the appropriate 
regional director may solicit comments from any person or institution 
which might have an interest in or be affected by the pending filing.
    (4) Applicant response. The FDIC will provide copies of all comments 
received to the applicant and may give the applicant an opportunity to 
respond.



Sec. 303.10  Hearings and other meetings.

    (a) Matters covered. This section covers hearings and other 
proceedings in connection with filings and determinations for or by:
    (1) Deposit insurance by a proposed new depository institution or 
operating non-insured institution;
    (2) An insured state nonmember bank to establish a domestic branch 
or to relocate a main office or domestic branch;
    (3) Relocation of an insured branch of a foreign bank;
    (4)(i) Merger transaction which requires the FDIC's prior approval 
under the Bank Merger Act (12 U.S.C. 1828(c));
    (ii) Except as otherwise expressly provided, the provisions of this 
Sec. 303.10 shall not be applicable to any proposed merger transaction 
which the FDIC Board of Directors determines must be acted upon 
immediately to prevent the probable failure of one of the institutions 
involved, or must be handled with expeditious action due to an existing 
emergency condition, as permitted by the Bank Merger Act (12 U.S.C. 
1828(c)(6));
    (5) Nullification of a decision on a filing; and
    (6) Any other purpose or matter which the FDIC Board of Directors in 
its sole discretion deems appropriate.
    (b) Hearing requests. (1) Any person may submit a written request 
for a hearing on a filing:
    (i) To the appropriate regional director before the end of the 
comment period; or
    (ii) To the appropriate regional director, pursuant to a notice to 
nullify a decision on a filing issued pursuant to Sec. 303.11(g)(2)(i) 
or (ii).


(2) The request must describe the nature of the issues or facts to be 
presented and the reasons why written submissions would be insufficient 
to make an adequate presentation of those issues or facts to the FDIC. A 
person requesting a hearing shall simultaneously submit a copy of the 
request to the applicant.


[[Page 12]]


    (c) Action on a hearing request. The appropriate regional director, 
after consultation with the Legal Division, may grant or deny a request 
for a hearing and may limit the issues that he or she deems relevant or 
material. The FDIC generally grants a hearing request only if it 
determines that written submissions would be insufficient or that a 
hearing otherwise would be in the public interest.
    (d) Denial of a hearing request. If the appropriate regional 
director, after consultation with the Legal Division, denies a hearing 
request, he or she shall notify the person requesting the hearing of the 
reason for the denial. A decision to deny a hearing request shall be a 
final agency determination and is not appealable.
    (e) FDIC procedures prior to the hearing--(1) Notice of hearing. The 
FDIC shall issue a notice of hearing if it grants a request for a 
hearing or orders a hearing because it is in the public interest. The 
notice of hearing shall state the subject and date of the filing, the 
time and place of the hearing, and the issues to be addressed. The FDIC 
shall send a copy of the notice of hearing to the applicant, to the 
person requesting the hearing, and to anyone else requesting a copy.
    (2) The presiding officer shall be the regional director or designee 
or such other person as may be named by the Board or the Director. The 
presiding officer is responsible for conducting the hearing and 
determining all procedural questions not governed by this section.
    (f) Participation in the hearing. Any person who wishes to appear 
(participant) shall notify the appropriate regional director of his or 
her intent to participate in the hearing no later than 10 days from the 
date that the FDIC issues the Notice of Hearing. At least 5 days before 
the hearing, each participant shall submit to the appropriate regional 
director, as well as to the applicant and any other person as required 
by the FDIC, the names of witnesses, a statement describing the proposed 
testimony of each witness, and one copy of each exhibit the participant 
intends to present.
    (g) Transcripts. The FDIC shall arrange for a hearing transcript. 
The person requesting the hearing and the applicant each shall bear the 
cost of one copy of the transcript for his or her use unless such cost 
is waived by the presiding officer and incurred by the FDIC.
    (h) Conduct of the hearing--(1) Presentations. Subject to the 
rulings of the presiding officer, the applicant and participants may 
make opening and closing statements and present and examine witnesses, 
material, and data.
    (2) Information submitted. Any person presenting material shall 
furnish one copy to the FDIC, one copy to the applicant, and one copy to 
each participant.
    (3) Laws not applicable to hearings. The Administrative Procedure 
Act (5 U.S.C. 551 et seq.), the Federal Rules of Evidence (28 U.S.C. 
Appendix), the Federal Rules of Civil Procedure (28 U.S.C. Rule 1 et 
seq.), and the FDIC's Rules of Practice and Procedure (12 CFR part 308) 
do not govern hearings under this Sec. 303.10.
    (i) Closing the hearing record. At the applicant's or any 
participant's request, or at the FDIC's discretion, the FDIC may keep 
the hearing record open for up to 10 days following the FDIC's receipt 
of the transcript. The FDIC shall resume processing the filing after the 
record closes.
    (j) Disposition and notice thereof. The presiding officer shall make 
a recommendation to the FDIC within 20 days following the date the 
hearing and record on the proceeding are closed. The FDIC shall notify 
the applicant and all participants of the final disposition of a filing 
and shall provide a statement of the reasons for the final disposition.
    (k) Computation of time. In computing periods of time under this 
section, the provisions of Sec. 308.12 of the FDIC's Rules of Practice 
and Procedure (12 CFR 308.12) shall apply.
    (l) Informal proceedings. The FDIC may arrange for an informal 
proceeding with an applicant and other interested parties in connection 
with a filing, either upon receipt of a written request for such a 
meeting made during the comment period, or upon the FDIC's own 
initiative. No later than 10 days prior to an informal proceeding, the 
appropriate regional director shall

[[Page 13]]

notify the applicant and each person who requested a hearing or oral 
presentation of the date, time, and place of the proceeding. The 
proceeding may assume any form, including a meeting with FDIC 
representatives at which participants will be asked to present their 
views orally. The regional director may hold separate meetings with each 
of the participants.
    (m) Authority retained by FDIC Board of Directors to modify 
procedures. The FDIC Board of Directors may delegate authority by 
resolution on a case-by-case basis to the presiding officer to adopt 
different procedures in individual matters and on such terms and 
conditions as the Board of Directors determines in its discretion. The 
resolution shall be made available for public inspection and copying in 
the Office of the General Counsel, Executive Secretary Section under the 
Freedom of Information Act (5 U.S.C. 552(a)(2)).



Sec. 303.11  Decisions.

    (a) General procedures. The FDIC may approve, conditionally approve, 
deny, or not object to a filing after appropriate review and 
consideration of the record. The FDIC will promptly notify the applicant 
and any person who makes a written request of the final disposition of a 
filing. If the FDIC denies a filing, the FDIC will immediately notify 
the applicant in writing of the reasons for the denial.
    (b) Authority retained by FDIC Board of Directors to modify 
procedures. In acting on any filing under this part, the FDIC Board of 
Directors may by resolution adopt procedures which differ from those 
contained in this part when it deems it necessary or in the public 
interest to do so. The resolution shall be made available for public 
inspection and copying in the Office of the General Counsel, Executive 
Secretary Section under the Freedom of Information Act (5 U.S.C. 
552(a)(2)).
    (c) Expedited processing. (1) A filing submitted by an eligible 
depository institution as defined in Sec. 303.2(r) will receive 
expedited processing as specified in the appropriate subparts of this 
part unless the FDIC determines to remove the filing from expedited 
processing for any of the reasons set forth in paragraph (c)(2) of this 
section. Except for filings made pursuant to subpart J (International 
Banking), expedited processing will not be available for any filing that 
the appropriate regional director does not have delegated authority to 
approve.
    (2) Removal of filing from expedited processing. The FDIC may remove 
a filing from expedited processing at any time prior to final 
disposition if:
    (i) For filings subject to public notice under Sec. 303.7, an 
adverse comment is received that warrants additional investigation or 
review;
    (ii) For filings subject to evaluation of CRA performance under 
Sec. 303.5, a CRA protest is received that warrants additional 
investigation or review, or the appropriate regional director determines 
that the filing presents a significant CRA or compliance concern;
    (iii) For any filing, the appropriate regional director determines 
that the filing presents a significant supervisory concern, or raises a 
significant legal or policy issue; or
    (iv) For any filing, the appropriate regional director determines 
that other good cause exists for removal.
    (3) For purposes of this section, a significant CRA concern 
includes, but is not limited to, a determination by the appropriate 
regional director that, although a depository institution may have an 
institution-wide rating of satisfactory or better, a depository 
institution's CRA rating is less than satisfactory in a state or multi-
state metropolitan statistical area, or a depository institution's CRA 
performance is less than satisfactory in a metropolitan statistical area 
as defined in 12 CFR 345.12 (MSA) or in the non-MSA portion of a state 
in which it seeks to expand through approval of an application for a 
deposit facility as defined in 12 U.S.C. 2902(3).
    (4) If the FDIC determines that it is necessary to remove a filing 
from expedited processing pursuant to paragraph (c)(2) of this section, 
the FDIC promptly will provide the applicant with a written explanation
    (d) Multiple transactions. If the FDIC is considering related 
transactions, some or all of which have been granted expedited 
processing, then the longest processing time for any of the related

[[Page 14]]

transactions shall govern for purposes of approval.
    (e) Abandonment of filing. A filing must contain all information set 
forth in the applicable subpart of this part. To the extent necessary to 
evaluate a filing, the FDIC may require an applicant to provide 
additional information. If information requested by the FDIC is not 
provided within the time period specified by the agency, the FDIC may 
deem the filing abandoned and shall provide written notification to the 
applicant and any interested parties that submitted comments to the FDIC 
that the file has been closed.
    (f) Appeals and requests for reconsideration--(1) General. Appeal 
procedures for a denial of a change in bank control (subpart E), change 
in senior executive officer or board of directors (subpart F) or denial 
of an application pursuant to section 19 of the FDI Act (subpart L) are 
contained in 12 CFR part 308, subparts D, L, and M, respectively. For 
all other filings covered by this chapter for which appeal procedures 
are not provided by regulation or other written guidance, the procedures 
specified in paragraphs (f) (2) and (3) of this section shall apply. A 
decision to deny a request for a hearing is a final agency determination 
and is not appealable.
    (2) Filing procedures. Within 15 days of receipt of notice from the 
FDIC that its filing has been denied, any applicant may file a request 
for reconsideration with the appropriate regional director.
    (3) Content of filing. A request for reconsideration must contain 
the following information:
    (i) A resolution of the board of directors of the applicant 
authorizing filing of the request if the applicant is a corporation, or 
a letter signed by the individual(s) filing the request if the applicant 
is not a corporation;
    (ii) Relevant, substantive information that for good cause was not 
previously set forth in the filing; and
    (iii) Specific reasons why the FDIC should reconsider its prior 
decision.
    (4)-(5) [Reserved]
    (6) Processing. The FDIC will notify the applicant whether 
reconsideration will be granted or denied within 15 days of receipt of a 
request for reconsideration. If a request for reconsideration is granted 
pursuant to Sec. 303.11(f), the FDIC will notify the applicant of the 
final agency decision on such filing within 60 days of its receipt of 
the request for reconsideration.
    (g) Nullification, withdrawal, revocation, amendment, and suspension 
of decisions on filings--(1) Grounds for action. Except as otherwise 
provided by law or regulation, the FDIC may nullify, withdraw, revoke, 
amend or suspend a decision on a filing if it becomes aware at anytime:
    (i) Of any material misrepresentation or omission related to the 
filing or of any material change in circumstance that occurred prior to 
the consummation of the transaction or commencement of the activity 
authorized by the decision on the filing; or
    (ii) That the decision on the filing is contrary to law or 
regulation or was granted due to clerical or administrative error.
    (iii) Any person responsible for a material misrepresentation or 
omission in a filing or supporting materials may be subject to an 
enforcement action and other penalties, including criminal penalties 
provided in Title 18 of the United States Code.
    (2) Notice of intent and temporary order. (i) Except as provided in 
Sec. 303.11(g)(2)(ii), before taking action under this Sec. 303.11(g), 
the FDIC shall issue and serve on an applicant written notice of its 
intent to take such action. A notice of intent to act on a filing shall 
include:
    (A) The reasons for the proposed action; and
    (B) The date by which the applicant may file a written response with 
the FDIC.
    (ii) The FDIC may issue a temporary order on a decision on a filing 
without providing an applicant a prior notice of intent if the FDIC 
determines that:
    (A) It is necessary to reevaluate the impact of a change in 
circumstance prior to the consummation of the transaction or 
commencement of the activity authorized by the decision on the filing; 
or
    (B) The activity authorized by the filing may pose a threat to the 
interests of the depository institution's depositors or may threaten to 
impair

[[Page 15]]

public confidence in the depository institution.
    (iii) A temporary order shall provide the applicant with an 
opportunity to make a written response in accordance with Sec. 
303.11(g)(3) of this section.
    (3) Response to notice of intent or temporary order. An applicant 
may file a written response to a notice of intent or a temporary order 
within 15 days from the date of service of the notice or temporary 
order. The written response should include:
    (i) An explanation of why the proposed action or temporary order is 
not warranted; and
    (ii)(A) Any other relevant information, mitigation circumstance, 
documentation, or other evidence in support of the applicant's position. 
An applicant may also request a hearing under Sec. 303.10.
    (B) Failure by an applicant to file a written response with the FDIC 
to a notice of intent or a temporary order within the specified time 
period, shall constitute a waiver of the opportunity to respond and 
shall constitute consent to a final order under this paragraph (g). The 
FDIC shall consider any such response, if filed in a timely manner, 
within 30 days of receiving the response.
    (4) Effective date. All orders issued pursuant to this section shall 
become effective immediately upon issuance unless otherwise stated 
therein.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.12  Waivers.

    (a) The Board of Directors, of the FDIC (Board) may, for good cause 
and to the extent permitted by statute, waiver the applicability of any 
provision of this chapter.
    (b) The provisions of this chapter may be suspended, revoked, 
amended or waived for good cause shown, in whole or in part, at any time 
by the Board, subject to the provisions of the Administrative Procedure 
Act and the provisions of this chapter. Any provision of the rules may 
be waived by the Board on its own motion or on petition if good cause 
thereof is shown.

[68 FR 50459, Aug. 21, 2003]



Sec. Sec. 303.13  [Reserved]



Sec. 303.14  Being ``engaged in the business of receiving deposits 
other than trust funds.''

    (a) Except as provided in paragraphs (b), (c), and (d) of this 
section, a depository institution shall be ``engaged in the business of 
receiving deposits other than trust funds'' only if it maintains one or 
more non-trust deposit accounts in the minimum aggregate amount of 
$500,000.
    (b) An applicant for federal deposit insurance under section 5 of 
the FDI Act, 12 U.S.C. 1815(a), shall be deemed to be ``engaged in the 
business of receiving deposits other than trust funds'' from the date 
that the FDIC approves deposit insurance for the institution until one 
year after it opens for business.
    (c) Any depository institution that fails to satisfy the minimum 
deposit standard specified in paragraph (a) of this section as of two 
consecutive call report dates (i.e., March 31st, June 30th, September 
30th, and December 31st) shall be subject to a determination by the FDIC 
that the institution is not ``engaged in the business of receiving 
deposits other than trust funds'' and to termination of its insured 
status under section 8(p) of the FDI Act, 12 U.S.C. 1818(p). For 
purposes of this paragraph, the first three call report dates after the 
institution opens for business are excluded.
    (d) Notwithstanding any failure by an insured depository institution 
to satisfy the minimum deposit standard in paragraph (a) of this 
section, the institution shall continue to be ``engaged in the business 
of receiving deposits other than trust funds'' for purposes of section 3 
of the FDI Act until the institution's insured status is terminated by 
the FDIC pursuant to a proceeding under section 8(a) or section 8(p) of 
the FDI Act. 12 U.S.C. 1818(a) or 1818(p).



Sec. 303.15  Certain limited liability companies deemed incorporated 
under State law.

    (a) For purposes of the definition of ``State bank'' in 12 U.S.C. 
1813(a)(2) and this Chapter, a banking institution that is chartered as 
a limited liability company (LLC) under the law of any

[[Page 16]]

State is deemed to be ``incorporated'' under the law of the State, if
    (1) The institution is not subject to automatic termination, 
dissolution, or suspension upon the happening of some event (including, 
e.g., the death, disability, bankruptcy, expulsion, or withdrawal of an 
owner of the institution), other than the passage of time;
    (2) The exclusive authority to manage the institution is vested in a 
board of managers or directors that is elected or appointed by the 
owners, and that operates in substantially the same manner as, and has 
substantially the same rights, powers, privileges, duties, 
responsibilities, as a board of directors of a bank chartered as a 
corporation in the State;
    (3) Neither State law, nor the institution's operating agreement, 
bylaws, or other organizational documents provide that an owner of the 
institution is liable for the debts, liabilities, and obligations of the 
institution in excess of the amount of the owner's investment; and
    (4) Neither State law, nor the institution's operating agreement, 
bylaws, or other organizational documents require the consent of any 
other owner of the institution in order for an owner to transfer an 
ownership interest in the institution, including voting rights.
    (b) For purposes of the Federal Deposit Insurance Act and this 
Chapter,
    (1) Each of the terms ``stockholder'' and ``shareholder'' includes 
an owner of any interest in a bank chartered as an LLC, including a 
member or participant;
    (2) The term ``director'' includes a manager or director of a bank 
chartered as an LLC, or other person who has, with respect to such a 
bank, authority substantially similar to that of a director of a 
corporation;
    (3) The term ``officer'' includes an officer of a bank chartered as 
an LLC, or other person who has, with respect to such a bank, authority 
substantially similar to that of an officer of a corporation; and
    (4) Each of the terms ``voting stock,'' ``voting shares,'' and 
``voting securities'' includes ownership interests in a bank chartered 
as an LLC, as well as any certificates or other evidence of such 
ownership interests.

[68 FR 7308, Feb. 13, 2003]



Sec. Sec. 303.16-303.19  [Reserved]



                       Subpart B_Deposit Insurance



Sec. 303.20  Scope.

    This subpart sets forth the procedures for applying for deposit 
insurance for a proposed depository institution or an operating 
noninsured depository institution under section 5 of the FDI Act (12 
U.S.C. 1815). It also sets forth the procedures for requesting 
continuation of deposit insurance for a state-chartered bank withdrawing 
from membership in the Federal Reserve System and for interim 
institutions chartered to facilitate a merger transaction.



Sec. 303.21  Filing procedures.

    (a) Applications for deposit insurance shall be filed with the 
appropriate FDIC office. The relevant application forms and instructions 
for applying for deposit insurance for an existing or proposed 
depository institution may be obtained from any FDIC regional director.
    (b) An application for deposit insurance for an interim depository 
institution shall be filed and processed in accordance with the 
procedures set forth in Sec. 303.24, subject to the provisions of Sec. 
303.62(b)(2) regarding deposit insurance for interim institutions. An 
interim institution is defined as a state- or federally-chartered 
depository institution that does not operate independently but exists 
solely as a vehicle to accomplish a merger transaction.
    (c) A request for continuation of deposit insurance upon withdrawing 
from membership in the Federal Reserve System shall be in letter form 
and shall provide the information prescribed in Sec. 303.25.



Sec. 303.22  Processing.

    (a) Expedited processing for proposed institutions. (1) An 
application for deposit insurance for a proposed institution which will 
be a subsidiary of an eligible depository institution as defined

[[Page 17]]

in Sec. 303.2(r) or an eligible holding company will be acknowledged in 
writing by the FDIC and will receive expedited processing unless the 
applicant is notified in writing to the contrary and provided with the 
basis for that decision. An eligible holding company is defined as a 
bank or thrift holding company that has consolidated assets of at least 
$150 million or more; a BOPEC rating of at least ``2'' for bank holding 
companies or an above average or ``A'' rating for thrift holding 
companies; and at least 75 percent of its consolidated depository 
institution assets comprised of eligible depository institutions. The 
FDIC may remove an application from expedited processing for any of the 
reasons set forth in Sec. 303.11(c)(2).
    (2) Under expedited processing, the FDIC will take action on an 
application within 60 days of receipt of a substantially complete 
application or 5 days after the expiration of the comment period 
described in Sec. 303.23, whichever is later. Final action may be 
withheld until the FDIC has assurance that permission to organize the 
proposed institution will be granted by the chartering authority. 
Notwithstanding paragraph (a)(1) of this section, if the FDIC does not 
act within the expedited processing period, it does not constitute an 
automatic or default approval.
    (b) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.23  Public notice requirements.

    (a) De novo institutions and operating noninsured institutions. The 
applicant shall publish a notice as prescribed in Sec. 303.7 in a 
newspaper of general circulation in the community in which the main 
office of the depository institution is or will be located. Notice shall 
be published as close as practicable to, but no sooner than five days 
before, the date the application is mailed or delivered to the 
appropriate FDIC office. Comments by interested parties must be received 
by the appropriate regional director within 30 days following the date 
of publication, unless the comment period has been extended or reopened 
in accordance with Sec. 303.9(b)(2).
    (b) Exceptions to public notice requirements. No publication shall 
be required in connection with the granting of insurance to a new 
depository institution established pursuant to the resolution of a 
depository institution in default, or to an interim depository 
institution formed solely to facilitate a merger transaction, or for a 
request for continuation of federal deposit insurance by a state-
chartered bank withdrawing from membership in the Federal Reserve 
System.



Sec. 303.24  Application for deposit insurance for an interim institution.

    (a) Application required. Subject to Sec. 303.62(b)(2), a deposit 
insurance application is required for a state-chartered interim 
institution if the related merger transaction is subject to approval by 
a federal banking agency other than the FDIC. A separate application for 
deposit insurance for an interim institution is not required in 
connection with any merger requiring FDIC approval pursuant to subpart D 
of this part.
    (b) Content of separate application. A letter application for 
deposit insurance for an interim institution, accompanied by a copy of 
the related merger application, shall be filed with the appropriate FDIC 
office. The letter application shall briefly describe the transaction 
and contain a statement that deposit insurance is being requested for an 
interim institution that does not operate independently but exists 
solely as a vehicle to accomplish a merger transaction which will be 
reviewed by a federal banking agency other than the FDIC.
    (c) Processing. An application for deposit insurance for an interim 
depository institution will be acknowledged in writing by the FDIC. 
Final action will be taken within 21 days after receipt of a 
substantially complete application, unless the applicant is notified in 
writing that additional review is warranted. If the FDIC does not act 
within the expedited processing period, it does not constitute an 
automatic or default approval.

[[Page 18]]



Sec. 303.25  Continuation of deposit insurance upon withdrawing from 
membership in the Federal Reserve System.

    (a) Content of application. To continue its insured status upon 
withdrawal from membership in the Federal Reserve System, a state-
chartered bank shall submit a letter application to the appropriate FDIC 
office. A complete application shall consist of the following 
information:
    (1) A copy of the letter, and any attachments thereto, sent to the 
appropriate Federal Reserve Bank setting forth the bank's intention to 
terminate its membership;
    (2) A copy of the letter from the Federal Reserve Bank acknowledging 
the bank's notice to terminate membership;
    (3) A statement regarding any anticipated changes in the bank's 
general business plan during the next 12-month period; and
    (4)(i) A statement by the bank's management that there are no 
outstanding or proposed corrective programs or supervisory agreements 
with the Federal Reserve System.
    (ii) If such programs or agreements exist, a statement by the 
applicant that its Board of Directors is willing to enter into similar 
programs or agreements with the FDIC which would become effective upon 
withdrawal from the Federal Reserve System.
    (b) Processing. An application for deposit insurance under this 
section will be acknowledged in writing by the FDIC. The FDIC shall 
notify the applicant, within 15 days of receipt of a substantially 
complete application, either that federal deposit insurance will 
continue upon termination of membership in the Federal Reserve System or 
that additional review is warranted and the applicant will be notified, 
in writing, of the FDIC's final decision regarding continuation of 
deposit insurance. If the FDIC does not act within the expedited 
processing period, it does not constitute an automatic or default 
approval.



Sec. Sec. 303.26-303.39  [Reserved]



 Subpart C_Establishment and Relocation of Domestic Branches and Offices



Sec. 303.40  Scope.

    (a) General. This subpart sets forth the application requirements 
and procedures for insured state nonmember banks to establish a branch, 
relocate a branch or main office, and retain existing branches after the 
interstate relocation of the main office subject to the approval by the 
FDIC pursuant to sections 13(f), 13(k), 18(d) and 44 of the FDI Act.
    (b) Merger transaction. Applications for approval of the acquisition 
and establishment of branches in connection with a merger transaction 
under section 18(c) of the FDI Act (12 U.S.C. 1828(c)), are processed in 
accordance with subpart D (Merger Transactions) of this part.
    (c) Insured branches of foreign banks and foreign branches of 
domestic banks. Applications regarding insured branches of foreign banks 
and foreign branches of domestic banks are processed in accordance with 
subpart J (International Banking) of this part.
    (d) Interstate acquisition of individual branch. Applications 
requesting approval of the interstate acquisition of an individual 
branch or branches located in a state other than the applicant's home 
state without the acquisition of the whole bank are treated as 
interstate bank merger transactions under section 44 of the FDI Act (12 
U.S.C. 1831a(u)), and are processed in accordance with subpart D (Merger 
Transactions) of this part.



Sec. 303.41  Definitions.

    For purposes of this subpart:
    (a) Branch includes any branch bank, branch office, additional 
office, or any branch place of business located in any State of the 
United States or in any territory of the United States, Puerto Rico, 
Guam, American Samoa, the Trust Territory of the Pacific Islands, the 
Virgin Islands, and the Northern Mariana Islands at which deposits are

[[Page 19]]

received or checks paid or money lent. A branch does not include an 
automated teller machine, an automated loan machine, or a remote service 
unit. The term branch also includes the following:
    (1) A messenger service that is operated by a bank or its affiliate 
that picks up and delivers items relating to transactions in which 
deposits are received or checks paid or money lent. A messenger service 
established and operated by a non-affiliated third party generally does 
not constitute a branch for purposes of this subpart. Banks contracting 
with third parties to provide messenger services should consult with the 
FDIC to determine if the messenger service constitutes a branch.
    (2) A mobile branch, other than a messenger service, that does not 
have a single, permanent site and uses a vehicle that travels to various 
locations to enable the public to conduct banking business. A mobile 
branch may serve defined locations on a regular schedule or may serve a 
defined area at varying times and locations.
    (3) A temporary branch that operates for a limited period of time 
not to exceed one year as a public service, such as during an emergency 
or disaster situation.
    (4) A seasonal branch that operates at various periodically 
recurring intervals, such as during state and local fairs, college 
registration periods, and other similar occasions.
    (b) Branch relocation means a move within the same immediate 
neighborhood of the existing branch that does not substantially affect 
the nature of the business of the branch or the customers of the branch. 
Moving a branch to a location outside its immediate neighborhood is 
considered the closing of an existing branch and the establishment of a 
new branch. Closing of a branch is covered in the FDIC Statement of 
Policy Concerning Branch Closing Notices and Policies. 1 FDIC Law, 
Regulations, Related Acts 5391; see Sec. 309.4 (a) and (b) of this 
chapter for availability.
    (c) De novo branch means a branch of a bank which is established by 
the bank as a branch and does not become a branch of such bank as a 
result of:
    (1) The acquisition by the bank of an insured depository institution 
or a branch of an insured depository institution; or
    (2) The conversion, merger, or consolidation of any such institution 
or branch.
    (d) Home state means the state by which the bank is chartered.
    (e) Host state means a state, other than the home state of the bank, 
in which the bank maintains, or seeks to establish and maintain, a 
branch.



Sec. 303.42  Filing procedures.

    (a) General. An applicant shall submit an application to the 
appropriate FDIC office on the date the notice required by Sec. 303.44 
is published, or within 5 days after the date of the last required 
publication.
    (b) Content of filing. A complete letter application shall include 
the following information:
    (1) A statement of intent to establish a branch, or to relocate the 
main office or a branch;
    (2) The exact location of the proposed site including the street 
address. With regard to messenger services, specify the geographic area 
in which the services will be available. With regard to a mobile branch 
specify the community or communities in which the vehicle will operate 
and the manner in which it will be used;
    (3) Details concerning any involvement in the proposal by an insider 
of the bank as defined in Sec. 303.2(u), including any financial 
arrangements relating to fees, the acquisition of property, leasing of 
property, and construction contracts;
    (4) A statement on the impact of the proposal on the human 
environment, including, information on compliance with local zoning laws 
and regulations and the effect on traffic patterns for purposes of 
complying with the applicable provisions of the NEPA and the FDIC 
Statement of Policy on NEPA (1 FDIC Law, Regulations, Related Acts 5185; 
see Sec. 309.4 (a) and (b) of this chapter for availability);
    (5) A statement as to whether or not the site is eligible for 
inclusion in the National Register of Historic Places for purposes of 
complying with applicable provisions of the NHPA and the FDIC

[[Page 20]]

Statement of Policy on NHPA (1 FDIC Law, Regulations, Related Acts 5175; 
see Sec. 309.4 (a) and (b) of this chapter for availability) including 
documentation of consultation with the State Historic Preservation 
Officer, as appropriate;
    (6) Comments on any changes in services to be offered, the community 
to be served, or any other effect the proposal may have on the 
applicant's compliance with the CRA;
    (7) A copy of each newspaper publication required by Sec. 303.44 of 
this subpart, the name and address of the newspaper, and date of the 
publication;
    (8) When an application is submitted to relocate the main office of 
the applicant from one state to another, a statement of the applicant's 
intent regarding retention of branches in the state where the main 
office exists prior to relocation.
    (c) Undercapitalized institutions. Applications to establish a 
branch by applicants subject to section 38 of the FDI Act (12 U.S.C. 
1831o) also should provide the information required by Sec. 303.204. 
Applications pursuant to sections 38 and 18(d) of the FDI Act (12 U.S.C. 
1831o and 1828(d)) may be filed concurrently or as a single application.
    (d) Additional information. The FDIC may request additional 
information to complete processing.



Sec. 303.43  Processing.

    (a) Expedited processing for eligible depository institutions. An 
application filed under this subpart by an eligible depository 
institution as defined in Sec. 303.2(r) will be acknowledged in writing 
by the FDIC 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 Sec. 303.11(c)(2). 
Absent such removal, an application processed under expedited processing 
will be deemed approved on the latest of the following:
    (1) The 21st day after receipt by the FDIC of a substantially 
complete filing;
    (2) The 5th day after expiration of the comment period described 
inSec. 303.44; or
    (3) In the case of an application to establish and operate a de novo 
branch in a state that is not the applicant's home state and in which 
the applicant does not maintain a branch, the 5th day after the FDIC 
receives confirmation from the host state that the applicant has both 
complied with the filing requirements of the host state and submitted a 
copy of the application with the FDIC to the host state bank supervisor.
    (b) Standard processing. For those applications which are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.



Sec. 303.44  Public notice requirements.

    (a) Newspaper publications. For applications to establish or 
relocate a branch, a notice as described in Sec. 303.7(c) shall be 
published once in a newspaper of general circulation. For applications 
to relocate a main office, notice shall be published at least once each 
week on the same day for two consecutive weeks. The required publication 
shall be made in the following communities:
    (1) To establish a branch. In the community in which the main office 
is located and in the communities to be served by the branch (including 
messenger services and mobile branches).
    (2) To relocate a main office. In the community in which the main 
office is currently located and in the community to which it is proposed 
the main office will relocate.
    (3) To relocate a branch. In the community in which the branch is 
located.
    (b) Public comments. Comments by interested parties must be received 
by the appropriate regional director within 15 days after the date of 
the last newspaper publication required by paragraph (a) of this 
section, unless the comment period has been extended or reopened in 
accordance with Sec. 303.9(b)(2).
    (c) Lobby notices. In the case of applications to relocate a main 
office or a branch, a copy of the required newspaper publication shall 
be posted in the public lobby of the office to be relocated for at least 
15 days beginning on the date of the last published notice required by 
paragraph (a) of this section.

[[Page 21]]



Sec. 303.45  Special provisions.

    (a) Emergency or disaster events. (1) In the case of an emergency or 
disaster at a main office or a branch which requires that an office be 
immediately relocated to a temporary location, applicants shall notify 
the appropriate FDIC office within 3 days of such temporary relocation.
    (2) Within 10 days of the temporary relocation resulting from an 
emergency or disaster, the bank shall submit a written application to 
the appropriate FDIC office, that identifies the nature of the emergency 
or disaster, specifies the location of the temporary branch, and 
provides an estimate of the duration the bank plans to operate the 
temporary branch.
    (3) As part of the review process, the FDIC will determine on a case 
by case basis whether additional information is necessary and may waive 
public notice requirements.
    (b) Redesignation of main office and existing branch. In cases where 
an applicant desires to redesignate its main office as a branch and 
redesignate an existing branch as the main office, a single application 
shall be submitted. The FDIC may waive the public notice requirements in 
instances where an application presents no significant or novel policy, 
supervisory, CRA, compliance or legal concerns. A waiver will be granted 
only to a redesignation within the applicant's home state.
    (c) Expiration of approval. Approval of an application expires if 
within 18 months after the approval date a branch has not commenced 
business or a relocation has not been completed.



Sec. Sec. 303.46-303.59  [Reserved]



                      Subpart D_Merger Transactions



Sec. 303.60  Scope.

    This subpart sets forth the application requirements and procedures 
for transactions subject to FDIC approval under the Bank Merger Act, 
section 18(c) of the FDI Act (12 U.S.C. 1828(c)). Additional guidance is 
contained in the FDIC ``Statement of Policy on Bank Merger 
Transactions'' (1 FDIC Law, Regulations, Related Acts 5145; see Sec. 
309.4(a) and (b) of this chapter for availability).



Sec. 303.61  Definitions.

    For purposes of this subpart:
    (a) Merger transaction includes any transaction:
    (1) In which an insured depository institution merges or 
consolidates with any other insured depository institution or, either 
directly or indirectly, acquires the assets of, or assumes liability to 
pay any deposits made in, any other insured depository institution; or
    (2) In which an insured depository institution merges or 
consolidates with any noninsured bank or institution or assumes 
liability to pay any deposits made in, or similar liabilities of, any 
noninsured bank or institution, or in which an insured depository 
institution transfers assets to any noninsured bank or institution in 
consideration of the assumption of any portion of the deposits made in 
the insured depository institution.
    (b) Corporate reorganization means a merger transaction between 
commonly-owned institutions, between an insured depository institution 
and its subsidiary, or between an insured depository institution and its 
holding company, provided that the merger transaction would have no 
effect on competition or otherwise have significance under the statutory 
standards set forth in section 18(c) of the FDI Act (12 U.S.C. 1828(c)). 
For purposes of this paragraph, institutions are commonly-owned if more 
than 50 percent of the voting stock of each of the institutions is owned 
by the same company, individual, or group of closely-related individuals 
acting in concert.
    (c) Interim merger transaction means a merger transaction (other 
than a purchase and assumption transaction) between an operating 
depository institution and a newly-formed depository institution or 
corporation that will not operate independently and that exists solely 
for the purpose of facilitating a corporate reorganization.
    (d) Optional conversion (Oakar transaction) means a merger 
transaction in which an insured depository institution assumes deposit 
liabilities insured by the deposit insurance fund (either the Bank 
Insurance Fund (BIF) or the Savings Association Insurance Fund

[[Page 22]]

(SAIF)) of which that assuming institution is not a member, and elects 
not to convert the insurance covering the assumed deposits. Such 
transactions are covered by section 5(d)(3) of the FDI Act (12 U.S.C. 
1815(d)(3)).
    (e) Resulting institution refers to the acquiring, assuming or 
resulting institution in a merger transaction.



Sec. 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 insured state nonmember bank; and
    (2) Any merger transaction, including any corporate reorganization 
or interim merger transaction, that involves an uninsured bank or 
institution.
    (b) Related provisions. Transactions covered by this subpart also 
may be subject to other provisions 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 
provisions 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) Deposit insurance fund conversions. Procedures for conversion 
transactions involving the transfer of deposits from BIF to SAIF or from 
SAIF to BIF are set forth in subpart M of this part at Sec. 303.246.
    (4) 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 Sec. 309.4(a) and (b) of 
this chapter for availability.)
    (5) 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 Sec. 
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.
    (6) Certification of assumption of deposit liability. 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 12 CFR part 307.



Sec. 303.63  Filing procedures.

    (a) General. Applications required under this subpart shall be filed 
with the appropriate FDIC office. The appropriate forms and instructions 
may be obtained upon request from any FDIC regional director.
    (b) Merger transactions. Applications for approval of merger 
transactions shall be accompanied by copies of all agreements or 
proposed agreements relating to the merger transaction and any other 
information requested by the FDIC.

[[Page 23]]

    (c) Interim merger transactions. Applications for approval of 
interim merger transactions and any related deposit insurance 
applications shall be made by filing the forms and other documents 
required by paragraphs (a) and (b) of this section and such other 
information as may be required by the FDIC for consideration of the 
request for deposit insurance.
    (d) Optional conversions. If the proposed merger transaction is an 
optional conversion, the merger application shall include a statement 
that the proposed merger transaction is a transaction covered by section 
5(d)(3) of the FDI Act (12 U.S.C. 1815(d)(3)).



Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 
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 paragraph (a)(1) of this section, if the FDIC 
does not act within the expedited processing period, it does not 
constitute an automatic or default approval.
    (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 B of part 
325 of this chapter (12 CFR part 325); and
    (ii)(A) All parties to the merger transaction are eligible 
depository institutions as defined in Sec. 303.2(r); or
    (B) The acquiring party is an eligible depository institution as 
defined in Sec. 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.



Sec. 303.65  Public notice requirements.

    (a) General. Except as provided in paragraph (b) of this section, an 
applicant for approval of a merger transaction must publish notice of 
the proposed transaction on at least three occasions at approximately 
equal intervals in a newspaper of general circulation in the community 
or communities where the main offices of the merging institutions are 
located or, if there is no such newspaper in the community, then in the 
newspaper of general circulation published nearest thereto.
    (1) First publication. The first publication of the notice should be 
as close as practicable to the date on which the application is filed 
with the FDIC, but no more than 5 days prior to the filing date.
    (2) Last publication. The last publication of the notice shall be on 
the 25th day after the first publication or, if the newspaper does not 
publish on the 25th day, on the newspaper's publication date that is 
closest to the 25th day.

[[Page 24]]

    (b) Exceptions--(1) Emergency requiring expeditious action. If the 
FDIC determines that an emergency exists requiring expeditious action, 
notice shall be published twice. The first notice shall be published as 
soon as possible after the FDIC notifies the applicant of such 
determination. The second notice shall be published on the 7th day after 
the first publication or, if the newspaper does not publish on the 7th 
day, on the newspaper's publication date that is closest to the 7th day.
    (2) Probable failure. If the FDIC determines that it must act 
immediately to prevent the probable failure of one of the institutions 
involved in a proposed merger transaction, publication is not required.
    (c) Content of notice--(1) General. The notice shall conform to the 
public notice requirements set forth in Sec. 303.7.
    (2) Branches. If it is contemplated that the resulting institution 
will operate offices of the other institution(s) as branches, the 
following statement shall be included in the notice required in Sec. 
303.7(b):

It is contemplated that all offices of the above-named institutions will 
continue to be operated (with the exception of [insert identity and 
location of each office that will not be operated]).

    (3) Emergency requiring expeditious action. If the FDIC determines 
that an emergency exists requiring expeditious action, the notice shall 
specify as the closing date of the public comment period the date that 
is the 10th day after the date of the first publication.
    (d) Public comments. Comments must be received by the appropriate 
FDIC office within 30 days after the first publication of the notice, 
unless the comment period has been extended or reopened in accordance 
with Sec. 303.9(b)(2). If the FDIC has determined that an emergency 
exists requiring expeditious action, comments must be received by the 
appropriate FDIC office within 10 days after the first publication.



Sec. Sec. 303.66-303.79  [Reserved]



                    Subpart E_Change in Bank Control



Sec. 303.80  Scope.

    This subpart sets forth the procedures for submitting a notice to 
acquire control of an insured state nonmember bank or a parent company 
of an insured state nonmember bank pursuant to the Change in Bank 
Control Act of 1978, section 7(j) of the FDI Act (12 U.S.C. 1817(j)).

[68 FR 50459, Aug. 21, 2003]



Sec. 303.81  Definitions.

    For purposes of this subpart:
    (a) Acquisition includes a purchase, assignment, transfer, pledge or 
other disposition of voting shares, or an increase in percentage 
ownership resulting from a redemption of voting shares of an insured 
state nonmember bank or a parent company.
    (b) Acting in concert means knowing participation in a joint 
activity or parallel action towards a common goal of acquiring control 
of an insured state nonmember bank or a parent company, whether or not 
pursuant to an express agreement.
    (c) Control means the power, directly or indirectly, to direct the 
management or policies of an insured bank or a parent company or to vote 
25 percent or more of any class of voting shares of an insured bank or a 
parent company.
    (d) Parent Company means any company that controls, directly or 
indirectly, an insured state nonmember bank.
    (e) Person means an individual, corporation, partnership, trust, 
association, joint venture, pool, syndicate, sole proprietorship, 
unincorporated organization, and any other form of entity; and a voting 
trust, voting agreement, and any group of persons acting in concert.

[68 FR 50459, Aug. 21, 2003]

[[Page 25]]



Sec. 303.82  Transactions requiring prior notice.

    (a) Prior notice requirement. Any person acting directly or 
indirectly, or through or in concert with one or more persons, shall 
give the FDIC 60 days prior written notice, as specified in Sec. 
303.84, before acquiring control of an insured state nonmember bank or 
any parent company, unless the acquisition is exempt under Sec. 303.83.
    (b) Acquisition requiring prior notice--(1) Acquisition of control. 
The acquisition of control, unless exempted, requires prior notice to 
the FDIC.
    (2) Rebuttable presumption of control. The FDIC presumes that an 
acquisition of voting shares of an insured state nonmember bank or a 
parent company constitutes the acquisition of the power to direct the 
management or policies of an insured bank or a parent company requiring 
prior notice to the FDIC, if, immediately after the transaction, the 
acquiring person (or persons acting in concert) will own, control, or 
hold with power to vote 10 percent or more of any class of voting shares 
of the institution, and if:
    (i) The institution has registered shares under section 12 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l); or
    (ii) No other person will own, control or hold the power to vote a 
greater percentage of that class of voting shares immediately after the 
transaction. If two or more persons, not acting in concert, each propose 
to acquire simultaneously equal percentages of 10 percent or more of a 
class of voting shares of an insured state nonmember bank or a parent 
company, each such person shall file prior notice with the FDIC.
    (c) Acquisition of loans in default. The FDIC presumes an 
acquisition of a loan in default that is secured by voting shares of an 
insured state nonmember bank or a parent company to be an acquisition of 
the underlying shares for purposes of this section.
    (d) Other transactions. Acquisitions other than those set forth in 
paragraph (b)(2) of this section resulting in a person's control of less 
than 25 percent of a class of voting shares of an insured state 
nonmember bank or a parent company are not deemed by the FDIC to 
constitute control for purposes of the Change in Bank Control Act.
    (e) Rebuttal of presumptions. Prior notice to the FDIC is not 
required for any acquisition of voting shares under the presumption of 
control set forth in this section, if the FDIC finds that the 
acquisition will not result in control. The FDIC will afford any person 
seeking to rebut a presumption in this section an opportunity to present 
views in writing or, if appropriate, orally before its designated 
representatives at an informal meeting.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50460, Aug. 21, 2003]



Sec. 303.83  Transactions not requiring prior notice.

    (a) Exempt transactions. The following transactions do not require 
notice to the FDIC under this subpart:
    (1) The acquisiiton of additional voting shares of an insured state 
nonmember bank or a parent company by a person who:
    (i) Held the power to vote 25 percent or more of any class of voting 
shares of the institution continuously since the later of March 9, 1979, 
or the date that the institution commenced business as an insured state 
nonmember bank or a parent company; or
    (ii) Is presumed, under Sec. 303.82(b)(2), to have controlled the 
institution continuously since March 9, 1979, if the aggregate amount of 
voting shares held does not exceed 25 percent or more of any class of 
voting shares of the institution or, in other cases, where the FDIC 
determines that the person has controlled the institution continuously 
since March 9, 1979;
    (2) The acquisition of additional shares of a class of voting shares 
of an insured state nonmember bank or a parent company by any person (or 
persons acting in concert) who has lawfully acquired and maintained 
control of the institution (for purposes of Sec. 303.82) after 
complying with the procedures of the Change in Bank Control Act to 
acquire voting shares of the institution under this subpart;
    (3) Acquisitions of voting shares subject to approval under section 
3 of the Bank Holding Company Act (12 U.S.C. 1842(a)), section 18(c) of 
the FDI Act (12 U.S.C. 1828(c)), or section 10 of the

[[Page 26]]

Home Owners' Loan Act (12 U.S.C. 1467a);
    (4) Transactions exempt under the Bank Holding Company Act: 
foreclosures by institutional lenders, fiduciary acquisitions by banks, 
and increases of majority holdings by bank holding companies described 
in sections 2(a)(5), 3(a)(A), or 3(a)(B) respectively of the Bank 
Holding Company Act (12 U.S.C. 1841(a)(5), 1842(a)(A), and 1842(a)(B));
    (5) A customary one-time proxy solicitation;
    (6) The receipt of voting shares of an insured state nonmember bank 
or a parent company through a pro rata stock dividend;
    (7) The acquisition of voting shares in a foreign bank, which has a 
insured branch or branches in the United States. (This exemption does 
not extend to the reports and information required under paragraphs 9, 
10, and 12 of the Change in Bank Control Act of 1978 (12 U.S.C. 
1817(j)(9), (10), and (12)) and;
    (8) The acquisition of voting shares of a depository institution 
holding company that either the Board of Governors of the Federal 
Reserve System or the Office of Thrift Supervision reviews pursuant to 
the Change in Bank Control Act (12 U.S.C. 1817(j)).
    (b) Prior notice exemption. (1) The following acquisitions of voting 
shares of an insured state nonmember bank or a parent company, which 
otherwise would require prior notice under this subpart, are not subject 
to the prior notice requirements if the acquiring person notifies the 
appropriate FDIC office within 90 calendar days after the acquisition 
and provides any relevant information requested by the FDIC:
    (i) The acquisition of voting shares through inheritance;
    (ii) The acquisition of voting shares as a bona fide gift; or
    (iii) The acquisition of voting shares in satisfaction of a debt 
previously contracted in good faith, except that the acquirer of a 
defaulted loan secured by a controlling amount of a state nonmember 
bank's voting securities or a parent company's voting securities shall 
file a notice before the loan is acquired.
    (2) The following acquisitions of voting shares of an insured state 
nonmember bank or a parent company, which otherwise would require prior 
notice under this subpart, are not subject to the prior notice 
requirements if the acquiring person notifies the appropriate FDIC 
office within 90 calendar days after receiving notice of the acquisition 
and provides any relevant information requested by the FDIC.
    (i) A percentage increase in ownership of voting shares resulting 
from a redemption of voting shares by the issuing bank or a parent 
company; or
    (ii) The sale of shares by any shareholder that is not within the 
control of a person resulting in that person becoming the largest 
shareholder.
    (3) Nothing in paragraph (b)(1) of this section limits the authority 
of the FDIC to disapprove a notice pursuant to Sec. 303.85(c).

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50460, Aug. 21, 2003]



Sec. 303.84  Filing procedures.

    (a) Filing notice. (1) A notice required under this subpart shall be 
filed with the appropriate FDIC office and shall contain all the 
information required by paragraph 6 of the Change in Bank Control Act, 
section 7 (j) of the FDI Act, (12 U.S.C. 1817(j)(6)), or prescribed in 
the designated interagency form which may be obtained from any FDIC 
regional director.
    (2) The FDIC may waive any of the informational requirements of the 
notice if the FDIC determines that it is in the public interest.
    (3) A notificant shall notify the appropriate FDIC office 
immediately of any material changes in a notice submitted to the FDIC, 
including changes in financial or other conditions.
    (4) When the acquiring person is an individual, or group of 
individuals acting in concert, the requirement to provide personal 
financial data may be satisfied by a current statement of assets and 
liabilities and an income summary, as required in the designated 
interagency form, together with a statement of any material changes 
since the date of the statement or summary. The FDIC may require 
additional information if appropriate.
    (b) Other laws. Nothing in this subpart shall affect any obligation 
which the acquiring person(s) may have to

[[Page 27]]

comply with the federal securities laws or other laws.



Sec. 303.85  Processing.

    (a) Acceptance of notice, additional information. The FDIC shall 
notify the person or persons submitting a notice under this subpart in 
writing of the date the notice is accepted as substantially complete. 
The FDIC may request additional information at any time.
    (b) Commencement of the 60-day notice period: consummation of 
acquisition. (1) The 60-day notice period specified in Sec. 303.82 
shall commerce on the day after the date of acceptance of a 
substantially complete notice by the appropriate regional director. The 
notificant(s) may consummate the proposed acquisition after the 
expiration of the 60-day notice period, unless the FDIC disapproves the 
proposed acquisition or extends the notice period.
    (c) Disapproval of acquisition of control. Subpart D of 12 CFR part 
308 sets forth the rules of practice and procedure for a notice of 
disapproval.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50460, Aug. 21, 2003]



Sec. 303.86  Public notice requirements.

    (a) Publication--(1) Newspaper announcement. Any person(s) filing a 
notice under this subpart shall publish an announcement soliciting 
public comment on the proposed acquisition. The announcement shall be 
published in a newspaper of general circulation in the community in 
which the home office of the state nonmember bank to be acquired is 
located. The announcement shall be published as close as is practicable 
to the date the notice is filed with the appropriate FDIC office, but in 
no event more than 10 calendar days before or after the filing date.
    (2) Contents of newspaper announcement. The newspaper announcement 
shall conform to the public notice requirements set forth in Sec. 
303.7.
    (b) Delay of publication. The FDIC may permit delay in the 
publication required by this section if the FDIC determines, for good 
cause, that it is in the public interest to grant such a delay. Requests 
for delay of publication may be submitted to the appropriate FDIC 
office.
    (c) Shortening or waiving public comment period, waiving 
publications; acting before close of public comment period. The FDIC may 
shorten the public comment period to a period of not less than 10 days, 
or waive the public comment or newspaper publication requirements of 
paragraph (a) of this section, or act on a notice before the expiration 
of a public comment period, if it determines in writing either that an 
emergency exists or that disclosure of the notice, solicitation of 
public comment, or delay until expiration of the public comment period 
would seriously threaten the safety and soundness of the bank to be 
acquired.
    (d) Consideration of public comments. In acting upon a notice filed 
under this subpart, the FDIC shall consider all public comments received 
in writing within 20 days following the required newspaper publication 
or, if the FDIC has shortened the public comment period pursuant to 
paragraph (c) of this section, within such shorter period.
    (e) Publication if filing is subsequent to acquisition of control. 
(1) Whenever a notice of a proposed acquisition of control is not filed 
in accordance with the Change in Bank Control Act and these regulations, 
the acquiring person(s) shall, within 10 days of being so directed by 
the FDIC, publish an announcement of the acquisition of control in a 
newspaper of general circulation in the community in which the home 
office of the state nonmember bank to be acquired is located.
    (2) The newspaper announcement shall contain the name(s) of the 
acquiror(s), the name of the depository institution involved, and the 
date of the acquisition of the stock. The announcement shall also 
contain a statement indicating that the FDIC is currently reviewing the 
acquisition of control. The announcement also shall state that any 
person wishing to comment on the change in control may do so by 
submitting written comments to the appropriate regional director of the 
FDIC (give address of appropriate FDIC office) within 20 days following 
the required newspaper publication.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50461, Aug. 21, 2003]

[[Page 28]]



Sec. Sec. 303.87-303.99  [Reserved]



        Subpart F_Change of Director or Senior Executive Officer



Sec. 303.100  Scope.

    This subpart sets forth the circumstances under which an insured 
state nonmember bank 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).



Sec. 303.101  Definitions.

    For purposes of this subpart:
    (a) Director means a person who serves on the board of directors or 
board of trustees of an insured state nonmember bank, except that this 
term does not include an advisory director who:
    (1) Is not elected by the shareholders;
    (2) Is not authorized to vote on any matters before the board of 
directors or board of trustees or any committee thereof;
    (3) Solely provides general policy advice to the board of directors 
or board of trustees and any committee thereof; and
    (4) Has not been identified by the FDIC as a person who performs the 
functions of a director for purposes of this subpart.
    (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, or 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 insured state 
nonmember bank.
    (c) Troubled condition means any insured state nonmember bank that:
    (1) Has a composite rating, as determined in its most recent report 
of examination, of 4 or 5 under the Uniform Financial Institutions 
Rating System (UFIRS), or in the case of an insured state branch of a 
foreign bank, an equivalent rating; or
    (2) Is subject to a proceeding initiated by the FDIC for termination 
or suspension of deposit insurance; or
    (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 bank 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 bank, 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 bank's most recent report of condition or report of examination, 
or other information available to the FDIC.



Sec. 303.102  Filing procedures and waiver of prior notice.

    (a) Insured state nonmember banks. An insured state nonmember bank 
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 bank, or changing the responsibilities of any senior 
executive officer so that the person would assume a different senior 
executive officer position, if:
    (1) The bank is not in compliance with all minimum capital 
requirements applicable to the bank as determined on the basis of the 
bank's most recent report of condition or report of examination;
    (2) The bank 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.
    (b) Insured branches of foreign banks. In the case of the addition 
of a member of the board of directors or a change in senior executive 
officer in a foreign bank having an insured state branch,

[[Page 29]]

the notice requirement shall not apply to such additions and changes in 
the foreign bank parent, but only to changes in senior executive 
officers in the state branch.
    (c) Waiver of prior notice--(1) Waiver requests. The FDIC may permit 
an individual, upon petition by the bank 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 or soundness of the bank;
    (ii) Delay would not be in the public interest; or
    (iii) Other extraordinary circumstances exist that justify waiver of 
prior notice.
    (2) Automatic waiver. In the case of the election of a new director 
not proposed by management at a meeting of the shareholders of an 
insured state nonmember bank, the prior 30-day notice is automatically 
waived 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.
    (3) Effect on disapproval authority. A waiver shall not affect the 
authority of the FDIC to disapprove a notice within 30 days after a 
waiver is granted under paragraph (c)(1) of this section or the election 
of an individual who has filed a notice and is serving pursuant to an 
automatic waiver under paragraph (c)(2) of this section.
    (d)(1) Content of filing. The notice required by paragraph (a) of 
this section shall be filed with the appropriate FDIC office and shall 
contain information pertaining to the competence, experience, character, 
or integrity of the individual with respect to whom the notice is 
submitted, as prescribed in the designated interagency form which is 
available from any FDIC regional director. The FDIC may require 
additional information.
    (2) Modification. The FDIC may modify or accept other information in 
place of the requirements of paragraph (d)(1) of this section for a 
notice filed under this subpart.



Sec. 303.103  Processing.

    (a) Processing. The 30-day notice period specified in Sec. 
303.102(a) shall begin on the date substantially all information 
required to be submitted by the notificant pursuant to Sec. 
303.102(c)(1) is received by the appropriate FDIC office. The FDIC shall 
notify the bank 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 within 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.
    (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 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 bank 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 Sec. 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 the depositors of the bank or in the best interests of the public to 
permit the individual to be employed by, or associated with, the bank. 
Subpart L of 12 CFR part 308 sets forth the rules of practice and 
procedure for a notice of disapproval.



Sec. Sec. 303.104-303.119  [Reserved]



               Subpart G_Activities of Insured State Banks



Sec. 303.120  Scope.

    This subpart sets forth procedures for complying with notice and 
application

[[Page 30]]

requirements contained in subpart A of part 362 of this chapter, 
governing insured state banks and their subsidiaries engaging in 
activities which are not permissible for national banks and their 
subsidiaries. This subpart sets forth procedures for complying with 
notice and application requirements contained in subpart B of part 362 
of this chapter, governing certain activities of insured state nonmember 
banks, their subsidiaries, and certain affiliates. This subpart also 
sets forth procedures for complying with the notice requirements 
contained in subpart E of part 362 of this chapter, governing 
subsidiaries of insured state nonmember banks engaging in financial 
activities.



Sec. 303.121  Filing procedures.

    (a) Where to file. A notice or application required by subpart A, 
subpart B, or subpart E of part 362 of this chapter shall be submitted 
in writing to the appropriate FDIC office.
    (b) Contents of filing. A complete letter notice or letter 
application shall include the following information:
    (1) Filings generally. (i) A brief description of the activity and 
the manner in which it will be conducted;
    (ii) The amount of the bank's existing or proposed direct or 
indirect investment in the activity as well as calculations sufficient 
to indicate compliance with any specific capital ratio or investment 
percentage limitation detailed in subpart A, B, or E of part 362 of this 
chapter;
    (iii) A copy of the bank's business plan regarding the conduct of 
the activity;
    (iv) A citation to the state statutory or regulatory authority for 
the conduct of the activity;
    (v) A copy of the order or other document from the appropriate 
regulatory authority granting approval for the bank to conduct the 
activity if such approval is necessary and has already been granted;
    (vi) A brief description of the bank's policy and practice with 
regard to any anticipated involvement in the activity by a director, 
executive office or principal shareholder of the bank or any related 
interest of such a person; and
    (vii) A description of the bank's expertise in the activity.
    (2) [Reserved]
    (3) Copy of application or notice filed with another agency. If an 
insured state bank has filed an application or notice with another 
federal or state regulatory authority which contains all of the 
information required by paragraph (b) (1) of this section, the insured 
state bank may submit a copy to the FDIC in lieu of a separate filing.
    (4) Additional information. The FDIC may request additional 
information to complete processing.



Sec. 303.122  Processing.

    (a) Expedited processing. A notice filed by an insured state bank 
seeking to commence or continue an activity under Sec. 
362.3(a)(2)(iii)(A)(2), Sec. 362.4(b)(3)(i), or Sec. 362.4(b)(5) of 
this chapter will be acknowledged in writing by the FDIC and will 
receive expedited processing, unless the applicant is notified in 
writing to the contrary and provided a basis for that decision. The FDIC 
may remove the notice from expedited processing for any of the reasons 
set forth in Sec. 303.11(c)(2). Absent such removal, a notice processed 
under expedited processing is deemed approved 30 days after receipt of a 
complete notice by the FDIC (subject to extension for an additional 15 
days upon written notice to the bank) or on such earlier date authorized 
by the FDIC in writing.
    (b) Standard processing for applications and notices that have been 
removed from expedited processing. For an application filed by an 
insured state bank seeking to commence or continue an activity under 
Sec. 362.3(a)(2)(iii)(A)(2), Sec. 362.3(b)(2)(i), Sec. 
362.3(b)(2)(ii)(A), Sec. 362.3(b)(2)(ii)(C), Sec. 362.4(b)(1), Sec. 
362.4(b)(4), Sec. 362.5(b)(2), or Sec. 362.8(b) or seeking a waiver or 
modification under Sec. 362.18(e) or Sec. 362.18(g)(3) of this chapter 
or for notices which are not processed pursuant to the expedited 
processing procedures, the FDIC will provide the insured State bank with 
written notification of the final action as soon as the decision is 
rendered. The FDIC will normally review and act in such cases within 60 
days after receipt of a completed application or notice (subject to 
extension for an additional 30 days

[[Page 31]]

upon written notice to the bank), but failure of the FDIC to act prior 
to the expiration of these periods does not constitute approval.



Sec. Sec. 303.123-303.139  [Reserved]



          Subpart H_Activities of Insured Savings Associations



Sec. 303.140  Scope.

    This subpart sets forth procedures for complying with the notice and 
application requirements contained in subpart C of part 362 of this 
chapter, governing insured state savings associations and their service 
corporations engaging in activities which are not permissible for 
federal savings associations and their service corporations. This 
subpart also sets forth procedures for complying with the notice 
requirements contained in subpart D of part 362 of this chapter, 
governing insured savings associations which establish or engage in new 
activities through a subsidiary.



Sec. 303.141  Filing procedures.

    (a) Where to file. All applications and notices required by subpart 
C or subpart D of part 362 of this chapter are to be in writing and 
filed with the appropriate FDIC office.
    (b) Contents of filing--(1) Filings generally. A complete letter 
notice or letter application shall include the following information:
    (i) A brief description of the activity and the manner in which it 
will be conducted;
    (ii) The amount of the association's existing or proposed direct or 
indirect investment in the activity as well as calculations sufficient 
to indicate compliance with any specific capital ratio or investment 
percentage limitation detailed in subpart C or D of part 362 of this 
chapter;
    (iii) A copy of the association's business plan regarding the 
conduct of the activity;
    (iv) A citation to the state statutory or regulatory authority for 
the conduct of the activity;
    (v) A copy of the order or other document from the appropriate 
regulatory authority granting approval for the association to conduct 
the activity if such approval is necessary and has already been granted;
    (vi) A brief description of the association's policy and practice 
with regard to any anticipated involvement in the activity by a 
director, executive officer or principal shareholder of the association 
or any related interest of such a person; and
    (vii) A description of the association's expertise in the activity.
    (2) [Reserved]
    (3) Copy of application or notice filed with another agency. If an 
insured savings association has filed an application or notice with 
another federal or state regulatory authority which contains all of the 
information required by paragraph (b)(1) of this section, the insured 
state bank may submit a copy to the FDIC in lieu of a separate filing.
    (4) Additional information. The FDIC may request additional 
information to complete processing.



Sec. 303.142  Processing.

    (a) Expedited processing. A notice filed by an insured state savings 
association seeking to commence or continue an activity under Sec. 
362.11(b)(2)(ii) of this chapter will be acknowledged in writing by the 
FDIC and will receive expedited processing, unless the applicant is 
notified in writing to the contrary and provided a basis for that 
decision. The FDIC may remove the notice from expedited processing for 
any of the reasons set forth in Sec. 303.11(c)(2). Absent such removal, 
a notice processed under expedited processing is deemed approved 30 days 
after receipt of a complete notice by the FDIC (subject to extension for 
an additional 15 days upon written notice to the bank) or on such 
earlier date authorized by the FDIC in writing.
    (b) Standard processing for applications and notices that have been 
removed from expedited processing. For an application filed by an 
insured state savings association seeking to commence or continue an 
activity under Sec. 362.11(a)(2)(ii), Sec. 362.11(b)(2)(i), Sec. 
362.12(b)(1) of this chapter or for notices which are not processed 
pursuant to the expedited processing procedures, the FDIC will provide 
the insured state savings association with written notification of the 
final action as soon as the decision is

[[Page 32]]

rendered. The FDIC will normally review and act in such cases within 60 
days after receipt of a completed application or notice (subject to 
extension for an additional 30 days upon written notice to the bank), 
but failure of the FDIC to act prior to the expiration of these periods 
does not constitute approval.
    (c) Notices of activities in excess of an amount permissible for a 
federal savings association; subsidiary notices. Receipt of a notice 
filed by an insured state savings association as required by Sec. 
362.11(b)(3) or Sec. 362.15 of this chapter will be acknowledged in 
writing by the FDIC. The notice will be reviewed at the appropriate FDIC 
office, which will take such action as it deems necessary and 
appropriate.



Sec. Sec. 303.143-303.159  [Reserved]



                  Subpart I_Mutual-To-Stock Conversions



Sec. 303.160  Scope.

    This subpart sets forth the notice requirements and procedures for 
the conversion of an insured mutual state-chartered savings bank to the 
stock form of ownership. The substantive requirements governing such 
conversions are contained in Sec. 333.4 of this chapter.



Sec. 303.161  Filing procedures.

    (a) Prior notice required. In addition to complying with the 
substantive requirements in Sec. 333.4 of this chapter, an insured 
state-chartered mutually owned savings bank that proposes to convert 
from mutual to stock form shall file with the FDIC a notice of intent to 
convert to stock form.
    (b) General. (1) A notice required under this subpart shall be filed 
in letter form with the appropriate FDIC office at the same time as 
required conversion application materials are filed with the 
institution's state regulator.
    (2) An insured mutual savings bank chartered by a state that does 
not require the filing of a conversion application shall file a notice 
in letter form with the appropriate FDIC office as soon as practicable 
after adoption of its plan of conversion.
    (c) Content of notice. The notice shall provide a description of the 
proposed conversion and include all materials that have been filed with 
any state or federal banking regulator and any state or federal 
securities regulator. At a minimum, the notice shall include, as 
applicable, copies of:
    (1) The plan of conversion, with specific information concerning the 
record date used for determining eligible depositors and the 
subscription offering priority established in connection with any 
proposed stock offering;
    (2) Certified board resolutions relating to the conversion;
    (3) A business plan, including a detailed discussion of how the 
capital acquired in the conversion will be used, expected earnings for 
at least a three-year period following the conversion, and a 
justification for any proposed stock repurchases;
    (4) The charter and bylaws of the converted institution;
    (5) The bylaws and operating plans of any other entities formed in 
connection with the conversion transaction, such as a holding company or 
charitable foundation;
    (6) A full appraisal report, prepared by an independent appraiser, 
of the value of the converting institution and the pricing of the stock 
to be sold in the conversion transaction;
    (7) Detailed descriptions of any proposed management or employee 
stock benefit plans or employment agreements and a discussion of the 
rationale for the level of benefits proposed, individually and by 
participant group;
    (8) Indemnification agreements;
    (9) A preliminary proxy statement and sample proxy;
    (10) Offering circular(s) and order form;
    (11) All contracts or agreements relating to solicitation, 
underwriting, market-making, or listing of conversion stock and any 
agreements among members of a group regarding the purchase of 
unsubscribed shares;
    (12) A tax opinion concerning the federal income tax consequences of 
the proposed conversion;
    (13) Consents from experts to use their opinions as part of the 
notice; and
    (14) An estimate of conversion-related expenses.

[[Page 33]]

    (d) Additional information. The FDIC, in its discretion, may request 
any additional information it deems necessary to evaluate the proposed 
conversion. The institution proposing to convert from mutual to stock 
form shall promptly provide such information to the FDIC.
    (e) Acceptance of notice. The 60-day notice period specified inSec. 
303.163 shall commence on the date of receipt of a substantially 
complete notice. The FDIC shall notify the institution proposing to 
convert in writing of the date the notice is accepted.
    (f) Related applications. Related applications that require FDIC 
action may include:
    (1) Applications for deposit insurance, as required by subpart B of 
this part; and
    (2) Applications for consent to merge, as required by subpart D of 
this part.



Sec. 303.162  Waiver from compliance.

    (a) General. An institution proposing to convert from mutual to 
stock form may file with the appropriate FDIC office a letter requesting 
waiver of compliance with this subpart or Sec. 333.4 of this chapter:
    (1) When compliance with any provision of this section or Sec. 
333.4 of this chapter would be inconsistent or in conflict with 
applicable state law, or
    (2) For any other good cause shown.
    (b) Content of filing. In making a request for waiver under 
paragraph (a) of this section, the institution shall demonstrate that 
the requested waiver, if granted, would not result in any effects that 
would be detrimental to the safety and soundness of the institution, 
entail a breach of fiduciary duty on part of the institution's 
management or otherwise be detrimental or inequitable to the 
institution, its depositors, any other insured depository 
institution(s), the federal deposit insurance funds, or to the public 
interest.



Sec. 303.163  Processing.

    (a) General considerations. The FDIC shall review the notice and 
other materials submitted by the institution proposing to convert from 
mutual to stock form, specifically considering the following factors:
    (1) The proposed use of the proceeds from the sale of stock, as set 
forth in the business plan;
    (2) The adequacy of the disclosure materials;
    (3) The participation of depositors in approving the transaction;
    (4) The form of the proxy statement required for the vote of the 
depositors/members on the conversion;
    (5) Any proposed increased compensation and other remuneration 
(including stock grants, stock option rights and other similar benefits) 
to be granted to officers and directors/trustees of the bank in 
connection with the conversion;
    (6) The adequacy and independence of the appraisal of the value of 
the mutual savings bank for purposes of determining the price of the 
shares of stock to be sold;
    (7) The process by which the bank's trustees approved the appraisal, 
the pricing of the stock, and the proposed compensation arrangements for 
insiders;
    (8) The nature and apportionment of stock subscription rights; and
    (9) The bank's plans to fulfill its commitment to serving the 
convenience and needs of its community.
    (b) Additional considerations. (1) In reviewing the notice and other 
materials submitted under this subpart, the FDIC will take into account 
the extent to which the proposed conversion transaction conforms with 
the various provisions of the mutual-to-stock conversion regulations of 
the Office of Thrift Supervision (OTS) (12 CFR part 563b), as currently 
in effect at the time the notice is submitted. Any non-conformity with 
those provisions will be closely reviewed.
    (2) Conformity with the OTS requirements will not be sufficient for 
FDIC regulatory purposes if the FDIC determines that the proposed 
conversion transaction would pose a risk to the bank's safety or 
soundness, violate any law or regulation, or present a breach of 
fiduciary duty.
    (c) Notice period. (1) The period in which the FDIC may object to 
the proposed conversion transaction shall be the later of:

[[Page 34]]

    (i) 60 days after receipt of a substantially complete notice of 
proposed conversion; or
    (ii) 20 days after the last applicable state or other federal 
regulator has approved the proposed conversion.
    (2) The FDIC may, in its discretion, extend the initial 60-day 
period for up to an additional 60 days by providing written notice to 
the institution.
    (d) Letter of non-objection. If the FDIC determines, in its 
discretion, that the proposed conversion transaction would not pose a 
risk to the institution's safety or soundness, violate any law or 
regulation, or present a breach of fiduciary duty, then the FDIC shall 
issue to the institution proposing to convert a letter of non-objection 
to the proposed conversion.
    (e) Letter of objection. If the FDIC determines, in its discretion, 
that the proposed conversion transaction poses a risk to the 
institution's safety or soundness, violates any law or regulation, or 
presents a breach of fiduciary duty, then the FDIC shall issue a letter 
to the institution stating its objection(s) to the proposed conversion 
and advising the institution not to consummate the proposed conversion 
until such letter is rescinded. A copy of the letter of objection shall 
be furnished to the institution's primary state regulator and any other 
state or federal banking regulator and state or federal securities 
regulator involved in the conversion.
    (f) Consummation of the conversion. (1) An institution may 
consummate the proposed conversion upon either:
    (i) The receipt of a letter of non-objection; or
    (ii) The expiration of the notice period.
    (2) If a letter of objection is issued, then the institution shall 
not consummate the proposed conversion until the FDIC rescinds such 
letter.



Sec. Sec. 303.164-303.179  [Reserved]



                     Subpart J_International Banking



Sec. 303.180  Scope.

    This subpart sets forth procedures for complying with application 
requirements relating to the foreign activities of insured state 
nonmember banks, U.S. activities of insured branches of foreign banks, 
and certain foreign mergers of insured depository institutions.



Sec. 303.181  Definitions.

    For the purposes of this subpart, the following additional 
definitions apply:
    (a) Board of Governors means the Board of Governors of the Federal 
Reserve System.
    (b) Comptroller means the Office of the Comptroller of the Currency.
    (c) Eligible insured branch. An insured branch will be treated as an 
eligible depository institution within the meaning of Sec. 303.2(r) if 
the insured branch:
    (1) Received an FDIC-assigned composite ROCA supervisory rating 
(which rates risk management, operational controls, compliance, and 
asset quality) of 1 or 2 as a result of its most recent federal or state 
examination, and the FDIC, Comptroller, or Board of Governors have not 
expressed concern about the condition or operations of the foreign 
banking organization or the support it offers the branch;
    (2) Received a satisfactory or better Community Reinvestment Act 
(CRA) rating from its primary federal regulator at its most recent 
examination, if the depository institution is subject to examination 
under part 345 of this chapter;
    (3) Received a compliance rating of 1 or 2 from its primary federal 
regulator at its most recent examination;
    (4) Is well-capitalized as defined in subpart B of part 325 of this 
chapter; and
    (5) Is not subject to a cease and desist order, consent order, 
prompt corrective action directive, written agreement, memorandum of 
understanding, or other administrative agreement with any U.S. bank 
regulatory authority.
    (d) Federal branch means a federal branch of a foreign bank as 
defined by Sec. 347.202 of this chapter.
    (e) Foreign bank means a foreign bank as defined by Sec. 347.202 of 
this chapter.
    (f) Foreign branch means a foreign branch of an insured state 
nonmember bank as defined by Sec. 347.102 of this chapter.
    (g) Foreign organization means a foreign organization as defined by 
Sec. 347.102 of this chapter.

[[Page 35]]

    (h) Insured branch means an insured branch of a foreign bank as 
defined by Sec. 347.202 of this chapter.
    (i) Noninsured branch means a noninsured branch of a foreign bank as 
defined by Sec. 347.202 of this chapter.
    (j) State branch means a state branch of a foreign bank as defined 
by Sec. 347.202 of this chapter.



Sec. 303.182  Establishing, moving or closing a foreign branch of a 
state nonmember bank; Sec. 347.103.

    (a) Notice procedures for general consent. Notice in the form of a 
letter from an eligible depository institution establishing or 
relocating a foreign branch pursuant to Sec. 347.103(b) of this chapter 
shall be provided to the appropriate FDIC office no later than 30 days 
after taking such action, and include the location of the foreign 
branch, including a street address, and a statement that the foreign 
branch has not been located on a site on the World Heritage List or on 
the foreign country's equivalent of the National Register of Historic 
Places (National Register), in accordance with section 402 of the 
National Historic Preservation Act Amendments of 1980 (NHPA Amendments 
Act) (16 U.S.C. 470a-2). The FDIC will provide written acknowledgment of 
receipt of the notice.
    (b) Filing procedures for other branch establishments--(1)Where to 
file. An applicant seeking to establish a foreign branch other than 
under Sec. 347.103(b) of this chapter shall submit an application to 
the appropriate FDIC office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) The exact location of the proposed foreign branch, including the 
street address, and a statement whether the foreign branch will be 
located on a site on the World Heritage List or on the foreign country's 
equivalent of the National Register, in accordance with section 402 of 
the NHPA Amendments Act;
    (ii) Details concerning any involvement in the proposal by an 
insider of the applicant, as defined in Sec. 303.2(u), including any 
financial arrangements relating to fees, the acquisition of property, 
leasing of property, and construction contracts;
    (iii) A brief description of the applicant's business plan with 
respect to the foreign branch; and
    (iv) A brief description of the activities of the branch, and to the 
extent any activities are not authorized by Sec. 347.103(a) of this 
chapter, the applicant's reasons why they should be approved.
    (3) Additional information. The FDIC may request additional 
information to complete processing.
    (c) Processing--(1) Expedited processing for eligible depository 
institutions. An application filed under Sec. 347.103(c) of this 
chapter by an eligible depository institution as defined in Sec. 
303.2(r) of this part seeking to establish a foreign branch by expedited 
processing will be acknowledged in writing by the FDIC 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 the application from expedited processing for any of the reasons 
set forth in Sec. 303.11(c)(2). Absent such removal, an application 
processed under expedited processing is deemed approved 45 days after 
receipt of a substantially complete application by the FDIC, or on such 
earlier date authorized by the FDIC in writing.
    (2) Standard processing. For those applications which are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.
    (d) Closing. Notices of branch closing under Sec. 347.103(f) of 
this chapter, in the form of a letter including the name, location, and 
date of closing of the closed branch, shall be filed with the 
appropriate FDIC office no later than 30 days after the branch is 
closed.



Sec. 303.183  Investment by insured state nonmember banks in foreign 
organizations; Sec. 347.108.

    (a) Notice procedures for general consent. Notice in the form of a 
letter from an eligible depository institution making direct or indirect 
investments in a foreign organization pursuant to Sec. 347.108(a) of 
this chapter shall be provided to the appropriate FDIC office no

[[Page 36]]

later than 30 days after taking such action. The FDIC will provide 
written acknowledgment of receipt of the notice.
    (b) Filing procedures for other investments--(1) Where to file. An 
applicant seeking to make a foreign investment other than under Sec. 
347.108(a) of this chapter shall submit an application to the 
appropriate FDIC office.
    (2) Content of filing. A complete application shall include the 
following information:
    (i) Basic information about the terms of the proposed transaction, 
the amount of the investment in the foreign organization and the 
proportion of its ownership to be acquired;
    (ii) Basic information about the foreign organization, its financial 
position and income, including any available balance sheet and income 
statement for the prior year, or financial projections for a new foreign 
organization;
    (iii) A listing of all shareholders known to hold ten percent or 
more of any class of the foreign organization's stock or other evidence 
of ownership, and the amount held by each;
    (iv) A brief description of the applicant's business plan with 
respect to the foreign organization;
    (v) A brief description of any business or activities which the 
foreign organization will conduct directly or indirectly in the United 
States, and to the extent such activities are not authorized by subpart 
A of part 347, the applicant's reasons why they should be approved;
    (vi) A brief description of the foreign organization's activities, 
and to the extent such activities are not authorized by subpart A of 
part 347, the applicant's reasons why they should be approved; and
    (vii) If the applicant seeks approval to engage in underwriting or 
dealing activities, a description of the applicant's plans and 
procedures to address all relevant risks.
    (3) Additional information. The FDIC may request additional 
information to complete processing.
    (c) Processing--(1) Expedited processing for eligible depository 
institutions. An application filed under Sec. 347.108(b) of this 
chapter by an eligible depository institution as defined in Sec. 
303.2(r) seeking to make direct or indirect investments in a foreign 
organization will be acknowledged in writing by the FDIC 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 the application from expedited processing for any of 
the reasons set forth in Sec. 303.11(c)(2). Absent such removal, an 
application processed under expedited processing is deemed approved 45 
days after receipt of a complete application by the FDIC, or on such 
earlier date authorized by the FDIC in writing.
    (2) Standard processing. For those applications which are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.
    (d) Divestiture. If an insured state nonmember bank holding 50 
percent or more of the voting equity interests of a foreign organization 
or otherwise controlling the foreign organization divests itself of such 
ownership or control, the insured state nonmember bank shall file a 
notice in the form of a letter, including the name, location, and date 
of divestiture of the foreign organization, with the appropriate FDIC 
office no later than 30 days after the divestiture.



Sec. 303.184  Moving an insured branch of a foreign bank.

    (a) Filing procedures--(1) Where and when to file. An application by 
an insured branch of a foreign bank seeking the FDIC's consent to move 
from one location to another, as required by section 18(d)(1) of the FDI 
Act (12 U.S.C. 1828(d)(1)), shall be submitted in writing to the 
appropriate FDIC office on the date the notice required by paragraph (c) 
of this section is published, or within 5 days after the date of the 
last required publication.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) The exact location of the proposed site, including the street 
address;
    (ii) Details concerning any involvement in the proposal by an 
insider of the applicant, as defined in Sec. 303.2(u), including any 
financial arrangements relating to fees, the acquisition of

[[Page 37]]

property, leasing of property, and construction contracts;
    (iii) A statement of the impact of the proposal on the human 
environment, including information on compliance with local zoning laws 
and regulations and the effect on traffic patterns, for purposes of 
complying with the applicable provisions of the NEPA, and the FDIC 
``Statement of Policy on NEPA'' (1 FDIC Law, Regulations, Related Acts 
5185; see Sec. 309.4(a) and (b) of this chapter for availability).
    (iv) A statement as to whether or not the site is eligible for 
inclusion in the National Register of Historic Places for purposes of 
complying with the applicable provisions of the NHPA, and the FDIC 
AStatement of Policy on NHPA'' (1 FDIC Law, Regulations, Related Acts 
5175; see Sec. 309.4(a) and (b) of this chapter for availability), 
including documentation of consultation with the State Historic 
Preservation Officer, as appropriate.
    (v) Comments on any changes in services to be offered, the community 
to be served, or any other effect the proposal may have on the 
applicant's compliance with the CRA; and
    (vi) A copy of the newspaper publication required by paragraph (c) 
of this section, as well as the name and address of the newspaper and 
the date of the publication.
    (3) Comptroller's application. If the applicant is filing an 
application with the Comptroller which contains the information required 
by paragraph (a)(2) of this section, the applicant may submit a copy to 
the FDIC in lieu of a separate application.
    (4) Additional information. The FDIC may request additional 
information to complete processing.
    (b) Processing--(1) Expedited processing for eligible insured 
branches. An application filed by an eligible insured branch as defined 
in Sec. 303.181(c) will be acknowledged in writing by the FDIC and will 
receive expedited processing, unless the applicant is notified 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 Sec. 303.11(c)(2). Absent such removal, an application 
processed under expedited processing will be deemed approved on the 
latest of the following:
    (i) The 21st day after the FDIC's receipt of a substantially 
complete application; or
    (ii) The 5th day after expiration of the comment period described in 
paragraph (c) of this section.
    (2) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action as soon as 
the decision is rendered.
    (c) Publication requirement and comment period--(1) Newspaper 
publications. The applicant shall publish a notice of its proposal to 
move from one location to another, as described in Sec. 303.7(b), in a 
newspaper of general circulation in the community in which the insured 
branch is located prior to its being moved and in the community to which 
it is to be moved. The notice shall include the insured branch's current 
and proposed addresses.
    (2) Public comments. All public comments must be received by the 
appropriate regional director within 15 days after the date of the last 
newspaper publication required by paragraph (c)(1) of this section, 
unless the comment period has been extended or reopened in accordance 
with Sec. 303.9(b)(2).
    (3) Lobby notices. If the insured branch has a public lobby, a copy 
of the newspaper publication shall be posted in the public lobby for at 
least 15 days beginning on the date of the publication required by 
paragraph (c)(1) of this section.
    (d) Other approval criteria. (1) The FDIC may approve an application 
under this section if the criteria in paragraphs (d)(1)(i) through 
(d)(1)(vi) of this section is satisfied.
    (i) The factors set forth in section 6 of the FDI Act (12 U.S.C. 
1816) have been considered and favorably resolved;
    (ii) The applicant is at least adequately capitalized as defined in 
subpart B of part 325 of this chapter;
    (iii) Any financial arrangements which have been made in connection 
with the proposed relocation and which involve the applicant's 
directors, officers, major shareholders, or their interests are fair and 
reasonable in comparison to similar arrangements that

[[Page 38]]

could have been made with independent third parties;
    (iv) Compliance with the CRA, the NEPA, the NHPA and any applicable 
related regulations, including 12 CFR part 345, has been considered and 
favorably resolved;
    (v) No CRA protest as defined in Sec. 303.2(l) has been filed which 
remains unresolved or, where such a protest has been filed and remains 
unresolved, the Director or designee concurs that approval is consistent 
with the purposes of the CRA and the applicant agrees in writing to any 
conditions imposed regarding the CRA; and
    (vi) The applicant agrees in writing to comply with any conditions 
imposed by the FDIC, other than the standard conditions defined in Sec. 
303.2(dd) which may be imposed without the applicant's written consent.



Sec. 303.185  Merger transactions involving foreign banks or foreign 
organizations.

    (a) Merger transactions involving an insured branch of a foreign 
bank. Merger transactions requiring the FDIC's prior approval as set 
forth in Sec. 303.62 include any merger transaction in which the 
resulting institution is an insured branch of a foreign bank which is 
not a federal branch, or any merger transaction which involves any 
insured branch and any uninsured institution. In such cases:
    (1) References to an eligible depository institution in subpart D of 
this part include an eligible insured branch as defined in Sec. 
303.181;
    (2) The definition of a corporate reorganization in Sec. 303.61(b) 
includes a merger transaction between an insured branch and other 
branches, agencies, or subsidiaries in the United States of the same 
foreign bank; and
    (3) For the purposes of Sec. 303.62(b)(1) on interstate mergers, a 
merger transaction involving an insured branch is one involving the 
acquisition of a branch of an insured bank without the acquisition of 
the bank for purposes of section 44 of the FDI Act (12 U.S.C. 1831u) 
only when the merger transaction involves fewer than all the insured 
branches of the same foreign bank in the same state.
    (b) Certain merger transactions with foreign organizations outside 
any State. Merger transactions requiring the FDIC's prior approval as 
set forth in Sec. 303.62 include any merger transaction in which an 
insured depository institution becomes directly liable for obligations 
which will, after the merger transaction, be treated as deposits under 
section 3(l)(5)(A)(i)-(ii) of the FDI Act (12 U.S.C. 1813(l)(5)(A)(i)-
(ii)), as a result of a merger or consolidation with a foreign 
organization or an assumption of liabilities of a foreign organization.



Sec. 303.186  Exemptions from insurance requirement for a state branch 
of a foreign bank; Sec. 347.206.

    (a) Filing procedures--(1) Where to file. An application by a state 
branch for consent to operate as a noninsured state branch, as permitted 
by Sec. 347.206(b) of this chapter, shall be submitted in writing to 
the appropriate FDIC office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) The kinds of deposit activities in which the state branch 
proposes to engage;
    (ii) The expected source of deposits;
    (iii) The manner in which deposits will be solicited;
    (iv) How the activity will maintain or improve the availability of 
credit to all sectors of the United States economy, including the 
international trade finance sector;
    (v) That the activity will not give the foreign bank an unfair 
competitive advantage over United States banking organizations; and
    (vi) A resolution by the applicant's board of directors, or evidence 
of approval by senior management if a resolution is not required 
pursuant to the applicant's organizational documents, authorizing the 
filing of the application.
    (3) Additional information. The FDIC may request additional 
information to complete processing.
    (4) Processing. The FDIC will provide the applicant with written 
notification of the final action taken.

[[Page 39]]



Sec. 303.187  Approval for an insured state branch of a foreign bank 
to conduct activities not permissible for federal branches; Sec. 347.213.

    (a) Filing procedures--(1) Where to file. An application by an 
insured state branch seeking approval to conduct activities not 
permissible for a federal branch, as required by Sec. 347.213(a) of 
this chapter, shall be submitted in writing to the appropriate FDIC 
office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) A brief description of the activity, including the manner in 
which it will be conducted and an estimate of the expected dollar volume 
associated with the activity;
    (ii) An analysis of the impact of the proposed activity on the 
condition of the United States operations of the foreign bank in general 
and of the branch in particular, including a copy of the feasibility 
study, management plan, financial projections, business plan, or similar 
document concerning the conduct of the activity;
    (iii) A resolution by the applicant's board of directors, or 
evidence of approval by senior management if a resolution is not 
required pursuant to the applicant's organizational documents, 
authorizing the filing of the application;
    (iv) A statement by the applicant of whether it is in compliance 
with Sec. Sec. 347.210 and 347.211 of this chapter, Pledge of assets 
and Asset maintenance, respectively;
    (v) A statement by the applicant that it has complied with all 
requirements of the Board of Governors concerning applications to 
conduct the activity in question and the status of each such 
application, including a copy of the Board of Governors' disposition of 
such application, if applicable; and
    (vi) A statement of why the activity will pose no significant risk 
to the Bank Insurance Fund.
    (3) Board of Governors application. If the application to the Board 
of Governors contains the information required by paragraph (a) of this 
section, the applicant may submit a copy to the FDIC in lieu of a 
separate letter application.
    (4) Additional information. The FDIC may request additional 
information to complete processing.
    (b) Divestiture or cessation--(1) Where to file. Divestiture plans 
necessitated by a change in law or other authority, as required by Sec. 
347.213(e) of this chapter, shall be submitted in writing to the 
appropriate FDIC office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) A detailed description of the manner in which the applicant 
proposes to divest itself of or cease the activity in question; and
    (ii) A projected timetable describing how long the divestiture or 
cessation is expected to take.
    (3) Additional information. The FDIC may request additional 
information to complete processing.



Sec. Sec. 303.188-303.199  [Reserved]



                   Subpart K_Prompt Corrective Action



Sec. 303.200  Scope.

    (a) General. (1) This subpart covers applications filed pursuant to 
section 38 of the FDI Act (12 U.S.C. 1831o), which requires insured 
depository institutions that are not adequately capitalized to receive 
approval prior to engaging in certain activities. Section 38 restricts 
or prohibits certain activities and requires an insured depository 
institution to submit a capital restoration plan when it becomes 
undercapitalized. The restrictions and prohibitions become more severe 
as an institution's capital level declines.
    (2) Definitions of the capital categories referenced in this Prompt 
Corrective Action subpart may be found in subpart B of part 325 of this 
chapter, Sec. 325.103(b) for state nonmember banks and Sec. 325.103(c) 
for insured branches of foreign banks.
    (b) Institutions covered. Restrictions and prohibitions contained in 
subpart B of part 325 of this chapter apply primarily to insured state 
nonmember banks and insured branches of foreign banks, as well as to 
directors and senior executive officers of those institutions. Portions 
of subpart B of part 325 of this chapter also apply to all insured

[[Page 40]]

depository institutions that are deemed to be critically 
undercapitalized.



Sec. 303.201   Filing procedures.

    Applications shall be filed with the appropriate FDIC office. The 
application shall contain the information specified in each respective 
section of this subpart, and shall be in letter form as prescribed in 
Sec. 303.3. Additional information may be requested by the FDIC. Such 
letter shall be signed by the president, senior officer or a duly 
authorized agent of the insured depository institution and be 
accompanied by a certified copy of a resolution adopted by the 
institution's board of directors or trustees authorizing the 
application.



Sec. 303.202  Processing.

    The FDIC will provide the applicant with a subsequent written 
notification of the final action taken as soon as the decision is 
rendered.



Sec. 303.203  Applications for capital distributions.

    (a) Scope. An insured state nonmember bank and any insured branch of 
a foreign bank shall submit an application for 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 insured 
depository institution shall describe the proposal, the shares or 
obligations which are the subject thereof, and the additional shares or 
obligations of the institution which 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 section 18(i) of the 
FDI Act (12 U.S.C. 1828(i)) as implemented by Sec. 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).



Sec. 303.204  Applications for acquisitions, branching, and new 
lines of business.

    (a) Scope. (1) Any insured state nonmember bank and any insured 
branch of a foreign bank which is undercapitalized or significantly 
undercapitalized, and any insured depository institution which is 
critically undercapitalized, shall submit an application to engage in 
acquisitions, branching or new lines of business.
    (2) A new line of business will include any new activity exercised 
which, although it may be permissible, has not been exercised by the 
institution.
    (b) Content of filing. Applications shall describe the proposal, 
state the date the institution's capital restoration plan was accepted 
by its primary federal regulator, describe the institution's status in 
implementing the plan, and explain how the proposed action is consistent 
with and will further the achievement of the plan or otherwise further 
the purposes of section 38 of the FDI Act. If the FDIC is not the 
applicant's primary federal regulator, the application also should state 
whether approval has been requested from the applicant's primary federal 
regulator, the date of such request and the disposition of the request, 
if any. If the proposed action also requires applications pursuant to 
section 18 (c) or (d) of the FDI Act (mergers and branches) (12 U.S.C. 
1828 (c) or (d)), such applications 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).



Sec. 303.205   Applications for bonuses and increased compensation 
for senior executive officers.

    (a) Scope. Any insured state nonmember bank or insured branch of a 
foreign bank that is significantly or critically undercapitalized, or 
any insured state nonmember bank or any insured branch of a foreign bank 
that is undercapitalized and which has failed to submit or implement in 
any material respect an acceptable capital restoration plan, shall 
submit an application to pay a bonus or increase compensation for any 
senior executive officer.

[[Page 41]]

    (b) Content of filing. Applications shall list each proposed bonus 
or increase in compensation, and for the latter shall identify 
compensation for each of the twelve calendar months preceding the 
calendar month in which the institution became undercapitalized. 
Applications also shall state the date the institution's capital 
restoration plan was accepted by the FDIC, and describe any progress 
made in implementing the plan.



Sec. 303.206  Application for payment of principal or interest on 
subordinated debt.

    (a) Scope. Any critically undercapitalized insured depository 
institution shall submit an application to pay principal or interest on 
subordinated debt.
    (b) Content of filing. Applications shall describe the proposed 
payment and provide an explanation of action taken under section 
38(h)(3)(A)(ii) of the FDI Act (action other than receivership or 
conservatorship). The application also shall explain how such payments 
would further the purposes of section 38 of the FDI Act (12 U.S.C. 
1831o). Existing approvals pursuant to requests filed under section 
18(i)(1) of the FDI Act (12 U.S.C. 1828(i)(1)) (capital stock reductions 
or retirements) shall not be deemed to be the permission needed pursuant 
to section 38.



Sec. 303.207   Restricted activities for critically undercapitalized 
institutions.

    (a) Scope. Any critically undercapitalized insured depository 
institution shall submit an application to engage in certain restricted 
activities.
    (b) Content of filing. Applications to engage in any of the 
following activities, as set forth in sections 38(i)(2) (A) through (G) 
of the FDI Act, shall describe the proposed activity and explain how the 
activity would further the purposes of section 38 of the FDI Act (12 
U.S.C. 1831o):
    (1) Enter into any material transaction other than in the usual 
course of business including any action with respect to which the 
institution is required to provide notice to the appropriate federal 
banking agency. Materiality will be determined on a case-by-case basis;
    (2) Extend credit for any highly leveraged transaction (as defined 
in part 325 of this chapter);
    (3) Amend the institution's charter or bylaws, except to the extent 
necessary to carry out any other requirement of any law, regulation, or 
order;
    (4) Make any material change in accounting methods;
    (5) Engage in any covered transaction (as defined in section 23A(b) 
of the Federal Reserve Act (12 U.S.C. 371c(b));
    (6) Pay excessive compensation or bonuses. Part 364 of this chapter 
provides guidance for determining excessive compensation; or
    (7) Pay interest on new or renewed liabilities at a rate that would 
increase the institution's weighted average cost of funds to a level 
significantly exceeding the prevailing rates of interest on insured 
deposits in the institution's normal market area. Section 337.6 of this 
chapter (Brokered deposits) provides guidance for defining the relevant 
terms of this provision; however this provision does not supersede the 
general prohibitions contained in Sec. 337.6.



Sec. Sec. 303.208-303.219  [Reserved]



   Subpart L_Section 19 of the FDI Act (Consent to Service of Persons 
                 Convicted of Certain Criminal Offenses)



Sec. 303.220  Scope.

    This subpart covers applications under section 19 of the FDI Act (12 
U.S.C. 1829). Pursuant to section 19, any person who has been convicted 
of any criminal offense involving dishonesty, breach of trust, or money 
laundering, or has agreed to enter into a pretrial diversion or similar 
program in connection with a prosecution for such offense, may not 
become, or continue as, an institution-affiliated party of an insured 
depository institution; own or control, directly or indirectly, any 
insured depository institution; or otherwise participate, directly or 
indirectly, in the conduct of the affairs of any insured depository 
institution without the prior written consent of the FDIC.

[[Page 42]]



Sec. 303.221   Filing procedures.

    (a) Where to file. An application under section 19 of the FDI Act 
shall be filed with the appropriate FDIC office.
    (b) Contents of filing. Application forms may be obtained from any 
FDIC regional director. The FDIC may require additional information 
beyond that sought in the form, as warranted, in individual cases.



Sec. 303.222   Service at another insured depository institution.

    In the case of a person who has already been approved by the FDIC 
under this subpart or section 19 of the FDI Act in connection with a 
particular insured depository institution, such person may not become an 
institution affiliated party, or own or control directly or indirectly 
another insured depository institution, or participate in the conduct of 
the affairs of another insured depository institution, without the prior 
written consent of the FDIC.



Sec. 303.223   Applicant's right to hearing following denial.

    An applicant may request a hearing following a denial of an 
application in accordance with the provisions of part 308 of this 
chapter.



Sec. Sec. 303.224-303.239  [Reserved]



                         Subpart M_Other Filings



Sec. 303.240  General.

    This subpart sets forth the filing procedures to be followed when 
seeking the FDIC's consent to engage in certain activities or accomplish 
other matters as specified in the individual sections contained herein. 
For those matters covered by this subpart that also have substantive 
FDIC regulations or related statements of policy, references to the 
relevant regulations or statements of policy are contained in the 
specific sections.



Sec. 303.241  Reduce or retire capital stock or capital debt instruments.

    (a) Scope. This section contains the procedures 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 Act (12 U.S.C. 1828(i)(1)).
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following:
    (1) The type and amount of the proposed change to the capital 
structure and the reason for the change;
    (2) A schedule detailing the present and proposed capital structure;
    (3) The time period that the proposal will encompass;
    (4) If the proposal involves a series of transactions affecting Tier 
1 capital components which will be consummated over a period of time 
which shall not exceed twelve months, the application shall certify that 
the insured depository institution will maintain itself as a well-
capitalized institution as defined in part 325 of this chapter, both 
before and after each of the proposed transactions;
    (5) If the proposal involves the repurchase of capital instruments, 
the amount of the repurchase price and the basis for establishing the 
fair market value of the repurchase price;
    (6) A statement that the proposal will be available to all holders 
of a particular class of outstanding capital instruments on an equal 
basis, and if not, the details of any restrictions; and
    (7) The date that the applicant's board of directors approved the 
proposal.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the application.
    (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), 
Sec. 303.203. Applications pursuant to sections 38 and 18(i) may be 
filed concurrently, or as a single application.
    (f) Expedited processing for eligible depository institutions. An 
application filed under this section by an eligible depository 
institution as defined inSec. 303.2(r) will be acknowledged in

[[Page 43]]

writing by the FDIC 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 Sec. 
303.11(c)(2). Absent such removal, an application processed under 
expedited processing will be deemed approved 20 days after the FDIC's 
receipt of a substantially complete application.
    (g) Standard processing. For those applications that are not 
processed pursuant to expedited procedures, the FDIC will provide the 
applicant with written notification of the final action as soon as the 
decision is rendered.



Sec. 303.242  Exercise of trust powers.

    (a) Scope. This section contains the procedures to be followed by a 
state nonmember bank to seek the FDIC's prior consent to exercise trust 
powers. The FDIC's prior consent to exercise trust powers is not 
required in the following circumstances:
    (1) Where a state nonmember bank received authority to exercise 
trust powers from its chartering authority prior to December 1, 1950; or
    (2) Where an insured depository institution continues to conduct 
trust activities pursuant to authority granted by its chartering 
authority subsequent to a charter conversion or withdrawal from 
membership in the Federal Reserve System.
    (b) Where to file. Applicants shall submit to the appropriate FDIC 
office a completed form, ``Application for Consent To Exercise Trust 
Powers''. This form may be obtained from any FDIC regional director.
    (c) Content of filing. The filing shall consist of the completed 
trust application form.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Expedited processing for eligible depository institutions. An 
application filed under this section by an eligible depository 
institution as defined in Sec. 303.2(r) will be acknowledged in writing 
by the FDIC 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 Sec. 303.11(c)(2). 
Absent such removal, an application processed under expedited procedures 
will be deemed approved 30 days after the FDIC's receipt of a 
substantially complete application.
    (f) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.



Sec. 303.243   Brokered deposit waivers.

    (a) Scope. Pursuant to section 29 of the FDI Act (12 U.S.C. 1831f) 
and part 337 of this chapter, an adequately capitalized insured 
depository institution may not accept, renew or roll over any brokered 
deposits unless it has obtained a waiver from the FDIC. A well-
capitalized insured depository institution may accept brokered deposits 
without a waiver, and an undercapitalized insured depository institution 
may not accept, renew or roll over any brokered deposits under any 
circumstances. This section contains the procedures to be followed to 
file with the FDIC for a brokered deposit waiver. The FDIC will provide 
notice to the depository institution's appropriate federal banking 
agency and any state regulatory agency, as appropriate, that a request 
for a waiver has been filed and will consult with such agency or 
agencies, prior to taking action on the institution's request for a 
waiver. Prior notice and/or consultation shall not be required in any 
particular case if the FDIC determines that the circumstances require it 
to take action without giving such notice and opportunity for 
consultation.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following:
    (1) The time period for which the waiver is requested;
    (2) A statement of the policy governing the use of brokered deposits 
in the institution's overall funding and liquidity management program;

[[Page 44]]

    (3) The volume, rates and maturities of the brokered deposits held 
currently and anticipated during the waiver period sought, including any 
internal limits placed on the terms, solicitation and use of brokered 
deposits;
    (4) How brokered deposits are costed and compared to other funding 
alternatives and how they are used in the institution's lending and 
investment activities, including a detailed discussion of asset growth 
plans;
    (5) Procedures and practices used to solicit brokered deposits, 
including an identification of the principal sources of such deposits;
    (6) Management systems overseeing the solicitation, acceptance and 
use of brokered deposits;
    (7) A recent consolidated financial statement with balance sheet and 
income statements; and
    (8) The reasons the institution believes its acceptance, renewal or 
rollover of brokered deposits would pose no undue risk.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the application.
    (e) Expedited processing for eligible depository institutions. An 
application filed under this section by an eligible depository 
institution as defined in this paragraph will be acknowledged in writing 
by the FDIC and will receive expedited processing, unless the applicant 
is notified in writing to the contrary and provided with the basis for 
that decision. For the purpose of this section, an applicant will be 
deemed an eligible depository institution if it satisfies all of the 
criteria contained in Sec. 303.2(r) except that the applicant may be 
adequately capitalized rather than well-capitalized. The FDIC may remove 
an application from expedited processing for any of the reasons set 
forth in Sec. 303.11(c)(2). Absent such removal, an application 
processed under expedited procedures will be deemed approved 21 days 
after the FDIC's receipt of a substantially complete application.
    (f) Standard processing. For those filings which are not processed 
pursuant to the expedited procedures, the FDIC will provide the 
applicant with written notification of the final action as soon as the 
decision is rendered.
    (g) Conditions for approval. A waiver issued pursuant to this 
section shall:
    (1) Be for a fixed period, generally no longer than two years, but 
may be extended upon refiling; and
    (2) May be revoked by the FDIC at any time by written notice to the 
institution.



Sec. 303.244  Golden parachute and severance plan payments.

    (a) Scope. Pursuant to section 18(k) of the FDI Act (12 U.S.C. 
1828(k)) and part 359 of this chapter, an insured depository institution 
or depository institution holding company may not make golden parachute 
payments or excess nondiscriminatory severance plan payments unless the 
depository institution or holding company obtains permission to make 
such payments in accordance with the rules contained in part 359 of this 
chapter. This section contains the procedures to file for the FDIC's 
consent when such consent is necessary under part 359 of this chapter.
    (1) Golden parachute payments. A troubled insured depository 
institution or a troubled depository institution holding company is 
prohibited from making golden parachute payments (as defined in Sec. 
359.1(f)(1) of this chapter) unless it obtains the consent of the 
appropriate federal banking agency and the written concurrence of the 
FDIC. Therefore, in the case of golden parachute payments, the 
procedures in this section apply to all troubled insured depository 
institutions and troubled depository institution holding companies.
    (2) Excess nondiscriminatory severance plan payments. In the case of 
excess nondiscriminatory severance plan payments as provided by Sec. 
359.1(f)(2)(v) of this chapter, the FDIC's consent is necessary for 
state nonmember banks that meet the criteria set forth in Sec. 
359.1(f)(1)(ii) of this chapter. In addition, the FDIC's consent is 
required for all insured depository institutions or depository 
institution holding companies that meet the same criteria and seek to 
make payments in excess of the 12-month amount specified in Sec. 
359.1(f)(2)(v).

[[Page 45]]

    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC regional director.
    (c) Content of filing. The application shall contain the following:
    (1) The reasons why the applicant seeks to make the payment;
    (2) An identification of the institution-affiliated party who will 
receive the payment;
    (3) A copy of any contract or agreement regarding the subject matter 
of the filing;
    (4) The cost of the proposed payment and its impact on the 
institution's capital and earnings;
    (5) The reasons why the consent to the payment should be granted; 
and
    (6) Certification and documentation as to each of the points cited 
in Sec. 359.4(a)(4).
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with a 
subsequent written notification of the final action taken as soon as the 
decision is rendered.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50461, Aug. 21, 2003]



Sec. 303.245  Waiver of liability for commonly controlled depository 
institutions.

    (a) Scope. Section 5(e) of the FDI Act (12 U.S.C. 1815(e)) creates 
liability for commonly controlled insured depository institutions for 
losses incurred or anticipated to be incurred by the FDIC in connection 
with the default of a commonly controlled insured depository institution 
or any assistance provided by the FDIC to any commonly controlled 
insured depository institution in danger of default. In addition to 
certain statutory exceptions and exclusions contained in sections 
5(e)(6), (7) and (8), the FDI Act also permits the FDIC, in its 
discretion, to exempt any insured depository institution from this 
liability if it determines that such exemption is in the best interests 
of the Bank Insurance Fund (BIF) or the Savings Association Insurance 
Fund (SAIF). This section describes procedures to request a conditional 
waiver of liability pursuant to section 5 of the FDI Act (12 U.S.C. 
1815(e)(5)(A)).
    (b) Definition. Conditional waiver of liability means an exemption 
from liability pursuant to section 5(e) of the FDI Act (12 U.S.C. 
1815(e)) subject to terms and conditions.
    (c) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (d) Content of filing. The application shall contain the following 
information:
    (1) The basis for requesting a waiver;
    (2) The existence of any significant events (e.g., change in 
control, capital injection, etc.) that may have an impact upon the 
applicant and/or any potentially liable institution;
    (3) Current, and if applicable, pro forma financial information 
regarding the applicant and potentially liable institution(s); and
    (4) The benefits to the appropriate FDIC insurance fund resulting 
from the waiver and any related events.
    (e) Additional information. The FDIC may request additional 
information at any time during the processing of the filing.
    (f) Processing. The FDIC will provide the applicant with written 
notification of the final action as soon as the decision is rendered.
    (g) Failure to comply with terms of conditional waiver. In the event 
a conditional waiver of liability is issued, failure to comply with the 
terms specified therein may result in the termination of the conditional 
waiver of liability. The FDIC reserves the right to revoke the 
conditional waiver of liability after giving the applicant written 
notice of such revocation and a reasonable opportunity to be heard on 
the matter pursuant to Sec. 303.10.



Sec. 303.246  Insurance fund conversions.

    (a) Scope. This section contains the procedures to be followed by an 
insured depository institution to seek the FDIC's prior approval to 
engage in an insurance fund conversion that involves the transfer of 
deposits between the SAIF and the BIF. Optional conversion transactions, 
commonly referred to as Oakar transactions, pursuant to section 5(d)(3) 
of the FDI Act (12 U.S.C. 1815(d)(3)), which do not involve the

[[Page 46]]

transfer of deposits between the SAIF and the BIF, are governed by the 
procedures set forth in subpart D (Merger Transactions) of this part.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC regional director. The filing shall be signed by 
representatives of each institution participating in the transaction. 
Insurance fund conversions which are proposed in conjunction with a 
merger application filed by a state nonmember bank pursuant to section 
18(c) of the FDI Act (12 U.S.C. 1828(c)) should be included with that 
filing.
    (c) Content of filing. The application shall include the following 
information:
    (1) A description of the transaction;
    (2) The amount of deposits involved in the conversion transaction;
    (3) A pro forma balance sheet and income statement for each 
institution upon consummation of the transaction; and
    (4) Certification by each party to the transaction that applicable 
entrance and exit fees will be paid pursuant to part 312 of this 
chapter.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action as soon as the decision is rendered.



Sec. 303.247  Conversion with diminution of capital.

    (a) Scope. This section contains the procedures to be followed by an 
insured federal depository institution seeking the prior written consent 
of the FDIC pursuant to section 18(i)(2) of the FDI Act (12 U.S.C. 
1828(i)(2)) to convert from an insured federal depository institution to 
an insured state nonmember bank (except a District bank) where the 
capital stock or surplus of the resulting bank will be less than the 
capital stock or surplus, respectively, of the converting institution at 
the time of the shareholders' meeting approving such conversion.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following 
information:
    (1) A description of the proposed transaction;
    (2) A schedule detailing the present and proposed capital structure; 
and
    (3) A copy of any documents submitted to the state chartering 
authority with respect to the charter conversion.
    (d) Additional information. The FDIC may request additional 
information at any time during the processing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action when the decision is rendered.



Sec. 303.248  Continue or resume status as an insured institution 
following termination under section 8 of the FDI Act.

    (a) Scope. This section relates to an application by a depository 
institution whose insured status has been terminated under section 8 of 
the FDI Act (12 U.S.C. 1818) for permission to continue or resume its 
status as an insured depository institution. This section covers 
institutions whose deposit insurance continues in effect for any purpose 
or for any length of time under the terms of an FDIC order terminating 
deposit insurance, but does not cover operating non-insured depository 
institutions which were previously insured by the FDIC, or any non-
insured, non-operating depository institution whose charter has not been 
surrendered or revoked.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The filing shall contain the following 
information:
    (1) A complete statement of the action requested, all relevant 
facts, and the reason for such requested action; and
    (2) A certified copy of the resolution of the depository 
institution's board of directors authorizing submission of the filing.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification

[[Page 47]]

of the final action as soon as the decision is rendered.



Sec. 303.249  Truth in Lending Act--Relief from reimbursement.

    (a) Scope. This section applies to requests for relief from 
reimbursement pursuant to the Truth in Lending Act (15 U.S.C. 1601 et 
seq.) and Regulation Z (12 CFR part 226). Related delegations of 
authority are also set forth.
    (b) Procedures to be followed in filing initial requests for relief. 
Requests for relief from reimbursement shall be filed with the 
appropriate FDIC office or within 60 days after receipt of the 
compliance report of examination containing the request to conduct a 
file search and make restitution to affected customers. The filing shall 
contain a complete and concise statement of the action requested, all 
relevant facts, the reasons and analysis relied upon as the basis for 
such requested action, and all supporting documentation.
    (c) Additional information. The FDIC may request additional 
information at any time during processing of any such requests.
    (d) Processing. The FDIC will acknowledge receipt of the request for 
reconsideration and provide the applicant with written notification of 
its determination within 60 days of its receipt of the request for 
reconsideration.
    (e) Procedures to be followed in filing requests for 
reconsideration. Within 15 days of receipt of written notice that its 
request for relief has been denied, the requestor may petition the 
appropriate FDIC office for reconsideration of such request in 
accordance with the procedures set forth inSec. 303.11(f).



Sec. 303.250  Management official interlocks.

    (a) Scope. This section contains the procedures to be followed by an 
insured state nonmember bank to seek the approval of FDIC to establish 
an interlock pursuant to the Depository Institutions Management 
Interlocks Act (12 U.S.C. 3207), section 13 of the FDI Act (12 U.S.C. 
1823(k)) and part 348 of this chapter (12 CFR part 348).
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following:
    (1) A description of the proposed interlock;
    (2) A statement of reason as to why the interlock will not result in 
a monopoly or a substantial lessening of competition; and
    (3) If the applicant is seeking an exemption set forth in Sec. 
348.5 or 348.6 of this chapter, a description of the particular 
exemption which is being requested and a statement of reasons as to why 
the exemption is applicable.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action when the decision is rendered.



Sec. 303.251  Modification of conditions.

    (a) Scope. This section contains the procedures to be followed by an 
insured depository institution to seek the prior consent of the FDIC to 
modify the requirement of a prior approval of a filing issued by the 
FDIC.
    (b) Where to file. Applicants should submit a letter application to 
the appropriate FDIC regional director.
    (c) Content of filing. The application should contain the following 
information:
    (1) A description of the original approved application;
    (2) A description of the modification requested; and
    (3) The reason for the request.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with a written 
notification of the final action as soon as the decision is rendered.



Sec. 303.252  Extension of time.

    (a) Scope. This section contains the procedures to be followed by an 
insured depository institution to seek the prior consent of the FDIC for 
additional time to fulfill a condition required in an approval of a 
filing issued by the FDIC or to consummate a transaction which

[[Page 48]]

was the subject of an approval by the FDIC.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following 
information:
    (1) A description of the original approved application;
    (2) Identification of the original time limitation;
    (3) The additional time period requested; and
    (4) The reason for the request.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action as soon as the decision is rendered.



Sec. Sec. 303.253-303.259  [Reserved]



PART 304_FORMS, INSTRUCTIONS, AND REPORTS--Table of Contents




Sec.
304.1 Purpose.
304.2 Where to obtain forms and instructions.
304.3 Reports.

    Authority: 5 U.S.C. 552; 12 U.S.C. 1817, 1831, 1867.

    Source: 67 FR 18793, Apr. 17, 2002, unless otherwise noted.



Sec. 304.1  Purpose.

    Part 304 informs the public where it may obtain forms and 
instructions for reports, applications, and other submittals used by the 
FDIC, and also describes certain forms that are not described elsewhere 
in FDIC regulations.



Sec. 304.2  Where to obtain forms and instructions.

    Forms and instructions used in connection with applications, 
reports, and other submittals used by the FDIC can be obtained by 
contacting the FDIC Public Information Center (801 17th Street, NW., 
Washington, DC 20434; telephone: 800-276-6003 or 202-416-6940), except 
as noted below in Sec. 304.3. In addition, many forms and instructions 
can be obtained from FDIC regional offices. A list of FDIC regional 
offices can be obtained from the FDIC Public Information Center or found 
at the FDIC's web site at http://www.fdic.gov, or in the directory of 
FDIC Law, Regulations and Related Acts published by the FDIC.



Sec. 304.3  Reports.

    (a) Consolidated Reports of Condition and Income, Forms FFIEC 031 
and 041. Pursuant to section 7(a) of the Federal Deposit Insurance Act 
(12 U.S.C. 1817(a)), every national bank, state member bank, and insured 
state nonmember bank is required to file Consolidated Reports of 
Condition and Income (also known as the Call Report) in accordance with 
the instructions for these reports. All assets and liabilities, 
including contingent assets and liabilities, must be reported in, or 
otherwise taken into account in the preparation of, the Call Report. The 
FDIC uses Call Report data to calculate deposit insurance assessments 
and monitor the condition, performance, and risk profile of individual 
banks and the banking industry. Reporting banks must also submit 
annually such information on small business and small farm lending as 
the FDIC may need to assess the availability of credit to these sectors 
of the economy. The report forms and instructions can be obtained from 
the Division of Supervision and Consumer Protection (DSC), FDIC, 
Washington, DC 20429.


(Approved by the Office of Management and Budget under control number 
3064-0052)

    (b) Report of Assets and Liabilities of U.S. Branches and Agencies 
of Foreign Banks, Form FFIEC 002. Pursuant to section 7(a) of the 
Federal Deposit Insurance Act (12 U.S.C. 1817(a)), every insured U.S. 
branch of a foreign bank is required to file a Report of Assets and 
Liabilities of U.S. Branches and Agencies of Foreign Banks in accordance 
with the instructions for the report. All assets and liabilities, 
including contingent assets and liabilities, must be reported in, or 
otherwise taken into account in the preparation of the report. The FDIC 
uses the reported data

[[Page 49]]

to calculate deposit insurance assessments and monitor the condition, 
performance, and risk profile of individual insured branches and the 
banking industry. Insured branches must also submit annually such 
information on small business and small farm lending as the FDIC may 
need to assess the availability of credit to these sectors of the 
economy. Because the Board of Governors of the Federal Reserve System 
collects and processes this report on behalf of the FDIC, the report 
forms and instructions can be obtained from Federal Reserve District 
Banks or through the web site of the Federal Financial Institutions 
Examination Council,

http://www.ffiec.gov/.


(Approved by the Office of Management and Budget under control number 
7100-0032)

    (c) Summary of Deposits, Form FDIC 8020/05. Form 8020/05 is a report 
on the amount of deposits for each authorized office of an insured bank 
with branches; unit banks do not report. Reports as of June 30 of each 
year must be submitted no later than the immediately succeeding July 31. 
The report forms and the instructions for completing the reports will be 
furnished to all such banks by, or may be obtained upon request from, 
the Division of Supervision and Consumer Protection (DSC), FDIC, 550 
17th Street, NW., Washington, DC 20429.


(Approved by the Office of Management and Budget under control number 
3064-0061)

    (d) Notification of Performance of Bank Services, Form FDIC 6120/06. 
Pursuant to Section 7 of the Bank Service Company Act (12 U.S.C. 1867), 
as amended, FDIC supervised banks must notify the agency about the 
existence of a service relationship within thirty days after the making 
of the contract or the performance of the service, whichever occurs 
first. Form FDIC 6120/06 may be used to satisfy the notice requirement. 
The form contains identification, location and contact information for 
the bank, the servicer, and a description of the services provided. In 
lieu of the form, notification may be provided by letter. Either the 
form or the letter containing the notice information must be submitted 
to the regional director-- Division of Supervision and Consumer 
Protection (DSC) of the region in which the bank's main office is 
located.

(Approved by the Office of Management and Budget under control number 
3064-0029)

                        PARTS 305-306 [RESERVED]



PART 307_NOTIFICATION OF CHANGES OF INSURED STATUS--Table of Contents




Sec.
307.1 Certification of assumption of deposit liabilities.
307.2 Notice to be given when deposit liabilities are not assumed.

    Authority: Sec. 2, Pub. L. 797, 64 Stat. 879, 880 as amended by 
secs. 202, 204, Pub. L. 89-694, 80 Stat. 1046, 1054, and sec. 6(c)(14), 
Pub. L. 95-369, 92 Stat. 618 (12 U.S.C. 1818(a), 1818(o)); sec. 304, 
Pub. L. 95-630, 92 Stat. 3676 (12 U.S.C. 1818(q); sec. 9, Pub. L. 797, 
64 Stat. 881 (12 U.S.C. 1819).



Sec. 307.1  Certification of assumption of deposit liabilities.

    Whenever the deposit liabilities of an insured bank or insured 
branch of a foreign bank are assumed by another insured bank (whether by 
merger, consolidation, or other statutory assumption, or by contract), 
the assuming or resulting bank shall certify to the FDIC that it has 
agreed to assume the deposit liabilities of the bank whose deposits were 
assumed. The certification shall be made within 30 days after the 
assumption takes effect and shall state the date the assumption took 
effect. This certification shall be considered satisfactory evidence of 
the assumption.

[48 FR 24031, May 31, 1983]



Sec. 307.2  Notice to be given when deposit liabilities are not assumed.

    Any insured bank or insured branch of a foreign bank whose insured 
status is voluntarily terminated, but whose deposit liabilities are not 
assumed shall give notice to each of its depositors of the date of the 
termination of its insured status under the Federal Deposit Insurance 
Act. The notice to depositors shall be given in a form, in a manner and 
at a time approved by

[[Page 50]]

the appropriate FDIC Regional Director. The FDIC may require the bank to 
take other steps that it considers necessary for the protection of 
depositors.

[48 FR 24031, May 31, 1983]



PART 308_RULES OF PRACTICE AND PROCEDURE--Table of Contents




            Subpart A_Uniform Rules of Practice and Procedure

Sec.
308.1 Scope.
308.2 Rules of construction.
308.3 Definitions.
308.4 Authority of Board of Directors.
308.5 Authority of the administrative law judge.
308.6 Appearance and practice in adjudicatory proceedings.
308.7 Good faith certification.
308.8 Conflicts of interest.
308.9 Ex parte communications.
308.10 Filing of papers.
308.11 Service of papers.
308.12 Construction of time limits.
308.13 Change of time limits.
308.14 Witness fees and expenses.
308.15 Opportunity for informal settlement.
308.16 FDIC's right to conduct examination.
308.17 Collateral attacks on adjudicatory proceeding.
308.18 Commencement of proceeding and contents of notice.
308.19 Answer.
308.20 Amended pleadings.
308.21 Failure to appear.
308.22 Consolidation and severance of actions.
308.23 Motions.
308.24 Scope of document discovery.
308.25 Request for document discovery from parties.
308.26 Document subpoenas to nonparties.
308.27 Deposition of witness unavailable for hearing.
308.28 Interlocutory review.
308.29 Summary disposition.
308.30 Partial summary disposition.
308.31 Scheduling and prehearing conferences.
308.32 Prehearing submissions.
308.33 Public hearings.
308.34 Hearing subpoenas.
308.35 Conduct of hearings.
308.36 Evidence.
308.37 Post-hearing filings.
308.38 Recommended decision and filing of record.
308.39 Exceptions to recommended decision.
308.40 Review by Board of Directors.
308.41 Stays pending judicial review.

                  Subpart B_General Rules of Procedure

308.101 Scope of Local Rules.
308.102 Authority of Board of Directors and Executive Secretary.
308.103 Appointment of administrative law judge.
308.104 Filings with the Board of Directors.
308.105 Custodian of the record.
308.106 Written testimony in lieu of oral hearing.
308.107 Document discovery.

  Subpart C_Rules of Practice Before the FDIC and Standards of Conduct

308.108 Sanctions.
308.109 Suspension and disbarment.

  Subpart D_Rules and Procedures Applicable to Proceedings Relating to 
                  Disapproval of Acquisition of Control

308.110 Scope.
308.111 Grounds for disapproval.
308.112 Notice of disapproval.
308.113 Answer to notice of disapproval.
308.114 Burden of proof.

  Subpart E_Rules and Procedures Applicable to Proceedings Relating to 
 Assessment of Civil Penalties for Willful Violations of the Change in 
                            Bank Control Act

308.115 Scope.
308.116 Assessment of penalties.
308.117 Effective date of, and payment under, an order to pay.
308.118 Collection of penalties.

Subpart F_Rules and Procedures Applicable to Proceedings for Involuntary 
                      Termination of Insured Status

308.119 Scope.
308.120 Grounds for termination of insurance.
308.121 Notification to primary regulator.
308.122 Notice of intent to terminate.
308.123 Notice to depositors.
308.124 Involuntary termination of insured status for failure to receive 
          deposits.
308.125 Temporary suspension of deposit insurance.
308.126 Special supervisory associations.

  Subpart G_Rules and Procedures Applicable to Proceedings Relating to 
                         Cease-and-Desist Orders

308.127 Scope.
308.128 Grounds for cease-and-desist orders.
308.129 Notice to state supervisory authority.
308.130 Effective date of order and service on bank.

[[Page 51]]

308.131 Temporary cease-and-desist order.

  Subpart H_Rules and Procedures Applicable to Proceedings Relating to 
  Assessment and Collection of Civil Money Penalties for Violation of 
Cease-and-Desist Orders and of Certain Federal Statutes, Including Call 
                            Report Penalties

308.132 Assessment of penalties.
308.133 Effective date of, and payment under, an order to pay.

    Subpart I_Rules and Procedures for Imposition of Sanctions Upon 
    Municipal Securities Dealers or Persons Associated With Them and 
                  Clearing Agencies or Transfer Agents

308.134 Scope.
308.135 Grounds for imposition of sanctions.
308.136 Notice to and consultation with the Securities and Exchange 
          Commission.
308.137 Effective date of order imposing sanctions.

 Subpart J_Rules and Procedures Relating to Exemption Proceedings Under 
          Section 12(h) of the Securities Exchange Act of 1934

308.138 Scope.
308.139 Application for exemption.
308.140 Newspaper notice.
308.141 Notice of hearing.
308.142 Hearing.
308.143 Decision of Board of Directors.

 Subpart K_Procedures Applicable to Investigations Pursuant to Section 
                            10(c) of the FDIA

308.144 Scope.
308.145 Conduct of investigation.
308.146 Powers of person conducting investigation.
308.147 Investigations confidential.
308.148 Rights of witnesses.
308.149 Service of subpoena.
308.150 Transcripts.

 Subpart L_Procedures and Standards Applicable to a Notice of Change in 
 Senior Executive Officer or Director Pursuant to Section 32 of the FDIA

308.151 Scope.
308.152 Grounds for disapproval of notice.
308.153 Procedures where notice of disapproval issues pursuant to Sec. 
          303.103(c) of this chapter.
308.154 Decision on review.
308.155 Hearing.

Subpart M_Procedures and Standards Applicable to an Application Pursuant 
                        to Section 19 of the FDIA

308.156 Scope.
308.157 Relevant considerations.
308.158 Filing papers and effective date.
308.159 Denial of applications.
308.160 Hearings.

  Subpart N_Rules and Procedures Applicable to Proceedings Relating to 
     Suspension, Removal, and Prohibition Where a Felony Is Charged

308.161 Scope.
308.162 Relevant considerations.
308.163 Notice of suspension, and orders of removal or prohibition.
308.164 Hearings.

   Subpart O_Liability of Commonly Controlled Depository Institutions

308.165 Scope.
308.166 Grounds for assessment of liability.
308.167 Notice of assessment of liability.
308.168 Effective date of and payment under an order to pay.

Subpart P_Rules and Procedures Relating to the Recovery of Attorney Fees 
                           and Other Expenses

308.169 Scope.
308.170 Filing, content, and service of documents.
308.171 Responses to application.
308.172 Eligibility of applicants.
308.173 Prevailing party.
308.174 Standards for awards.
308.175 Measure of awards.
308.176 Application for awards.
308.177 Statement of net worth.
308.178 Statement of fees and expenses.
308.179 Settlement negotiations.
308.180 Further proceedings.
308.181 Recommended decision.
308.182 Board of Directors action.
308.183 Payment of awards.

     Subpart Q_Issuance and Review of Orders Pursuant to the Prompt 
    Corrective Action Provisions of the Federal Deposit Insurance Act

308.200 Scope.
308.201 Directives to take prompt corrective action.
308.202 Procedures for reclassifying a bank based on criteria other than 
          capital.
308.203 Order to dismiss a director or senior executive officer.

[[Page 52]]

308.204 Enforcement of directives.

Subpart R_Submission and Review of Safety and Soundness Compliance Plans 
   and Issuance of Orders To Correct Safety and Soundness Deficiencies

308.300 Scope.
308.301 Purpose.
308.302 Determination and notification of failure to meet a safety and 
          soundness standard and request for compliance plan.
308.303 Filing of safety and soundness compliance plan.
308.304 Issuance of orders to correct deficiencies and to take or 
          refrain from taking other actions.
308.305 Enforcement of orders.

Subpart S_Applications for a Stay or Review of Actions of Bank Clearing 
                                Agencies

308.400 Scope.
308.401 Applications for stays of disciplinary sanctions or summary 
          suspensions by a bank clearing agency.
308.402 Applications for review of final disciplinary sanctions, denials 
          of participation, or prohibitions or limitations of access to 
          services imposed by bank clearing agencies.

          Subpart T_Program Fraud Civil Remedies and Procedures

308.500 Basis, purpose, and scope.
308.501 Definitions.
308.502 Basis for civil penalties and assessments.
308.503 Investigations.
308.504 Review by the reviewing official.
308.505 Prerequisites for issuing a complaint.
308.506 Complaint.
308.507 Service of complaint.
308.508 Answer.
308.509 Default upon failure to file an answer.
308.510 Referral of complaint and answer to the ALJ.
308.511 Notice of hearing.
308.512 Parties to the hearing.
308.513 Separation of functions.
308.514 Ex parte contacts.
308.515 Disqualification of reviewing official or ALJ.
308.516 Rights of parties.
308.517 Authority of the ALJ.
308.518 Prehearing conferences.
308.519 Disclosure of documents.
308.520 Discovery.
308.521 Exchange of witness lists, statements, and exhibits.
308.522 Subpoenas for attendance at hearing.
308.523 Protective order.
308.524 Witness fees.
308.525 Form, filing, and service of papers.
308.526 Computation of time.
308.527 Motions.
308.528 Sanctions.
308.529 The hearing and burden of proof.
308.530 Determining the amount of penalties and assessments.
308.531 Location of hearing.
308.532 Witnesses.
308.533 Evidence.
308.534 The record.
308.535 Post-hearing briefs.
308.536 Initial decision.
308.537 Reconsideration of initial decision.
308.538 Appeal to the Board of Directors.
308.539 Stays ordered by the Department of Justice.
308.540 Stay pending appeal.
308.541 Judicial review.
308.542 Collection of civil penalties and assessments.
308.543 Right to administrative offset.
308.544 Deposit in Treasury of United States.
308.545 Compromise or settlement.
308.546 Limitations.

    Subpart U_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

308.600 Scope.
308.601 Definitions.
308.602 Removal, suspension, or debarment.
308.603 Automatic removal, suspension, and debarment.
308.604 Notice of removal, suspension, or debarment.
308.605 Application for reinstatement.

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4), 1831o, 
1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717; 15 
U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3 and 
78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31 U.S.C. 330, 5321; 42 
U.S.C. 4012a; Sec. 3100(s), Pub. L. 104-134, 110 Stat. 1321-358.

    Source: 56 FR 37975, Aug. 9, 1991, unless otherwise noted.



            Subpart A_Uniform Rules of Practice and Procedure



Sec. 308.1  Scope.

    This subpart prescribes rules of practice and procedure applicable 
to adjudicatory proceedings as to which hearings on the record are 
provided for by the following statutory provisions:

[[Page 53]]

    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (``FDIA'') (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Federal Deposit 
Insurance Corporation (``FDIC''), should issue an order to approve or 
disapprove a person's proposed acquisition of an institution and/or 
institution holding company;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (``Exchange Act'') (15 U.S.C. 78o-5), to impose sanctions 
upon any government securities broker or dealer or upon any person 
associated or seeking to become associated with a government securities 
broker or dealer for which the FDIC is the appropriate regulatory 
agency;
    (e) Assessment of civil money penalties by the FDIC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate regulatory agency for any violation of:
    (1) Sections 22(h) and 23 of the Federal Reserve Act (``FRA''), or 
any regulation issued thereunder, and certain unsafe or unsound 
practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 1828(j);
    (2) Section 106(b) of the Bank Holding Company Act Amendments of 
1970 (``BHCA Amendments of 1970''), and certain unsafe or unsound 
practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 
1972(2)(F);
    (3) Any provision of the Change in Bank Control Act of 1978, as 
amended (the ``CBCA''), or any regulation or order issued thereunder, 
and certain unsafe or unsound practices, or breaches of fiduciary duty, 
pursuant to 12 U.S.C. 1817(j)(16);
    (4) Section 7(a)(1) of the FDIA, pursuant to 12 U.S.C. 1817(a)(1);
    (5) Any provision of the International Lending Supervision Act of 
1983 (``ILSA''), or any rule, regulation or order issued thereunder, 
pursuant to 12 U.S.C. 3909;
    (6) Any provision of the International Banking Act of 1978 
(``IBA''), or any rule, regulation or order issued thereunder, pursuant 
to 12 U.S.C. 3108;
    (7) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (8) Section 1120 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (9) The terms of any final or temporary order issued under section 8 
of the FDIA or of any written agreement executed by the FDIC, the terms 
of any condition imposed in writing by the FDIC in connection with the 
grant of an application or request, certain unsafe or unsound practices 
or breaches of fiduciary duty, or any law or regulation not otherwise 
provided herein pursuant to 12 U.S.C. 1818(i)(2);
    (10) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (11) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g)); and
    (g) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.2  Rules of construction.

    For purposes of this subpart:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate;
    (c) The term counsel includes a non-attorney representative; and
    (d) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.

[[Page 54]]



Sec. 308.3  Definitions.

    For purposes of this subpart, unless explicitly stated to the 
contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Board of Directors or Board means the Board of Directors of the 
Federal Deposit Insurance Corporation or its designee.
    (d) Decisional employee means any member of the Federal Deposit 
Insurance Corporation's or administrative law judge's staff who has not 
engaged in an investigative or prosecutorial role in a proceeding and 
who may assist the Board of Directors or the administrative law judge, 
respectively, in preparing orders, recommended decisions, decisions, and 
other documents under the Uniform Rules.
    (e) Designee of the Board of Directors means officers or officials 
of the Federal Deposit Insurance Corporation acting pursuant to 
authority delegated by the Board of Directors as provided in 12 CFR part 
303 of this chapter or by specific resolution of the Board of Directors.
    (f) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the FDIC in an adjudicatory 
proceeding.
    (g) Executive Secretary means the Executive Secretary of the Federal 
Deposit Insurance Corporation or his or her designee.
    (h) FDIC means the Federal Deposit Insurance Corporation.
    (i) Final order means an order issued by the FDIC with or without 
the consent of the affected institution or the institution-affiliated 
party, that has become final, without regard to the pendency of any 
petition for reconsideration or review.
    (j) Institution includes:
    (1) Any bank as that term is defined in section 3(a) of the FDIA (12 
U.S.C. 1813(a));
    (2) Any bank holding company or any subsidiary (other than a bank) 
of a bank holding company as those terms are defined in the BHCA (12 
U.S.C. 1841 et seq.);
    (3) Any savings association as that term is defined in section 3(b) 
of the FDIA (12 U.S.C. 1813(b)), any savings and loan holding company or 
any subsidiary thereof (other than a bank) as those terms are defined in 
section 10(a) of the HOLA (12 U.S.C. 1467(a));
    (4) Any organization operating under section 25 of the FRA (12 
U.S.C. 601 et seq.);
    (5) Any foreign bank or company to which section 8 of the IBA (12 
U.S.C. 3106), applies or any subsidiary (other than a bank) thereof; and
    (6) Any federal agency as that term is defined in section 1(b) of 
the IBA (12 U.S.C. 3101(5)).
    (k) Institution-affiliated party means any institution-affiliated 
party as that term is defined in section 3(u) of the FDIA (12 U.S.C. 
1813(u)).
    (l) Local Rules means those rules promulgated by the FDIC in those 
subparts of this part other than subpart A.
    (m) Office of Financial Institution Adjudication (``OFIA'') means 
the executive body charged with overseeing the administration of 
administrative enforcement proceedings of the Office of the Comptroller 
of the Currency (``OCC''), the Board of Governors of the Federal Reserve 
Board (``FRB''), the FDIC, the Office of Thrift Supervision (``OTS'') 
and the National Credit Union Administration (``NCUA'').
    (n) Party means the FDIC and any person named as a party in any 
notice.
    (o) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (j) of this section.
    (p) Respondent means any party other than the FDIC.
    (q) Uniform Rules means those rules in subpart A of this part that 
pertain to the types of formal administrative enforcement actions set 
forth at Sec. 308.01 and as specified in subparts B through P of this 
part.
    (r) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.

[[Page 55]]



Sec. 308.4  Authority of Board of Directors.

    The Board of Directors may, at any time during the pendency of a 
proceeding, perform, direct the performance of, or waive performance of, 
any act which could be done or ordered by the administrative law judge.



Sec. 308.5  Authority of the administrative law judge.

    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of 
the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;
    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec. 308.31;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the Board 
of Directors shall have the power to grant any motion to dismiss the 
proceeding or to decide any other motion that results in a final 
determination of the merits of the proceeding;
    (8) To prepare and present to the Board of Directors a recommended 
decision as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.



Sec. 308.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the FDIC or an administrative law judge--(1) 
By attorneys. Any member in good standing of the bar of the highest 
court of any state, commonwealth, possession, territory of the United 
States, or the District of Columbia may represent others before the FDIC 
if such attorney is not currently suspended or debarred from practice 
before the FDIC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer; director, 
or employee is not currently suspended or debarred from practice before 
the FDIC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the FDIC, shall file a notice of appearance with 
OFIA at or before the time that individual submits papers or otherwise 
appears on behalf of a party in the adjudicatory proceeding. The notice 
of appearance must include a written declaration that the individual is 
currently qualified as provided in paragraph (a)(1) or (a)(2) of this 
section and is authorized to represent the particular party. By filing a 
notice of appearance on behalf of a party in an adjudicatory proceeding, 
the counsel agrees and represents that he or she is authorized to accept 
service on behalf of the represented party and that, in the event of 
withdrawal from representation, he or she will, if required by the 
administrative law judge, continue to accept service until new counsel 
has filed a notice of appearance or until the represented party 
indicates that he or she will proceed on a pro se basis.

[[Page 56]]

    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel shall sign his or her individual name and state his or her 
address and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: The counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.
    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.



Sec. 308.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec. 308.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the FDIC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Board of Directors, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.

[[Page 57]]

    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the FDIC until the date that the Board of Directors issues 
its final decision pursuant to Sec. 308.40(c):
    (1) No interested person outside the FDIC shall make or knowingly 
cause to be made an ex parte communication to any member of the Board of 
Directors, the administrative law judge, or a decisional employee; and
    (2) No member of the Board of Directors, no administrative law 
judge, or decisional employee shall make or knowingly cause to be made 
to any interested person outside the FDIC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, any 
member of the Board of Directors or other person identified in paragraph 
(a) of this section, that person shall cause all such written 
communications (or, if the communication is oral, a memorandum stating 
the substance of the communication) to be placed on the record of the 
proceeding and served on all parties. All other parties to the 
proceeding shall have an opportunity, within ten days of receipt of 
service of the ex parte communication, to file responses thereto and to 
recommend any sanctions that they believe to be appropriate under the 
circumstances. The administrative law judge or the Board of Directors 
shall then determine whether any action should be taken concerning the 
ex parte communication in accordance with paragraph (d) of this section.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Board of Directors or the 
administrative law judge including, but not limited to, exclusion from 
the proceedings and an adverse ruling on the issue which is the subject 
of the prohibited communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the FDIC in a case may 
not, in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec. 308.40 except as witness or counsel in public 
proceedings.

[56 FR 37975, Aug. 9, 1991, as amended at 60 FR 24762, May 10, 1995]



Sec. 308.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec. 
308.25 and 308.26, shall be filed with the OFIA, except as otherwise 
provided.
    (b) Manner of filing. Unless otherwise specified by the Board of 
Directors or the administrative law judge, filing may be accomplished 
by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the Board of Directors or the 
administrative law judge. All papers filed by electronic media shall 
also concurrently be filed in accordance with paragraph (c) of this 
section.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\x11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 308.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the FDIC and of the

[[Page 58]]

filing party, the title and docket number of the proceeding, and the 
subject of the particular paper.
    (4) Number of copies. Unless otherwise specified by the Board of 
Directors, or the administrative law judge, an original and one copy of 
all documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.



Sec. 308.11  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec. 308.10(c).
    (c) By the Board of Directors. (1) All papers required to be served 
by the Board of Directors or the administrative law judge upon a party 
who has appeared in the proceeding in accordance with Sec. 308.6, shall 
be served by any means specified in paragraph (b) of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec. 308.6, the Board of Directors or the administrative law judge 
shall make service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the party's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) By delivery to an agent which, in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) In such other manner as is reasonably calculated to give actual 
notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed

[[Page 59]]

is included unless it is a Saturday, Sunday, or Federal holiday. When 
the last day is a Saturday, Sunday, or Federal holiday, the period runs 
until the end of the next day that is not a Saturday, Sunday, or Federal 
holiday. Intermediate Saturdays, Sundays, and Federal holidays are 
included in the computation of time. However, when the time period 
within which an act is to be performed is ten days or less, not 
including any additional time allowed for in paragraph (c) of this 
section, intermediate Saturdays, Sundays, and Federal holidays are not 
included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b) (1) of this section may be modified by the Board of Directors or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Board of Directors or the administrative law judge in the case of 
filing, or by agreement among the parties in the case of service.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.13  Change of time limits.

    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or by any notice or order issued in the proceedings. After 
the referral of the case to the Board of Directors pursuant to Sec. 
308.38, the Board of Directors may grant extensions of the time limits 
for good cause shown. Extensions may be granted at the motion of a party 
or of the Board of Directors after notice and opportunity to respond is 
afforded all non-moving parties, or on the administrative law judge's 
own motion.



Sec. 308.14  Witness fees and expenses.

    Witnesses subpoenaed for testimony or depositions shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the FDIC is the 
party requesting the subpoena. The FDIC shall not be required to pay any 
fees to, or expenses of, any witness not subpoenaed by the FDIC.



Sec. 308.15  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any FDIC representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.

[[Page 60]]



Sec. 308.16  FDIC's right to conduct examination.

    Nothing contained in this subpart limits in any manner the right of 
the FDIC to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the FDIC to 
conduct or continue any form of investigation authorized by law.



Sec. 308.17  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.



Sec. 308.18  Commencement of proceeding and contents of notice.

    (a) Commencement of proceeding. (1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the FDIC.
    (ii) The notice must be served by the Executive Secretary upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law.
    (iii) The notice must be filed with the OFIA.
    (2) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
FDIC.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the FDIC's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the FDIC 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) That the answer and/or request for a hearing shall be filed with 
OFIA.



Sec. 308.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding. A respondent is not required to respond to 
the portion of a notice that constitutes the prayer for relief or 
proposed order. The answer must set forth affirmative defenses, if any, 
asserted by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the Board of 
Directors a recommended decision containing the findings and the relief 
sought in the notice. Any final order issued by the Board of Directors 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.

[[Page 61]]

    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.



Sec. 308.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Board of Directors or 
administrative law judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.

[61 FR 20348, May 6, 1996]



Sec. 308.21  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the Board of Directors a recommended decision containing the findings 
and the relief sought in the notice.



Sec. 308.22  Consolidation and severance of actions.

    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the matter as 
to any respondent only if the administrative law judge finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.



Sec. 308.23  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, except that following the filing

[[Page 62]]

of the recommended decision, motions must be filed with the Executive 
Secretary for disposition by the Board of Directors.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Executive Secretary, any party may file a written response to a motion. 
The administrative law judge shall not rule on any oral or written 
motion before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec. 308.29 and 308.30.



Sec. 308.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec. 308.25.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative-process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing. No exceptions to this 
time limit shall be permitted, unless the administrative law judge finds 
on the record that good cause exists for waiving the requirements of 
this paragraph.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.25  Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place,

[[Page 63]]

and manner for production and performing any related acts. In lieu of 
inspecting the documents, the requesting party may specify that all or 
some of the responsive documents be copied and the copies delivered to 
the requesting party. If copying of fewer than 250 pages is requested, 
the party to whom the request is addressed shall bear the cost of 
copying and shipping charges. If a party requests 250 pages or more of 
copying, the requesting party shall pay for the copying and shipping 
charges. Copying charges are the current per-page copying rate imposed 
by 12 CFR part 310 implementing the Freedom of Information Act (5 U.S.C. 
552). The party to whom the request is addressed may require payment in 
advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.
    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec. 308.23 
to strike or otherwise limit the request. If an objection is made to 
only a portion of an item or category in a request, the portion objected 
to shall be specified. Any objections not made in accordance with this 
paragraph and Sec. 308.23 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney-work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec. 308.23 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may deny or 
modify the request, and may issue appropriate protective orders, upon 
such conditions as justice may require. The pendency of a motion to 
strike or limit discovery or to compel production is not a basis for 
staying or continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a

[[Page 64]]

subpoena compelling production of documents by a party, the subpoenaing 
party may, in the event of noncompliance and to the extent authorized by 
applicable law, apply to any appropriate United States district court 
for an order requiring compliance with the subpoena. A party's right to 
seek court enforcement of a subpoena shall not in any manner limit the 
sanctions that may be imposed by the administrative law judge against a 
party who fails to produce subpoenaed documents.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.26  Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.
    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec. 308.24(d). The party obtaining the 
document subpoena is responsible for serving it on the subpoenaed person 
and for serving copies on all parties. Document subpoenas may be served 
in any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec. 308.25(d), and 
during the same time limits during which such an objection could be 
filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with so much of the document subpoena as the administrative 
law judge has not quashed or modified. A party's right to seek court 
enforcement of a document subpoena shall in no way limit the sanctions 
that may be imposed by the administrative law judge on a party who 
induces a failure to comply with subpoenas issued under this section.



Sec. 308.27  Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section, to the administrative law judge for 
the issuance of a subpoena, including a subpoena duces tecum, requiring 
the attendance of the witness at a deposition. The administrative law 
judge may issue a deposition subpoena under this section upon showing 
that:

[[Page 65]]

    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.
    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to answer or submit any evidence the witness has refused to 
submit during the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena under paragraph (b) or 
(c)(3) of this section, the subpoenaing party or other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
portions of the subpoena that the administrative law judge has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
administrative law judge on a party who fails to comply with, or 
procures a failure to

[[Page 66]]

comply with, a subpoena issued under this section.



Sec. 308.28  Interlocutory review.

    (a) General rule. The Board of Directors may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Board of Directors only in accordance with the procedures set forth in 
this section and Sec. 308.23.
    (b) Scope of review. The Board of Directors may exercise 
interlocutory review of a ruling of, the administrative law judge if the 
Board of Directors finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec. 308.23. Any party may 
file a response to a request for interlocutory review in accordance with 
Sec. 308.23(d). Upon the expiration of the time for filing all 
responses, the administrative law judge shall refer the matter to the 
Board of Directors for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Board of Directors 
under this section suspends or stays the proceeding unless otherwise 
ordered by the administrative law judge or the Board of Directors.



Sec. 308.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the Board of Directors issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes that 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the administrative law judge, may 
file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits and any other evidentiary materials that the moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the contention that summary 
disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that

[[Page 67]]

summary disposition is warranted, the administrative law judge shall 
submit a recommended decision to that effect to the Board of Directors. 
If the administrative law judge finds that no party is entitled to 
summary disposition, he or she shall make a ruling denying the motion.



Sec. 308.30  Partial summary disposition.

    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.



Sec. 308.31  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone 
conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at his or her 
expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.



Sec. 308.32  Prehearing submissions.

    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec. 308.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the FDIC, in its discretion, determines that holding an open hearing 
would be contrary to

[[Page 68]]

the public interest. Within 20 days of service of the notice or, in the 
case of change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)), within 20 days from service of the hearing 
order, any respondent may file with the Executive Secretary a request 
for a private hearing, and any party may file a reply to such a request. 
A party must serve on the administrative law judge a copy of any request 
or reply the party files with the Executive Secretary. The form of, and 
procedure for, these requests and replies are governed by Sec. 308.23. 
A party's failure to file a request or a reply constitutes a waiver of 
any objections regarding whether the hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.34  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other evidence 
sought, the administrative law judge may issue a subpoena or a subpoena 
duces tecum requiring the attendance of a witness at the hearing or the 
production of documentary or physical evidence at the hearing. The 
application for a hearing subpoena must also contain a proposed subpoena 
specifying the attendance of a witness or the production of evidence 
from any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law at any designated 
place where the hearing is being conducted. The party making the 
application shall serve a copy of the application and the proposed 
subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek enforcement of the subpoena pursuant to Sec. 
308.26(c).

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.35  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as

[[Page 69]]

may be required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree the administrative 
law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.36  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or Board of Directors shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by an appropriate Federal financial 
institution regulatory agency or state regulatory agency, is admissible 
either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a

[[Page 70]]

witness is sustained, the examining counsel may make a specific proffer 
on the record of what he or she expected to prove by the expected 
testimony of the witness, either by representation of counsel or by 
direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Board of Directors.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing, and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec. 308.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party, that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under Sec. 
308.37(b), the administrative law judge shall file with and certify to 
the Executive Secretary, for decision, the record of the proceeding. The 
record must include the administrative law judge's recommended decision, 
recommended findings of fact, recommended conclusions of law, and 
proposed order; all prehearing and hearing transcripts, exhibits, and 
rulings; and the motions, briefs, memoranda, and other supporting papers 
filed in connection with the hearing. The administrative law judge shall

[[Page 71]]

serve upon each party the recommended decision, findings, conclusions, 
and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Executive Secretary for final 
determination the record of the proceeding, the administrative law judge 
shall furnish to the Executive Secretary a certified index of the entire 
record of the proceeding. The certified index shall include, at a 
minimum, an entry for each paper, document or motion filed with the 
administrative law judge in the proceeding, the date of the filing, and 
the identity of the filer. The certified index shall also include an 
exhibit index containing, at a minimum, an entry consisting of exhibit 
number and title or description for: Each exhibit introduced and 
admitted into evidence at the hearing; each exhibit introduced but not 
admitted into evidence at the hearing; each exhibit introduced and 
admitted into evidence after the completion of the hearing; and each 
exhibit introduced but not admitted into evidence after the completion 
of the hearing.

[61 FR 20350, May 6, 1996]



Sec. 308.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec. 308.38, a party may file with the Executive Secretary written 
exceptions to the administrative law judge's recommended decision, 
findings, conclusions or proposed order, to the admission or exclusion 
of evidence, or to the failure of the administrative law judge to make a 
ruling proposed by a party. A supporting brief may be filed at the time 
the exceptions are filed, either as part of the same document or in a 
separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Board of Directors if the 
party taking exception had an opportunity to raise the same objection, 
issue, or argument before the administrative law judge and failed to do 
so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.



Sec. 308.40  Review by Board of Directors.

    (a) Notice of submission to Board of Directors. When the Executive 
Secretary determines that the record in the proceeding is complete, the 
Executive Secretary shall serve notice upon the parties that the 
proceeding has been submitted to the Board of Directors for final 
decision.
    (b) Oral argument before the Board of Directors. Upon the initiative 
of the Board of Directors or on the written request of any party filed 
with the Executive Secretary within the time for filing exceptions, the 
Board of Directors may order and hear oral argument on the recommended 
findings, conclusions, decision, and order of the administrative law 
judge. A written request by a party must show good cause for oral 
argument and state reasons why arguments cannot be presented adequately 
in writing. A denial of a request for oral argument may be set forth in 
the Board of Directors' final decision. Oral argument before the Board 
of Directors must be on the record.
    (c) Final decision. (1) Decisional employees may advise and assist 
the Board of Directors in the consideration and disposition of the case. 
The final decision of the Board of Directors will be based upon review 
of the entire record of the proceeding, except that the Board of 
Directors may limit the issues to be reviewed to those findings

[[Page 72]]

and conclusions to which opposing arguments or exceptions have been 
filed by the parties.
    (2) The Board of Directors shall render a final decision within 90 
days after notification of the parties that the case has been submitted 
for final decision, or 90 days after oral argument, whichever is later, 
unless the Board of Directors orders that the action or any aspect 
thereof be remanded to the administrative law judge for further 
proceedings. Copies of the final decision and order of the Board of 
Directors shall be served upon each party to the proceeding, upon other 
persons required by statute, and, if directed by the Board of Directors 
or required by statute, upon any appropriate state or Federal 
supervisory authority.



Sec. 308.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the FDIC may not, unless specifically ordered by 
the Board of Directors or a reviewing court, operate as a stay of any 
order issued by the FDIC. The Board of Directors may, in its discretion, 
and on such terms as it finds just, stay the effectiveness of all or any 
part of its order pending a final decision on a petition for review of 
that order.



                  Subpart B_General Rules of Procedure



Sec. 308.101  Scope of Local Rules.

    (a) Subparts B and C of the Local Rules prescribe rules of practice 
and procedure to be followed in the administrative enforcement 
proceedings initiated by the FDIC as set forth in Sec. 308.01 of the 
Uniform Rules.
    (b) Except as otherwise specifically provided, the Uniform Rules and 
subpart B of the Local Rules shall not apply to subparts D through T of 
the Local Rules.
    (c) Subpart C of the Local Rules shall apply to any administrative 
proceeding initiated by the FDIC.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 66 
FR 9189, Feb. 7, 2001]



Sec. 308.102  Authority of Board of Directors and Executive Secretary.

    (a) The Board of Directors. (1) The Board of Directors may, at any 
time during the pendency of a proceeding, perform, direct the 
performance of, or waive performance of, any act which could be done or 
ordered by the Executive Secretary.
    (2) Nothing contained in this part 308 shall be construed to limit 
the power of the Board of Directors granted by applicable statutes or 
regulations.
    (b) The Executive Secretary. (1) When no administrative law judge 
has jurisdiction over a proceeding, the Executive Secretary may act in 
place of, and with the same authority as, an administrative law judge, 
except that the Executive Secretary may not hear a case on the merits or 
make a recommended decision on the merits to the Board of Directors.
    (2) Pursuant to authority delegated by the Board of Directors, the 
Executive Secretary and Assistant Executive Secretary, upon the advice 
and recommendation of the Deputy General Counsel for Litigation or, in 
his absence, the Assistant General Counsel, Trial Litigation Section, 
may issue rulings in proceedings under sections 7(j), 8, 18(j), 19, 32 
and 38 of the FDIA (12 USC 1817(j), 1818, 1828(j), 1829, 1831i and 1831o 
concerning:
    (i) Denials of requests for private hearing;
    (ii) Interlocutory appeals;
    (iii) Stays pending judicial review;
    (iv) Reopenings of the record and/or remands of the record to the 
ALJ;
    (v) Supplementation of the evidence in the record;
    (vi) All remands from the courts of appeals not involving 
substantive issues;
    (vii) Extensions of stays of orders terminating deposit insurance; 
and
    (viii) All matters, including final decisions, in proceedings under 
section 8(g) of the FDIA (12 U.S.C. 1818(g)).

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 67 
FR 71071, Nov. 29, 2002]



Sec. 308.103  Appointment of administrative law judge.

    (a) Appointment. Unless otherwise directed by the Board of Directors 
or as

[[Page 73]]

otherwise provided in the Local Rules, a hearing within the scope of 
this part 308 shall be held before an administrative law judge of the 
Office of Financial Institution Adjudication (``OFIA'').
    (b) Procedures. (1) The Executive Secretary shall promptly after 
issuance of the notice refer the matter to the OFIA which shall secure 
the appointment of an administrative law judge to hear the proceeding.
    (2) OFIA shall advise the parties, in writing, that an 
administrative law judge has been appointed.



Sec. 308.104  Filings with the Board of Directors.

    (a) General rule. All materials required to be filed with or 
referred to the Board of Directors in any proceedings under this part 
308 shall be filed with the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
    (b) Scope. Filings to be made with the Executive Secretary include 
pleadings and motions filed during the proceeding; the record filed by 
the administrative law judge after the issuance of a recommended 
decision; the recommended decision filed by the administrative law judge 
following a motion for summary disposition; referrals by the 
administrative law judge of motions for interlocutory review; motions 
and responses to motions filed by the parties after the record has been 
certified to the Board of Directors; exceptions and requests for oral 
argument; and any other papers required to be filed with the Board of 
Directors under this part 308.



Sec. 308.105  Custodian of the record.

    The Executive Secretary is the official custodian of the record when 
no administrative law judge has jurisdiction over the proceeding. As the 
official custodian, the Executive Secretary shall maintain the official 
record of all papers filed in each proceeding.



Sec. 308.106  Written testimony in lieu of oral hearing.

    (a) General rule. (1) At any time more than fifteen days before the 
hearing is to commence, on the motion of any party or on his or her own 
motion, the administrative law judge may order that the parties present 
part or all of their case-in-chief and, if ordered, their rebuttal, in 
the form of exhibits and written statements sworn to by the witness 
offering such statements as evidence, provided that if any party 
objects, the administrative law judge shall not require such a format if 
that format would violate the objecting party's right under the 
Administrative Procedure Act, or other applicable law, or would 
otherwise unfairly prejudice that party.
    (2) Any such order shall provide that each party shall, upon 
request, have the same right of oral cross-examination (or redirect 
examination) as would exist had the witness testified orally rather than 
through a written statement. Such order shall also provide that any 
party has a right to call any hostile witness or adverse party to 
testify orally.
    (b) Scheduling of submission of written testimony. (1) If written 
direct testimony and exhibits are ordered under paragraph (a) of this 
section, the administrative law judge shall require that it be filed 
within the time period for commencement of the hearing, and the hearing 
shall be deemed to have commenced on the day such testimony is due.
    (2) Absent good cause shown, written rebuttal, if any, shall be 
submitted and the oral portion of the hearing begun within 30 days of 
the date set for filing written direct testimony.
    (3) The administrative law judge shall direct, unless good cause 
requires otherwise, that--
    (i) All parties shall simultaneously file any exhibits and written 
direct testimony required under paragraph (b)(1) of this section; and
    (ii) All parties shall simultaneously file any exhibits and written 
rebuttal required under paragraph (b)(2) of this section.
    (c) Failure to comply with order to file written testimony. (1) The 
failure of any party to comply with an order to file written testimony 
or exhibits at the time and in the manner required under this section 
shall be deemed a waiver of that party's right to present any evidence, 
except testimony of a previously

[[Page 74]]

identified adverse party or hostile witness. Failure to file written 
testimony or exhibits is, however, not a waiver of that party's right of 
cross-examination or a waiver of the right to present rebuttal evidence 
that was not required to be submitted in written form.
    (2) Late filings of papers under this section may be allowed and 
accepted only upon good cause shown.



Sec. 308.107  Document discovery.

    (a) Parties to proceedings set forth at Sec. 308.01 of the Uniform 
Rules and as provided in the Local Rules may obtain discovery only 
through the production of documents. No other form of discovery shall be 
allowed.
    (b) Any questioning at a deposition of a person producing documents 
pursuant to a document subpoena shall be strictly limited to the 
identification of documents produced by that person and a reasonable 
examination to determine whether the subpoenaed person made an adequate 
search for, and has produced, all subpoenaed documents.



  Subpart C_Rules of Practice Before the FDIC and Standards of Conduct



Sec. 308.108  Sanctions.

    (a) General rule. Appropriate sanctions may be imposed when any 
counsel or party has acted, or failed to act, in a manner required by 
applicable statute, regulations, or order, and that act or failure to 
act:
    (1) Constitutes contemptuous conduct;
    (2) Has in a material way injured or prejudiced some other party in 
terms of substantive injury, incurring additional expenses including 
attorney's fees, prejudicial delay, or otherwise;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Has unduly delayed the proceeding.
    (b) Sanctions. Sanctions which may be imposed include any one or 
more of the following:
    (1) Issuing an order against the party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just; and
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Limits on dismissal as a sanction. No recommendation of 
dismissal shall be made by the administrative law judge or granted by 
the Board of Directors based on the failure to hold a hearing within the 
time period called for in this part 308, or on the failure of an 
administrative law judge to render a recommended decision within the 
time period called for in this part 308, absent a finding:
    (1) That the delay resulted solely or principally from the conduct 
of the FDIC enforcement counsel;
    (2) That the conduct of the FDIC enforcement counsel is unexcused;
    (3) That the moving respondent took all reasonable steps to oppose 
and prevent the subject delay;
    (4) That the moving respondent has been materially prejudiced or 
injured; and
    (5) That no lesser or different sanction is adequate.
    (d) Procedure for imposition of sanctions. (1) The administrative 
law judge, upon the request of any party, or on his or her own motion, 
may impose sanctions in accordance with this section, provided that the 
administrative law judge may only recommend to the Board of Directors 
the sanction of entering a final order determining the case on the 
merits.
    (2) No sanction, other than refusing to accept late papers, 
authorized by this section shall be imposed without prior notice to all 
parties and an opportunity for any counsel or party against whom 
sanctions would be imposed to be heard. Such opportunity to be heard may 
be on such notice, and the response may be in such form, as the 
administrative law judge directs. The opportunity to be heard may be 
limited

[[Page 75]]

to an opportunity to respond orally immediately after the act or 
inaction covered by this section is noted by the administrative law 
judge.
    (3) Requests for the imposition of sanctions by any party, and the 
imposition of sanctions, shall be treated for interlocutory review 
purposes in the same manner as any other ruling by the administrative 
law judge.
    (4) Section not exclusive. Nothing in this section shall be read as 
precluding the administrative law judge or the Board of Directors from 
taking any other action, or imposing any restriction or sanction, 
authorized by applicable statute or regulation.



Sec. 308.109  Suspension and disbarment.

    (a) Discretionary suspension and disbarment. (1) The Board of 
Directors may suspend or revoke the privilege of any counsel to appear 
or practice before the FDIC if, after notice of and opportunity for 
hearing in the matter, that counsel is found by the Board of Directors:
    (i) Not to possess the requisite qualifications to represent others;
    (ii) To be seriously lacking in character or integrity or to have 
engaged in material unethical or improper professional conduct;
    (iii) To have engaged in, or aided and abetted, a material and 
knowing violation of the FDIA; or
    (iv) To have engaged in contemptuous conduct before the FDIC. 
Suspension or revocation on the grounds set forth in paragraphs (a)(1) 
(ii), (iii), and (iv) of this section shall only be ordered upon a 
further finding that the counsel's conduct or character was sufficiently 
egregious as to justify suspension or revocation.
    (2) Unless otherwise ordered by the Board of Directors, an 
application for reinstatement by a person suspended or disbarred under 
paragraph (a)(1) of this section may be made in writing at any time more 
than three years after the effective date of the suspension or 
disbarment and, thereafter, at any time more than one year after the 
person's most recent application for reinstatement. The suspension or 
disbarment shall continue until the applicant has been reinstated by the 
Board of Directors for good cause shown or until, in the case of a 
suspension, the suspension period has expired. An applicant for 
reinstatement under this provision may, in the Board of Directors' sole 
discretion, be afforded a hearing.
    (b) Mandatory suspension and disbarment. (1) Any counsel who has 
been and remains suspended or disbarred by a court of the United States 
or of any state, territory, district, commonwealth, or possession; or 
any person who has been and remains suspended or barred from practice 
before the OCC, Board of Governors, the OTS, the NCUA, the Securities 
and Exchange Commission, or the Commodity Futures Trading Commission; or 
any person who has been convicted of a felony, or of a misdemeanor 
involving moral turpitude, within the last ten years, shall be suspended 
automatically from appearing or practicing before the FDIC. A 
disbarment, suspension, or conviction within the meaning of this 
paragraph (b) shall be deemed to have occurred when the disbarring, 
suspending, or convicting agency or tribunal enters its judgment or 
order, regardless of whether an appeal is pending or could be taken, and 
includes a judgment or an order on a plea of nolo contendere or on 
consent, regardless of whether a violation is admitted in the consent.
    (2) Any person appearing or practicing before the FDIC who is the 
subject of an order, judgment, decree, or finding of the types set forth 
in paragraph (b)(1) of this section shall promptly file with the 
Executive Secretary a copy thereof, together with any related opinion or 
statement of the agency or tribunal involved. Failure to file any such 
paper shall not impair the operation of any other provision of this 
section.
    (3) A suspension or disbarment under paragraph (b)(1) of this 
section from practice before the FDIC shall continue until the applicant 
has been reinstated by the Board of Directors for good cause shown, 
provided that any person suspended or disbarred under paragraph (b)(1) 
of this section shall be automatically reinstated by the Executive 
Secretary, upon appropriate application, if all the grounds for 
suspension or disbarment under paragraph (b)(1) of this section are 
subsequently removed

[[Page 76]]

by a reversal of the conviction (or the passage of time since the 
conviction) or termination of the underlying suspension or disbarment. 
An application for reinstatement on any other grounds by any person 
suspended or disbarred under paragraph (b)(1) of this section may be 
filed no sooner than one year after the suspension or disbarment, and 
thereafter, a new request for reinstatement may be made no sooner than 
one year after the counsel's most recent reinstatement application. The 
application must comply with the requirements of Sec. 303.3 of this 
chapter. An applicant for reinstatement under this provision may, in the 
Board of Directors' sole discretion, be afforded a hearing.
    (c) Hearings under this section. Hearings conducted under this 
section shall be conducted in substantially the same manner as other 
hearings under the Uniform Rules, provided that in proceedings to 
terminate an existing FDIC suspension or disbarment order, the person 
seeking the termination of the order shall bear the burden of going 
forward with an application and with the burden of proving the grounds 
supporting the application, and that the Board of Directors may, in its 
sole discretion, direct that any proceeding to terminate an existing 
suspension or disbarment by the FDIC be limited to written submissions.
    (d) Summary suspension for contemptuous conduct. A finding by the 
administrative law judge of contemptuous conduct during the course of 
any proceeding shall be grounds for summary suspension by the 
administrative law judge of a counsel or other representative from any 
further participation in that proceeding for the duration of that 
proceeding.
    (e) Practice defined. Unless the Board of Directors orders 
otherwise, for the purposes of this section, practicing before the FDIC 
includes, but is not limited to, transacting any business with the FDIC 
as counsel or agent for any other person and the preparation of any 
statement, opinion, or other paper by a counsel, which statement, 
opinion, or paper is filed with the FDIC in any registration statement, 
notification, application, report, or other document, with the consent 
of such counsel.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 68 
FR 48270, Aug. 13, 2003]



  Subpart D_Rules and Procedures Applicable to Proceedings Relating to 
                  Disapproval of Acquisition of Control



Sec. 308.110  Scope.

    Except as specifically indicated in this subpart, the rules and 
procedures in this subpart, subpart B of the Local Rules, and the 
Uniform Rules shall apply to proceedings in connection with the 
disapproval by the Board of Directors or its designee of a proposed 
acquisition of control of an insured nonmember bank.



Sec. 308.111  Grounds for disapproval.

    The following are grounds for disapproval of a proposed acquisition 
of control of an insured nonmember bank:
    (a) The proposed acquisition of control would result in a monopoly 
or would be in furtherance of any combination or conspiracy to 
monopolize or attempt to monopolize the banking business in any part of 
the United States;
    (b) The effect of the proposed acquisition of control in any section 
of the United States may be to substantially lessen competition or to 
tend to create a monopoly or would in any other manner be in restraint 
of trade, and the anticompetitive effects of the proposed acquisition of 
control are not clearly outweighed in the public interest by the 
probable effect of the transaction in meeting the convenience and needs 
of the community to be served;
    (c) The financial condition of any acquiring person might jeopardize 
the financial stability of the bank or prejudice the interests of the 
depositors of the bank;
    (d) The competence, experience, or integrity of any acquiring person 
or of any of the proposed management personnel indicates that it would 
not be in the interest of the depositors of the bank, or in the interest 
of the public, to permit such person to control the bank;

[[Page 77]]

    (e) Any acquiring person neglects, fails, or refuses to furnish to 
the FDIC all the information required by the FDIC; or
    (f) The FDIC determines that the proposed acquisition would result 
in an adverse effect on the Bank Insurance Fund or the Savings 
Association Insurance Fund.



Sec. 308.112  Notice of disapproval.

    (a) General rule. (1) Within three days of the decision by the Board 
of Directors or its designee to disapprove a proposed acquisition of 
control of an insured nonmember bank, a written notice of disapproval 
shall be mailed by first class mail to, or otherwise served upon, the 
party seeking acquire control.
    (2) The notice of disapproval shall:
    (i) Contain a statement of the basis for the disapproval; and
    (ii) Indicate that a hearing may be requested by filing a written 
request with the Executive Secretary within ten days after service of 
the notice of disapproval; and if a hearing is requested, that an answer 
to the notice of disapproval, as required by Sec. 308.113, must be 
filed within 20 days after service of the notice of disapproval.
    (b) Waiver of hearing. Failure to request a hearing pursuant to this 
section shall constitute a waiver of the opportunity for a hearing and 
the notice of disapproval shall constitute a final and unappealable 
order.
    (c) Section 308.18(b) of the Uniform Rules shall not apply to the 
content of the Notice of Disapproval.



Sec. 308.113  Answer to notice of disapproval.

    (a) Contents. (1) An answer to the notice of disapproval of a 
proposed acquisition of control shall be filed within 20 days after 
service of the notice of disapproval and shall specifically deny those 
portions of the notice of disapproval which are disputed. Those portions 
of the notice of disapproval which are not specifically denied are 
deemed admitted by the applicant.
    (2) Any hearing under this subpart shall be limited to those parts 
of the notice of disapproval that are specifically denied.
    (b) Failure to answer. Failure of a respondent to file an answer 
required by this section within the time provided constitutes a waiver 
of his or her right to appear and contest the allegations in the notice 
of disapproval. If no timely answer is filed, Enforcement Counsel may 
file a motion for entry of an order of default. Upon a finding that no 
good cause has been shown for the failure to file a timely answer, the 
administrative law judge shall file a recommended decision containing 
the findings and relief sought in the notice. A final order issued by 
the Board of Directors based upon a respondent's failure to answer is 
deemed to be an order issued upon consent.



Sec. 308.114  Burden of proof.

    The ultimate burden of proof shall be upon the person proposing to 
acquire a depository institution. The burden of going forward with a 
prima facie case shall be upon the FDIC.



  Subpart E_Rules and Procedures Applicable to Proceedings Relating to 
 Assessment of Civil Penalties for Willful Violations of the Change in 
                            Bank Control Act



Sec. 308.115  Scope.

    The rules and procedures of this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings to assess civil 
penalties against any person for willful violation of the Change in Bank 
Control Act of 1978 (12 U.S.C. 1817(j)), or any regulation or order 
issued pursuant thereto, in connection with the affairs of an insured 
nonmember bank.



Sec. 308.116  Assessment of penalties.

    (a) In general. The civil money penalty shall be assessed upon the 
service of a Notice of Assessment which shall become final and 
unappealable unless the respondent requests a hearing pursuant to Sec. 
308.19(c)(2).
    (b) Amount. (1) Any person who violates any provision of the Change 
in Bank Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto, shall forfeit and pay a civil money penalty of not 
more than

[[Page 78]]

$5,000 for each day the violation continues.
    (2) Any person who violates any provision of the Change in Bank 
Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto; or recklessly engages in any unsafe or unsound 
practice in conducting the affairs of a depository institution; or 
breaches any fiduciary duty; which violation, practice or breach is part 
of a pattern of misconduct; or causes or is likely to cause more than a 
minimal loss to such institution; or results in pecuniary gain or other 
benefit to such person, shall forfeit and pay a civil money penalty of 
not more than $25,000 for each day such violation, practice or breach 
continues.
    (3) Any person who knowingly violates any provision of the Change in 
Bank Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto; or engages in any unsafe or unsound practice in 
conducting the affairs of a depository institution; or breaches any 
fiduciary duty; and knowingly or recklessly causes a substantial loss to 
such institution or a substantial pecuniary gain or other benefit to 
such institution or a substantial pecuniary gain or other benefit to 
such person by reason of such violation, practice or breach, shall 
forfeit and pay a civil money penalty not to exceed:
    (i) In the case of a person other than a depository institution--
$1,000,000 per day for each day the violation, practice or breach 
continues; or
    (ii) In the case of a depository institution--an amount not to 
exceed the lesser of $1,000,000 or one percent of the total assets of 
such institution for each day the violation, practice or breach 
continues.
    (4) Adjustment of civil money penalties by the rate of inflation 
pursuant to section 31001(s) of the Debt Collection Improvement Act. 
After November 12, 1996:
    (i) Any person who engages in a violation as set forth in paragraph 
(b)(1) of this section shall forfeit and pay a civil money penalty of 
not more than $5,500 for each day the violation continues.
    (ii) Any person who engages in a violation, unsafe or unsound 
practice or breach of fiduciary duty, as set forth in paragraph (b)(2) 
of this section, shall forfeit and pay a civil money penalty of not more 
than $27,500 for each day such violation, practice or breach continues.
    (iii) Any person who knowingly engages in a violation, unsafe or 
unsound practice or breach of fiduciary duty, as set forth in paragraph 
(b)(3) of this section, shall forfeit and pay a civil money penalty not 
to exceed:
    (A) In the case of a person other than a depository institution--
$1,175,000 per day for each day the violation, practice or breach 
continues; or
    (B) In the case of a depository institution--an amount not to exceed 
the lesser of $1,175,000 or one percent of the total assets of such 
institution for each day the violation, practice or breach continues.
    (c) Mitigating factors. In assessing the amount of the penalty, the 
Board of Directors or its designee shall consider the gravity of the 
violation, the history of previous violations, respondent's financial 
resources, good faith, and any other matters as justice may require.
    (d) Failure to answer. Failure of a respondent to file an answer 
required by this section within the time provided constitutes a waiver 
of his or her right to appear and contest the allegations in the notice 
of disapproval. If no timely answer is filed, Enforcement Counsel may 
file a motion for entry of an order of default. Upon a finding that no 
good cause has been shown for the failure to file a timely answer, the 
administrative law judge shall file a recommended decision containing 
the findings and relief sought in the notice. A final order issued by 
the Board of Directors based upon a respondent's failure to answer is 
deemed to be an order issued upon consent.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 57990, Nov. 12, 1996; 65 
FR 64887, Oct. 31, 2000]



Sec. 308.117  Effective date of, and payment under, an order to pay.

    If the respondent both requests a hearing and serves an answer, 
civil penalties assessed pursuant to this subpart are due and payable 60 
days after an order to pay, issued after the hearing or upon default, is 
served upon the respondent, unless the order provides for a different 
period of payment. Civil penalties assessed pursuant to an order

[[Page 79]]

to pay issued upon consent are due and payable within the time specified 
therein.



Sec. 308.118  Collection of penalties.

    The FDIC may collect any civil penalty assessed pursuant to this 
subpart by agreement with the respondent, or the FDIC may bring an 
action against the respondent to recover the penalty amount in the 
appropriate United States district court. All penalties collected under 
this section shall be paid over to the Treasury of the United States.



Subpart F_Rules and Procedures Applicable to Proceedings for Involuntary 
                      Termination of Insured Status



Sec. 308.119  Scope.

    (a) Involuntary termination of insurance pursuant to section 8(a) of 
the FDIA. The rules and procedures in this subpart, subpart B of the 
Local Rules and the Uniform Rules shall apply to proceedings in 
connection with the involuntary termination of the insured status of an 
insured bank depository institution or an insured branch of a foreign 
bank pursuant to section 8(a) of the FDIA (12 U.S.C. 1818(a)), except 
that the Uniform Rules and subpart B of the Local Rules shall not apply 
to the temporary suspension of insurance pursuant to section 8(a)(8) of 
the FDIA (12 U.S.C. 1818(a)(8)).
    (b) Involuntary termination of insurance pursuant to section 8(p) of 
the Act. The rules and procedures in Sec. 308.124 of this subpart F 
shall apply to proceedings in connection with the involuntary 
termination of the insured status of an insured depository institution 
or an insured branch of a foreign bank pursuant to section 8(p) of the 
FDIA (12 U.S.C. 1818(p)). The Uniform Rules shall not apply to 
proceedings under section 8(p) of the FDIA.



Sec. 308.120  Grounds for termination of insurance.

    (a) General rule. The following are grounds for involuntary 
termination of insurance pursuant to section 8(a) of the FDIA:
    (1) An insured depository institution or its directors or trustees 
have engaged or are engaging in unsafe or unsound practices in 
conducting the business of such depository institution;
    (2) An insured depository institution is in an unsafe or unsound 
condition such that it should not continue operations as an insured 
depository institution; or
    (3) An insured depository institution or its directors or trustees 
have violated an applicable law, rule, regulation, order, condition 
imposed in writing by the FDIC in connection with the granting of any 
application or other request by the insured depository institution or 
have violated any written agreement entered into between the insured 
depository institution and the FDIC.
    (b) Extraterritorial acts of foreign banks. An act or practice 
committed outside the United States by a foreign bank or its directors 
or trustees which would otherwise be a ground for termination of insured 
status under this section shall be a ground for termination if the Board 
of Directors finds:
    (1) The act or practice has been, is, or is likely to be a cause of, 
or carried on in connection with or in furtherance of, an act or 
practice committed within any state, territory, or possession of the 
United States or the District of Columbia that, in and of itself, would 
be an appropriate basis for action by the FDIC; or
    (2) The act or practice committed outside the United States, if 
proven, would adversely affect the insurance risk of the FDIC.
    (c) Failure of foreign bank to secure removal of personnel. The 
failure of a foreign bank to comply with any order of removal or 
prohibition issued by the Board of Directors or the failure of any 
person associated with a foreign bank to appear promptly as a party to a 
proceeding pursuant to section 8(e) of the FDIA (12 U.S.C. 1818(e)), 
shall be a ground for termination of insurance of deposits in any branch 
of the bank.



Sec. 308.121  Notification to primary regulator.

    (a) Service of notification. (1) Upon a determination by the Board 
of Directors or its designee pursuant to Sec. 308.120

[[Page 80]]

of an unsafe or unsound practice or condition or of a violation, a 
notification shall be served upon the appropriate Federal banking agency 
of the insured depository institution, or the State banking supervisor 
if the FDIC is the appropriate Federal banking agency.


The notification shall be served not less than 30 days before the Notice 
of Intent to Terminate Insured Status required by section 8(a)(2)(B) of 
the FDIA (12 U.S.C. 1818(a)(2)(B)), and Sec. 308.122, except that this 
period for notification may be reduced or eliminated with the agreement 
of the appropriate Federal banking agency.
    (2) Appropriate Federal banking agency shall have the meaning given 
that term in section 3(q) of the FDIA (12 U.S.C. 1813(q)), and shall be 
the OCC in the case of a national bank, a District bank or an insured 
Federal branch of a foreign bank; the FDIC in the case of an insured 
nonmember bank, including an insured State branch of a foreign bank; the 
Board of Governors in the case of a state member bank; or the OTS in the 
case of an insured Federal or state savings association.
    (3) In the case of a state nonmember bank, insured Federal branch of 
a foreign bank, or state member bank, in addition to service of the 
notification upon the appropriate Federal banking agency, a copy of the 
notification shall be sent to the appropriate State banking supervisor.
    (4) In instances in which a Temporary Order Suspending Insurance is 
issued pursuant to section 8(a)(8) of the FDIA (12 U.S.C. 1818(a)(8)), 
the notification may be served concurrently with such order.
    (b) Contents of notification. The notification shall contain the 
FDIC's determination, and the facts and circumstances upon which such 
determination is based, for the purpose of securing correction of such 
practice, condition, or violation.



Sec. 308.122  Notice of intent to terminate.

    (a) If, after serving the notification under Sec. 308.121, the 
Board of Directors determines that any unsafe or unsound practices, 
condition, or violation, specified in the notification, requires the 
termination of the insured status of the insured depository institution, 
the Board of Directors or its designee, if it determines to proceed 
further, shall cause to be served upon the insured depository 
institution a notice of its intention to terminate insured status not 
less than 30 days after service of the notification, unless a shorter 
time period has been agreed upon by the appropriate Federal banking 
agency.
    (b) The Board of Directors or its designee shall cause a copy of the 
notice to be sent to the appropriate Federal banking agency and to the 
appropriate state banking supervisor, if any.



Sec. 308.123  Notice to depositors.

    If the Board of Directors enters an order terminating the insured 
status of an insured depository institution or branch, the insured 
depository institution shall, on the day that order becomes final, or on 
such other day as that order prescribes, mail a notification of 
termination of insured status to each depositor at the depositor's last 
address of record on the books of the insured depository institution or 
branch. The insured depository institution shall also publish the 
notification in two issues of a local newspaper of general circulation 
and shall furnish the FDIC with proof of such publications. The 
notification to depositors shall include information provided in 
substantially the following form:

                                 Notice

    (Date)----------.
    1. The status of the ----------, as an (insured depository 
institution) (insured branch) under the provisions of the Federal 
Deposit Insurance Act, will terminate as of the close of business on the 
-------- day of------------, 19----.
    2. Any deposits made by you after that date, either new deposits or 
additions to existing deposits, will not be insured by the Federal 
Deposit Insurance Corporation.
    3. Insured deposits in the (depository institution) (branch) on the 
-------- day of------------, 19----, will continue to be insured, as 
provided by Federal Deposit Insurance Act, for 2 years after the close 
of business on the -------- day of ------------, 19----. Provided, 
however, that any withdrawals after the close of business on the ------
-- day of ------------, 19----, will reduce the insurance coverage by 
the amount of such withdrawals.
________________________________________________________________________
(Name of (depository institution or branch)

[[Page 81]]

________________________________________________________________________
(Address)

The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



Sec. 308.124  Involuntary termination of insured status for failure 
to receive deposits.

    (a) Notice to show cause. When the Board of Directors or its 
designee has evidence that an insured depository institution is not 
engaged in the business of receiving deposits, other than trust funds, 
the Board of Directors or its designee shall give written notice of this 
evidence to the depository institution and shall direct the depository 
institution to show cause why its insured status should not be 
terminated under the provisions of section 8(p) of the FDIA (12 U.S.C. 
1818(p)). The insured depository institution shall have 30 days after 
receipt of the notice, or such longer period as is prescribed in the 
notice, to submit affidavits, other written proof, and any legal 
arguments that it is engaged in the business of receiving deposits other 
than trust funds.
    (b) Notice of termination date. If, upon consideration of the 
affidavits, other written proof, and legal arguments, the Board of 
Directors determines that the depository institution is not engaged in 
the business of receiving deposits, other than trust funds, the finding 
shall be conclusive and the Board of Directors shall notify the 
depository institution that its insured status will terminate at the 
expiration of the first full semiannual assessment period following 
issuance of that notification.
    (c) Notification to depositors of termination of insured status. 
Within the time specified by the Board of Directors and prior to the 
date of termination of its insured status, the depository institution 
shall mail a notification of termination of insured status to each 
depositor at the depositor's last address of record on the books of the 
depository institution. The depository institution shall also publish 
the notification in two issues of a local newspaper of general 
circulation and shall furnish the FDIC with proof of such publications. 
The notification to depositors shall include information provided in 
substantially the following form:

                                 Notice

    (Date)----------.
    The status of the ----------, as an (insured depository institution) 
(insured branch) under the Federal Deposit Insurance Act, will terminate 
on the -------- day of------------, 19----, and its deposits will 
thereupon cease to be insured.
________________________________________________________________________
(Name of depository institution or branch)
________________________________________________________________________
(Address)


The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



Sec. 308.125  Temporary suspension of deposit insurance.

    (a) If, while an action is pending under section 8(a)(2) of the FDIA 
(12 U.S.C. 1818(a)(2)), the Board of Directors, after consultation with 
the appropriate Federal banking agency, finds that an insured depository 
institution (other than a special supervisory association to which Sec. 
308.126 of this subpart applies) has no tangible capital under the 
capital guidelines or regulations of the appropriate Federal banking 
agency, the Board of Directors may issue a Temporary Order Suspending 
Deposit Insurance, pending completion of the proceedings under section 
8(a)(2) of the FDIA (12 U.S.C. 1818(a)(2)).
    (b) The temporary order shall be served upon the insured institution 
and a copy sent to the appropriate Federal banking agency and to the 
appropriate State banking supervisor.
    (c) The temporary order shall become effective ten days from the 
date of service upon the insured depository institution. Unless set 
aside, limited, or suspended in proceedings under section 8(a)(8)(D) of 
the FDIA (12 U.S.C. 1818 (a)(8)(D)), the temporary order shall remain 
effective and enforceable until an order terminating the insured status 
of the institution is entered by the Board of Directors and becomes 
final, or the Board of Directors dismisses the proceedings.

[[Page 82]]

    (d) Notification to depositors of suspension of insured status. 
Within the time specified by the Board of Directors and prior to the 
suspension of insured status, the depository institution shall mail a 
notification of suspension of insured status to each depositor at the 
depositor's last address of record on the books of the depository 
institution. The depository institution shall also publish the 
notification in two issues of a local newspaper of general circulation 
and shall furnish the FDIC with proof of such publications. The 
notification to depositors shall include information provided in 
substantially the following form:

                                 Notice

    (Date)------------.
    1. The status of the ----------, as an (insured depository 
institution) (insured branch) under the provisions of the Federal 
Deposit Insurance Act, will be suspended as of the close of business on 
the -------- day of ------------, 19----, pending the completion of 
administrative proceedings under section 8(a) of the Federal Deposit 
Insurance Act.
    2. Any deposits made by you after that date, either new deposits or 
additions to existing deposits, will not be insured by the Federal 
Deposit Insurance Corporation.
    3. Insured deposits in the (depository institution) (branch) on the 
-------- day of ------------, 19----, will continue to be insured for --
---------- after the close of business on the---------- day of --------
--, 19----. Provided, however, that any withdrawals after the close of 
business on the -------- day of------------, 19----, will reduce the 
insurance coverage by the amount of such withdrawals.
________________________________________________________________________
(Name of depository institution or branch)
________________________________________________________________________
(Address)


The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



Sec. 308.126  Special supervisory associations.

    If the Board of Directors finds that a savings association is a 
special supervisory association under the provisions of section 
8(a)(8)(B) of the FDIA (12 U.S.C. 1818(a)(8)(B)) for purposes of 
temporary suspension of insured status, the Board of Directors shall 
serve upon the association its findings with regard to the determination 
that the capital of the association, as computed using applicable 
accounting standards, has suffered a material decline; that such 
association or its directors or officers, is engaging in an unsafe or 
unsound practice in conducting the business of the association; that 
such association is in an unsafe or unsound condition to continue 
operating as an insured association; or that such association or its 
directors or officers, has violated any law, rule, regulation, order, 
condition imposed in writing by any Federal banking agency, or any 
written agreement, or that the association failed to enter into a 
capital improvement plan acceptable to the Corporation prior to January, 
1990.



  Subpart G_Rules and Procedures Applicable to Proceedings Relating to 
                         Cease-and-Desist Orders



Sec. 308.127  Scope.

    (a) Cease-and-desist proceedings under section 8 of the FDIA. The 
rules and procedures of this subpart, subpart B of the Local Rules and 
the Uniform Rules shall apply to proceedings to order an insured 
nonmember bank or an institution-affiliated party to cease and desist 
from practices and violations described in section 8(b) of the FDIA, 12 
U.S.C. 1818(b).
    (b) Proceedings under the Securities Exchange Act of 1934. (1) The 
rules and procedures of this subpart, subpart B of the Local Rules and 
the Uniform Rules shall apply to proceedings by the Board of Directors 
to order a municipal securities dealer to cease and desist from any 
violation of law or regulation specified in section 15B(c)(5) of the 
Securities Exchange Act, as amended (15 U.S.C. 78o-4(c)(5)) where the 
municipal securities dealer is an insured nonmember bank or a subsidiary 
thereof.
    (2) The rules and procedures of this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings by the Board of 
Directors to order a clearing agency or transfer agent to cease and 
desist from failure

[[Page 83]]

to comply with the applicable provisions of section 17, 17A and 19 of 
the Securities Exchange Act of 1934, as amended (15 U.S.C. 78q, 78q-l, 
78s), and the applicable rules and regulations thereunder, where the 
clearing agency or transfer agent is an insured nonmember bank or a 
subsidiary thereof.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999]



Sec. 308.128  Grounds for cease-and-desist orders.

    (a) General rule. The Board of Directors or its designee may issue 
and have served upon any insured nonmember bank or an institution-
affiliated party a notice, as set forth in Sec. 308.18 of the Uniform 
Rules for practices and violations as described in Sec. 308.127.
    (b) Extraterritorial acts of foreign banks. An act, violation or 
practice committed outside the United States by a foreign bank or an 
institution-affiliated party that would otherwise be a ground for 
issuing a cease-and-desist order under paragraph (a) of this section or 
a temporary cease-and-desist order under Sec. 308.131 of this subpart, 
shall be a ground for an order if the Board of Directors or its designee 
finds that:
    (1) The act, violation or practice has been, is, or is likely to be 
a cause of, or carried on in connection with or in furtherance of, an 
act, violation or practice committed within any state, territory, or 
possession of the United States or the District of Columbia which act, 
violation or practice, in and of itself, would be an appropriate basis 
for action by the FDIC; or
    (2) The act, violation or practice, if proven, would adversely 
affect the insurance risk of the FDIC.



Sec. 308.129  Notice to state supervisory authority.

    The Board of Directors or its designee shall give the appropriate 
state supervisory authority notification of its intent to institute a 
proceeding pursuant to subpart G of this part, and the grounds thereof. 
Any proceedings shall be conducted according to subpart G of this part, 
unless, within the time period specified in such notification, the state 
supervisory authority has effected satisfactory corrective action. No 
insured institution or other party who is the subject of any notice or 
order issued by the FDIC under this section shall have standing to raise 
the requirements of this subpart as grounds for attacking the validity 
of any such notice or order.



Sec. 308.130  Effective date of order and service on bank.

    (a) Effective date. A cease-and-desist order issued by the Board of 
Directors after a hearing, and a cease-and-desist order issued based 
upon a default, shall become effective at the expiration of 30 days 
after the service of the order upon the bank or its official. A cease-
and-desist order issued upon consent shall become effective at the time 
specified therein. All cease-and-desist orders shall remain effective 
and enforceable, except to the extent they are stayed, modified, 
terminated, or set aside by the Board of Directors or its designee or by 
a reviewing court.
    (b) Service on banks. In cases where the bank is not the respondent, 
the cease-and-desist order shall also be served upon the bank.



Sec. 308.131  Temporary cease-and-desist order.

    (a) Issuance. (1) When the Board of Directors or its designee 
determines that the violation, or the unsafe or unsound practice, as 
specified in the notice, or the continuation thereof, is likely to cause 
insolvency or significant dissipation of assets or earnings of the bank, 
or is likely to weaken the condition of the bank or otherwise prejudice 
the interests of its depositors prior to the completion of the 
proceedings under section 8(b) of the FDIA (12 U.S.C. 1818(b)) and Sec. 
308.128 of this subpart, the Board of Directors or its designee may 
issue a temporary order requiring the bank or an institution-affiliated 
party to immediately cease and desist from any such violation, practice 
or to take affirmative action to prevent such insolvency, dissipation, 
condition or prejudice pending completion of the proceedings under 
section 8(b) of the FDIA (12 U.S.C. 1818(b)).
    (2) When the Board of Directors or its designee issues a Notice of 
charges pursuant to 12 U.S.C. 1818(b)(1) which specifies on the basis of 
particular

[[Page 84]]

facts and circumstances that a bank's books and records are so 
incomplete or inaccurate that the FDIC is unable, through the normal 
supervisory process, to determine the financial condition of the bank or 
the details or purpose of any transaction or transactions that may have 
a material effect on the financial condition of the bank, then the Board 
of Directors or its designee may issue a temporary order requiring:
    (i) The cessation of any activity or practice which gave rise, 
whether in whole or in part, to the incomplete or inaccurate state of 
the books or records; or
    (ii) Affirmative action to restore such books or records to a 
complete and accurate state, until the completion of the proceedings 
under section 8(b) of the FDIA (12 U.S.C. 1818(b)).
    (3) The temporary order shall be served upon the bank or the 
institution-affiliated party named therein and shall also be served upon 
the bank in the case where the temporary order applies only to an 
institution-affiliated party.
    (b) Effective date. A temporary order shall become effective when 
served upon the bank or the institution-affiliated party. Unless the 
temporary order is set aside, limited, or suspended by a court in 
proceedings authorized under section 8(c)(2) of the FDIA (12 U.S.C. 
1818(c)(2)), the temporary order shall remain effective and enforceable 
pending completion of administrative proceedings pursuant to section 
8(b) of the FDIA (12 U.S.C. 1818(b)) and entry of an order which has 
become final, or with respect to paragraph (a)(2) of this section the 
FDIC determines by examination or otherwise that the bank's books and 
records are accurate and reflect the financial condition of the bank.
    (c) Uniform Rules do not apply. The Uniform Rules and subpart B of 
the Local Rules shall not apply to the issuance of temporary orders 
under this section.



  Subpart H_Rules and Procedures Applicable to Proceedings Relating to 
  
Assessment and Collection of Civil Money Penalties for Violation of 
Cease-and-Desist Orders and of Certain Federal Statutes, Including Call 
                            Report Penalties



Sec. 308.132  Assessment of penalties.

    (a) Scope. The rules and procedures of this subpart, subpart B of 
the Local Rules, and the Uniform Rules shall apply to proceedings to 
assess and collect civil money penalties, including civil money 
penalties for violation of section 7(a) of the FDIA (12 U.S.C. 1817(a)).
    (b) Relevant considerations. In determining the amount of the civil 
penalty to be assessed, the Board of Directors or its designee shall 
consider the financial resources and good faith of the bank or official, 
the gravity of the violation, the history of previous violations, and 
any such other matters as justice may require.
    (c) Amount. (1) The Board of Directors or its designee may assess 
civil money penalties pursuant to section 8(i) of the FDIA (12 U.S.C. 
1818(i)), and Sec. 308.01(e)(1) of the Uniform Rules.
    (2) The Board of Directors or its designee may assess civil money 
penalties pursuant to section 7(a) of the FDIA (12 U.S.C. 1817(a)) as 
follows:
    (i) Late filing--Tier One penalties. In cases in which a bank fails 
to make or publish its Report of Condition and Income (Call Report) 
within the appropriate time periods, a civil money penalty of not more 
than $2,200 per day may be assessed where the bank maintains procedures 
in place reasonably adapted to avoid inadvertent error and the late 
filing occurred unintentionally and as a result of such error; or the 
bank inadvertently transmitted a Call Report which is minimally late.
    (A) First offense. Generally, in such cases, the amount assessed 
shall be $300 per day for each of the first 15 days for

[[Page 85]]

which the failure continues, and $600 per day for each subsequent day 
the failure continues, beginning on the sixteenth day. For banks with 
less than $25,000,000 in assets, the amount assessed shall be the 
greater of $100 per day or \1/1000\th of the bank's total assets (\1/
10\th of a basis point) for each of the first 15 days for which the 
failure continues, and $200 or \1/500\th of the bank's total assets, \1/
5\ of a basis point) for each subsequent day the failure continues, 
beginning on the sixteenth day.
    (B) Second offense. Where the bank has been delinquent in making or 
publishing its Call Report within the preceding five quarters, the 
amount assessed for the most current failure shall generally be $500 per 
day for each of the first 15 days for which the failure continues, and 
$1,000 per day for each subsequent day the failure continues, beginning 
on the sixteenth day. For banks with less than $25,000,000 in assets, 
those amounts, respectively, shall be \1/500\th of the bank's total 
assets and \1/250\th of the bank's total assets.
    (C) Mitigating factors. The amounts set forth in paragraph 
(c)(2)(i)(A) of this section may be reduced based upon the factors set 
forth in paragraph (b) of this section.
    (D) Lengthy or repeated violations. The amounts set forth in this 
paragraph (c)(2)(i) will be assessed on a case-by-case basis where the 
amount of time of the bank's delinquency is lengthy or the bank has been 
delinquent repeatedly in making or publishing its Call Reports.
    (E) Waiver. Absent extraordinary circumstances outside the control 
of the bank, penalties assessed for late filing shall not be waived.
    (ii) Late filing--Tier Two penalties. Where a bank fails to make or 
publish its Call Report within the appropriate time period, the Board of 
Directors or its designee may assess a civil money penalty of not more 
than $20,000 per day for each day the failure continues. Pursuant to the 
Debt Collection Improvement Act of 1996, for violations which occur 
after November 12, 1996, the maximum Tier Two penalty amount will 
increase to $22,000 per day for each day the failure continues.
    (iii) False or misleading reports or information--(A) Tier One 
penalties. In cases in which a bank submits or publishes any false or 
misleading Call Report or information, the Board of Directors or its 
designee may assess a civil money penalty of not more than $2,200 per 
day for each day the information is not corrected, where the bank 
maintains procedures in place reasonably adapted to avoid inadvertent 
error and the violation occurred unintentionally and as a result of such 
error; or the bank inadvertently transmits a Call Report or information 
which is false or misleading.
    (B) Tier Two penalties. Where a bank submits or publishes any false 
or misleading Call Report or other information, the Board of Directors 
or its designee may assess a civil money penalty of not more than 
$20,000 per day for each day the information is not corrected. Pursuant 
to the Debt Collection Improvement Act of 1996, for violations which 
occur after November 12, 1996, the maximum Tier Two penalty amount will 
increase to $22,000 per day for each day the information is not 
corrected.
    (C) Tier Three penalties. Where a bank knowingly or with reckless 
disregard for the accuracy of any Call Report or information submits or 
publishes any false or misleading Call Report or other information, the 
Board of Directors or its designee may assess a civil money penalty of 
not more than the lesser of $1,175,000 or 1 percent of the bank's total 
assets per day for each day the information is not corrected. Pursuant 
to the Debt Collection Improvement Act of 1996, for violations which 
occur after November 12, 1996, the maximum Tier Three penalty amount 
will increase to the lesser of $1,175,000 per day or 1 percent of the 
bank's total assets per day for each day the information is not 
corrected.
    (D) Mitigating factors. The amounts set forth in this paragraph 
(c)(2) may be reduced based upon the factors set forth in paragraph (b) 
of this section.
    (3) Adjustment of civil money penalties by the rate of inflation 
pursuant to section 31001(s) of the Debt Collection Improvement Act. 
Pursuant to section 31001(s) of the Debt Collection Improvement Act, for 
violations which occur after November 12, 1996, the Board of Directors 
or its designee may assess

[[Page 86]]

civil money penalties in the maximum amounts as follows:
    (i) Civil money penalties assessed pursuant to section 8(i)(2) of 
the FDIA. Tier One civil money penalties may be assessed pursuant to 
section 8(i)(2)(A) of the FDIA (12 U.S.C. 1818(i)(2)(A)) in an amount 
not to exceed $5,500 for each day during which the violation continues. 
Tier Two civil money penalties may be assessed pursuant to section 
8(i)(2)(B) of the FDIA (12 U.S.C. 1818(i)(2)(B)) in an amount not to 
exceed $27,500 for each day during which the violation, practice or 
breach continues. Tier Three civil money penalties may be assessed 
pursuant to section 8(i)(2)(C)(12 U.S.C. 1818(i)(2)(C)) in an amount not 
to exceed, in the case of any person other than an insured depository 
institution $1,175,000 or, in the case of any insured depository 
institution, an amount not to exceed the lesser of $1,175,000 or 1 
percent of the total assets of such institution for each day during 
which the violation, practice, or breach continues.
    (A) Civil money penalties may be assessed pursuant to section 
8(i)(2) of the FDIA in the amounts set forth in this paragraph (c)(3)(i) 
for violations of various consumer laws, including, the Home Mortgage 
Disclosure Act (12 U.S.C. 2804 et seq. and 12 CFR 203.6), the Expedited 
Funds Availability Act (12 U.S.C. 4001 et seq.), the Truth in Savings 
Act (12 U.S.C. 4301 et seq.), the Real Estate Settlement Procedures Act 
(12 U.S.C. 2601 et seq. and 12 CFR part 3500), the Truth in Lending Act 
(15 U.S.C. 1601 et seq.), the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) the 
Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.), the 
Electronic Funds Transfer Act (15 U.S.C. 1693 et seq.) and the Fair 
Housing Act (42 U.S.C. 3601 et seq.) in the amounts set forth in 
paragraphs (c)(3)(i) through (c)(3)(iii) of this section.
    (ii) Civil money penalties assessed pursuant to section 7(c) of the 
FDIA for late filing or the submission false or misleading certified 
statements. Tier One civil money penalties may be assessed pursuant to 
section 7(c)(4)(A) of the FDIA (12 U.S.C. 1817(c)(4)(A)) in an amount 
not to exceed 2,200 for each day during which the failure to file 
continues or the false or misleading information is not corrected. Tier 
Two civil money penalties may be assessed pursuant to section 7(c)(4)(B) 
of the FDIA (12 U.S.C. 1817(c)(4)(B)) in an amount not to exceed $22,000 
for each day during which the failure to file continues or the false or 
misleading information is not corrected. Tier Three civil money 
penalties may be assessed pursuant to section 7(c)(4)(C) in an amount 
not to exceed the lesser of $1,100,000 or 1 percent of the total assets 
of the institution for each day during which the failure to file 
continues or the false or misleading information is not corrected.
    (iii) Civil money penalties assessed pursuant to section 10(e)(4) of 
the FDIA for refusal to allow examination or to provide required 
information during an examination. Pursuant to section 10(e)(4) of the 
FDIA (12 U.S.C. 1820(e)(4)), civil money penalties may be assessed 
against any affiliate of an insured depository institution which refuses 
to permit a duly-appointed examiner to conduct an examination or to 
provide information during the course of an examination as set forth in 
section 20(b) of the FDIA (12 U.S.C. 1820(b)), in an amount not to 
exceed $5,500 for each day the refusal continues.
    (iv) Civil money penalties assessed pursuant to section 18(a)(3) of 
the FDIA for incorrect display of insurance logo. Pursuant to section 
18(a)(3) of the FDIA (12 U.S.C. 1828(a)(3)), civil money penalties may 
be assessed against an insured depository institution which fails to 
correctly display its insurance logo pursuant to that section, in an 
amount not to exceed $110 for each day the violation continues.
    (v) Civil money penalties assessed pursuant to section 18(h) of the 
FDIA for failure to file a certified statement or to pay assessment. 
Pursuant to section 18(h) of the FDIA (12 U.S.C. 1828(h)), a civil money 
penalty may be assessed against an insured depository institution which 
wilfully fails or refuses to file a certified statement or pay any 
assessment required under the FDIA in an amount not to exceed $110 for 
each day the violation continues.
    (vi) Civil money penalties assessed pursuant to section 19b(j) of 
the FDIA for

[[Page 87]]

recordkeeping violations. Pursuant to section 19b(j) of the FDIA (12 
U.S.C. 1829b(j)), civil money penalties may be assessed against an 
insured depository institution and any director, officer or employee 
thereof who wilfully or through gross negligence violates or causes a 
violation of the recordkeeping requirements of that section or its 
implementing regulations in an amount not to exceed $11,000 per 
violation.
    (vii) Civil fine pursuant to 12 U.S.C. 1832(c) for violation of 
provisions forbidding interest-bearing demand deposit accounts. Pursuant 
to 12 U.S.C. 1832(c), any depository institution which violates the 
prohibition on deposit or withdrawal from interest-bearing accounts via 
negotiable or transferable instruments payable to third parties shall be 
subject to a fine of $1,100 per violation.
    (viii) Civil penalties for violations of security measure 
requirements under 12 U.S.C. 1884. Pursuant to 12 U.S.C. 1884, an 
institution which violates a rule establishing minimum security 
requirements as set forth in 12 U.S.C. 1882, shall be subject to a civil 
penalty not to exceed $110 for each day of the violation.
    (ix) Civil money penalties assessed pursuant to the Bank Holding 
Company Act of 1970 for prohibited tying arrangements. Pursuant to the 
Bank Holding Company Act of 1970, Tier One civil money penalties may be 
assessed pursuant to 12 U.S.C. 1972(2)(F)(i) in an amount not to exceed 
$5,500 for each day during which the violation continues. Tier Two civil 
money penalties may be assessed pursuant to 12 U.S.C. 1972(2)(F)(ii) in 
an amount not to exceed $27,500 for each day during which the violation, 
practice or breach continues. Tier Three civil money penalties may be 
assessed pursuant to 12 U.S.C. 1972(2)(F)(iii) in an amount not to 
exceed, in the case of any person other than an insured depository 
institution $1,175,000 for each day during which the violation, 
practice, or breach continues or, in the case of any insured depository 
institution, an amount not to exceed the lesser of $1,175,000 or 1 
percent of the total assets of such institution for each day during 
which the violation, practice, or breach continues.
    (x) Civil money penalties assessed pursuant to the International 
Banking Act of 1978. Pursuant to the International Banking Act of 1978 
(IBA) (12 U.S.C. 3108(b)), civil money penalties may be assessed for 
failure to comply with the requirements of the IBA pursuant to section 
8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)), in the amounts set forth in 
paragraph (c)(3)(i) of this section.
    (xi) Civil money penalties assessed for appraisal violations. 
Pursuant to 12 U.S.C. 3349(b), where a financial institution seeks, 
obtains, or gives any other thing of value in exchange for the 
performance of an appraisal by a person that the institution knows is 
not a state certified or licensed appraiser in connection with a 
federally related transaction, a civil money penalty may be assessed 
pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)) in the 
amounts set forth in paragraph (c)(3)(i) of this section.
    (xii) Civil money penalties assessed pursuant to International 
Lending Supervision Act. Pursuant to the International Lending 
Supervision Act (ILSA) (12 U.S.C. 3909(d)), the CMP that may be assessed 
against any banking institution or any officer, director, employee, 
agent or other person participating in the conduct of the affairs of 
such banking institution is amount not to exceed $1,100 for each day a 
violation of the ILSA or any rule, regulation or order issued pursuant 
to ILSA continues.
    (xiii) Civil money penalties assessed for violations of the 
Community Development Banking and Financial Institution Act. Pursuant to 
the Community Development Banking and Financial Institution Act 
(Community Development Banking Act) (12 U.S.C. 4717(b)) a civil money 
penalty may be assessed for violations of the Community Development 
Banking Act pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 
1818(i)(2)), in the amounts set forth in paragraph (c)(3)(i) of this 
section.
    (xiv) Civil money penalties assessed for violations of the 
Securities Exchange Act of 1934. Pursuant to section 21B of the 
Securities Exchange Act of 1934 (Exchange Act) (15 U.S.C. 78u-2), civil 
money penalties may be assessed for violations of certain provisions of 
the Exchange Act, where such penalties are

[[Page 88]]

in the public interest. Tier One civil money penalties may be assessed 
pursuant to 15 U.S.C. 78u-2(b)(1) in an amount not to exceed $5,500 for 
a natural person or $60,000 for any other person for violations set 
forth in 15 U.S.C. 78u-2(a). Tier Two civil money penalties may be 
assessed pursuant to 15 U.S.C. 78u-2(b)(2) in an amount not to exceed--
for each violation set forth in 15 U.S.C. 78u-2(a)--$60,000 for a 
natural person or $300,000 for any other person if the act or omission 
involved fraud, deceit, manipulation, or deliberate or reckless 
disregard of a regulatory requirement. Tier Three civil money penalties 
may be assessed pursuant to 15 U.S.C. 78u-2(b)(3) for each violation set 
forth in 15 U.S.C. 78u-2(a), in an amount not to exceed $120,000 for a 
natural person or $575,000 for any other person, if the act or omission 
involved fraud, deceit, manipulation, or deliberate or reckless 
disregard of a regulatory requirement; and such act or omission directly 
or indirectly resulted in substantial losses, or created a significant 
risk of substantial losses to other persons or resulted in substantial 
pecuniary gain to the person who committed the act or omission.
    (xv) Civil money penalties assessed for false claims and statements 
pursuant to the Program Fraud Civil Remedies Act. Pursuant to the 
Program Fraud Civil Remedies Act (31 U.S.C. 3802), civil money penalties 
of not more than $5,500 per claim or statement may be assessed for 
violations involving false claims and statements.
    (xvi) Civil money penalties assessed for violations of the Flood 
Disaster Protection Act. Pursuant to the Flood Disaster Protection Act 
(FDPA)(42 U.S.C. 4012a(f)), civil money penalties may be assessed 
against any regulated lending institution that engages in a pattern or 
practice of violations of the FDPA in an amount not to exceed $350 per 
violation, and not to exceed a total of $115,000 annually.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 57991, Nov. 12, 1996; 64 
FR 62100, Nov. 16, 1999; 65 FR 64887, Oct. 31, 2000; 66 FR 9189, Feb. 7, 
2001]



Sec. 308.133  Effective date of, and payment under, an order to pay.

    (a) Effective date. (1) Unless otherwise provided in the Notice, 
except in situations covered by paragraph (a)(2) of this section, civil 
penalties assessed pursuant to this subpart are due and payable 60 days 
after the Notice is served upon the respondent.
    (2) If the respondent both requests a hearing and serves an answer, 
civil penalties assessed pursuant to this subpart are due and payable 60 
days after an order to pay, issued after the hearing or upon default, is 
served upon the respondent, unless the order provides for a different 
period of payment. Civil penalties assessed pursuant to an order to pay 
issued upon consent are due and payable within the time specified 
therein.
    (b) Payment. All penalties collected under this section shall be 
paid over to the Treasury of the United States.



    Subpart I_Rules and Procedures for Imposition of Sanctions Upon 
    Municipal Securities Dealers or Persons Associated With Them and 
                  Clearing Agencies or Transfer Agents



Sec. 308.134  Scope.

    The rules and procedures in this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings by the Board of 
Directors or its designee:
    (a) To censure, limit the activities of, suspend, or revoke the 
registration of, any municipal securities dealer for which the FDIC is 
the appropriate regulatory agency;
    (b) To censure, suspend, or bar from being associated with such a 
municipal securities dealer, any person associated with such a municipal 
securities dealer; and
    (c) To deny registration, to censure limit the activities of, 
suspend, or revoke the registration of, any transfer agent or clearing 
agency for which the FDIC is the appropriate regulatory agency. This 
subpart and the Uniform Rules shall not apply to proceedings to postpone 
or suspend registration of a

[[Page 89]]

transfer agent or clearing agency pending final determination of denial 
or revocation of registration.



Sec. 308.135  Grounds for imposition of sanctions.

    (a) Action under section 15(b)(4) of the Exchange Act. The Board of 
Directors or its designee may issue and have served upon any municipal 
securities dealer for which the FDIC is the appropriate regulatory 
agency, or any person associated or seeking to become associated with a 
municipal securities dealer for which the FDIC is the appropriate 
regulatory agency, a written notice of its intention to censure, limit 
the activities or functions or operations of, suspend, or revoke the 
registration of, such municipal securities dealer, or to censure, 
suspend, or bar the person from being associated with the municipal 
securities dealer, when the Board of Directors or its designee 
determines:
    (1) That such municipal securities dealer or such person
    (i) Has committed any prohibited act or omitted any required act 
specified in subparagraph (A), (D), or (E) of section 15(b)(4) of the 
Exchange Act, as amended (15 U.S.C. 78o);
    (ii) Has been convicted of any offense specified in section 
15(b)(4)(B) of the Exchange Act within ten years of commencement of 
proceedings under this subpart; or
    (iii) Is enjoined from any act, conduct, or practice specified in 
section 15(b)(4)(C) of the Exchange Act; and
    (2) That it is in the public interest to impose any of the sanctions 
set forth in paragraph (a) of this section.
    (b) Action under sections 17 and 17A of the Exchange Act. The Board 
of Directors or its designee may issue, and have served upon any 
transfer agent or clearing agency for which the FDIC is the appropriate 
regulatory agency, a written Notice of its intention to deny 
registration to, censure, place limitations on the activities or 
function or operations of, suspend, or revoke the registration of, the 
transfer agent or clearing agency, when the Board of Directors or its 
designee determines:
    (1) That the transfer agent or clearing agency has willfully 
violated, or is unable to comply with, any applicable provision of 
section 17 or 17A of the Exchange Act, as amended, or any applicable 
rule or regulation issued pursuant thereto; and
    (2) That it is in the public interest to impose any of the sanctions 
set forth in paragraph (b) of this section.



Sec. 308.136  Notice to and consultation with the Securities and Exchange 
Commission.

    Before initiating any proceedings under Sec. 308.135, the FDIC 
shall:
    (a) Notify the Securities and Exchange Commission of the identity of 
the municipal securities dealer or associated person against whom 
proceedings are to be initiated, and the nature of and basis for the 
proposed action; and
    (b) Consult with the Commission concerning the effect of the 
proposed action on the protection of investors and the possibility of 
coordinating the action with any proceeding by the Commission against 
the municipal securities dealer or associated person.



Sec. 308.137  Effective date of order imposing sanctions.

    An order issued by the Board of Directors after a hearing or an 
order issued upon default shall become effective at the expiration of 30 
days after the service of the order, except that an order of censure, 
denial, or revocation of registration is effective when served. An order 
issued upon consent shall become effective at the time specified 
therein. All orders shall remain effective and enforceable except to the 
extent they are stayed, modified, terminated, or set aside by the Board 
of Directors, its designee, or a reviewing court, provided that orders 
of suspension shall continue in effect no longer than 12 months.



 Subpart J_Rules and Procedures Relating to Exemption Proceedings Under 
          Section 12(h) of the Securities Exchange Act of 1934



Sec. 308.138  Scope.

    The rules and procedures of this subpart J shall apply to 
proceedings by the Board of Directors or its designee to exempt, in 
whole or in part, an

[[Page 90]]

issuer of securities from the provisions of sections 12(g), 13, 14(a), 
14(c), 14(d), or 14(f) of the Exchange Act, as amended (15 U.S.C. 781, 
78m, 78n (a), (c) (d) or (f)), or to exempt an officer or a director or 
beneficial owner of securities of such an issuer from the provisions of 
section 16 of the Exchange Act (15 U.S.C. 78p).



Sec. 308.139  Application for exemption.

    Any interested person may file a written application for an 
exemption under this subpart with the Executive Secretary, Federal 
Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 
20429. The application shall specify the exemption sought and the reason 
therefor, and shall include a statement indicating why the exemption 
would be consistent with the public interest or the protection of 
investors.



Sec. 308.140  Newspaper notice.

    (a) General rule. If the Board of Directors or its designee, in its 
sole discretion, decides to further consider an application for 
exemption, there shall be served upon the applicant instructions to 
publish one notification in a newspaper of general circulation in the 
community where the main office of the issuer is located. The applicant 
shall furnish proof of such publication to the Executive Secretary or 
such other person as may be directed in the instructions.
    (b) Contents. The notification shall contain the name and address of 
the issuer and the name and title of the applicant, the exemption 
sought, a statement that a hearing will be held, and a statement that 
within 30 days of publication of the newspaper notice, interested 
persons may submit to the FDIC written comments on the application for 
exemption and a written request for an opportunity to be heard. The 
address of the FDIC must appear in the notice.



Sec. 308.141  Notice of hearing.

    Within ten days after expiration of the period for receipt of 
comments pursuant to Sec. 308.140, the Executive Secretary shall serve 
upon the applicant and any person who has requested an opportunity to be 
heard written notification indicating the place and time of the hearing. 
The hearing shall be held not later than 30 days after service of the 
notification of hearing. The notification shall contain the name and 
address of the presiding officer designated by the Executive Secretary 
and a statement of the matters to be considered.



Sec. 308.142  Hearing.

    (a) Proceedings are informal. Formal rules of evidence, the 
adjudicative procedures of the APA (5 U.S.C. 554-557), the Uniform Rules 
and Sec. 308.108 of subpart B of the Local Rules shall not apply to 
hearings under this subpart.
    (b) Hearing Procedure. (1) Parties to the hearing may appear 
personally or through counsel and shall have the right to introduce 
relevant and material documents and to make an oral statement.
    (2) There shall be no discovery in proceeding under this subpart J.
    (3) The presiding officer shall have discretion to permit 
presentation of witnesses within specified time limits, provided that a 
list of witnesses is furnished to the presiding officer prior to the 
hearing. Witnesses shall be sworn, unless otherwise directed by the 
presiding officer. The presiding officer may ask questions of any 
witness and each party may cross-examine any witness presented by an 
opposing party.
    (4) The proceedings shall be on the record and the transcript shall 
be promptly submitted to the Board of Directors. The presiding officer 
shall make recommendations to the Board of Directors, unless the Board 
of Directors, in its sole discretion, directs otherwise.



Sec. 308.143  Decision of Board of Directors.

    Following submission of the hearing transcript to the Board of 
Directors, the Board of Directors may grant the exemption where it 
determines, by reason of the number of public investors, the amount of 
trading interest in the securities, the nature and extent of the 
issuer's activities, the issuer's income or assets, or otherwise, that 
the exemption is consistent with the public interest or the protection 
of investors. Any exemption shall be set forth in an order

[[Page 91]]

specifying the terms of the exemption, the person to whom it is granted, 
and the period for which it is granted. A copy of the order shall be 
served upon each party to the proceeding.



 Subpart K_Procedures Applicable to Investigations Pursuant to Section 
                            10(c) of the FDIA



Sec. 308.144  Scope.

    The procedures of this subpart shall be followed when an 
investigation is instituted and conducted in connection with any open or 
failed insured depository institution, any institutions making 
application to become insured depository institutions, and affiliates 
thereof, or with other types of investigations to determine compliance 
with applicable law and regulations, pursuant to section 10(c) of the 
FDIA (12 U.S.C. 1820(c)). The Uniform Rules and subpart B of the Local 
Rules shall not apply to investigations under this subpart.



Sec. 308.145  Conduct of investigation.

    An investigation conducted pursuant to section 10(c) of the FDIA 
shall be initiated only upon issuance of an order by the Board of 
Directors; or by the General Counsel, the Director of the Division of 
Supervision and Consumer Protection (DSC), the Director of the Division 
of Depositor and Asset Services, or their respective designees as set 
forth at Sec. 303.272 of this chapter. The order shall indicate the 
purpose of the investigation and designate FDIC's representative(s) to 
direct the conduct of the investigation. Upon application and for good 
cause shown, the persons who issue the order of investigation may limit, 
quash, modify, or withdraw it. Upon the conclusion of the investigation, 
an order of termination of the investigation shall be issued by the 
persons issuing the order of investigation.

[56 FR 37975, Aug. 9, 1991, as amended at 60 FR 31384, June 15, 1995; 64 
FR 62100, Nov. 16, 1999]



Sec. 308.146  Powers of person conducting investigation.

    The person designated to conduct a section 10(c) investigation shall 
have the power, among other things, to administer oaths and 
affirmations, to take and preserve testimony under oath, to issue 
subpoenas and subpoenas duces tecum and to apply for their enforcement 
to the United States District Court for the judicial district or the 
United States court in any territory in which the main office of the 
bank, institution, or affiliate is located or in which the witness 
resides or conducts business. The person conducting the investigation 
may obtain the assistance of counsel or others from both within and 
outside the FDIC. The persons who issue the order of investigation may 
limit, quash, or modify any subpoena or subpoena duces tecum, upon 
application and for good cause shown. The person conducting an 
investigation may report to the Board of Directors any instance where 
any attorney has been guilty of contemptuous conduct. The Board of 
Directors, upon motion of the person conducting the investigation, or on 
its own motion, may make a finding of contempt and may then summarily 
suspend, without a hearing, any attorney representing a witness from 
further participation in the investigation.



Sec. 308.147  Investigations confidential.

    lnvestigations conducted pursuant to section 10(c) shall be 
confidential. Information and documents obtained by the FDIC in the 
course of such investigations shall not be disclosed, except as provided 
in part 309 of this chapter and as otherwise required by law.



Sec. 308.148  Rights of witnesses.

    In an investigation pursuant to section 10(c):
    (a) Any person compelled or requested to furnish testimony, 
documentary evidence, or other information, shall upon request be shown 
and provided with a copy of the order initiating the proceeding;
    (b) Any person compelled or requested to provide testimony as a 
witness or to furnish documentary evidence may be represented by a 
counsel who meets the requirements of Sec. 308.6 of the Uniform Rules. 
That counsel may be present and may:
    (1) Advise the witness before, during, and after such testimony;

[[Page 92]]

    (2) Briefly question the witness at the conclusion of such testimony 
for clarification purposes; and
    (3) Make summary notes during such testimony solely for the use and 
benefit of the witness;
    (c) All persons testifying shall be sequestered. Such persons and 
their counsel shall not be present during the testimony of any other 
person, unless permitted in the discretion of the person conducting the 
investigation;
    (d) In cases of a perceived or actual conflict of interest arising 
out of an attorney's or law firm's representation of multiple witnesses, 
the person conducting the investigation may require the attorney to 
comply with the provisions of Sec. 308.8 of the Uniform Rules; and
    (e) Witness fees shall be paid in accordance with Sec. 308.14 of 
the Uniform Rules.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999]



Sec. 308.149  Service of subpoena.

    Service of a subpoena shall be accomplished in accordance with Sec. 
308.11 of the Uniform Rules.



Sec. 308.150  Transcripts.

    (a) General rule. Transcripts of testimony, if any, in an 
investigation pursuant to section 10(c) shall be recorded by an official 
reporter, or by any other person or means designated by the person 
conducting the investigation. A witness may, solely for the use and 
benefit of the witness, obtain a copy of the transcript of his or her 
testimony at the conclusion of the investigation or, at the discretion 
of the person conducting the investigation, at an earlier time, provided 
the transcript is available. The witness requesting a copy of his or her 
testimony shall bear the cost thereof.
    (b) Subscription by witness. The transcript of testimony shall be 
subscribed by the witness, unless the person conducting the 
investigation and the witness, by stipulation, have waived the signing, 
or the witness is ill, cannot be found, or has refused to sign. If the 
transcript of the testimony is not subscribed by the witness, the 
official reporter taking the testimony shall certify that the transcript 
is a true and complete transcript of the testimony.



 Subpart L_Procedures and Standards Applicable to a Notice of Change in 
 Senior Executive Officer or Director Pursuant to Section 32 of the FDIA



Sec. 308.151  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the notice filed by a state nonmember bank pursuant to section 32 of the 
FDIA (12 U.S.C. 1831i) and Sec. 303.102 of this chapter for the consent 
of the FDIC to add or replace an individual on the Board of Directors, 
or to employ any individual as a senior executive officer, or change the 
responsibilities of any individual to a position of senior executive 
officer where:
    (a) The bank is not in compliance with all minimum capital 
requirements applicable to it as determined by the FDIC on the basis of 
such institution's most recent report of condition or report of 
examination or inspection;
    (b) The bank is in a troubled condition as defined in Sec. 
303.101(c) of this chapter; or
    (c) The FDIC determines, in connection with the review of a capital 
restoration plan required under section 38(e)(2) of the FDIA (12 U.S.C. 
1831o(e)(2)) or otherwise, that such prior notice is appropriate.

[64 FR 62100, Nov. 16, 1999]



Sec. 308.152  Grounds for disapproval of notice.

    The Board of Directors or its designee may issue a notice of 
disapproval with respect to a notice submitted by a state nonmember bank 
pursuant to section 32 of the FDIA (12 U.S.C. 1831i) where:
    (a) The competence, experience, character, or integrity of the 
individual with respect to whom such notice is submitted indicates that 
it would not be in the best interests of the depositors of the state 
nonmember bank to permit the individual to be employed by or associated 
with such bank; or
    (b) The competence, experience, character, or integrity of the 
individual

[[Page 93]]

with respect to whom such notice is submitted indicates that it would 
not be in the best interests of the public to permit the individual to 
be employed by, or associated with, the state nonmember bank.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.153  Procedures where notice of disapproval issues pursuant to 
Sec. 303.103(c) of this chapter.

    (a) The Notice of Disapproval shall be served upon the insured state 
nonmember bank and the candidate for director or senior executive 
officer. The Notice of Disapproval shall:
    (1) Summarize or cite the relevant considerations specified in Sec. 
308.152;
    (2) Inform the individual and the bank that a request for review of 
the disapproval may be filed within fifteen days of receipt of the 
Notice of Disapproval; and
    (3) Specify that additional information, if any, must be contained 
in the request for review.
    (b) The request for review must be filed at the appropriate regional 
office.
    (c) The request for review must be in writing and should:
    (1) Specify the reasons why the FDIC should reconsider its 
disapproval; and
    (2) Set forth relevant, substantive and material documents, if any, 
that for good cause were not previously set forth in the notice required 
to be filed pursuant to section 32 of the FDIA (12 U.S.C. 1831i).

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.154  Decision on review.

    (a) Within 30 days of receipt of the request for review, the Board 
of Directors or its designee, shall notify the bank and/or the 
individual filing the reconsideration (hereafter ``petitioner'') of the 
FDIC's decision on review.
    (b) If the decision is to grant the review and approve the notice, 
the bank and the individual involved shall be so notified.
    (c) A denial of the request for review pursuant to section 32 of the 
FDIA shall:
    (1) Inform the petitioner that a written request for a hearing, 
stating the relief desired and the grounds therefore, may be filed with 
the Executive Secretary within 15 days after the receipt of the denial; 
and
    (2) Summarize or cite the relevant considerations specified in Sec. 
308.152.
    (d) If a decision is not rendered within 30 days, the petitioner may 
file a request for a hearing within fifteen days from the date of 
expiration.



Sec. 308.155  Hearing.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 30 days after receipt of a request for a hearing 
filed pursuant to Sec. 308.154. Upon request of the petitioner or the 
FDIC, the presiding officer or the Executive Secretary may order a later 
hearing date.
    (b) Burden of proof. The ultimate burden of proof shall be upon the 
candidate for director or senior executive officer. The burden of going 
forward with a prima facie case shall be upon the FDIC.
    (c) Hearing procedure. (1) The hearing shall be held in Washington, 
DC or at another designated place, before a presiding officer designated 
by the Executive Secretary.
    (2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102, and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The petitioner may appear at the hearing and shall have the 
right to introduce relevant and material documents and make an oral 
presentation. Members of the FDIC enforcement staff may attend the 
hearing and participate as representatives of the FDIC enforcement 
staff.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be

[[Page 94]]

furnished, upon request and payment of the cost thereof, to the 
petitioner afforded the hearing.
    (6) In the course of or in connection with any hearing under 
paragraph (c) of this section the presiding officer shall have the power 
to administer oaths and affirmations, to take or cause to be taken 
depositions of unavailable witnesses, and to issue, revoke, quash, or 
modify subpoenas and subpoenas duces tecum. Where the presentation of 
witnesses is permitted, the presiding officer may require the attendance 
of witnesses from any state, territory, or other place subject to the 
jurisdiction of the United States at any location where the proceeding 
is being conducted. Witness fees shall be paid in accordance with Sec. 
308.14 of the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or the 
members of the FDIC enforcement staff, the record shall remain open for 
five business days following the hearing for the parties to make 
additional submissions to the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors or its designee, where possible, within fifteen days after the 
last day for the parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors or its designee. 
The Executive Secretary's certification shall close the record.
    (d) Written submissions in lieu of hearing. The petitioner may in 
writing waive a hearing and elect to have the matter determined on the 
basis of written submissions.
    (e) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the order shall be final and unappealable, and shall remain in 
full force and effect.
    (f) Decision by Board of Directors or its designee. Within 45 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected individual whether the denial of the 
notice will be continued, terminated, or otherwise modified. The 
notification shall state the basis for any decision of the Board of 
Directors or its designee that is adverse to the petitioner. The Board 
of Directors or its designee shall promptly rescind or modify the denial 
where the decision is favorable to the petitioner.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Subpart M_Procedures and Standards Applicable to an Application Pursuant 
                        to Section 19 of the FDIA



Sec. 308.156  Scope.

    The rules and procedures set forth in this subpart shall apply to an 
application filed pursuant to section 19 of the FDIA (12 U.S.C. 1829) by 
an insured depository institution and/or an individual, who has been 
convicted of any criminal offense involving dishonesty or a breach of 
trust or money laundering or who has agreed to enter into a pretrial 
diversion or similar program in connection with the prosecution of such 
offense, to seek the prior written consent of the FDIC to become or 
continue as an institution-affiliated party with respect to an insured 
depository institution; to own or control directly or indirectly an 
insured depository institution; or to participate directly or indirectly 
in any manner in the conduct of the affairs of an insured depository 
institution.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999; 64 
FR 72913, Dec. 29, 1999]



Sec. 308.157  Relevant considerations.

    (a) In proceedings under Sec. 308.156 on an application to become 
or continue as an institution-affiliated party with respect to an 
insured depository institution; to own or control directly or indirectly 
an insured depository institution; or to participate directly or 
indirectly in any manner in the conduct of

[[Page 95]]

the affairs of an insured depository institution, the following shall be 
considered:
    (1) Whether the conviction or entry into a pretrial diversion or 
similar program is for a criminal offense involving dishonesty or breach 
of trust or money laundering;
    (2) Whether participation directly or indirectly by the person in 
any manner in the conduct of the affairs of the insured depository 
institution constitutes a threat to the safety or soundness of the 
insured depository institution or the interests of its depositors, or 
threatens to impair public confidence in the insured depository 
institution;
    (3) Evidence of the applicant's rehabilitation;
    (4) The position to be held by the applicant;
    (5) The amount of influence and control the applicant will be able 
to exercise over the affairs and operations of the insured depository 
institution;
    (6) The ability of the management at the insured depository 
institution to supervise and control the activities of the applicant;
    (7) The level of ownership which the applicant will have at the 
insured depository institution;
    (8) Applicable fidelity bond coverage for the applicant; and
    (9) Additional factors in the specific case that appear relevant.
    (b) The question of whether a person, who was convicted of a crime 
or who agreed to enter a pretrial diversion or similar program, was 
guilty of that crime shall not be at issue in a proceeding under this 
subpart.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.158  Filing papers and effective date.

    (a) Filing with the regional office. Applications pursuant to 
section 19 shall be filed by in the appropriate regional office. Unless 
a waiver has been granted pursuant to paragraph (c) of this section, 
only an insured depository institution may file an application. Persons 
meeting the de minimis criteria set forth in the FDIC's Statement of 
Policy on Section 19 of the FDIA (63 FR 66177 (1998)) need not file an 
application.
    (b) Effective date. An application pursuant to section 19 may be 
made in writing at any time more than one year after the issuance of a 
decision denying an application pursuant to section 19. The removal and/
or prohibition pursuant to section 19 shall continue until the 
individual has been reinstated by the Board of Directors or its designee 
for good cause shown.
    (c) Waiver applications. If an institution does not file an 
application regarding an individual, the individual may file a request 
for a waiver of the institution filing requirement for section 19 of the 
FDIA. Such a waiver application shall be filed with the appropriate 
regional office and shall set forth substantial good cause why the 
application should be granted. The Director of the Division of 
Supervision and Consumer Protection (DSC) and, where confirmed in 
writing by the director, a deputy director or an associate director may 
grant or deny applications requesting waivers of the institution filing 
requirement. The authority delegated under this section shall be 
exercised only upon the concurrent certification of the General Counsel 
or his designee that the action to be taken is not inconsistent with 
section 19 of the FDIA.

[64 FR 62101, Nov. 16, 1999]



Sec. 308.159  Denial of applications.

    A denial of an application pursuant to section 19 shall:
    (a) Inform the applicant that a written request for a hearing, 
stating the relief desired and the grounds therefor and any supporting 
evidence, may be filed with the Executive Secretary within 60 days after 
the denial; and
    (b) Summarize or cite the relevant considerations specified in Sec. 
308.157 of this subpart.



Sec. 308.160  Hearings.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 60 days after receipt of a request for hearing on an 
application filed pursuant to Sec. 308.159. Upon the request of the 
applicant or FDIC enforcement counsel, the presiding officer or

[[Page 96]]

the Executive Secretary may order a later hearing date.
    (b) Burden of proof. The ultimate burden of proof shall be upon the 
person proposing to become or continue as an institution-affiliated 
party with respect to an insured depository institution; to own or 
control directly or indirectly an insured depository institution; or to 
participate directly or indirectly in any manner in the conduct of the 
affairs of an insured depository institution. The burden of going 
forward with a prima facie case shall be upon the FDIC.
    (c) Hearing procedure. (1) The hearing shall be held in Washington, 
DC, or at another designated place, before a presiding officer 
designated by the Executive Secretary.
    (2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102 and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The applicant may appear at the hearing and shall have the right 
to introduce relevant and material documents and oral argument. Members 
of the FDIC enforcement staff may attend the hearing and participate as 
a party.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the applicant afforded the hearing.
    (6) In the course of or in connection with any hearing under this 
subsection, the presiding officer shall have the power to administer 
oaths and affirmations, to take or cause to be taken depositions of 
unavailable witnesses, and to issue, revoke, quash, or modify subpoenas 
and subpoenas duces tecum. Where the presentation of witnesses is 
permitted, the presiding officer may require the attendance of witnesses 
from any state, territory, or other place subject to the jurisdiction of 
the United States at any location where the proceeding is being 
conducted. Witness fees shall be paid in accordance with Sec. 308.14 of 
the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or FDIC 
enforcement staff, the record shall remain open for five business days 
following the hearing for the parties to make additional submissions to 
the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors, where possible, within 20 days after the last day for the 
parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors or its designee. 
The Executive Secretary's certification shall close the record.
    (d) Written submissions in lieu of hearing. The applicant or the 
bank may in writing waive a hearing and elect to have the matter 
determined on the basis of written submissions.
    (e) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the person shall remain barred under section 19.
    (f) Decision by Board of Directors or its designee. Within 60 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected person whether the person shall 
remain barred under section 19. The notification shall state the basis 
for any decision of the Board of Directors or its designee that is 
adverse to the applicant.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]

[[Page 97]]



  Subpart N_Rules and Procedures Applicable to Proceedings Relating to 
     Suspension, Removal, and Prohibition Where a Felony ls Charged



Sec. 308.161  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the following:
    (a) Proceedings to suspend an institution-affiliated party of an 
insured state nonmember bank, or to prohibit such party from further 
participation in the conduct of the affairs of the bank, if continued 
service or participation by such party poses a threat to the interests 
of the bank's depositors or threatens to impair public confidence in the 
depository institution, where the individual is charged in any state or 
federal information, indictment, or complaint, with the commission of, 
or participation in:
    (1) A crime involving dishonesty or breach of trust punishable by 
imprisonment exceeding one year under state or federal law; or (2) A 
criminal violation of section 1956, 1957, or 1960 of Title 18 or section 
5322 or 5324 of Title 31.
    (b) Proceedings to remove from office or to prohibit an institution-
affiliated party from further participation in the conduct of the 
affairs of the bank without the consent of the Board of Directors or its 
designee where:
    (1) A judgment of conviction or an agreement to enter a pre-trial 
diversion or other similar program has been entered against such party 
in connection with a crime described in paragraph (a)(1) of this section 
that is not subject to further appellate review, if continued service or 
participation by such party poses a threat to the interests of the 
bank's depositors or threatens to impair public confidence in the 
depository institution; or
    (2) A judgment of conviction or an agreement to enter a pre-trial 
diversion or other similar program has been entered against such party 
in connection with a crime described in paragraph (a)(2) of this 
section.

[64 FR 62101, Nov. 16, 1999]



Sec. 308.162  Relevant considerations.

    (a)(1) In proceedings under Sec. 308.161 (a) and (b) for a 
suspension, removal or prohibition order, the following shall be 
considered:
    (i) Whether the alleged offense is a crime which is punishable by 
imprisonment for a term exceeding one year under state or federal law 
and which involves dishonesty or breach of trust; and
    (ii) Whether the alleged offense is a criminal violation of section 
1956, 1957, or 1960 of Title 18 or section 5322 or 5324 of Title 31; and
    (iii) Whether continued service or participation by the institution-
affiliated party may pose a threat to the interest of the bank's 
depositors, or threatens to impair public confidence in the bank.
    (b) The question of whether an institution-affiliated party charged 
with a crime is guilty of the crime charged shall not be tried or 
considered in a proceeding under this subpart.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.163  Notice of suspension, and orders of removal or prohibition.

    (a) Notice of suspension or prohibition. (1) The Board of Directors 
or its designee may suspend or prohibit from further participation in 
the conduct of the affairs of the bank an institution-affiliated party 
by written notice of suspension or prohibition upon a determination by 
the Board of Directors or its designee that the grounds for such 
suspension or prohibition exist. The written notice of suspension or 
prohibition shall be served upon the institution-affiliated party and 
the bank.
    (2) The written notice of suspension shall:
    (i) Inform the institution-affiliated party that a written request 
for a hearing, stating the relief desired and grounds therefore, and any 
supporting evidence, may be filed with the Executive Secretary within 30 
days after receipt of the written notice; and
    (ii) Summarize or cite to the relevant considerations specified in 
Sec. 308.162 of this subpart.
    (3) The suspension or prohibition shall be effective immediately 
upon

[[Page 98]]

service on the institution-affiliated party, and shall remain in effect 
until final disposition of the information, indictment, complaint, or 
until it is terminated by the Board of Directors or its designee under 
the provisions of Sec. 308.164 or otherwise.
    (b) Order of removal or prohibition. (1) The Board of Directors or 
its designee may issue an order removing or prohibiting from further 
participation in the conduct of the affairs of the bank an institution-
affiliated party, when a final judgment of conviction not subject to 
further appellate review is entered against the individual for a crime 
referred to in Sec. 308.161(a)(1) and continued service or 
participation by such party poses a threat to the interests of the 
bank's depositors or threatens to impair public confidence in the 
depository institution.
    (2) An order of removal or prohibition shall be entered if a 
judgment of conviction is entered against the individual for a crime 
described in Sec. 308.161(a)(ii).

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.164  Hearings.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 30 days after receipt of a request for hearing on an 
application filed pursuant to Sec. 308.163. Upon the request of the 
applicant, the presiding officer or the Executive Secretary may order a 
later hearing date.
    (b) Hearing procedure. (1) The hearing shall be held in Washington, 
DC, or at another designated place, before a presiding officer 
designated by the Executive Secretary.
    (2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102 and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The applicant may appear at the hearing and shall have the right 
to introduce relevant and material documents and oral argument. Members 
of the FDIC enforcement staff may attend the hearing and participate as 
representatives of the FDIC enforcement staff.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the applicant afforded the hearing.
    (6) In the course of or in connection with any hearing under 
paragraph (b) of this section, the presiding officer shall have the 
power to administer oaths and affirmations, to take or cause to be taken 
depositions of unavailable witnesses, and to issue, revoke, quash, or 
modify subpoenas and subpoenas duces tecum. Where the presentation of 
witnesses is permitted, the presiding officer may require the attendance 
of witnesses from any state, territory, or other place subject to the 
jurisdiction of the United States at any location where the proceeding 
is being conducted. Witness fees shall be paid in accordance with Sec. 
308.14 of the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or the 
members of the FDIC enforcement staff, the record shall remain open for 
five business days following the hearing for the parties to make 
additional submissions to the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors, where possible, within ten days after the last day for the 
parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors. The Executive 
Secretary's certification shall close the record.
    (c) Written submissions in lieu of hearing. The applicant or the 
bank may in writing waive a hearing and elect to

[[Page 99]]

have the matter determined on the basis of written submissions.
    (d) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the order shall be final and unappealable, and shall remain in 
full force and effect pursuant to Sec. 308.163.
    (e) Decision by Board of Directors or its designee. Within 60 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected individual whether the order of 
removal or prohibition will be continued, terminated, or otherwise 
modified. The notification shall state the basis for any decision of the 
Board of Directors or its designee that is adverse to the applicant. The 
Board of Directors or its designee shall promptly rescind or modify an 
order of removal or prohibition where the decision is favorable to the 
applicant.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



   Subpart O_Liability of Commonly Controlled Depository Institutions



Sec. 308.165  Scope.

    The rules and procedures in this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings in connection 
with the assessment of cross-guaranty liability against commonly 
controlled depository institutions.



Sec. 308.166  Grounds for assessment of liability.

    Any insured depository institution shall be liable for any loss 
incurred or reasonably anticipated to be incurred by the corporation, 
subsequent to August 9, 1989, in connection with the default of a 
commonly controlled insured depository institution, or any loss incurred 
or reasonably anticipated to be incurred in connection with any 
assistance provided by the Corporation to any commonly controlled 
depository institution in danger of default.



Sec. 308.167  Notice of assessment of liability.

    (a) The amount of liability shall be assessed upon service of a 
Notice of Assessment of Liability upon the liable depository 
institution, within two years of the date the Corporation incurred the 
loss.
    (b) Contents of Notice. (1) The Notice of Assessment of Liability 
shall set forth:
    (i) The basis for the FDIC's jurisdiction over the proceeding;
    (ii) A statement of the Corporation's good faith estimate of the 
amount of loss it has incurred or anticipates incurring;
    (iii) A statement of the method by which the estimated loss was 
calculated;
    (iv) A proposed order directing payment by the liable institution of 
the FDIC's estimated amount of loss, and the schedule under which the 
payment will be due;
    (v) In cases involving more than one liable institution, the 
estimated amount of each institution's share of the liability.
    (2) The Notice of Assessment of Liability shall advise the liable 
institution(s):
    (i) That an answer must be filed within 20 days after service of the 
Notice;
    (ii) That, if a hearing is requested, a request for a hearing must 
be filed within 20 days after service of the Notice;
    (iii) That if a hearing is requested, such hearing will be held 
within the judicial district in which the liable institution is found, 
or, in cases involving more than one liable institution, within a 
judicial district in which at least one liable institution is found;
    (iv) That, unless the administrative law judge sets a different 
date, the hearing will commence 120 days after service of the Notice of 
Assessment of Liability; and
    (v) That failure to request a hearing shall render the Notice of 
Assessment a final and unappealable order.

[[Page 100]]



Sec. 308.168  Effective date of and payment under an order to pay.

    (a) Unless otherwise provided in the Notice of Assessment of 
Liability, payment of the assessment shall be due on or before the 21st 
day after service of the Assessment of Liability, under the terms of the 
schedule for payment set forth therein.
    (b) All payments collected shall be paid to the Corporation.
    (c) Failure to request a hearing as prescribed herein shall render 
the order to pay final and unappealable.



Subpart P_Rules and Procedures Relating to the Recovery of Attorney Fees 
                           and Other Expenses



Sec. 308.169  Scope.

    This subpart, and the Equal Access to Justice Act (5 U.S.C. 504), 
which it implements, apply to adversary adjudications before the FDIC. 
The types of adjudication covered by this subpart are those listed in 
Sec. 308.01 of the Uniform Rules. The Uniform Rules and subpart B of 
the Local Rules apply to any proceedings to recover fees and expenses 
under this subpart.



Sec. 308.170  Filing, content, and service of documents.

    (a) Time to file. An application and any other pleading or document 
related to the application shall be filed with the Executive Secretary 
within 30 days after service of the final order of the Board of 
Directors in disposition of the proceeding whenever:
    (1) The applicant seeks an award pursuant to 5 U.S.C. 504(a)(1) as 
the prevailing party in the adversary adjudication or in a discrete 
significant substantive portion of the proceeding; or
    (2) The applicant, in an adversary adjudication arising from an 
action to enforce compliance with a statutory or regulatory requirement, 
asserts pursuant to 5 U.S.C. 504(a)(4) that the demand by the FDIC is 
substantially in excess of the decision of the administrative law judge 
and is unreasonable when compared with such decision under the facts and 
circumstances of the case.
    (b) Content. The application and related documents shall conform to 
the requirements of Sec. 308.10(b) and (c) of the Uniform Rules.
    (c) Service. The application and related documents shall be served 
on all parties to the adversary adjudication in accordance with Sec. 
308.11 of the Uniform Rules, except that statements of net worth shall 
be served only on counsel for the FDIC.
    (d) Upon receipt of an application, the Executive Secretary shall 
refer the matter to the administrative law judge who heard the 
underlying adversary proceeding, provided that if the original 
administrative law judge is unavailable, or the Executive Secretary 
determines, in his or her sole discretion, that there is cause to refer 
the matter to a different administrative law judge, the matter shall be 
referred to a different administrative law judge.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.171  Responses to application.

    (a) By FDIC. (1) Within 20 days after service of an application, 
counsel for the FDIC may file with the Executive Secretary and serve on 
all parties an answer to the application. Unless counsel for the FDIC 
requests and is granted an extension of time for filing or files a 
statement of intent to negotiate under Sec. 308.179 of this subpart, 
failure to file an answer within the 20-day period will be treated as a 
consent to the award requested.
    (2) The answer shall explain in detail any objections to the award 
requested and identify the facts relied on in support of the FDIC's 
position. If the answer is based on any alleged facts not already in the 
record of the proceeding, the answer shall include either supporting 
affidavits or a request for further proceedings under Sec. 308.180.
    (b) Reply to answer. The applicant may file a reply with regard to 
an application filed pursuant to 5 U.S.C. 504 (a)(1), if the FDIC has 
addressed in its answer any of the following issues: that the position 
of the FDIC was substantially justified, that the applicant unduly 
protracted the proceedings, or that special circumstances make an award 
unjust. The applicant may file a reply with regard to an application

[[Page 101]]

filed pursuant to 5 U.S.C. 504 (a)(4), if the FDIC has addressed in its 
answer any of the following issues: that the applicant has committed a 
willful violation of law or otherwise acted in bad faith, that the 
FDIC's demand is reasonable when compared to the decision of the 
administrative law judge or that special circumstances make an award 
unjust. The reply shall be filed within 15 days after service of the 
answer. If the reply is based on any alleged facts not already in the 
record of the proceeding, the reply shall include either supporting 
affidavits or a request for further proceedings under Sec. 308.180.
    (c) By other parties. Any party to the adversary adjudication, other 
than the applicant and the FDIC, may file comments on an application 
within 20 days after service of the application. If the applicant is 
entitled to file a reply to the FDIC's answer under paragraph (b) of 
this section, another party may file comments on the answer within 15 
days after service of the answer. A commenting party may not participate 
in any further proceedings on the application unless the administrative 
law judge determines that the public interest requires such 
participation in order to permit additional exploration of matters 
raised in the comments.
    (d) Additional response. Additional filings in the nature of 
pleadings may be submitted only by leave of the administrative law 
judge.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.172  Eligibility of applicants.

    (a) Genera1 rule. To be eligible for an award under this subpart, an 
applicant must have been named or admitted as a party to the proceeding. 
In addition, the applicant must show that it meets all other conditions 
of eligibility set out in paragraph (b) of this section.
    (b) Types of eligible applicant. The types of eligible applicant 
are:
    (1) An individual with a net worth of not more than $2,000,000 at 
the time the adversary adjudication was initiated; or
    (2) Any owner of an unincorporated business, or any partnership, 
corporation, associations, unit of local government or organization, the 
net worth of which did not exceed $7,000,000 and which did not have more 
than 500 employees at the time the adversary adjudication was initiated.
    (3) For purposes of an application filed pursuant to 5 U.S.C. 
504(a)(4), a small entity as defined in 5 U.S.C. 601.
    (c) Factors to be considered. In determining the types of eligible 
applicants:
    (1) An applicant who owns an unincorporated business shall be 
considered as an individual rather than a sole owner of an 
unincorporated business if the issues on which he or she prevails are 
related to personal interests rather than to business interests.
    (2) An applicant's net worth includes the value of any assets 
disposed of for the purpose of meeting an eligibility standard and 
excludes the value of any obligations incurred for this purpose. 
Transfers of assets or obligations incurred for less than reasonably 
equivalent value will be presumed to have been made for this purpose.
    (3) The net worth of a bank shall be established by the net worth 
information reported in conformity with applicable instructions and 
guidelines on the bank's Consolidated Report of Condition and Income 
filed for the last reporting date before the initiation of the adversary 
adjudication.
    (4) The employees of an applicant include all those persons who were 
regularly providing services for remuneration for the applicant, under 
its direction and control, on the date the adversary adjudication was 
initiated. Part-time employees are included as though they were full-
time employees.
    (5) The net worth and number of employees of the applicant and all 
of its affiliates shall be aggregated to determine eligibility. The 
aggregated net worth shall be adjusted if necessary to avoid counting 
the net worth of any entity twice. As used in this subpart, affiliates 
are individuals, corporations, and entities that directly or indirectly 
or acting through one or more entities control a majority of the voting 
shares of the applicant; and corporations and entities of which the 
applicant directly or indirectly owns or controls a majority of the 
voting shares. The Board of Directors may, however, on the 
recommendation of the administrative law judge, or otherwise, determine 
that such aggregation with regard to one or

[[Page 102]]

more of the applicant's affiliates would be unjust and contrary to the 
purposes of this subpart in light of the actual relationship between the 
affiliated entities. In such a case the net worth and employees of the 
relevant affiliate or affiliates will not be aggregated with those of 
the applicant. In addition, the Board of Directors may determine that 
financial relationships of the applicant other than those described in 
this paragraph constitute special circumstances that would make an award 
unjust.
    (6) An applicant that participates in a proceeding primarily on 
behalf of one or more other persons or entities that would be ineligible 
is not itself eligible for an award.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.173  Prevailing party.

    (a) General rule. An eligible applicant who, following an adversary 
adjudication has gained victory on the merits in the proceeding is a 
``prevailing party''. An eligible applicant may be a ``prevailing 
party'' if a settlement of the proceeding was effected on terms 
favorable to it or if the proceeding against it has been dismissed. In 
appropriate situations an applicant may also have prevailed if the 
outcome of the proceeding has substantially vindicated the applicant's 
position on the significant substantive matters at issue, even though 
the applicant has not totally avoided adverse final action.
    (b) Segregation of costs. When a proceeding has presented a number 
of discrete substantive issues, an applicant may have prevailed even 
though all the issues were not resolved in its favor. If such an 
applicant is deemed to have prevailed, any award shall be based on the 
fees and expenses incurred in connection with the discrete significant 
substantive issue or issues on which the applicant's position has been 
upheld. If such segregation of costs is not practicable, the award may 
be based on a fair proration of those fees and expenses incurred in the 
entire proceeding which would be recoverable under Sec. 308.175 if 
proration were not performed, whether separate or prorated treatment is 
appropriate, and the appropriate proration percentage, shall be 
determined on the facts of the particular case. Attention shall be given 
to the significance and nature of the respective issues and their 
separability and interrelationship.



Sec. 308.174  Standards for awards.

    (a) For applications filed pursuant to 5 U.S.C. 504(a)(1), a 
prevailing applicant may receive an award for fees and expenses unless 
the position of the FDIC during the proceeding was substantially 
justified or special circumstances make the award unjust. An award will 
be reduced or denied if the applicant has unduly or unreasonably 
protracted the proceedings. Awards for fees and expenses incurred before 
the date on which the adversary adjudication was initiated are allowable 
if their incurrence was necessary to prepare for the proceeding.
    (b) For applications filed pursuant to 5 U.S.C. 504(a)(4), an 
applicant may receive an award unless the demand by the FDIC was 
reasonable when compared with the decision of the administrative law 
judge, the applicant has committed a willful violation of law or 
otherwise acted in bad faith, or special circumstances make an award 
unjust.

[64 FR 62102, Nov. 16, 1999]



Sec. 308.175  Measure of awards.

    (a) General rule. Awards will be based on rates customarily charged 
by persons engaged in the business of acting as attorneys, agents, and 
expert witnesses, even if the services were made available without 
charge or at a reduced rate, provided that no award under this subpart 
for the fee of an attorney or agent may exceed $125 per hour. No award 
to compensate an expert witness may exceed the highest rate at which the 
FDIC pays expert witnesses. An award may include the reasonable expenses 
of the attorney, agent, or expert witness as a separate item, if the 
attorney, agent, or expert witness ordinarily charges clients separately 
for such expenses. Fees and expenses awarded under 5 U.S.C. 504(a)(4) 
related to defending against an excessive demand shall be paid only as a 
consequence of appropriations paid in advance.
    (b) Determination of reasonableness of fees. In determining the 
reasonableness

[[Page 103]]

of the fee sought for an attorney, agent, or expert witness, the 
administrative law judge shall consider the following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fee for like services, or, if he or she 
is an employee of the applicant, the fully allocated cost of the 
services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;
    (3) The time actually spent in the representation of the applicant;
    (4) The time reasonably spent in light of the difficulty or 
complexity of the issues in the proceeding; and
    (5) Such other factors as may bear on the value of the services 
provided.
    (c) Awards for studies. The reasonable cost of any study, analysis, 
test, project, or similar matter prepared on behalf of an applicant may 
be awarded to the extent that the charge for the service does not exceed 
the prevailing rate payable for similar services, and the study or other 
matter was necessary for preparation of the applicant's case and not 
otherwise required by law or sound business or financial practice.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.176  Application for awards.

    (a) Contents. An application for an award of fees and expenses under 
this subpart shall contain:
    (1) The name of the applicant and an identification of the 
proceeding;
    (2) For applications filed pursuant to 5 U.S.C. 504(a)(1), a showing 
that the applicant has prevailed, and an identification of each issue 
with regard to which the applicant believes that the position of the 
FDIC in the proceeding was not substantially justified;
    (3) For applications filed pursuant to 5 U.S.C. 504(a)(4), a showing 
that the demand by the FDIC is substantially in excess of the decision 
of the administrative law judge and is unreasonable when compared with 
such decision under the facts and circumstances of the case;
    (4) A statement of the amount of fees and expenses for which an 
award is sought;
    (5) For applications filed pursuant to 5 U.S.C. 504(a)(4), a 
statement of the amount of fees and expenses which constitute 
appropriations paid in advance;
    (6) If the applicant is not an individual, a statement of the number 
of its employees on the date the proceeding was initiated;
    (7) A description of any affiliated individuals or entities, as 
defined in Sec. 308.172(c)(5), or a statement that none exist;
    (8) A declaration that the applicant, together with any affiliates, 
had a net worth not more than the ceiling established for it by Sec. 
308.172(b) as of the date the proceeding was initiated;
    (9) For applications filed pursuant to 5 U.S.C. 504(a)(1), a 
statement whether the applicant is a small entity as defined in 5 U.S.C. 
601; and
    (10) Any other matters that the applicant wishes the FDIC to 
consider in determining whether and in what amount an award should be 
made.
    (b) Verification. The application shall be signed by the applicant 
or an authorized officer or attorney of the applicant. It shall also 
contain or be accompanied by a written verification under oath or under 
penalty of perjury that the information provided in the application and 
supporting documents is true and correct.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.177  Statement of net worth.

    (a) General rule. A statement of net worth must be filed with the 
application for an award of fees. The statement shall reflect the net 
worth of the applicant and all affiliates of the applicant.
    (b) Contents. (1) The statement of net worth may be in any form 
convenient to the applicant which fully discloses all the assets and 
liabilities of the applicant and all the assets and liabilities of its 
affiliates, as of the time of the initiation of the adversary 
adjudication. Unaudited financial statements are acceptable unless the 
administrative law judge or the Board of Directors otherwise requires. 
Financial statements or reports to a Federal or

[[Page 104]]

state agency, prepared before the initiation of the adversary 
adjudication for other purposes, and accurate as of a date not more than 
three months prior to the initiation of the proceeding, are acceptable 
in establishing net worth as of the time of the initiation of the 
proceeding, unless the administrative law judge or the Board of 
Directors otherwise requires.
    (2) In the case of applicants or affiliates that are not banks, net 
worth shall be considered for the purposes of this subpart to be the 
excess of total assets over total liabilities, as of the date the 
underlying proceeding was initiated, except as adjusted under Sec. 
308.172(c)(2). Assets and liabilities of individuals shall include those 
beneficially owned within the meaning of the FDIC's rules and 
regulations.
    (3) If the applicant or any of its affiliates is a bank, the portion 
of the statement of net worth which relates to the bank shall consist of 
a copy of the bank's last Consolidated Report of Condition and Income 
filed before the initiation of the adversary adjudication. In all cases 
the administrative law judge or the Board of Directors may call for 
additional information needed to establish the applicant's net worth as 
of the initiation of the proceeding. Except as adjusted by additional 
information that was called for under the preceding sentence, net worth 
shall be considered for the purposes of this subpart to be the total 
equity capital (or, in the case of mutual savings banks, the total 
surplus accounts) as reported, in conformity with applicable 
instructions and guidelines, on the bank's Consolidated Report of 
Condition and Income filed for the last reporting date before the 
initiation of the proceeding.
    (c) Statement confidential. Unless otherwise ordered by the Board of 
Directors or required by law, the statement of net worth shall be for 
the confidential use of counsel for the FDIC, the Board of Directors, 
and the administrative law judge.



Sec. 308.178  Statement of fees and expenses.

    The application shall be accompanied by a statement fully 
documenting the fees and expenses for which an award is sought. A 
separate itemized statement shall be submitted for each professional 
firm or individual whose services are covered by the application, 
showing the hours spent in work in connection with the proceeding by 
each individual, a description of the specific services performed, the 
rate at which each fee has been computed, any expenses for which 
reimbursement is sought, the total amount claimed, and the total amount 
paid or payable by the applicant or by any other person or entity for 
the services performed. The administrative law judge or the Board of 
Directors may require the applicant to provide vouchers, receipts, or 
other substantiation for any expenses claimed.



Sec. 308.179  Settlement negotiations.

    If counsel for the FDIC and the applicant believe that the issues in 
a fee application can be settled, they may jointly file with the 
Executive Secretary with a copy to the administrative law judge a 
statement of their intent to negotiate a settlement. The filing of this 
statement shall extend the time for filing an answer under Sec. 308.171 
for an additional 30 days, and further extensions may be granted by the 
administrative law judge upon the joint request of counsel for the FDIC 
and the applicant.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.180  Further proceedings.

    (a) General rule. Ordinarily, the determination of a recommended 
award will be made by the administrative law judge on the basis of the 
written record. However, on request of either the applicant or the FDIC, 
or on his or her own initiative, the administrative law judge may order 
further proceedings such as an informal conference, oral argument, 
additional written submissions, or an evidentiary hearing. Such further 
proceedings will be held only when necessary for full and fair 
resolution of the issues arising from the application and will be 
conducted promptly and expeditiously.
    (b) Request for further proceedings. A request for further 
proceedings under this section shall specifically identify the 
information sought or the issues in

[[Page 105]]

dispute and shall explain why additional proceedings are necessary.
    (c) Hearing. Ordinarily, the administrative law judge shall hold an 
oral evidentiary hearing only on disputed issues of material fact which 
cannot be adequately resolved through written submissions.



Sec. 308.181  Recommended decision.

    The administrative law judge shall file with the Executive Secretary 
a recommended decision on the fee application not later than 90 days 
after the filing of the application or 30 days after the conclusion of 
the hearing, whichever is later. The recommended decision shall include 
written proposed findings and conclusions on the applicant's eligibility 
and its status as a prevailing party and an explanation of the reasons 
for any difference between the amount requested and the amount of the 
recommended award. The recommended decision shall also include, if at 
issue, proposed findings on whether the FDIC's position was 
substantially justified, whether the applicant unduly protracted the 
proceedings, or whether special circumstances make an award unjust. The 
administrative law judge shall file the record of the proceeding on the 
fee application and, at the same time, serve upon each party a copy of 
the recommended decision, findings, conclusions, and proposed order.



Sec. 308.182  Board of Directors action.

    (a) Exceptions to recommended decision. Within 20 days after service 
of the recommended decision, findings, conclusions, and proposed order, 
the applicant or counsel for the FDIC may file with the Executive 
Secretary written exceptions thereto. A supporting brief may also be 
filed.
    (b) Decision of Board of Directors. The Board of Directors shall 
render its decision within 60 days after the matter is submitted to it 
by the Executive Secretary. The Executive Secretary shall furnish copies 
of the decision and order of the Board of Directors to the parties. 
Judicial review of the decision and order may be obtained as provided in 
5 U.S.C. 504(c)(2).



Sec. 308.183  Payment of awards.

    An applicant seeking payment of an award made by the Board of 
Directors shall submit to the Executive Secretary a statement that the 
applicant will not seek judicial review of the decision and order or 
that the time for seeking further review has passed and no further 
review has been sought. The FDIC will pay the amount awarded within 30 
days after receiving the applicant's statement, unless judicial review 
of the award or of the underlying decision of the adversary adjudication 
has been sought by the applicant or any other party to the proceeding.



     Subpart Q_Issuance and Review of Orders Pursuant to the Prompt 
    Corrective Action Provisions of the Federal Deposit Insurance Act

    Source: 57 FR 44897, Sept. 29, 1992, unless otherwise noted.



Sec. 308.200  Scope.

    The rules and procedures set forth in this subpart apply to banks, 
insured branches of foreign banks and senior executive officers and 
directors of banks that are subject to the provisions of section 38 of 
the Federal Deposit Insurance Act (section 38) (12 U.S.C. 1831o) and 
subpart B of part 325 of this chapter.

[57 FR 44897, Sept. 29, 1992; 57 FR 48426, Oct. 23, 1992]



Sec. 308.201  Directives to take prompt corrective action.

    (a) Notice of intent to issue directive--(1) In general. The FDIC 
shall provide an undercapitalized, significantly undercapitalized, or 
critically undercapitalized bank prior written notice of the FDIC's 
intention to issue a directive requiring such bank to take actions or to 
follow proscriptions described in section 38 that are within the FDIC's 
discretion to require or impose under section 38 of the FDI Act, 
including sections 38 (e)(5), (f)(2), (f)(3), or (f)(5). The bank shall 
have such time to respond to a proposed directive as provided by the 
FDIC under paragraph (c) of this section.

[[Page 106]]

    (2) Immediate issuance of final directive. If the FDIC finds it 
necessary in order to carry out the purposes of section 38 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue a directive requiring a bank immediately 
to take actions or to follow proscriptions described in section 38 that 
are within the FDIC's discretion to require or impose under section 38 
of the FDI Act, including section 38 (e)(5), (f)(2), (f)(3), or (f)(5). 
A bank that is subject to such an immediately effective directive may 
submit a written appeal of the directive to the FDIC. Such an appeal 
must be received by the FDIC within 14 calendar days of the issuance of 
the directive, unless the FDIC permits a longer period. The FDIC shall 
consider any such appeal, if filed in a timely matter, within 60 days of 
receiving the appeal. During such period of review, the directive shall 
remain in effect unless the FDIC, in its sole discretion, stays the 
effectiveness of the directive.
    (b) Contents of notice. A notice of intention to issue a directive 
shall include:
    (1) A statement of the bank's capital measures and capital levels;
    (2) A description of the restrictions, prohibitions or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of such affirmative 
actions; and
    (4) The date by which the bank subject to the directive may file 
with the FDIC a written response to the notice.
    (c) Response to notice--(1) Time for response. A bank may file a 
written response to a notice of intent to issue a directive within the 
time period set by the FDIC. The date shall be at least 14 calendar days 
from the date of the notice unless the FDIC determines that a shorter 
period is appropriate in light of the financial condition of the bank or 
other relevant circumstances.
    (2) Content of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 38;
    (ii) Any recommended modification of the proposed directive; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the proposed directive.
    (d) FDIC consideration of response. After considering the response, 
the FDIC may:
    (1) Issue the directive as proposed or in modified form;
    (2) Determine not to issue the directive and so notify the bank; or
    (3) Seek additional information or clarification of the response 
from the bank or any other relevant source.
    (e) Failure to file response. Failure by a bank to file with the 
FDIC, within the specified time period, a written response to a proposed 
directive shall constitute a waiver of the opportunity to respond and 
shall constitute consent to the issuance of the directive.
    (f) Request for modification or rescission of directive. Any bank 
that is subject to a directive under this subpart may, upon a change in 
circumstances, request in writing that the FDIC reconsider the terms of 
the directive, and may propose that the directive be rescinded or 
modified. Unless otherwise ordered by the FDIC, the directive shall 
continue in place while such request is pending before the FDIC.



Sec. 308.202  Procedures for reclassifying a bank based on criteria 
other than capital.

    (a) Reclassification based on unsafe or unsound condition or 
practice--(1) Issuance of notice of proposed reclassification--(i) 
Grounds for reclassification. (A) Pursuant to Sec. 325.103(d) of this 
chapter, the FDIC may reclassify a well capitalized bank as adequately 
capitalized or subject an adequately capitalized or undercapitalized 
institution to the supervisory actions applicable to the next lower 
capital category if:
    (1) The FDIC determines that the bank is in unsafe or unsound 
condition; or
    (2) The FDIC, pursuant to section 8(b)(8) of the FDI Act (12 U.S.C. 
1818(b)(8)), deems the bank to be engaged in an unsafe or unsound 
practice and not to have corrected the deficiency.

[[Page 107]]

    (B) Any action pursuant to this paragraph (a)(1)(i) shall 
hereinafter be referred to as reclassification.
    (ii) Prior notice to institution. Prior to taking action pursuant to 
Sec. 325.103(d) of this chapter, the FDIC shall issue and serve on the 
bank a written notice of the FDIC's intention to reclassify the bank.
    (2) Contents of notice. A notice of intention to reclassify a bank 
based on unsafe or unsound condition shall include:
    (i) A statement of the bank's capital measures and capital levels 
and the category to which the bank would be reclassified;
    (ii) The reasons for reclassification of the bank;
    (iii) The date by which the bank subject to the notice of 
reclassification may file with the FDIC a written appeal of the proposed 
reclassification and a request for a hearing, which shall be at least 14 
calendar days from the date of service of the notice unless the FDIC 
determines that a shorter period is appropriate in light of the 
financial condition of the bank or other relevant circumstances.
    (3) Response to notice of proposed reclassification. A bank may file 
a written response to a notice of proposed reclassification within the 
time period set by the FDIC. The response should include:
    (i) An explanation of why the bank is not in an unsafe or unsound 
condition or otherwise should not be reclassified; and
    (ii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the reclassification.
    (4) Failure to file response. Failure by a bank to file, within the 
specified time period, a written response with the FDIC to a notice of 
proposed reclassification shall constitute a waiver of the opportunity 
to respond and shall constitute consent to the reclassification.
    (5) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the FDIC under this section. If the bank desires to present oral 
testimony or witnesses at the hearing, the bank shall include a request 
to do so with the request for an informal hearing. A request to present 
oral testimony or witnesses shall specify the names of the witnesses and 
the general nature of their expected testimony. Failure to request a 
hearing shall constitute a waiver of any right to a hearing, and failure 
to request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (6) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the FDIC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the bank requests a later date. The 
hearing shall be held in Washington, DC or at such other place as may be 
designated by the FDIC, before a presiding officer(s) designated by the 
FDIC to conduct the hearing.
    (7) Hearing procedures. (i) The bank shall have the right to 
introduce relevant written materials and to present oral argument at the 
hearing. The bank may introduce oral testimony and present witnesses 
only if expressly authorized by the FDIC or the presiding officer(s). 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules of Practice and Procedure in this part 
apply to an informal hearing under this section unless the FDIC orders 
that such procedures shall apply.
    (ii) The informal hearing shall be recorded, and a transcript shall 
be furnished to the bank upon request and payment of the cost thereof. 
Witnesses need not be sworn, unless specifically requested by a party or 
the presiding officer(s). The presiding officer(s) may ask questions of 
any witness.
    (iii) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (8) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding

[[Page 108]]

officer(s) shall make a recommendation to the FDIC on the 
reclassification.
    (9) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the FDIC will decide whether to reclassify the 
bank and notify the bank of the FDIC's decision.
    (b) Request for rescission of reclassification. Any bank that has 
been reclassified under this section, may, upon a change in 
circumstances, request in writing that the FDIC reconsider the 
reclassification, and may propose that the reclassification be rescinded 
and that any directives issued in connection with the reclassification 
be modified, rescinded, or removed. Unless otherwise ordered by the 
FDIC, the bank shall remain subject to the reclassification and to any 
directives issued in connection with that reclassification while such 
request is pending before the FDIC.



Sec. 308.203  Order to dismiss a director or senior executive officer.

    (a) Service of notice. When the FDIC issues and serves a directive 
on a bank pursuant to Sec. 308.201 of this part requiring the bank to 
dismiss from office any director or senior executive officer under Sec. 
38(f)(2)(F)(ii) of the FDI Act, the FDIC shall also serve a copy of the 
directive, or the relevant portions of the directive where appropriate, 
upon the person to be dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed within 
10 calendar days of the receipt of the directive by the Respondent, 
unless further time is allowed by the FDIC at the request of the 
Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement shall include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
FDIC under this section. If the Respondent desires to present oral 
testimony or witnesses at the hearing, the Respondent shall include a 
request to do so with the request for an informal hearing. The request 
to present oral testimony or witnesses shall specify the names of the 
witnesses and the general nature of their expected testimony. Failure to 
request a hearing shall constitute a waiver of any right to a hearing 
and failure to request the opportunity to present oral testimony or 
witnesses shall constitute a waiver of any right or opportunity to 
present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the FDIC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a bank to dismiss from office any director or senior 
executive officer, the FDIC shall issue an order directing an informal 
hearing to commence no later than 30 days after receipt of the request, 
unless the Respondent requests a later date. The hearing shall be held 
in Washington, DC, or at such other place as may be designated by the 
FDIC, before a presiding officer(s) designated by the FDIC to conduct 
the hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the FDIC or the presiding officer(s). Neither 
the provisions of the Administrative Procedure Act governing 
adjudications required by statute to be determined on the record nor the 
Uniform Rules of Practice and Procedure in this part apply to an 
informal hearing under this section unless the FDIC orders that such 
procedures shall apply.
    (2) The informal hearing shall be recorded, and a transcript shall 
be furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.

[[Page 109]]

    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the bank would materially strengthen the bank's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the bank's capital level or failure 
to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the bank based on supervisory criteria other than 
capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the FDIC 
concerning the Respondent's request for reinstatement with the bank.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the FDIC shall grant or deny the request for 
reinstatement and notify the Respondent of the FDIC's decision. If the 
FDIC denies the request for reinstatement, the FDIC shall set forth in 
the notification the reasons for the FDIC's action.



Sec. 308.204  Enforcement of directives.

    (a) Judicial remedies. Whenever a bank fails to comply with a 
directive issued under section 38, the FDIC may seek enforcement of the 
directive in the appropriate United States district court pursuant to 
section 8(i)(1) of the FDI Act (12 U.S.C. 1818(i)(1)).
    (b) Administrative remedies--(1) Failure to comply with directive. 
Pursuant to section 8(i)(2)(A) of the FDI Act, the FDIC may assess a 
civil money penalty against any bank that violates or otherwise fails to 
comply with any final directive issued under section 38 and against any 
institution-affiliated party who participates in such violation or 
noncompliance.
    (2) Failure to implement capital restoration plan. The failure of a 
bank to implement a capital restoration plan required under section 38, 
or subpart B of part 325 of this chapter, or the failure of a company 
having control of a bank to fulfill a guarantee of a capital restoration 
plan made pursuant to section 38(e)(2) of the FDI Act shall subject the 
bank to the assessment of civil money penalties pursuant to section 
8(i)(2)(A) of the FDI Act.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the FDIC may seek enforcement 
of the provisions of section 38 or subpart B of part 325 of this chapter 
through any other judicial or administrative proceeding authorized by 
law.

[57 FR 44897, Sept. 29, 1992; 57 FR 48426, Oct. 23, 1992]



Subpart R_Submission and Review of Safety and Soundness Compliance Plans 
   and Issuance of Orders To Correct Safety and Soundness Deficiencies

    Source: 60 FR 35684, July 10, 1995, unless otherwise noted.



Sec. 308.300  Scope.

    The rules and procedures set forth in this subpart apply to insured 
state nonmember banks and to state-licensed insured branches of foreign 
banks, that are subject to the provisions of section 39 of the Federal 
Deposit Insurance Act (section 39) (12 U.S.C. 1831p-1).



Sec. 308.301  Purpose.

    Section 39 of the FDI Act requires the FDIC to establish safety and 
soundness standards. Pursuant to section 39, a bank may be required to 
submit a compliance plan if it is not in compliance with a safety and 
soundness standard established by guideline under section 39(a) or (b). 
An enforceable order under section 8 of the FDI Act may be issued if, 
after being notified that it is in violation of a safety and soundness 
standard established

[[Page 110]]

under section 39, the bank fails to submit an acceptable compliance plan 
or fails in any material respect to implement an accepted plan. This 
subpart establishes procedures for requiring submission of a compliance 
plan and issuing an enforceable order pursuant to section 39.



Sec. 308.302  Determination and notification of failure to meet a safety 
and soundness standard and request for compliance plan.

    (a) Determination. The FDIC may, based upon an examination, 
inspection or any other information that becomes available to the FDIC, 
determine that a bank has failed to satisfy the safety and soundness 
standards set out in part 364 of this chapter and in the Interagency 
Guidelines Establishing Standards for Safety and Soundness in appendix A 
and the Interagency Guidelines Establishing Standards for Safeguarding 
Customer Information in appendix B to part 364 of this chapter.
    (b) Request for compliance plan. If the FDIC determines that a bank 
has failed a safety and soundness standard pursuant to paragraph (a) of 
this section, the FDIC may request, by letter or through a report of 
examination, the submission of a compliance plan and the bank shall be 
deemed to have notice of the request three days after mailing of the 
letter by the FDIC or delivery of the report of examination.

[60 FR 35684, July 10, 1995, as amended at 66 FR 8638, Feb. 1, 2001]



Sec. 308.303  Filing of safety and soundness compliance plan.

    (a) Schedule for filing compliance plan--(1) In general. A bank 
shall file a written safety and soundness compliance plan with the FDIC 
within 30 days of receiving a request for a compliance plan pursuant to 
Sec. 308.302(b), unless the FDIC notifies the bank in writing that the 
plan is to be filed within a different period.
    (2) Other plans. If a bank is obligated to file, or is currently 
operating under, a capital restoration plan submitted pursuant to 
section 38 of the FDI Act (12 U.S.C. 1831o), a cease-and-desist order 
entered into pursuant to section 8 of the FDI Act, a formal or informal 
agreement, or a response to a report of examination or report of 
inspection, it may, with the permission of the FDIC, submit a compliance 
plan under this section as part of that plan, order, agreement, or 
response, subject to the deadline provided in paragraph (a)(1) of this 
section.
    (b) Contents of plan. The compliance plan shall include a 
description of the steps the bank will take to correct the deficiency 
and the time within which those steps will be taken.
    (c) Review of safety and soundness compliance plans. Within 30 days 
after receiving a safety and soundness compliance plan under this 
subpart, the FDIC shall provide written notice to the bank of whether 
the plan has been approved or seek additional information from the bank 
regarding the plan. The FDIC may extend the time within which notice 
regarding approval of a plan will be provided.
    (d) Failure to submit or implement a compliance plan--(1) 
Supervisory actions. If a bank fails to submit an acceptable plan within 
the time specified by the FDIC or fails in any material respect to 
implement a compliance plan, then the FDIC shall, by order, require the 
bank to correct the deficiency and may take further actions provided in 
section 39(e)(2)(B). Pursuant to section 39(e)(3), the FDIC may be 
required to take certain actions if the bank commenced operations or 
experienced a change in control within the previous 24-month period, or 
the bank experienced extraordinary growth during the previous 18-month 
period.
    (2) Extraordinary growth. For purposes of paragraph (d)(1) of this 
section, extraordinary growth means an increase in assets of more than 
7.5 percent during any quarter within the 18-month period preceding the 
issuance of a request for submission of a compliance plan, by a bank 
that is not well capitalized for purposes of section 38 of the FDI Act. 
For purposes of calculating an increase in assets, assets acquired 
through merger or acquisition approved pursuant to the Bank Merger Act 
(12 U.S.C. 1828(c)) will be excluded.
    (e) Amendment of compliance plan. A bank that has filed an approved 
compliance plan may, after prior written notice to and approval by the 
FDIC, amend the plan to reflect a change in

[[Page 111]]

circumstance. Until such time as a proposed amendment has been approved, 
the bank shall implement the compliance plan as previously approved.



Sec. 308.304  Issuance of orders to correct deficiencies and to take or 
refrain from taking other actions.

    (a) Notice of intent to issue order--(1) In general. The FDIC shall 
provide a bank prior written notice of the FDIC's intention to issue an 
order requiring the bank to correct a safety and soundness deficiency or 
to take or refrain from taking other actions pursuant to section 39 of 
the FDI Act. The bank shall have such time to respond to a proposed 
order as provided by the FDIC under paragraph (c) of this section.
    (2) Immediate issuance of final order. If the FDIC finds it 
necessary in order to carry out the purposes of section 39 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue an order requiring a bank immediately to 
take actions to correct a safety and soundness deficiency or take or 
refrain from taking other actions pursuant to section 39. A bank that is 
subject to such an immediately effective order may submit a written 
appeal of the order to the FDIC. Such an appeal must be received by the 
FDIC within 14 calendar days of the issuance of the order, unless the 
FDIC permits a longer period. The FDIC shall consider any such appeal, 
if filed in a timely matter, within 60 days of receiving the appeal. 
During such period of review, the order shall remain in effect unless 
the FDIC, in its sole discretion, stays the effectiveness of the order.
    (b) Contents of notice. A notice of intent to issue an order shall 
include:
    (1) A statement of the safety and soundness deficiency or 
deficiencies that have been identified at the bank;
    (2) A description of any restrictions, prohibitions, or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of any required action; 
and
    (4) The date by which the bank subject to the order may file with 
the FDIC a written response to the notice.
    (c) Response to notice--(1) Time for response. A bank may file a 
written response to a notice of intent to issue an order within the time 
period set by the FDIC. Such a response must be received by the FDIC 
within 14 calendar days from the date of the notice unless the FDIC 
determines that a different period is appropriate in light of the safety 
and soundness of the bank or other relevant circumstances.
    (2) Contents of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 39;
    (ii) Any recommended modification of the proposed order; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the proposed order.
    (d) Agency consideration of response. After considering the 
response, the FDIC may:
    (1) Issue the order as proposed or in modified form;
    (2) Determine not to issue the order and so notify the bank; or
    (3) Seek additional information or clarification of the response 
from the bank, or any other relevant source.
    (e) Failure to file response. Failure by a bank to file with the 
FDIC, within the specified time period, a written response to a proposed 
order shall constitute a waiver of the opportunity to respond and shall 
constitute consent to the issuance of the order.
    (f) Request for modification or rescission of order. Any bank that 
is subject to an order under this subpart may, upon a change in 
circumstances, request in writing that the FDIC reconsider the terms of 
the order, and may propose that the order be rescinded or modified. 
Unless otherwise ordered by the FDIC, the order shall continue in place 
while such request is pending before the FDIC.



Sec. 308.305  Enforcement of orders.

    (a) Judicial remedies. Whenever a bank fails to comply with an order 
issued under section 39, the FDIC may seek

[[Page 112]]

enforcement of the order in the appropriate United States district court 
pursuant to section 8(i)(1) of the FDI Act.
    (b) Failure to comply with order. Pursuant to section 8(i)(2)(A) of 
the FDI Act, the FDIC may assess a civil money penalty against any bank 
that violates or otherwise fails to comply with any final order issued 
under section 39 and against any institution-affiliated party who 
participates in such violation or noncompliance.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the FDIC may seek enforcement 
of the provisions of section 39 or this part through any other judicial 
or administrative proceeding authorized by law.



Subpart S_Applications for a Stay or Review of Actions of Bank Clearing 
                                Agencies

    Source: 61 FR 48403, Sept. 11, 1996, unless otherwise noted.



Sec. 308.400  Scope.

    This subpart is issued by the Corporation pursuant to sections 
17A(b)(3)(g), 17A(b)(5)(C), 19 and 23 of the Securities Exchange Act of 
1934 (Exchange Act), as amended (15 U.S.C. 78q-1 (b)(3)(g), (b)(5)(C), 
78s, 78w). It applies to applications by banks insured by the 
Corporation (other than members of the Federal Reserve System) for a 
stay or review of certain actions by clearing agencies registered under 
the Exchange Act, for which the Securities and Exchange Commission 
(Commission) is not the appropriate regulatory agency under section 
3(a)(34)(B) of the Exchange Act (bank clearing agencies).



Sec. 308.401  Applications for stays of disciplinary sanctions or 
summary suspensions by a bank clearing agency.

    Applications to the Corporation for a stay of disciplinary action 
imposed by registered clearing agencies pursuant to section 17(b)(3)(G) 
of the Exchange Act, or summary suspension or limitation or prohibition 
of access under section 17(b)(5)(C) of the Exchange Act shall be made 
according to the rules adopted by the Commission (17 CFR 240.19d-2). 
References to the ``Commission'' in 17 CFR 240.19d-2 are deemed to refer 
to the ``Corporation.''



Sec. 308.402  Applications for review of final disciplinary sanctions, 

denials of participation, or prohibitions or limitations of access to 
services imposed 
          by bank clearing agencies.

    Proceedings on an application to the Corporation under section 
19(d)(2) of the Exchange Act for review of any final disciplinary 
sanctions, denials of participation, or prohibitions or limitations of 
access to services imposed by bank clearing agencies shall be conducted 
according to the procedures set forth in rules adopted by the Commission 
(17 CFR 240.19d-3). References to the ``Commission'' in 17 CFR 240.19d-3 
are deemed to refer to the ``Corporation.''



          Subpart T_Program Fraud Civil Remedies and Procedures

    Source: 66 FR 9189, Feb. 7, 2001, unless otherwise noted.



Sec. 308.500  Basis, purpose, and scope.

    (a) Basis. This subpart implements the Program Fraud Civil Remedies 
Act, Pub. L. 99-509, sections 6101-6104, 100 Stat. 1874 (October 21, 
1986), codified at 31 U.S.C. 3801-3812, (PFCRA) and made applicable to 
the Federal Deposit Insurance Corporation (FDIC) by section 23 of the 
Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 
2369). 31 U.S.C. 3809 of the statute requires each Authority head to 
promulgate regulations necessary to implement the provisions of the 
statute.
    (b) Purpose. This subpart:
    (1) Establishes administrative procedures for imposing civil 
penalties and assessments against persons who make, submit, or present 
or cause to be made, submitted, or presented false, fictitious, or 
fraudulent claims or written statements to the FDIC or to its agents; 
and
    (2) Specifies the hearing and appeal rights of persons subject to 
allegations of liability for such penalties and assessments.
    (c) Scope. This subpart applies only to persons who make, submit, or 
present or cause to be made, submitted, or presented false, fictitious, 
or fraudulent

[[Page 113]]

claims or written statements to the FDIC or to its agents acting on 
behalf of the FDIC in connection with FDIC employment matters, FDIC 
contracting activities, and the FDIC Asset Purchaser Certification 
Program. It does not apply to false claims or statements made in 
connection with programs (other than as set forth in the preceding 
sentence) related to the FDIC's regulatory, supervision, enforcement, 
insurance, receivership or liquidation responsibilities. The FDIC is 
restricting the scope of applicability of this subpart because other 
civil and administrative remedies are adequate to redress fraud in the 
areas not covered.



Sec. 308.501  Definitions.

    For purposes of this subpart:
    (a) Administrative Law Judge (ALJ) means the presiding officer 
appointed by the Office of Financial Institution Adjudication pursuant 
to 12 U.S.C. 1818 note and 5 U.S.C. 3105.
    (b) Authority means the Federal Deposit Insurance Corporation 
(FDIC).
    (c) Authority head or Board means the Board of Directors of the 
FDIC, which is herein designated by the Chairman of the FDIC to serve as 
head of the FDIC for PFCRA matters.
    (d) Benefit means, in the context of ``statement'' as defined in 31 
U.S.C. 3801(a)(9), any financial assistance received from the FDIC that 
amounts to $150,000 or less. The term does not include the FDIC's 
deposit insurance program.
    (e) Claim means any request, demand, or submission:
    (1) Made to the FDIC for property, services, or money (including 
money representing grants, loans, insurance, or benefits);
    (2) Made to a recipient of property, services, or money from the 
FDIC or to a party to a contract with the FDIC;
    (i) For property or services if the United States:
    (A) Provided such property or services;
    (B) Provided any portion of the funds for the purchase of such 
property or services; or
    (C) Will reimburse such recipient or party for the purchase of such 
property or services;
    (ii) For the payment of money (including money representing grants, 
loans, insurance, or benefits) if the United States:
    (A) Provided any portion of the money requested or demanded; or
    (B) Will reimburse such recipient or party for any portion of the 
money paid on such request or demand; or
    (3) Made to the FDIC that has the effect of decreasing an obligation 
to pay or account for property, services, or money.
    (f) Complaint means the administrative complaint served by the 
reviewing official on the defendant under Sec. 308.506 of this subpart.
    (g) Corporation means the Federal Deposit Insurance Corporation.
    (h) Defendant means any person alleged in a complaint under Sec. 
308.506 of this subpart to be liable for a civil penalty or assessment 
under Sec. 308.502 of this subpart.
    (i) Government means the United States Government.
    (j) Individual means a natural person.
    (k) Initial decision means the written decision of the ALJ required 
by Sec. 308.509 or Sec. 308.536 of this subpart, and includes a 
revised initial decision issued following a remand or a motion for 
consideration.
    (l) Investigating official means the Inspector General of the FDIC, 
or an officer or employee of the Inspector General designated by the 
Inspector General. The investigating official must serve in a position 
that has a rate of basic pay under the pay scale utilized by the FDIC 
that is equal to or greater than 120 percent of the minimum rate of 
basic pay for grade 15 under the federal government's General Schedule.
    (m) Knows or has reason to know, means that a person, with respect 
to a claim or statement:
    (1) Has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (3) Acts in reckless disregard of the truth or falsity of the claim 
or statement.

[[Page 114]]

    (n) Makes, wherever it appears, includes the terms ``presents'', 
``submits'', and ``causes to be made, presented, or submitted.'' As the 
context requires, ``making'' or ``made'' likewise includes the 
corresponding forms of such terms.
    (o) Person means any individual, partnership, corporation, 
association, or private organization, and includes the plural of that 
term.
    (p) Representative means an attorney, who is a member in good 
standing of the bar of any state, territory, or possession of the United 
States or of the District of Columbia or the Commonwealth of Puerto 
Rico, and designated by a party in writing.
    (q) Reviewing official means the General Counsel of the FDIC or his 
designee who is:
    (1) Not subject to supervision by, or required to report to, the 
investigating official;
    (2) Not employed in the organizational unit of the FDIC in which the 
investigating official is employed; and
    (3) Serving in a position that has a rate of basic pay under the pay 
scale utilized by the FDIC that is equal to or greater than 120 percent 
of the minimum rate of basic pay for grade 15 under the federal 
government's General Schedule.
    (r) Statement means any representation, certification, affirmation, 
document, record, or accounting or bookkeeping entry made:
    (1) With respect to a claim or to obtain the approval or payment of 
a claim (including relating to eligibility to make a claim); or
    (2) With respect to (including relating to eligibility for):
    (i) A contract with, or a bid or proposal for a contract with; or
    (ii) A grant, loan, or benefit received, directly or indirectly, 
from the FDIC, or any state, political subdivision of a state, or other 
party, if the United States government provides any portion of the money 
or property under such contract or for such grant, loan, or benefit, or 
if the government will reimburse such state, political subdivision, or 
party for any portion of the money or property under such contract or 
for such grant, loan, or benefit.



Sec. 308.502  Basis for civil penalties and assessments.

    (a) Claims. (1) A person who makes a false, fictitious, or 
fraudulent claim to the FDIC is subject to a civil penalty of up to 
$5,000 per claim. A claim is false, fictitious, or fraudulent if the 
person making the claim knows, or has reason to know, that:
    (i) The claim is false, fictitious, or fraudulent; or
    (ii) The claim includes, or is supported by, a written statement 
that asserts a material fact which is false, fictitious or fraudulent; 
or
    (iii) The claim includes, or is supported by, a written statement 
that:
    (A) Omits a material fact; and
    (B) Is false, fictitious, or fraudulent as a result of that 
omission; and
    (C) Is a statement in which the person making the statement has a 
duty to include the material fact; or
    (iv) The claim seeks payment for providing property or services that 
the person has not provided as claimed.
    (2) Each voucher, invoice, claim form, or other individual request 
or demand for property, services, or money constitutes a separate claim.
    (3) A claim will be considered made to the FDIC, recipient, or party 
when the claim is actually made to an agent, fiscal intermediary, or 
other entity, including any state or political subdivision thereof, 
acting for or on behalf of the FDIC, recipient, or party.
    (4) Each claim for property, services, or money that constitutes any 
one of the elements in paragraph (a)(1) of this section is subject to a 
civil penalty regardless of whether the property, services, or money is 
actually delivered or paid.
    (5) If the FDIC has made any payment (including transferred property 
or provided services) on a claim, a person subject to a civil penalty 
under paragraph (a)(1) of this section will also be subject to an 
assessment of not more than twice the amount of such claim (or portion 
of the claim) that is determined to constitute a false, fictitious, or 
fraudulent claim under paragraph (a)(1) of this section. The assessment 
will be in lieu of damages sustained by the FDIC because of the claims.

[[Page 115]]

    (6) The amount of any penalty assessed under paragraph (a)(1) of 
this section will be adjusted for inflation in accordance with Sec. 
308.132(c)(3)(xv) of this part.
    (7) The penalty specified in paragraph (a)(1) of this section is in 
addition to any other remedy allowable by law.
    (b) Statements. (1) A person who submits to the FDIC a false, 
fictitious or fraudulent statement is subject to a civil penalty of up 
to $5,000 per statement. A statement is false, fictitious or fraudulent 
if the person submitting the statement to the FDIC knows, or has reason 
to know, that:
    (i) The statement asserts a material fact which is false, 
fictitious, or fraudulent; or
    (ii) The statement omits a material fact that the person making the 
statement has a duty to include in the statement; and
    (iii) The statement contains or is accompanied by an express 
certification or affirmation of the truthfulness and accuracy of the 
contents of the statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate statement.
    (3) A statement will be considered made to the FDIC when the 
statement is actually made to an agent, fiscal intermediary, or other 
entity, including any state or political subdivision thereof, acting for 
or on behalf of the FDIC.
    (4) The amount of any penalty assessed under paragraph (a)(1) of 
this section will be adjusted for inflation in accordance with Sec. 
308.132(c)(3)(xv) of this part.
    (5) The penalty specified in paragraph (a)(1) of this section is in 
addition to any other remedy allowable by law.
    (c) Failure to file declaration/certification. Where, as a 
prerequisite to conducting business with the FDIC, a person is required 
by law to file one or more declarations and/or certifications, and the 
person intentionally fails to file such declaration/certification, the 
person will be subject to the civil penalties as prescribed by this 
subpart.
    (d) Intent. No proof of specific intent to defraud is required to 
establish liability under this section.
    (e) Liability. (1) In any case in which it is determined that more 
than one person is liable for making a claim or statement under this 
section, each such person may be held jointly and severally liable for a 
civil penalty under this section.
    (2) In any case in which it is determined that more than one person 
is liable for making a claim under this section on which the FDIC has 
made payment (including transferred property or provided services), an 
assessment may be imposed against any such person or jointly and 
severally against any combination of such persons.



Sec. 308.503  Investigations.

    (a) If an investigating official concludes that a subpoena pursuant 
to the authority conferred by 31 U.S.C. 3804(a) is warranted:
    (1) The subpoena will identify the person to whom it is addressed 
and the authority under which the subpoena is issued and will identify 
the records or documents sought;
    (2) The investigating official may designate a person to act on his 
or her behalf to receive the documents sought; and
    (3) The person receiving such subpoena will be required to provide 
the investigating official or the person designated to receive the 
documents a certification that the documents sought have been produced, 
or that such documents are not available, and the reasons therefor, or 
that such documents, suitably identified, have been withheld based upon 
the assertion of an identified privilege.
    (b) If the investigating official concludes that an action under the 
PFCRA may be warranted, the investigating official will submit a report 
containing the findings and conclusions of such investigation to the 
reviewing official.
    (c) Nothing in this section will preclude or limit an investigating 
official's discretion to refer allegations directly to the United States 
Department of Justice (DOJ) for suit under the False Claims Act (31 
U.S.C. 3729 et seq.) or other civil relief, or to preclude or limit the 
investigating official's discretion to defer or postpone a report or 
referral to the reviewing official to

[[Page 116]]

avoid interference with a criminal investigation or prosecution.
    (d) Nothing in this section modifies any responsibility of an 
investigating official to report violations of criminal law to the 
Attorney General.



Sec. 308.504  Review by the reviewing official.

    (a) If, based on the report of the investigating official under 
Sec. 308.503(b) of this subpart, the reviewing official determines that 
there is adequate evidence to believe that a person is liable under 
Sec. 308.502 of this subpart, the reviewing official will transmit to 
the Attorney General a written notice of the reviewing official's 
intention to issue a complaint under Sec. 308.506 of this subpart.
    (b) Such notice will include:
    (1) A statement of the reviewing official's reasons for issuing a 
complaint;
    (2) A statement specifying the evidence that supports the 
allegations of liability;
    (3) A description of the claims or statements upon which the 
allegations of liability are based;
    (4) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in violation of Sec. 
308.502 of this subpart;
    (5) A statement of any exculpatory or mitigating circumstances that 
may relate to the claims or statements known by the reviewing official 
or the investigating official; and
    (6) A statement that there is a reasonable prospect of collecting an 
appropriate amount of penalties and assessments. Such a statement may be 
based upon information then known, or upon an absence of any information 
indicating that the person may be unable to pay such amount.



Sec. 308.505  Prerequisites for issuing a complaint.

    (a) The reviewing official may issue a complaint under Sec. 308.506 
of this subpart only if:
    (1) The DOJ approves the issuance of a complaint in a written 
statement described in 31 U.S.C. 3803(b)(1); and
    (2) In the case of allegations of liability under Sec. 308.502(a) 
of this subpart with respect to a claim (or a group of related claims 
submitted at the same time as defined in paragraph (b) of this section) 
the reviewing official determines that the amount of money or the value 
of property or services demanded or requested does not exceed $150,000.
    (b) For the purposes of this section, a group of related claims 
submitted at the same time will include only those claims arising from 
the same transaction (e.g., grant, loan, application, or contract) that 
are submitted simultaneously as part of a single request, demand, or 
submission.
    (c) Nothing in this section will be construed to limit the reviewing 
official's authority to join in a single complaint against a person 
claims that are unrelated or were not submitted simultaneously, 
regardless of the amount of money, or the value of property or services, 
demanded or requested.



Sec. 308.506  Complaint.

    (a) On or after the date the DOJ approves the issuance of a 
complaint in accordance with 31 U.S.C. 3803(b)(1), the reviewing 
official may serve a complaint on the defendant, as provided in Sec. 
308.507 of this subpart.
    (b) The complaint will state:
    (1) The allegations of liability against the defendant, including 
the statutory basis for liability, or identification of the claims or 
statements that are the basis for the alleged liability, and the reasons 
why liability allegedly arises from such claims or statements;
    (2) The maximum amount of penalties and assessments for which the 
defendant may be held liable;
    (3) Instructions for filing an answer and to request a hearing, 
including a specific statement of the defendant's right to request a 
hearing by filing an answer and to be represented by a representative; 
and
    (4) That failure to file an answer within 30 days of service of the 
complaint will result in the imposition of the maximum amount of 
penalties and assessments without right to appeal, as provided in Sec. 
308.509 of this subpart.
    (c) At the same time the reviewing official serves the complaint, he 
or she will provide the defendant with a copy of this subpart.

[[Page 117]]



Sec. 308.507  Service of complaint.

    (a) Service of a complaint will be made by certified or registered 
mail or by delivery in any manner authorized by rule 4(c) of the Federal 
Rules of Civil Procedure (28 U.S.C. App.). Service is complete upon 
receipt.
    (b) Proof of service, stating the name and address of the person on 
whom the complaint was served, and the manner and date of service, may 
be made by:
    (1) Affidavit of the individual serving the complaint by delivery;
    (2) A United States Postal Service return receipt card acknowledging 
receipt; or
    (3) Written acknowledgment of receipt by the defendant or his or her 
representative.



Sec. 308.508  Answer.

    (a) The defendant may request a hearing by filing an answer with the 
reviewing official within 30 days of service of the complaint. An answer 
will be deemed to be a request for hearing.
    (b) In the answer, the defendant:
    (1) Must admit or deny each of the allegations of liability made in 
the complaint;
    (2) Must state any defense on which the defendant intends to rely;
    (3) May state any reasons why the defendant contends that the 
penalties and assessments should be less than the statutory maximum; and
    (4) Must state the name, address, and telephone number of the person 
authorized by the defendant to act as defendant's representative, if 
any.
    (c) If the defendant is unable to file an answer meeting the 
requirements of paragraph (b) of this section within the time provided:
    (1) The defendant may, before the expiration of 30 days from service 
of the complaint, file with the reviewing official a general answer 
denying liability and requesting a hearing, and a request for an 
extension of time within which to file an answer meeting the 
requirements of paragraph (b) of this section.
    (2) The reviewing official will file promptly with the ALJ the 
complaint, the general answer denying liability, and the request for an 
extension of time as provided in Sec. 308.510 of this subpart.
    (3) For good cause shown, the ALJ may grant the defendant up to 30 
additional days within which to file an answer meeting the requirements 
of paragraph (b) of this section.



Sec. 308.509  Default upon failure to file an answer.

    (a) If the defendant does not file an answer within the time 
prescribed in Sec. 308.508(a) of this subpart, the reviewing official 
may refer the complaint to the ALJ.
    (b) Upon the referral of the complaint, the ALJ will promptly serve 
on defendant in the manner prescribed in Sec. 308.507 of this subpart, 
a notice that an initial decision will be issued under this section.
    (c) If the defendant fails to answer, the ALJ will assume the facts 
alleged in the complaint to be true, and, if such facts establish 
liability under Sec. 308.502 of this subpart, the ALJ will issue an 
initial decision imposing the maximum amount of penalties and 
assessments allowed under the statute.
    (d) Except as otherwise provided in this section, by failing to file 
a timely answer, the defendant waives any right to further review of the 
penalties and assessments imposed under paragraph (c) of this section, 
and the initial decision will become final and binding upon the parties 
30 days after it is issued.
    (e) If, before such an initial decision becomes final, the defendant 
files a motion with the ALJ seeking to reopen on the grounds that 
extraordinary circumstances prevented the defendant from filing an 
answer, the initial decision will be stayed pending the ALJ's decision 
on the motion.
    (f) If, in the motion to reopen under paragraph (e) of this section, 
the defendant can demonstrate extraordinary circumstances excusing the 
failure to file a timely answer, the ALJ will withdraw the initial 
decision in paragraph (c) of this section, if such a decision has been 
issued, and will grant the defendant an opportunity to answer the 
complaint.
    (g) A decision of the ALJ denying a defendant's motion to reopen 
under paragraph (e) of this section is not subject to reconsideration 
under Sec. 308.537 of this subpart.

[[Page 118]]

    (h) The decision denying the motion to reopen under paragraph (e) of 
this section may be appealed by the defendant to the Board by filing a 
notice of appeal with the Board within 15 days after the ALJ denies the 
motion. The timely filing of a notice of appeal will stay the initial 
decision until the Board decides the issue.
    (i) If the defendant files a timely notice of appeal with the Board, 
the ALJ will forward the record of the proceeding to the Board.
    (j) The Board will decide whether extraordinary circumstances excuse 
the defendant's failure to file a timely answer based solely on the 
record before the ALJ.
    (k) If the Board decides that extraordinary circumstances excuse the 
defendant's failure to file a timely answer, the Board will remand the 
case to the ALJ with instructions to grant the defendant an opportunity 
to answer.
    (l) If the Board decides that the defendant's failure to file a 
timely answer is not excused, the Board will reinstate the initial 
decision of the ALJ, which will become final and binding upon the 
parties 30 days after the Board issues such decision.



Sec. 308.510  Referral of complaint and answer to the ALJ.

    Upon receipt of an answer, the reviewing official will file the 
complaint and answer with the ALJ. The reviewing official will include 
the name, address, and telephone number of a representative of the 
Corporation.



Sec. 308.511  Notice of hearing.

    (a) When the ALJ receives the complaint and answer, the ALJ will 
promptly serve a notice of hearing upon the defendant in the manner 
prescribed by Sec. 308.507 of this subpart. At the same time, the ALJ 
will send a copy of such notice to the representative of the 
Corporation.
    (b) The notice will include:
    (1) The tentative time, date, and place, and the nature of the 
hearing;
    (2) The legal authority and jurisdiction under which the hearing is 
to be held;
    (3) The matters of fact and law to be asserted;
    (4) A description of the procedures for the conduct of the hearing;
    (5) The name, address, and telephone number of the representative of 
the Corporation and of the defendant, if any; and
    (6) Other matters as the ALJ deems appropriate.



Sec. 308.512  Parties to the hearing.

    (a) The parties to the hearing will be the defendant and the 
Corporation.
    (b) Pursuant to the False Claims Act (31 U.S.C. 3730(c)(5)), a 
private plaintiff under the False Claims Act may participate in these 
proceedings to the extent authorized by the provisions of that Act.



Sec. 308.513  Separation of functions.

    (a) The investigating official, the reviewing official, and any 
employee or agent of the FDIC who takes part in investigating, 
preparing, or presenting a particular case may not, in such case or a 
factually related case:
    (1) Participate in the hearing as the ALJ;
    (2) Participate or advise in the initial decision or the review of 
the initial decision by the Board, except as a witness or a 
representative in public proceedings; or
    (3) Make the collection of penalties and assessments under 31 U.S.C. 
3806.
    (b) The ALJ will not be responsible to, or subject to the 
supervision or direction of, the investigating official or the reviewing 
official.
    (c) Except as provided in paragraph (a) of this section, the 
representative for the FDIC will be an attorney employed in the FDIC's 
Legal Division; however, the representative of the FDIC may not 
participate or advise in the review of the initial decision by the 
Board.



Sec. 308.514  Ex parte contacts.

    No party or person (except employees of the ALJ's office) will 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for all parties to participate. This 
provision does not prohibit a person or party from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.

[[Page 119]]



Sec. 308.515  Disqualification of reviewing official or ALJ.

    (a) A reviewing official or ALJ in a particular case may disqualify 
himself or herself at any time.
    (b) A party may file with the ALJ a motion for disqualification of a 
reviewing official or an ALJ. An affidavit alleging conflict of interest 
or other reason for disqualification must accompany the motion.
    (c) Such motion and affidavit must be filed promptly upon the 
party's discovery of reasons requiring disqualification, or such 
objections will be deemed waived.
    (d) Such affidavit must state specific facts that support the 
party's belief that personal bias or other reason for disqualification 
exists and the time and circumstances of the party's discovery of such 
facts. The representative of record must certify that the affidavit is 
made in good faith and this certification must accompany the affidavit.
    (e) Upon the filing of such a motion and affidavit, the ALJ will 
proceed no further in the case until he or she resolves the matter of 
disqualification in accordance with paragraph (f) of this section.
    (f)(1) If the ALJ determines that a reviewing official is 
disqualified, the ALJ will dismiss the complaint without prejudice.
    (2) If the ALJ disqualifies himself or herself, the case will be 
reassigned promptly to another ALJ.
    (3) If the ALJ denies a motion to disqualify, the Board may 
determine the matter only as part of the Board's review of the initial 
decision upon appeal, if any.



Sec. 308.516  Rights of parties.

    Except as otherwise limited by this subpart, all parties may:
    (a) Be accompanied, represented, and advised by a representative;
    (b) Participate in any conference held by the ALJ;
    (c) Conduct discovery;
    (d) Agree to stipulations of fact or law which will be made part of 
the record;
    (e) Present evidence relevant to the issues at the hearing;
    (f) Present and cross-examine witnesses;
    (g) Present oral arguments at the hearing as permitted by the ALJ; 
and
    (h) Submit written briefs and proposed findings of fact and 
conclusions of law.



Sec. 308.517  Authority of the ALJ.

    (a) The ALJ will conduct a fair and impartial hearing, avoid delay, 
maintain order, and assure that a record of the proceeding is made.
    (b) The ALJ has the authority to:
    (1) Set and change the date, time, and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses and the 
production of documents at depositions or at hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of discovery;
    (8) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude, or limit evidence;
    (11) Upon motion of a party, take official notice of facts, decide 
cases, in whole or in part, by summary judgment where there is no 
disputed issue of material fact;
    (12) Conduct any conference, argument, or hearing on motions in 
person or by telephone; and
    (13) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this subpart.
    (c) The ALJ does not have the authority to make any determinations 
regarding the validity of federal statutes or regulations or of 
directives, rules, resolutions, policies, orders or other such general 
pronouncements issued by the Corporation.

[[Page 120]]



Sec. 308.518  Prehearing conferences.

    (a) The ALJ may schedule prehearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ will schedule at least one 
prehearing conference at a reasonable time in advance of the hearing.
    (c) The ALJ may use prehearing conferences to discuss the following:
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleading, 
including the need for a more definite statement;
    (3) Stipulations and admissions of fact as to the contents and 
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;
    (5) Whether a party chooses (subject to the objection of other 
parties) to waive appearance at an oral hearing and to submit only 
documentary evidence and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery;
    (9) The time, date, and place for the hearing; and
    (10) Such other matters as may tend to expedite the fair and just 
disposition of the proceedings.
    (d) The ALJ may issue an order containing all matters agreed upon by 
the parties or ordered by the ALJ at a prehearing conference.



Sec. 308.519  Disclosure of documents.

    (a) Upon written request to the reviewing official, the defendant 
may review any relevant and material documents, transcripts, records, 
and other materials that relate to the allegations set out in the 
complaint and upon which the findings and conclusions of the 
investigating official under Sec. 308.503(b) of this subpart are based, 
unless such documents are subject to a privilege under federal law. Upon 
payment of fees for duplication, the defendant may obtain copies of such 
documents.
    (b) Upon written request to the reviewing official, the defendant 
also may obtain a copy of all exculpatory information in the possession 
of the reviewing official or investigating official relating to the 
allegations in the complaint, even if it is contained in a document that 
would otherwise be privileged. If the document would otherwise be 
privileged, only that portion containing exculpatory information must be 
disclosed.
    (c) The notice sent to the Attorney General from the reviewing 
official as described in Sec. 308.504 of this subpart is not 
discoverable under any circumstances.
    (d) The defendant may file a motion to compel disclosure of the 
documents subject to the provisions of this section. Such a motion may 
only be filed with the ALJ following the filing of an answer pursuant to 
Sec. 308.508 of this subpart.



Sec. 308.520  Discovery.

    (a) The following types of discovery are authorized:
    (1) Requests for production of documents for inspection and copying;
    (2) Requests for admission of the authenticity of any relevant 
document or of the truth of any relevant fact;
    (3) Written interrogatories; and
    (4) Depositions.
    (b) For the purpose of this section and Sec. Sec. 308.521 and 
308.522 of this subpart, the term documents includes information, 
documents, reports, answers, records, accounts, papers, and other data 
or documentary evidence. Nothing contained in this subpart will be 
interpreted to require the creation of a document.
    (c) Unless mutually agreed to by the parties, discovery is available 
only as ordered by the ALJ. The ALJ will regulate the timing of 
discovery.
    (d) Motions for discovery. (1) A party seeking discovery may file a 
motion with the ALJ and a copy of the requested discovery, or in the 
case of depositions, a summary of the scope of the proposed deposition, 
must accompany such motions.
    (2) Within 10 days of service, a party may file an opposition to the 
motion and/or a motion for protective order as provided in Sec. 308.523 
of this subpart.
    (3) The ALJ may grant a motion for discovery only if he or she finds 
that the discovery sought:

[[Page 121]]

    (i) Is necessary for the expeditious, fair, and reasonable 
consideration of the issues;
    (ii) Is not unduly costly or burdensome;
    (iii) Will not unduly delay the proceeding; and
    (iv) Does not seek privileged information.
    (4) The burden of showing that discovery should be allowed is on the 
party seeking discovery.
    (5) The ALJ may grant discovery subject to a protective order under 
Sec. 308.523 of this subpart.
    (e) Dispositions. (1) If a motion for deposition is granted, the ALJ 
will issue a subpoena for the deponent, which may require the deponent 
to produce documents. The subpoena will specify the time, date, and 
place at which the deposition will be held.
    (2) The party seeking to depose must serve the subpoena in the 
manner prescribed in Sec. 308.507 of this subpart.
    (3) The deponent may file with the ALJ a motion to quash the 
subpoena or a motion for a protective order within 10 days of service.
    (4) The party seeking to depose must provide for the taking of a 
verbatim transcript of the deposition, and must make the transcript 
available to all other parties for inspection and copying.
    (f) Each party must bear its own costs of discovery.



Sec. 308.521  Exchange of witness lists, statements, and exhibits.

    (a) At least 15 days before the hearing or at such other time as may 
be ordered by the ALJ, the parties must exchange witness lists, copies 
of prior statements of proposed witnesses, and copies of proposed 
hearing exhibits, including copies of any written statements that the 
party intends to offer in lieu of live testimony in accordance with 
Sec. 308.532(b) of this subpart. At the time such documents are 
exchanged, any party that intends to rely on the transcript of 
deposition testimony in lieu of live testimony at the hearing, if 
permitted by the ALJ, must provide each party with a copy of the 
specific pages of the transcript it intends to introduce into evidence.
    (b) If a party objects, the ALJ will not admit into evidence the 
testimony of any witness whose name does not appear on the witness list 
or any exhibit not provided to the opposing party as provided in 
paragraph (a) of this section unless the ALJ finds good cause for the 
failure or that there is no prejudice to the objecting party.
    (c) Unless another party objects within the time set by the ALJ, 
documents exchanged in accordance with paragraph (a) of this section 
will be deemed to be authentic for the purpose of admissibility at the 
hearing.



Sec. 308.522  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may request that the ALJ issue a subpoena.
    (b) A subpoena requiring the attendance and testimony of an 
individual may also require the individual to produce documents at the 
hearing.
    (c) A party seeking a subpoena must file a written request not less 
than 15 days before the date fixed for the hearing unless otherwise 
allowed by the ALJ for good cause shown. Such request must specify any 
documents to be produced and must designate the witnesses and describe 
the address and location thereof with sufficient particularity to permit 
such witnesses to be found.
    (d) The subpoena must specify the time, date, and place at which the 
witness is to appear and any documents the witness is to produce.
    (e) The party seeking the subpoena must serve it in the manner 
prescribed in Sec. 308.507 of this subpart. A subpoena on a party or 
upon an individual under the control of a party may be served by first 
class mail.
    (f) A party or the individual to whom the subpoena is directed may 
file with the ALJ a motion to quash the subpoena within 10 days after 
service or on or before the time specified in the subpoena for 
compliance if it is less than 10 days after service.



Sec. 308.523  Protective order.

    (a) A party or a prospective witness or deponent may file a motion 
for a

[[Page 122]]

protective order with respect to discovery sought by an opposing party 
or with respect to the hearing, seeking to limit the availability or 
disclosure of evidence.
    (b) In issuing a protective order, the ALJ may make any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one or 
more of the following:
    (1) That the discovery will not be conducted;
    (2) That the discovery will be conducted only on specified terms and 
conditions, including a designation of the time or place;
    (3) That the discovery will be conducted only through a method of 
discovery other than that requested;
    (4) That certain matters not be inquired into, or that the scope of 
discovery be limited to certain matters;
    (5) That discovery be conducted with no one present except persons 
designated by the ALJ;
    (6) That the contents of discovery or evidence be sealed or 
otherwise kept confidential;
    (7) That a deposition after being sealed be opened only by order of 
the ALJ;
    (8) That a trade secret or other confidential research, development, 
commercial information, or facts pertaining to any criminal 
investigation, proceeding, or other administrative investigation not be 
disclosed or be disclosed only in a designated way; or
    (9) That the parties simultaneously file specified documents or 
information enclosed in sealed envelopes to be opened as directed by the 
ALJ.



Sec. 308.524  Witness fees.

    The party requesting a subpoena must pay the cost of the fees and 
mileage of any witness subpoenaed in the amounts that would be payable 
to a witness in a proceeding in United States District Court. A check 
for witness fees and mileage must accompany the subpoena when served, 
except that when a subpoena is issued on behalf of the FDIC, a check for 
witness fees and mileage need not accompany the subpoena.



Sec. 308.525  Form, filing, and service of papers.

    (a) Form. (1) Documents filed with the ALJ must include an original 
and two copies.
    (2) Every pleading and paper filed in the proceeding must contain a 
caption setting forth the title of the action, the case number assigned 
by the ALJ, and a designation of the paper (e.g., motion to quash 
subpoena).
    (3) Every pleading and paper must be signed by, and must contain the 
address and telephone number of the party or the person on whose behalf 
the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed by certified or 
registered mail. Date of mailing may be established by a certificate 
from the party or its representative or by proof that the document was 
sent by certified or registered mail.
    (b) Service. A party filing a document with the ALJ must, at the 
time of filing, serve a copy of such document on every other party. 
Service upon any party of any document other than those required to be 
served as prescribed in Sec. 308.507 of this subpart must be made by 
delivering a copy or by placing a copy of the document in the United 
States mail, postage prepaid, and addressed to the party's last known 
address. When a party is represented by a representative, service must 
be made upon such representative in lieu of the actual party. The ALJ 
may authorize facsimile transmission as an acceptable form of service.
    (c) Proof of service. A certificate by the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, will be proof of service.



Sec. 308.526  Computation of time.

    (a) In computing any period of time under this subpart or in an 
order issued thereunder, the time begins with the day following the act, 
event, or default, and includes the last day of the period, unless it is 
a Saturday, Sunday, or legal holiday observed by the federal government, 
in which event it includes the next business day.

[[Page 123]]

    (b) When the period of time allowed is less than 7 days, 
intermediate Saturdays, Sundays, and legal holidays observed by the 
federal government will be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional 5 days will be added to the time permitted for any 
response.



Sec. 308.527  Motions.

    (a) Any application to the ALJ for an order or ruling must be by 
motion. Motions must state the relief sought, the authority relied upon, 
and the facts alleged, and must be filed with the ALJ and served on all 
other parties. Motions may include, without limitation, motions for 
summary judgment.
    (b) Except for motions made during a prehearing conference or at the 
hearing, all motions must be in writing. The ALJ may require that oral 
motions be reduced to writing.
    (c) Within 15 days after a written motion is served, or any other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses thereto has expired, except upon consent of the parties 
or following a hearing on the motion, but may overrule or deny such 
motion without awaiting a response.
    (e) The ALJ will make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.



Sec. 308.528  Sanctions.

    (a) The ALJ may sanction a person, including any party or 
representative for:
    (1) Failing to comply with an order, rule, or procedure governing 
the proceeding;
    (2) Failing to prosecute or defend an action; or
    (3) Engaging in other misconduct that interferes with the speedy, 
orderly, or fair conduct of the hearing.
    (b) Any such sanction, including but not limited to, those listed in 
paragraphs (c), (d), and (e) of this section, must reasonably relate to 
the severity and nature of the failure or misconduct.
    (c) When a party fails to comply with an order, including an order 
for taking a deposition, the production of evidence within the party's 
control, or a request for admission, the ALJ may:
    (1) Draw an inference in favor of the requesting party with regard 
to the information sought;
    (2) In the case of requests for admission, deem each matter of which 
an admission is requested to be admitted;
    (3) Prohibit the party failing to comply with such order from 
introducing evidence concerning, or otherwise relying upon, testimony 
relating to the information sought; and
    (4) Strike any part of the related pleading or other submissions of 
the party failing to comply with such request.
    (d) If a party fails to prosecute or defend an action under this 
subpart commenced by service of a notice of hearing, the ALJ may dismiss 
the action or may issue an initial decision imposing penalties and 
assessments.
    (e) The ALJ may refuse to consider any motion, request, response, 
brief, or other document which is not filed in a timely fashion.



Sec. 308.529  The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the defendant is liable for a civil penalty or 
assessment under Sec. 308.502 of this subpart, and, if so, the 
appropriate amount of any such civil penalty or assessment considering 
any aggravating or mitigating factors.
    (b) The FDIC must prove defendant's liability and any aggravating 
factors by a preponderance of the evidence.
    (c) The defendant must prove any affirmative defenses and any 
mitigating factors by a preponderance of the evidence.
    (d) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.



Sec. 308.530  Determining the amount of penalties and assessments.

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the Board, upon appeal, should evaluate any 
circumstances that mitigate or aggravate

[[Page 124]]

the violation and should articulate in their opinions the reasons that 
support the penalties and assessments they impose. Because of the 
intangible costs of fraud, the expense of investigating such conduct, 
and the need to deter others who might be similarly tempted, ordinarily 
double damages and a significant civil penalty should be imposed.
    (b) Although not exhaustive, the following factors are among those 
that may influence the ALJ and the Board in determining the amount of 
penalties and assessments to impose with respect to the misconduct 
(i.e., the false, fictitious, or fraudulent claims or statement) charged 
in the complaint:
    (1) The number of false, fictitious, or fraudulent claims or 
statements;
    (2) The time period over which such claims or statements were made;
    (3) The degree of the defendant's culpability with respect to the 
misconduct;
    (4) The amount of money or the value of the property, services, or 
benefit falsely claimed;
    (5) The value of the government's actual loss as a result of the 
misconduct, including foreseeable consequential damages and the costs of 
investigation;
    (6) The relationship of the amount imposed as civil penalties to the 
amount of the government's loss;
    (7) The potential or actual impact of the misconduct upon national 
defense, public health or safety, or public confidence in the management 
of government programs and operations, including particularly the impact 
on the intended beneficiaries of such programs;
    (8) Whether the defendant has engaged in a pattern of the same or 
similar misconduct;
    (9) Whether the defendant attempted to conceal the misconduct;
    (10) The degree to which the defendant has involved others in the 
misconduct or in concealing it;
    (11) Where the misconduct of employees or agents is imputed to the 
defendant, the extent to which the defendant's practices fostered or 
attempted to preclude such misconduct;
    (12) Whether the defendant cooperated in or obstructed an 
investigation of the misconduct;
    (13) Whether the defendant assisted in identifying and prosecuting 
other wrongdoers;
    (14) The complexity of the program or transaction, and the degree of 
the defendant's sophistication with respect to it, including the extent 
of the defendant's prior participation in the program or in a similar 
transaction;
    (15) Whether the defendant has been found, in any criminal, civil, 
or administrative proceeding to have engaged in similar misconduct or to 
have dealt dishonestly with the Government of the United States or of a 
state, directly or indirectly; and
    (16) The need to deter the defendant and others from engaging in the 
same or similar misconduct.
    (c) Nothing in this section will be construed to limit the ALJ or 
the Board from considering any other factors that in any given case may 
mitigate or aggravate the offense for which penalties and assessments 
are imposed.
    (d) Civil money penalties that are assessed pursuant to this subpart 
are subject to adjustment on a four-year basis to account for inflation 
as required by section 4 of the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended (codified at 28 U.S.C. 2461, note) 
(see also 12 CFR 308.132(c)(3)(xv)).



Sec. 308.531  Location of hearing.

    (a) The hearing may be held:
    (1) In any judicial district of the United States in which the 
defendant resides or transacts business;
    (2) In any judicial district of the United States in which the claim 
or statement at issue was made; or
    (3) In such other place as may be agreed upon by the defendant and 
the ALJ.
    (b) Each party will have the opportunity to present argument with 
respect to the location of the hearing.
    (c) The hearing will be held at the place and at the time ordered by 
the ALJ.



Sec. 308.532  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing will be given orally by witnesses under oath or 
affirmation.
    (b) At the discretion of the ALJ, testimony may be admitted in the 
form of

[[Page 125]]

a written statement or deposition. The party offering a written 
statement must provide all other parties with a copy of the written 
statement along with the last known address of the witness. Sufficient 
time must be allowed for other parties to subpoena the witness for 
cross-examination at the hearing. Prior written statements and 
deposition transcripts of witnesses identified to testify at the hearing 
must be exchanged as provided in Sec. 308.521(a) of this subpart.
    (c) The ALJ will exercise reasonable control over the mode and order 
of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (2) Avoid needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination as may be required for a full and true disclosure of the 
facts.
    (e) At the discretion of the ALJ, a witness may be cross-examined on 
matters relevant to the proceeding without regard to the scope of his or 
her direct examination. To the extent permitted by the ALJ, cross-
examination on matters outside the scope of direct examination will be 
conducted in the manner of direct examination and may proceed by leading 
questions only if the witness is a hostile witness, an adverse party, or 
a witness identified with an adverse party.
    (f) Upon motion of any party, the ALJ will order witnesses excluded 
so that they cannot hear the testimony of other witnesses. This rule 
does not authorize exclusion of:
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, an officer or 
employee of the party appearing for the entity pro se or designated by 
the party's representative; or
    (3) An individual whose presence is shown by a party to be essential 
to the presentation of its case, including an individual employed by the 
Corporation engaged in assisting the representative for the Corporation.



Sec. 308.533  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this subpart, the ALJ will not be bound by 
the Federal Rules of Evidence (28 U.S.C. App.). However, the ALJ may 
apply the Federal Rules of Evidence where appropriate, e.g., to exclude 
unreliable evidence.
    (c) The ALJ will exclude irrelevant and immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or needless 
presentation of cumulative evidence.
    (e) Although relevant, evidence may be excluded if it is privileged 
under federal law.
    (f) Evidence concerning offers of compromise or settlement will be 
inadmissible to the extent provided in rule 408 of the Federal Rules of 
Evidence.
    (g) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (h) All documents and other evidence offered or taken for the record 
must be open to examination by all parties, unless otherwise ordered by 
the ALJ pursuant to Sec. 308.523 of this subpart.



Sec. 308.534  The record.

    (a) The hearing will be recorded by audio or videotape and 
transcribed. Transcripts may be obtained following the hearing from the 
ALJ at a cost not to exceed the actual cost of duplication.
    (b) The transcript of testimony, exhibits, and other evidence 
admitted at the hearing, and all papers and requests filed in the 
proceeding constitute the record for the decision by the ALJ and the 
Board.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant 
to Sec. 308.523 of this subpart.



Sec. 308.535  Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ will fix the 
time for filing

[[Page 126]]

such briefs, not to exceed 60 days from the date the parties receive the 
transcript of the hearing or, if applicable, the stipulated record. Such 
briefs may be accompanied by proposed findings of fact and conclusions 
of law. The ALJ may permit the parties to file reply briefs.



Sec. 308.536  Initial decision.

    (a) The ALJ will issue an initial decision based only on the record, 
which will contain findings of fact, conclusions of law, and the amount 
of any penalties and assessments imposed.
    (b) The findings of fact will include a finding on each of the 
following issues:
    (1) Whether the claims or statements identified in the complaint, or 
any portions of such claims or statements, violate Sec. 308.502 of this 
subpart; and
    (2) If the person is liable for penalties or assessments, the 
appropriate amount of any such penalties or assessments considering any 
mitigating or aggravating factors that he or she finds in the case, such 
as those described in Sec. 308.530 of this subpart.
    (c) The ALJ will promptly serve the initial decision on all parties 
within 90 days after the time for submission of post-hearing briefs and 
reply briefs (if permitted) has expired. The ALJ will at the same time 
serve all parties with a statement describing the right of any defendant 
determined to be liable for a civil penalty or assessment to file a 
motion for reconsideration with the ALJ or a notice of appeal with the 
Board. If the ALJ fails to meet the deadline contained in this 
paragraph, he or she will notify the parties of the reason for the delay 
and will set a new deadline.
    (d) Unless the initial decision of the ALJ is timely appealed to the 
Board, or a motion for reconsideration of the initial decision is timely 
filed, the initial decision will constitute the final decision of the 
Board and will be final and binding on the parties 30 days after it is 
issued by the ALJ.



Sec. 308.537  Reconsideration of initial decision.

    (a) Except as provided in paragraph (d) of this section, any party 
may file a motion for reconsideration of the initial decision within 20 
days of receipt of the initial decision. If service is made by mail, 
receipt will be presumed to be 5 days from the date of mailing in the 
absence of proof to the contrary.
    (b) Every motion for reconsideration must set forth the matters 
claimed to have been erroneously decided and the nature of the alleged 
errors. The motion must be accompanied by a supporting brief.
    (c) Responses to the motions will be allowed only upon order of the 
ALJ.
    (d) No party may file a motion for reconsideration of an initial 
decision that has been revised in response to a previous motion for 
reconsideration.
    (e) The ALJ may dispose of a motion for reconsideration by denying 
it or by issuing a revised initial decision.
    (f) If the ALJ denies a motion for reconsideration, the initial 
decision will constitute the final decision of the FDIC and will be 
final and binding on all parties 30 days after the ALJ denies the 
motion, unless the final decision is timely appealed to the Board in 
accordance with Sec. 308.538 of this subpart.
    (g) If the ALJ issues a revised initial decision, that decision will 
constitute the final decision of the FDIC and will be final and binding 
on the parties 30 days after it is issued, unless it is timely appealed 
to the Board in accordance with Sec. 308.538 of this subpart.



Sec. 308.538  Appeal to the Board of Directors.

    (a) Any defendant who has filed a timely answer and who is 
determined in an initial decision to be liable for a civil penalty or 
assessment may appeal such decision to the Board by filing a notice of 
appeal with the Board in accordance with this section.
    (b)(1) No notice of appeal may be filed until the time period for 
filing a motion for reconsideration under Sec. 308.537 of this subpart 
has expired.
    (2) If a motion for reconsideration is timely filed, a notice of 
appeal must be filed within 30 days after the ALJ denies the motion or 
issues a revised initial decision, whichever applies.
    (3) If no motion for reconsideration is timely filed, a notice of 
appeal must be filed within 30 days after the ALJ issues the initial 
decision.
    (4) The Board may extend the initial 30-day period for an additional 
30 days

[[Page 127]]

if the defendant files with the Board a request for an extension within 
the initial 30-day period and shows good cause.
    (c) If the defendant files a timely notice of appeal with the Board, 
the ALJ will forward the record of the proceeding to the Board.
    (d) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting the 
exceptions.
    (e) The representative for the Corporation may file a brief in 
opposition to exceptions within 30 days of receiving the notice of 
appeal and accompanying brief.
    (f) There is no right to appear personally before the Board.
    (g) There is no right to appeal any interlocutory ruling by the ALJ.
    (h) In reviewing the initial decision, the Board will not consider 
any objection that was not raised before the ALJ unless a demonstration 
is made of extraordinary circumstances causing the failure to raise the 
objection.
    (i) If any party demonstrates to the satisfaction of the Board that 
additional evidence not presented at such hearing is material and that 
there were reasonable grounds for the failure to present such evidence 
at such hearing, the Board will remand the matter to the ALJ for 
consideration of such additional evidence.
    (j) The Board may affirm, reduce, reverse, compromise, remand, or 
settle any penalty or assessment determined by the ALJ in any initial 
decision.
    (k) The Board will promptly serve each party to the appeal with a 
copy of the decision of the Board and a statement describing the right 
of any person determined to be liable for a penalty or an assessment to 
seek judicial review.
    (l) Unless a petition for review is filed as provided in 31 U.S.C. 
3805 after a defendant has exhausted all administrative remedies under 
this subpart and within 60 days after the date on which the Board serves 
the defendant with a copy of the Board's decision, a determination that 
a defendant is liable under Sec. 308.502 of this subpart is final and 
is not subject to judicial review.



Sec. 308.539  Stays ordered by the Department of Justice.

    If at any time the Attorney General or an Assistant Attorney General 
designated by the Attorney General transmits to the Board a written 
finding that continuation of the administrative process described in 
this subpart with respect to a claim or statement may adversely affect 
any pending or potential criminal or civil action related to such claim 
or statement, the Board will stay the process immediately. The Board may 
order the process resumed only upon receipt of the written authorization 
of the Attorney General.



Sec. 308.540  Stay pending appeal.

    (a) An initial decision is stayed automatically pending disposition 
of a motion for reconsideration or of an appeal to the Board.
    (b) No administrative stay is available following a final decision 
of the Board.



Sec. 308.541  Judicial review.

    Section 3805 of Title 31, United States Code, authorizes judicial 
review by an appropriate United States District Court of a final 
decision of the Board imposing penalties or assessments under this 
subpart and specifies the procedures for such review.



Sec. 308.542  Collection of civil penalties and assessments.

    Sections 3806 and 3808(b) of Title 31, United States Code, authorize 
actions for collection of civil penalties and assessments imposed under 
this subpart and specify the procedures for such actions.



Sec. 308.543  Right to administrative offset.

    The amount of any penalty or assessment which has become final, or 
for which a judgment has been entered under Sec. 308.541 or Sec. 
308.542 of this subpart, or any amount agreed upon in a compromise or 
settlement under Sec. 308.545 of this subpart, may be collected by 
administrative offset under 31 U.S.C. 3716, except that an 
administrative offset may not be made under this section against a 
refund of an overpayment of federal taxes, then or later

[[Page 128]]

owing by the United States to the defendant.



Sec. 308.544  Deposit in Treasury of United States.

    All amounts collected pursuant to this subpart will be deposited as 
miscellaneous receipts in the Treasury of the United States, except as 
provided in 31 U.S.C. 3806(g).



Sec. 308.545  Compromise or settlement.

    (a) Parties may make offers of compromise or settlement at any time.
    (b) The reviewing official has the exclusive authority to compromise 
or settle a case under this subpart at any time after the date on which 
the reviewing official is permitted to issue a complaint and before the 
date on which the ALJ issues an initial decision.
    (c) The Board has exclusive authority to compromise or settle a case 
under this subpart any time after the date on which the ALJ issues an 
initial decision, except during the pendency of any review under Sec. 
308.541 of this subpart or during the pendency of any action to collect 
penalties and assessments under Sec. 308.542 of this subpart.
    (d) The Attorney General has exclusive authority to compromise or 
settle a case under this subpart during the pendency of any review under 
Sec. 308.541 of this subpart or of any action to recover penalties and 
assessments under 31 U.S.C. 3806.
    (e) The investigating official may recommend settlement terms to the 
reviewing official, the Board, or the Attorney General, as appropriate. 
The reviewing official may recommend settlement terms to the Board, or 
the Attorney General, as appropriate.
    (f) Any compromise or settlement must be in writing.



Sec. 308.546  Limitations.

    (a) The notice of hearing with respect to a claim or statement will 
be served in the manner specified in Sec. 308.507 of this subpart 
within 6 years after the date on which such claim or statement is made.
    (b) If the defendant fails to file a timely answer, service of 
notice under Sec. 308.509(b) of this subpart will be deemed a notice of 
a hearing for purposes of this section.
    (c) The statute of limitations may be extended by agreement of the 
parties.



    Subpart U_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

    Source:  68 FR 48270, Aug. 13, 2003, unless otherwise noted.



Sec. 308.600  Scope.

    This subpart, which implements section 36(g)(4) of the FDIA (12 
U.S.C. 1831m(g)(4)), provides rules and procedures for the removal, 
suspension, or debarment of independent public accountants and 
accounting firms from performing independent audit and attestation 
services required by section 36 of the FDIA (12 U.S.C. 1831m) for 
insured depository institutions for which the FDIC is the appropriate 
Federal banking agency.



Sec. 308.601  Definitions.

    As used in this subpart, the following terms shall have the meaning 
given below unless the context requires otherwise:
    (a) Accounting firm means a corporation, proprietorship, 
partnership, or other business firm providing audit services.
    (b) Audit services means any service required to be performed by an 
independent public accountant by section 36 of the FDIA and 12 CFR part 
363, including attestation services.
    (c) Independent public accountant (accountant) means any individual 
who performs or participates in providing audit services.



Sec. 308.602  Removal, suspension, or debarment.

    (a) Good cause for removal, suspension, or debarment.
    (1) Individuals. The Board of Directors may remove, suspend, or 
debar an independent public accountant under section 36 of the FDIA from 
performing audit services for insured depository institutions for which 
the FDIC is the appropriate Federal banking agency if, after service of 
a notice of intention and opportunity for hearing in the

[[Page 129]]

matter, the Board of Directors finds that the accountant:
    (i) Lacks the requisite qualifications to perform audit services;
    (ii) Has knowingly or recklessly engaged in conduct that results in 
a violation of applicable professional standards, including those 
standards and conflicts of interest provisions applicable to accountants 
through the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 
(2002)) (Sarbanes-Oxley Act) and developed by the Public Company 
Accounting Oversight Board and the Securities and Exchange Commission;
    (iii) Has engaged in negligent conduct in the form of:
    (A) A single instance of highly unreasonable conduct that results in 
a violation of applicable professional standards in circumstances in 
which an accountant knows, or should know, that heightened scrutiny is 
warranted; or
    (B) Repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to perform audit services;
    (iv) Has knowingly or recklessly given false or misleading 
information, or knowingly or recklessly participated in any way in the 
giving of false or misleading information, to the FDIC or any officer or 
employee of the FDIC;
    (v) Has engaged in, or aided and abetted, a material and knowing or 
reckless violation of any provision of the Federal banking or securities 
laws or the rules and regulations thereunder, or any other law;
    (vi) Has been removed, suspended, or debarred from practice before 
any Federal or state agency regulating the banking, insurance, or 
securities industries, other than by an action listed in Sec. 308.603, 
on grounds relevant to the provision of audit services; or
    (vii) Is suspended or debarred for cause from practice as an 
accountant by any duly constituted licensing authority of any state, 
possession, commonwealth, or the District of Columbia.
    (2) Accounting firms. If the Board of Directors determines that 
there is good cause for the removal, suspension, or debarment of a 
member or employee of an accounting firm under paragraph (a)(1) of this 
section, the Board of Directors also may remove, suspend, or debar such 
firm or one or more offices of such firm. In considering whether to 
remove, suspend, or debar an accounting firm or an office thereof, and 
the term of any sanction against an accounting firm under this section, 
the Board of Directors may consider, for example:
    (i) The gravity, scope, or repetition of the act or failure to act 
that constitutes good cause for the removal, suspension, or debarment;
    (ii) The adequacy of, and adherence to, applicable policies, 
practices, or procedures for the accounting firm's conduct of its 
business and the performance of audit services;
    (iii) The selection, training, supervision, and conduct of members 
or employees of the accounting firm involved in the performance of audit 
services;
    (iv) The extent to which managing partners or senior officers of the 
accounting firm have participated, directly, or indirectly through 
oversight or review, in the act or failure to act; and
    (v) The extent to which the accounting firm has, since the 
occurrence of the act or failure to act, implemented corrective internal 
controls to prevent its recurrence.
    (3) Limited scope orders. An order of removal, suspension (including 
an immediate suspension), or debarment may, at the discretion of the 
Board of Directors, be made applicable to a limited number of insured 
depository institutions for which the FDIC is the appropriate Federal 
banking agency.
    (4) Remedies not exclusive. The remedies provided in this subpart 
are in addition to any other remedies the FDIC may have under any other 
applicable provision of law, rule, or regulation.
    (b) Proceedings to remove, suspend or debar. (1) Initiation of 
formal removal, suspension, or debarment proceedings. The Board of 
Directors may initiate a proceeding to remove, suspend, or debar an 
accountant or accounting firm from performing audit services by issuing 
a written notice of intention to take such action that names the 
individual or firm as a respondent and describes the nature of the 
conduct that constitutes good cause for such action.

[[Page 130]]

    (2) Hearings under paragraph (b) of this section. An accountant or 
firm named as a respondent in the notice issued under paragraph (b)(1) 
of this section may request a hearing on the allegations contained in 
the notice. Hearings conducted under this paragraph shall be conducted 
in the same manner as other hearings under the Uniform Rules of Practice 
and Procedure (12 CFR part 308, subpart A) (Uniform Rules).
    (c) Immediate suspension from performing audit services.
    (1) In general. If the Board of Directors serves a written notice of 
intention to remove, suspend, or debar an accountant or accounting firm 
from performing audit services, the Board of Directors may, with due 
regard for the public interest and without a preliminary hearing, 
immediately suspend such accountant or firm from performing audit 
services for insured depository institutions for which the FDIC is the 
appropriate Federal banking agency if the Board of Directors:
    (i) Has a reasonable basis to believe that the accountant or 
accounting firm has engaged in conduct (specified in the notice served 
upon the accountant or accounting firm under paragraph (b)(1) of this 
section) that would constitute grounds for removal, suspension, or 
debarment under paragraph (a) of this section;
    (ii) Determines that immediate suspension is necessary to avoid 
immediate harm to an insured depository institution or its depositors or 
to the depository system as a whole; and
    (iii) Serves such respondent with written notice of the immediate 
suspension.
    (2) Procedures. An immediate suspension notice issued under this 
paragraph will become effective upon service. Such suspension will 
remain in effect until the date the Board of Directors dismisses the 
charges contained in the notice of intention, or the effective date of a 
final order of removal, suspension, or debarment issued by the Board of 
Directors to the respondent.
    (3) Petition to stay. Any accountant or accounting firm immediately 
suspended from performing audit services in accordance with paragraph 
(c)(1) of this section may, within 10 calendar days after service of the 
notice of immediate suspension, file a petition with the Executive 
Secretary for a stay of such immediate suspension. If no petition is 
filed within 10 calendar days, the immediate suspension shall remain in 
effect.
    (4) Hearing on petition. Upon receipt of a stay petition, the 
Executive Secretary will designate a presiding officer who will fix a 
place and time (not more than 10 calendar days after receipt of the 
petition, unless extended at the request of petitioner) at which the 
immediately suspended party may appear, personally or through counsel, 
to submit written materials and oral argument. Any FDIC employee engaged 
in investigative or prosecuting functions for the FDIC in a case may 
not, in that or a factually related case, serve as a presiding officer 
or participate or advise in the decision of the presiding officer or of 
the FDIC, except as witness or counsel in the proceeding. In the sole 
discretion of the presiding officer, upon a specific showing of 
compelling need, oral testimony of witnesses also may be presented. 
Enforcement counsel may represent the agency at the hearing. In hearings 
held pursuant to this paragraph there shall be no discovery, and the 
provisions of Sec. Sec. 308.6 through 308.12, Sec. 308.16, and Sec. 
308.21 of the Uniform Rules will apply.
    (5) Decision on petition. Within 30 calendar days after the hearing, 
the presiding officer will issue a decision. The presiding officer will 
grant a stay upon a demonstration that a substantial likelihood exists 
of the respondent's success on the issues raised by the notice of 
intention and that, absent such relief, the respondent will suffer 
immediate and irreparable injury, loss, or damage. In the absence of 
such a demonstration, the presiding officer will notify the parties that 
the immediate suspension will be continued pending the completion of the 
administrative proceedings pursuant to the notice of intention. The 
presiding officer will serve a copy of the decision on, and 
simultaneously certify the record to, the Executive Secretary.
    (6) Review of presiding officer's decision. The parties may seek 
review of the presiding officer's decision by filing

[[Page 131]]

a petition for review with the Executive Secretary within 10 calendar 
days after service of the decision. Replies must be filed within 10 
calendar days after the petition filing date. Upon receipt of a petition 
for review and any reply, the Executive Secretary will promptly certify 
the entire record to the Board of Directors. Within 60 calendar days of 
the Executive Secretary's certification, the Board of Directors will 
issue an order notifying the affected party whether or not the immediate 
suspension should be continued or reinstated. The order will state the 
basis of the Board's decision.



Sec. 308.603  Automatic removal, suspension, and debarment.

    (a) An independent public accountant or accounting firm may not 
perform audit services for insured depository institutions for which the 
FDIC is the appropriate Federal banking agency if the accountant or 
firm:
    (1) Is subject to a final order of removal, suspension, or debarment 
(other than a limited scope order) issued by the Board of Governors of 
the Federal Reserve System, the Office of the Comptroller of the 
Currency, or the Office of Thrift Supervision under section 36 of the 
FDIA;
    (2) Is subject to a temporary suspension or permanent revocation of 
registration or a temporary or permanent suspension or bar from further 
association with any registered public accounting firm issued by the 
Public Company Accounting Oversight Board or the Securities and Exchange 
Commission under sections 105(c)(4)(A) or (B) of the Sarbanes-Oxley Act 
(15 U.S.C. 7215(c)(4)(A) or (B)); or
    (3) Is subject to an order of suspension or denial of the privilege 
of appearing or practicing before the Securities and Exchange 
Commission.
    (b) Upon written request, the FDIC, for good cause shown, may grant 
written permission to such accountant or firm to perform audit services 
for insured depository institutions for which the FDIC is the 
appropriate Federal banking agency. The written request must comply with 
the requirements of Sec. 303.3 of this chapter.



Sec. 308.604  Notice of removal, suspension, or debarment.

    (a) Notice to the public. Upon the issuance of a final order for 
removal, suspension, or debarment of an independent public accountant or 
accounting firm from providing audit services, the FDIC will make the 
order publicly available and provide notice of the order to the other 
Federal banking agencies.
    (b) Notice to the FDIC by accountants and firms. An accountant or 
accounting firm that provides audit services to any insured depository 
institution for which the FDIC is the appropriate Federal banking agency 
must provide the FDIC with written notice of:
    (1) any currently effective order or other action described in 
Sec. Sec. 308.602(a)(1)(vi) through (a)(1)(vii) or Sec. Sec. 
308.603(a)(2) through (a)(3); and
    (2) any currently effective action by the Public Company Accounting 
Oversight Board under sections 105(c)(4)(C) or (G) of the Sarbanes-Oxley 
Act (15 U.S.C. 7215(c)(4)(C) or (G)).
    (c) Timing of notice. Written notice required by this paragraph 
shall be given no later than 15 calendar days following the effective 
date of an order or action, or 15 calendar days before an accountant or 
accounting firm accepts an engagement to provide audit services, 
whichever date is earlier.



Sec. 308.605  Application for reinstatement.

    (a) Form of petition. Unless otherwise ordered by the Board of 
Directors, an application for reinstatement by an independent public 
accountant, an accounting firm, or an office of a firm that was removed, 
suspended, or debarred under Sec. 308.602 may be made in writing at any 
time. The application must comply with the requirements of Sec. 303.3 
of this chapter.
    (b) Procedure. An applicant for reinstatement under this section 
may, in the sole discretion of the Board of Directors, be afforded a 
hearing. In reinstatement proceedings, the person seeking reinstatement 
shall bear the burden of going forward with an application and proving 
the grounds asserted in support of the application, and the Board of 
Directors may, in its

[[Page 132]]

sole discretion, direct that any reinstatement proceeding be limited to 
written submissions. The removal, suspension, or debarment shall 
continue until the Board of Directors, for good cause shown, has 
reinstated the applicant or until the suspension period has expired. The 
filing of an application for reinstatement will not stay the 
effectiveness of the removal, suspension, or debarment of an accountant 
or firm.



PART 309_DISCLOSURE OF INFORMATION--Table of Contents




Sec.
309.1 Purpose and scope.
309.2 Definitions.
309.3 Federal Register publication.
309.4 Publicly available records.
309.5 Procedures for requesting records.
309.6 Disclosure of exempt records.
309.7 Service of process.

    Authority: 5 U.S.C. 552; 12 U.S.C. 1819 ``Seventh'' and ``Tenth.''

    Source: 60 FR 61465, Nov. 30, 1995, unless otherwise noted.



Sec. 309.1  Purpose and scope.

    This part sets forth the basic policies of the Federal Deposit 
Insurance Corporation regarding information it maintains and the 
procedures for obtaining access to such information. Section 309.2 sets 
forth definitions applicable to this part 309. Section 309.3 describes 
the types of information and documents typically published in the 
Federal Register. Section 309.4 explains how to access public records 
maintained on the Federal Deposit Insurance Corporation's World Wide Web 
page and in the Federal Deposit Insurance Corporation's Public 
Information Center or ``PIC'', and describes the categories of records 
generally found there. Section 309.5 implements the Freedom of 
Information Act (5 U.S.C. 552). Section 309.6 authorizes the 
discretionary disclosure of exempt records under certain limited 
circumstances. Section 309.7 outlines procedures for serving a subpoena 
or other legal process to obtain information maintained by the FDIC.

[63 FR 16404, Apr. 3, 1998]



Sec. 309.2  Definitions.

    For purposes of this part:
    (a) The term depository institution, as used in Sec. 309.6, 
includes depository institutions that have applied to the Corporation 
for federal deposit insurance, closed depository institutions, presently 
operating federally insured depository institutions, foreign banks, 
branches of foreign banks, and all affiliates of any of the foregoing.
    (b) The terms Corporation or FDIC mean the Federal Deposit Insurance 
Corporation.
    (c) The words disclose or disclosure, as used in Sec. 309.6, mean 
to give access to a record, whether by producing the written record or 
by oral discussion of its contents. Where the Corporation employee 
authorized to release Corporation documents makes a determination that 
furnishing copies of the documents is necessary, the words disclose or 
disclosure include the furnishing of copies of documents or records. In 
addition, disclose or disclosure as used in Sec. 309.6 is synonymous 
with the term transfer as used in the Right to Financial Privacy Act of 
1978 (12 U.S.C. 3401 et seq.).
    (d) The term examination includes, but is not limited to, formal and 
informal investigations of irregularities involving suspected violations 
of federal or state civil or criminal laws, or unsafe and unsound 
practices as well as such other investigations as may be conducted 
pursuant to law.
    (e) The term record includes records, files, documents, reports, 
correspondence, books, and accounts, or any portion thereof, in any form 
the FDIC regularly maintains them.
    (f) The term report of examination includes, but is not limited to, 
examination reports resulting from examinations of depository 
institutions conducted jointly by Corporation examiners and state 
banking authority examiners or other federal financial institution 
examiners, as well as reports resulting from examinations conducted 
solely by Corporation examiners. The term also includes compliance 
examination reports.
    (g) The term customer financial records, as used in Sec. 309.6, 
means an original of, a copy of, or information known to have been 
derived from, any record held by a depository institution pertaining to 
a customer's relationship

[[Page 133]]

with the depository institution but does not include any record that 
contains information not identified with or identifiable as being 
derived from the financial records of a particular customer. The term 
customer as used in Sec. 309.6 refers to individuals or partnerships of 
five or fewer persons.
    (h) The term Director of the Division having primary authority 
includes Deputies to the Chairman and directors of FDIC Divisions and 
Offices that create, maintain custody, or otherwise have primary 
responsibility for the handling of FDIC records or information.

[60 FR 61465, Nov. 30, 1995, as amended at 63 FR 16404, Apr. 3, 1998]



Sec. 309.3  Federal Register publication.

    The FDIC publishes the following information in the Federal Register 
for the guidance of the public:
    (a) Descriptions of its central and field organization and the 
established places at which, the officers from whom, and the methods 
whereby, the public may secure information, make submittals or requests, 
or obtain decisions;
    (b) Statements of the general course and method by which its 
functions are channeled and determined, including the nature and 
requirements of all formal and informal procedures available;
    (c) Rules of procedure, descriptions of forms available or the 
places at which forms may be obtained, and instructions as to the scope 
and contents of all papers, reports or examinations;
    (d) Substantive rules of general applicability adopted as authorized 
by law, and statements of general policy or interpretations of general 
applicability formulated and adopted by the FDIC;
    (e) Every amendment, revision or repeal of the foregoing; and
    (f) General notices of proposed rule-making.



Sec. 309.4  Publicly available records.

    (a) Records available on the FDIC's World Wide Web page--(1) 
Discretionary release of documents. The FDIC encourages the public to 
explore the wealth of resources available on the FDIC's World Wide Web 
page, located at: http://www.fdic.gov. The FDIC has elected to publish a 
broad range of materials on its World Wide Web page, including consumer 
guides; financial and statistical information of interest to the banking 
industry; and information concerning the FDIC's responsibilities and 
structure.
    (2) Documents required to be made available via computer 
telecommunications. (i) The following types of documents created on or 
after November 1, 1996, and required to be made available through 
computer telecommunications, may be found on the FDIC's World Wide Web 
page located at: http://www.fdic.gov:
    (A) Final opinions, including concurring and dissenting opinions, as 
well as final orders and written agreements, made in the adjudication of 
cases;
    (B) Statements of policy and interpretations adopted by the Board of 
Directors that are not published in the Federal Register;
    (C) Administrative staff manuals and instructions to staff that 
affect the public;
    (D) Copies of all records released to any person under Sec. 309.5 
that, because of the nature of their subject matter, the FDIC has 
determined are likely to be the subject of subsequent requests;
    (E) A general index of the records referred to in paragraph 
(a)(2)(i)(D) of this section.
    (ii) To the extent permitted by law, the FDIC may delete identifying 
details when it makes available or publishes a final opinion, final 
order, statement of policy, interpretation or staff manual or 
instruction. If redaction is necessary, the FDIC will, to the extent 
technically feasible, indicate the amount of material deleted at the 
place in the record where such deletion is made unless that indication 
in and of itself will jeopardize the purpose for the redaction.
    (b) Public Information Center. The FDIC maintains a Public 
Information Center or ``PIC'' that contains Corporate records that the 
Freedom of Information Act requires be made available for regular 
inspection and copying, as well as any records or information the FDIC, 
in its discretion, has regularly made available to the public. The PIC 
has extensive materials of interest to the public, including many 
Reports, Summaries and Manuals used

[[Page 134]]

or published by the Corporation that are available for inspection and 
copying. The PIC is open from 9:00 AM to 5:00 PM, Monday through Friday, 
excepting federal holidays. It is located at 801 17th Street, NW., 
Washington, DC 20006. The PIC may be reached during business hours by 
calling (800) 276-6003.
    (c) Applicable fees. (i) If applicable, fees for furnishing records 
under this section are as set forth in Sec. 309.5(f) except that all 
categories of requesters shall be charged duplication costs.
    (ii) Information on the FDIC's World Wide Web page is available to 
the public without charge. If, however, information available on the 
FDIC's World Wide Web page is provided pursuant to a Freedom of 
Information Act request processed under Sec. 309.5, then fees apply and 
will be assessed pursuant to Sec. 309.5(f).

[63 FR 16404, Apr. 3, 1998]



Sec. 309.5  Procedures for requesting records.

    (a) Definitions. For purposes of this section:
    (1) Commercial use request means a request from or on behalf of a 
requester who seeks records for a use or purpose that furthers the 
commercial, trade, or profit interests of the requester or the person on 
whose behalf the request is made. In determining whether a request falls 
within this category, the FDIC will determine the use to which a 
requester will put the records requested and seek additional information 
as it deems necessary.
    (2) Direct costs means those expenditures the FDIC actually incurs 
in searching for, duplicating, and, in the case of commercial 
requesters, reviewing records in response to a request for records.
    (3) Duplication means the process of making a copy of a record 
necessary to respond to a request for records or for inspection of 
original records that contain exempt material or that cannot otherwise 
be directly inspected. Such copies can take the form of paper copy, 
microfilm, audiovisual records, or machine readable records (e.g., 
magnetic tape or computer disk).
    (4) Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate or 
graduate higher education, an institution of professional education, and 
an institution of vocational education, which operates a program or 
programs of scholarly research.
    (5) Noncommercial scientific institution means an institution that 
is not operated on a commercial basis as that term is defined in 
paragraph (a)(1) of this section, and which is operated solely for the 
purpose of conducting scientific research, the results of which are not 
intended to promote any particular product or industry.
    (6) Representative of the news media means any person primarily 
engaged in gathering news for, or a free-lance journalist who can 
demonstrate a reasonable expectation of having his or her work product 
published or broadcast by, an entity that is organized and operated to 
publish or broadcast news to the public. The term news means information 
that is about current events or that would be of current interest to the 
general public.
    (7) Review means the process of examining records located in 
response to a request for records to determine whether any portion of 
any record is permitted to be withheld as exempt information. It 
includes processing any record for disclosure, e.g., doing all that is 
necessary to excise them or otherwise prepare them for release.
    (8) Search includes all time spent looking for material that is 
responsive to a request, including page-by-page or line-by-line 
identification of material within records. Searches may be done manually 
and/or by computer using existing programming.
    (b) Making a request for records. (1) The request shall be submitted 
in writing to the Freedom of Information Act/Privacy Act Group (``FOIA/
PA Group''), Legal Division :
    (i) By completing the online request form located on the FDIC's 
World Wide Web page, found at: http://www.fdic.gov;
    (ii) By facsimile clearly marked Freedom of Information Act Request 
to the FOIA/PA Group: (202) 736-0547; or
    (iii) By sending a letter to: Legal Division, FDIC, ATTN: FOIA/PA 
Group,,

[[Page 135]]

550 17th Street, NW., Washington, DC 20429.
    (2) The request shall contain the following information:
    (i) The name and address of the requester, an electronic mail 
address, if available, and the telephone number at which the requester 
may be reached during normal business hours;
    (ii) Whether the requester is an educational institution, 
noncommercial scientific institution, or news media representative;
    (iii) A statement agreeing to pay the applicable fees, or a 
statement identifying a maximum fee that is acceptable to the requester, 
or a request for a waiver or reduction of fees that satisfies paragraph 
(f)(1)(x) of this section; and
    (iv) The preferred form and format of any responsive information 
requested, if other than paper copies.
    (3) A request for identifiable records shall reasonably describe the 
records in a way that enables the FDIC's staff to identify and produce 
the records with reasonable effort and without unduly burdening or 
significantly interfering with any of the FDIC's operations.
    (c) Defective requests. The FDIC need not accept or process a 
request that does not reasonably describe the records requested or that 
does not otherwise comply with the requirements of this part. The FDIC 
may return a defective request, specifying the deficiency. The requester 
may submit a corrected request, which will be treated as a new request.
    (d) Processing requests--(1) Receipt of requests. Upon receipt of 
any request that satisfies paragraph (b) of this section, the FOIA/PA 
Group, Legal Division shall assign the request to the appropriate 
processing track pursuant to this section. The date of receipt for any 
request, including one that is addressed incorrectly or that is referred 
by another agency, is the date the FOIA/PA Group actually receives the 
request.
    (2) Multitrack processing. (i) The FDIC provides different levels of 
processing for categories of requests under this part. Requests for 
records that are readily identifiable by the FOIA/PA Group, and that 
have already been cleared for public release may qualify for fast-track 
processing. All other requests shall be handled under normal processing 
procedures, unless expedited processing has been granted pursuant to 
paragraph (d)(3) of this section.
    (ii) The FDIC will make the determination whether a request 
qualifies for fast-track processing. A requester may contact the FOIA/PA 
Group to learn whether a particular request has been assigned to fast-
track processing. If the request has not qualified for fast-track 
processing, the requester will be given an opportunity to refine the 
request in order to qualify for fast-track processing. Changes made to 
requests to obtain faster processing must be in writing.
    (3) Expedited processing. (i) Where a person requesting expedited 
access to records has demonstrated a compelling need for the records, or 
where the FDIC has determined to expedite the response, the FDIC shall 
process the request as soon as practicable. To show a compelling need 
for expedited processing, the requester shall provide a statement 
demonstrating that:
    (A) The failure to obtain the records on an expedited basis could 
reasonably be expected to pose an imminent threat to the life or 
physical safety of an individual; or
    (B) The requester can establish that they are primarily engaged in 
information dissemination as their main professional occupation or 
activity, and there is urgency to inform the public of the government 
activity involved in the request; and
    (C) The requester's statement must be certified to be true and 
correct to the best of the person's knowledge and belief and explain in 
detail the basis for requesting expedited processing.
    (ii) The formality of the certification required to obtain expedited 
treatment may be waived by the FDIC as a matter of administrative 
discretion.
    (4) A requester seeking expedited processing will be notified 
whether expedited processing has been granted within ten (10) working 
days of the receipt of the request. If the request for expedited 
processing is denied, the requester may file an appeal pursuant to the 
procedures set forth in paragraph (h) of this section, and the FDIC 
shall respond to the appeal within ten (10)

[[Page 136]]

working days after receipt of the appeal.
    (5) Priority of responses. Consistent with sound administrative 
process the FDIC processes requests in the order they are received in 
the separate processing tracks. However, in the agency's discretion, or 
upon a court order in a matter to which the FDIC is a party, a 
particular request may be processed out of turn.
    (6) Notification. (i) The time for response to requests will be 
twenty (20) working days except:
    (A) In the case of expedited treatment under paragraph (d)(3) of 
this section;
    (B) Where the running of such time is suspended for the calculation 
of a cost estimate for the requester if the FDIC determines that the 
processing of the request may exceed the requester's maximum fee 
provision or if the charges are likely to exceed $250 as provided for in 
paragraph (f)(1)(v) of this section;
    (C) Where the running of such time is suspended for the payment of 
fees pursuant to the paragraphs (d)(6)(i)(B) and (f)(1) of this section; 
or
    (D) In unusual circumstances, as defined in 5 U.S.C. 552(a)(6)(B) 
and further described in paragraph (d)(6)(iii) of this section.
    (ii) In unusual circumstances as referred to in paragraph 
(d)(6)(i)(D) of this section, the time limit may be extended for a 
period of:
    (A) Ten (10) working days as provided by written notice to the 
requester, setting forth the reasons for the extension and the date on 
which a determination is expected to be dispatched; or
    (B) Such alternative time period as agreed to by the requester or as 
reasonably determined by the FDIC when the FDIC notifies the requester 
that the request cannot be processed in the specified time limit.
    (iii) Unusual circumstances may arise when:
    (A) The records are in facilities, such as field offices or storage 
centers, that are not located at the FDIC's Washington office;
    (B) The records requested are voluminous or are not in close 
proximity to one another; or
    (C) There is a need to consult with another agency or among two or 
more components of the FDIC having a substantial interest in the 
determination.
    (7) Response to request. In response to a request that satisfies the 
requirements of paragraph (b) of this section, a search shall be 
conducted of records maintained by the FDIC in existence on the date of 
receipt of the request, and a review made of any responsive information 
located. The FDIC shall notify the requester of:
    (i) The FDIC's determination of the request;
    (ii) The reasons for the determination;
    (iii) If the response is a denial of an initial request or if any 
information is withheld, the FDIC will advise the requester in writing:
    (A) If the denial is in part or in whole;
    (B) The name and title of each person responsible for the denial 
(when other than the person signing the notification);
    (C) The exemptions relied on for the denial; and
    (D) The right of the requester to appeal the denial to the FDIC's 
General Counsel within 30 business days following receipt of the 
notification, as specified in paragraph (h) of this section.
    (e) Providing responsive records. (1) Copies of requested records 
shall be sent to the requester by regular U.S. mail to the address 
indicated in the request, unless the requester elects to take delivery 
of the documents at the FDIC or makes other acceptable arrangements, or 
the FDIC deems it appropriate to send the documents by another means.
    (2) The FDIC shall provide a copy of the record in any form or 
format requested if the record is readily reproducible by the FDIC in 
that form or format, but the FDIC need not provide more than one copy of 
any record to a requester.
    (3) By arrangement with the requester, the FDIC may elect to send 
the responsive records electronically if a substantial portion of the 
request is in electronic format. If the information requested is made 
pursuant to the Privacy Act of 1974, 5 U.S.C. 552a, it will

[[Page 137]]

not be sent by electronic means unless reasonable security measures can 
be provided.
    (f) Fees--(1) General rules. (i) Persons requesting records of the 
FDIC shall be charged for the direct costs of search, duplication, and 
review as set forth in paragraphs (f)(2) and (f)(3) of this section, 
unless such costs are less than the FDIC's cost of processing the 
requester's remittance.
    (ii) Requesters will be charged for search and review costs even if 
responsive records are not located or, if located, are determined to be 
exempt from disclosure.
    (iii) Multiple requests seeking similar or related records from the 
same requester or group of requesters will be aggregated for the 
purposes of this section.
    (iv) If the FDIC determines that the estimated costs of search, 
duplication, or review of requested records will exceed the dollar 
amount specified in the request, or if no dollar amount is specified, 
the FDIC will advise the requester of the estimated costs (if greater 
than the FDIC's cost of processing the requester's remittance). The 
requester must agree in writing to pay the costs of search, duplication, 
and review prior to the FDIC initiating any records search.
    (v) If the FDIC estimates that its search, duplication, and review 
costs will exceed $250.00, the requester must pay an amount equal to 20 
percent of the estimated costs prior to the FDIC initiating any records 
search.
    (vi) The FDIC shall ordinarily collect all applicable fees under the 
final invoice before releasing copies of requested records to the 
requester.
    (vii) The FDIC may require any requester who has previously failed 
to pay the charges under this section within 30 calendar days of mailing 
of the invoice to pay in advance the total estimated costs of search, 
duplication, and review. The FDIC may also require a requester who has 
any charges outstanding in excess of 30 calendar days following mailing 
of the invoice to pay the full amount due, or demonstrate that the fee 
has been paid in full, prior to the FDIC initiating any additional 
records search.
    (viii) The FDIC may begin assessing interest charges on unpaid bills 
on the 31st day following the day on which the invoice was sent. 
Interest will be at the rate prescribed in section 3717 of title 31 of 
the United States Code and will accrue from the date of the invoice.
    (ix) The time limit for the FDIC to respond to a request will not 
begin to run until the FDIC has received the requester's written 
agreement under paragraph (f)(1)(iv) of this section, and advance 
payment under paragraph (f)(1) (v) or (vii) of this section, or payment 
of outstanding charges under paragraph (f)(1)(vii) or (viii) of this 
section.
    (x) As part of the initial request, a requester may ask that the 
FDIC waive or reduce fees if disclosure of the records is in the public 
interest because it is likely to contribute significantly to public 
understanding of the operations or activities of the government and is 
not primarily in the commercial interest of the requester. 
Determinations as to a waiver or reduction of fees will be made by the 
FOIA/PA Group, Legal Division (or designee) and the requester will be 
notified in writing of his/her determination. A determination not to 
grant a request for a waiver or reduction of fees under this paragraph 
may be appealed to the FDIC's General Counsel (or designee) pursuant to 
the procedure set forth in paragraph (h) of this section.
    (2) Chargeable fees by category of requester. (i) Commercial use 
requesters shall be charged search, duplication and review costs.
    (ii) Educational institutions, non-commercial scientific 
institutions and news media representatives shall be charged duplication 
costs, except for the first 100 pages.
    (iii) Requesters not described in paragraph (f)(2) (i) or (ii) of 
this section shall be charged the full reasonable direct cost of search 
and duplication, except for the first two hours of search time and first 
100 pages of duplication.
    (3) Fee schedule. The dollar amount of fees which the FDIC may 
charge to records requesters will be established by the Chief Financial 
Officer of the FDIC (or designee). The FDIC may

[[Page 138]]

charge fees that recoup the full allowable direct costs it incurs. Fees 
are subject to change as costs change.
    (i) Manual searches for records. The FDIC will charge for manual 
searches for records at the basic rate of pay of the employee making the 
search plus 16 percent to cover employee benefit costs. Where a single 
class of personnel (e.g., all clerical, all professional, or all 
executive) is used exclusively, the FDIC, at its discretion, may 
establish and charge an average rate for the range of grades typically 
involved.
    (ii) Computer searches for records. The fee for searches of 
computerized records is the actual direct cost of the search, including 
computer time, computer runs, and the operator's time apportioned to the 
search. The fee for a computer printout is the actual cost. The fees for 
computer supplies are the actual costs. The FDIC may, at its discretion, 
establish and charge a fee for computer searches based upon a reasonable 
FDIC-wide average rate for central processing unit operating costs and 
the operator's basic rate of pay plus 16 percent to cover employee 
benefit costs.
    (iii) Duplication of records. (A) The per-page fee for paper copy 
reproduction of documents is the average FDIC-wide cost based upon the 
reasonable direct costs of making such copies.
    (B) For other methods of reproduction or duplication, the FDIC will 
charge the actual direct costs of reproducing or duplicating the 
documents.
    (iv) Review of records. The FDIC will charge commercial use 
requesters for the review of records at the time of processing the 
initial request to determine whether they are exempt from mandatory 
disclosure at the basic rate of pay of the employee making the search 
plus 16 percent to cover employee benefit costs. Where a single class of 
personnel (e.g., all clerical, all professional, or all executive) is 
used exclusively, the FDIC, at its discretion, may establish and charge 
an average rate for the range of grades typically involved. The FDIC 
will not charge at the administrative appeal level for review of an 
exemption already applied. When records or portions of records are 
withheld in full under an exemption which is subsequently determined not 
to apply, the FDIC may charge for a subsequent review to determine the 
applicability of other exemptions not previously considered.
    (v) Other services. Complying with requests for special services, 
other than a readily produced electronic form or format, is at the 
FDIC's discretion. The FDIC may recover the full costs of providing such 
services to the requester.
    (4) Publication of fee schedule and effective date of changes. (i) 
The fee schedule is made available on the FDIC's World Wide Web page, 
found at http://www.fdic.gov.
    (ii) The fee schedule will be set forth in the ``Notice of Federal 
Deposit Insurance Corporation Records Fees'' issued in December of each 
year or in such ``Interim Notice of Federal Deposit Insurance 
Corporation Records Fees'' as may be issued. Copies of such notices may 
be obtained at no charge from the FOIA/PA Group, Legal Division, 550 
17th Street NW., Washington, DC 20429, and are available on the FDIC's 
World Wide Web page as noted in paragraph (f)(4)(i) of this section.
    (iii) The fees implemented in the December or Interim Notice will be 
effective 30 days after issuance.
    (5) Use of contractors. The FDIC may contract with independent 
contractors to locate, reproduce, and/or disseminate records; provided, 
however, that the FDIC has determined that the ultimate cost to the 
requester will be no greater than it would be if the FDIC performed 
these tasks itself. In no case will the FDIC contract out 
responsibilities which the Freedom of Information Act (FOIA) (5 U.S.C. 
552) provides that the FDIC alone may discharge, such as determining the 
applicability of an exemption or whether to waive or reduce fees.
    (g) Exempt information. A request for records may be denied if the 
requested record contains information which falls into one or more of 
the following categories.\1\ If the requested record contains both 
exempt and nonexempt information, the nonexempt portions

[[Page 139]]

which may reasonably be segregated from the exempt portions will be 
released to the requester. If redaction is necessary, the FDIC will, to 
the extent technically feasible, indicate the amount of material deleted 
at the place in the record where such deletion is made unless that 
indication in and of itself will jeopardize the purpose for the 
redaction. The categories of exempt records are as follows:
---------------------------------------------------------------------------

    \1\ Classification of a record as exempt from disclosure under the 
provisions of this paragraph (g) shall not be construed as authority to 
withhold the record if it is otherwise subject to disclosure under the 
Privacy Act of 1974 (5 U.S.C. 552a) or other federal statute, any 
applicable regulation of FDIC or any other federal agency having 
jurisdiction thereof, or any directive or order of any court of 
competent jurisdiction.
---------------------------------------------------------------------------

    (1) Records that are specifically authorized under criteria 
established by an Executive Order to be kept secret in the interest of 
national defense or foreign policy and are in fact properly classified 
pursuant to such Executive Order;
    (2) Records related solely to the internal personnel rules and 
practices of the FDIC;
    (3) Records specifically exempted from disclosure by statute, 
provided that such statute:
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue; or
    (ii) Establishes particular criteria for withholding or refers to 
particular types of matters to be withheld;
    (4) Trade secrets and commercial or financial information obtained 
from a person that is privileged or confidential;
    (5) Interagency or intra-agency memoranda or letters that would not 
be available by law to a private party in litigation with the FDIC;
    (6) Personnel, medical, and similar files (including financial 
files) the disclosure of which would constitute a clearly unwarranted 
invasion of personal privacy;
    (7) Records compiled for law enforcement purposes, but only to the 
extent that the production of such law enforcement records:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trial or an 
impartial adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a state, local, or foreign agency or 
authority or any private institution which furnished records on a 
confidential basis;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual;
    (8) Records that are contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the FDIC or any agency responsible for the regulation or 
supervision of financial institutions; or
    (9) geological and geophysical information and data, including maps, 
concerning wells.
    (h) Appeals. (1) Appeals should be addressed to the FOIA/PA Group, 
Legal Division, FDIC, 550 17th Street, NW., Washington, DC 20429.
    (2) A person whose initial request for records under this section, 
or whose request for a waiver of fees under paragraph (f)(1)(x) of this 
section, has been denied, either in part or in whole, has the right to 
appeal the denial to the FDIC's General Counsel (or designee) within 30 
business days after receipt of notification of the denial. Appeals of 
denials of initial requests or for a waiver of fees must be in writing 
and include any additional information relevant to consideration of the 
appeal.
    (3) Except in the case of an appeal for expedited treatment under 
paragraph (d)(3) of this section, the FDIC will notify the appellant in 
writing within 20 business days after receipt of the appeal and will 
state:
    (i) Whether it is granted or denied in whole or in part;
    (ii) The name and title of each person responsible for the denial 
(if other than the person signing the notification);

[[Page 140]]

    (iii) The exemptions relied upon for the denial in the case of 
initial requests for records; and
    (iv) The right to judicial review of the denial under the FOIA.
    (4) If a requester is appealing for denial of expedited treatment, 
the FDIC will notify the appellant within 10 business days after receipt 
of the appeal of the FDIC's disposition.
    (5) Complete payment of any outstanding fee invoice will be required 
before an appeal is processed.
    (i) Records of another agency. If a requested record is the property 
of another federal agency or department, and that agency or department, 
either in writing or by regulation, expressly retains ownership of such 
record, upon receipt of a request for the record the FDIC will promptly 
inform the requester of this ownership and immediately shall forward the 
request to the proprietary agency or department either for processing in 
accordance with the latter's regulations or for guidance with respect to 
disposition.

[63 FR 16404, Apr. 3, 1998, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 309.6  Disclosure of exempt records.

    (a) Disclosure prohibited. Except as provided in paragraph (b) of 
this section or by 12 CFR part 310,\2\ no person shall disclose or 
permit the disclosure of any exempt records, or information contained 
therein, to any persons other than those officers, directors, employees, 
or agents of the Corporation who have a need for such records in the 
performance of their official duties. In any instance in which any 
person has possession, custody or control of FDIC exempt records or 
information contained therein, all copies of such records shall remain 
the property of the Corporation and under no circumstances shall any 
person, entity or agency disclose or make public in any manner the 
exempt records or information without written authorization from the 
Director of the Corporation's Division having primary authority over the 
records or information as provided in this section.
---------------------------------------------------------------------------

    \2\ The procedures for disclosing records under the Privacy Act are 
separately set forth in 12 CFR part 310.
---------------------------------------------------------------------------

    (b) Disclosure authorized. Exempt records or information of the 
Corporation may be disclosed only in accordance with the conditions and 
requirements set forth in this paragraph (b). Requests for discretionary 
disclosure of exempt records or information pursuant to this paragraph 
(b) may be submitted directly to the Division having primary authority 
over the exempt records or information or to the FOIA/PA Group for 
forwarding to the appropriate Division having primary authority over the 
records sought. Such administrative request must clearly state that it 
seeks discretionary disclosure of exempt records, clearly identify the 
records sought, provide sufficient information for the Corporation to 
evaluate whether there is good cause for disclosure, and meet all other 
conditions set forth in paragraph (b)(1) through (10) of this section. 
Information regarding the appropriate FDIC Division having primary 
authority over a particular record or records may be obtained from the 
FOIA/PA Group. Authority to disclose or authorize disclosure of exempt 
records of the Corporation is delegated as follows:
    (1) Disclosure to depository institutions. The Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may disclose to any director or authorized officer, 
employee or agent of any depository institution, information contained 
in, or copies of, exempt records pertaining to that depository 
institution.
    (2) Disclosure to state banking agencies. The Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may in his or her discretion and for good cause, disclose 
to any authorized officer or employee of any state banking or securities 
department or agency, copies of any exempt records to the extent the 
records pertain to a state-chartered depository institution supervised 
by the agency or authority, or where the exempt records are requested in 
writing for a legitimate depository institution supervisory or 
regulatory purpose.
    (3) Disclosure to federal financial institutions supervisory 
agencies and certain other agencies. The Director of the Corporation's 
Division having primary authority over the exempt records, or

[[Page 141]]

designee, may in his or her discretion and for good cause, disclose to 
any authorized officer or employee of any federal financial institution 
supervisory agency including the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Office of Thrift 
Supervision, the Securities and Exchange Commission, the National Credit 
Union Administration, or any other agency included in section 1101(7) of 
the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401 et. seq.) 
(RFPA), any exempt records for a legitimate depository institution 
supervisory or regulatory purpose. The Director, or designee, may in his 
or her discretion and for good cause, disclose exempt records, including 
customer financial records, to certain other federal agencies as 
referenced in section 1113 of the RFPA for the purposes and to the 
extent permitted therein, or to any foreign bank regulatory or 
supervisory authority as provided, and to the extent permitted, by 
section 206 of the Federal Deposit Insurance Corporation Improvement Act 
of 1991 (12 U.S.C. 3109).
    (4) Disclosure to prosecuting or investigatory agencies or 
authorities. (i) Reports of Apparent Crime pertaining to suspected 
violations of law, which may contain customer financial records, may be 
disclosed to federal or state prosecuting or investigatory authorities 
without giving notice to the customer, as permitted in the relevant 
exceptions of the RFPA.
    (ii) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may disclose to the 
proper federal or state prosecuting or investigatory authorities, or to 
any authorized officer or employee of such authority, copies of exempt 
records pertaining to irregularities discovered in depository 
institutions which are believed to constitute violations of any federal 
or state civil or criminal law, or unsafe or unsound banking practices, 
provided that customer financial records may be disclosed without giving 
notice to the customer, only as permitted by the relevant exceptions of 
the RFPA. Unless such disclosure is initiated by the FDIC, customer 
financial records shall be disclosed only in response to a written 
request which:
    (A) Is signed by an authorized official of the agency making the 
request;
    (B) Identifies the record or records to which access is requested; 
and
    (C) Gives the reasons for the request.
    (iii) When notice to the customer is required to be given under the 
RFPA, the Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may disclose customer 
financial records to any federal or state prosecuting or investigatory 
agency or authority, provided, that:
    (A) The General Counsel, or designee, has determined that disclosure 
is authorized or required by law; or
    (B) Disclosure is pursuant to a written request that indicates the 
information is relevant to a legitimate law enforcement inquiry within 
the jurisdiction of the requesting agency and:
    (1) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, certifies pursuant to 
section 1112(a) \3\ of the RFPA that the records are believed relevant 
to a legitimate law enforcement inquiry within the jurisdiction of the 
receiving agency; and
---------------------------------------------------------------------------

    \3\ The form of certification generally is as follows. Additional 
information may be added:
    Pursuant to section 1112(a) of the Right to Financial Privacy Act of 
1978 (12 U.S.C. 3412), I, ------ [name and appropriate title] hereby 
certify that the financial records described below were transferred to 
(agency or department) in the belief that they were relevant to a 
legitimate law enforcement inquiry, within the jurisdiction of the 
receiving agency.
---------------------------------------------------------------------------

    (2) A copy of such certification and the notice required by section 
1112(b) \4\

[[Page 142]]

of the RFPA is sent within fourteen days of the disclosure to the 
customer whose records are disclosed.\5\
---------------------------------------------------------------------------

    \4\ The form of notice generally is as follows. Additional 
information may be added:
    Dear Mr./Ms. ------:
    Copies of, or information contained in, your financial records 
lawfully in the possession of the Federal Deposit Insurance Corporation 
have been furnished to (agency or department) pursuant to the Right to 
Financial Privacy Act of 1978 for the following purpose: ------. If you 
believe that this transfer has not been made to further a legitimate law 
enforcement inquiry, you may have legal rights under the Right to 
Financial Privacy Act of 1978 or the Privacy Act of 1974.
    \5\ Whenever the Corporation is subject to a court-ordered delay of 
the customer notice, the notice shall be sent immediately upon the 
expiration of the court-ordered delay.
---------------------------------------------------------------------------

    (5) Disclosure to servicers and serviced institutions. The Director 
of the Corporation's Division having primary authority over the exempt 
records, or designee, may disclose copies of any exempt record related 
to a bank data center, a depository institution service corporation or 
any other data center that provides data processing or related services 
to an insured institution (hereinafter referred to as ``data center'') 
to:
    (i) The examined data center;
    (ii) Any insured institution that receives data processing or 
related services from the examined data center;
    (iii) Any state agency or authority which exercises general 
supervision over an institution serviced by the examined data center; 
and
    (iv) Any federal financial institution supervisory agency which 
exercises general supervision over an institution serviced by the 
examined data center. The federal supervisory agency may disclose any 
such examination report received from the Corporation to an insured 
institution over which it exercises general supervision and which is 
serviced by the examined data center.
    (6) Disclosure to third parties. (i) Except as otherwise provided in 
paragraphs (c) (1) through (5) of this section, the Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may in his or her discretion and for good cause, disclose 
copies of any exempt records to any third party where requested to do so 
in writing. Any such written request shall:
    (A) Specify, with reasonable particularity, the record or records to 
which access is requested; and
    (B) Give the reasons for the request.
    (ii) Either prior to or at the time of any disclosure, the Director 
or designee shall require such terms and conditions as he deems 
necessary to protect the confidential nature of the record, the 
financial integrity of any depository institution to which the record 
relates, and the legitimate privacy interests of any individual named in 
such records.
    (7) Authorization for disclosure by depository institutions or other 
third parties. (i) The Director of the Corporation's Division having 
primary authority over the exempt records, or designee, may, in his or 
her discretion and for good cause, authorize any director, officer, 
employee, or agent of a depository institution to disclose copies of any 
exempt record in his custody to anyone who is not a director, officer or 
employee of the depository institution. Such authorization must be in 
response to a written request from the party seeking the record or from 
management of the depository institution to which the report or record 
pertains. Any such request shall specify, with reasonable particularity, 
the record sought, the party's interest therein, and the party's 
relationship to the depository institution to which the record relates.
    (ii) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may, in his or her 
discretion and for good cause, authorize any third party, including a 
federal or state agency, that has received a copy of a Corporation 
exempt record, to disclose such exempt record to another party or 
agency. Such authorization must be in response to a written request from 
the party that has custody of the copy of the exempt record. Any such 
request shall specify the record sought to be disclosed and the reasons 
why disclosure is necessary.
    (iii) Any subsidiary depository institution of a bank holding 
company or a savings and loan holding company may reproduce and furnish 
a copy of any report of examination of the subsidiary depository 
institution to the parent holding company without prior approval of the 
Director of the Division having primary authority over the exempt 
records and any depository institution may reproduce and furnish a copy 
of any report of examination of the disclosing depository institution to 
a majority shareholder if the following conditions are met:
    (A) The parent holding company or shareholder owns in excess of 50% 
of

[[Page 143]]

the voting stock of the depository institution or subsidiary depository 
institution;
    (B) The board of directors of the depository institution or 
subsidiary depository institution at least annually by resolution 
authorizes the reproduction and furnishing of reports of examination 
(the resolution shall specifically name the shareholder or parent 
holding company, state the address to which the reports are to be sent, 
and indicate that all reports furnished pursuant to the resolution 
remain the property of the Federal Deposit Insurance Corporation and are 
not to be disclosed or made public in any manner without the prior 
written approval of the Director of the Corporation's Division having 
primary authority over the exempt records as provided in paragraph (b) 
of this section;
    (C) A copy of the resolution authorizing disclosure of the reports 
is sent to the shareholder or parent holding company; and
    (D) The minutes of the board of directors of the depository 
institution or subsidiary depository institution for the meeting 
immediately following disclosure of a report state:
    (1) That disclosure was made;
    (2) The date of the report which was disclosed;
    (3) To whom the report was sent; and
    (4) The date the report was disclosed.
    (iv) With respect to any disclosure that is authorized under this 
paragraph (b)(7), the Director of the Corporation's Division having 
primary authority over the exempt records, or designee, shall only 
permit disclosure of records upon determining that good cause exists. If 
the exempt record contains information derived from depository 
institution customer financial records, disclosure is to be authorized 
only upon the condition that the requesting party and the party 
releasing the records comply with any applicable provision of the RFPA. 
Before authorizing the disclosure, the Director (or designee) may 
require that both the party having custody of a copy of a Corporation 
exempt record and the party seeking access to the record agree to such 
limitations as the Director (or designee) deems necessary to protect the 
confidential nature of the record, the financial integrity of any 
depository institution to which the record relates and the legitimate 
privacy interests of any persons named in such record.
    (8) Disclosure by General Counsel. (i) The Corporation's General 
Counsel, or designee, may disclose or authorize the disclosure of any 
exempt record in response to a valid judicial subpoena, court order, or 
other legal process, and authorize any current or former officer, 
director, employee, agent of the Corporation, or third party, to appear 
and testify regarding an exempt record or any information obtained in 
the performance of such person's official duties, at any administrative 
or judicial hearing or proceeding where such person has been served with 
a valid subpoena, court order, or other legal process requiring him or 
her to testify. The General Counsel shall consider the relevancy of such 
exempt records or testimony to the litigation, and the interests of 
justice, in determining whether to disclose such records or testimony. 
Third parties seeking disclosure of exempt records or testimony in 
litigation to which the FDIC is not a party shall submit a request for 
discretionary disclosure directly to the General Counsel.\6\ Such 
request shall specify the information sought with reasonable 
particularity and shall be accompanied by a statement with supporting 
documentation showing in detail the relevance of such exempt information 
to the litigation, justifying good cause for disclosure, and a 
commitment to be bound by a protective order. Failure to exhaust such 
administrative request prior to service of a subpoena or other legal 
process may, in the General Counsel's discretion, serve as a basis for 
objection to such subpoena or legal process. Customer financial records 
may not be disclosed to any federal agency that is not a federal 
financial

[[Page 144]]

supervisory agency pursuant to this paragraph unless notice to the 
customer and certification as required by the RFPA have been given 
except where disclosure is subject to the relevant exceptions set forth 
in the RFPA.
---------------------------------------------------------------------------

    \6\ This administrative requirement does not apply to subpoenas, 
court orders or other legal process issued for records of depository 
institutions held by the FDIC as Receiver or Conservator. Subpoenas, 
court orders or other legal process issued for such records will be 
processed in accordance with State and Federal law, regulations, rules 
and privileges applicable to FDIC as Receiver or Conservator.
---------------------------------------------------------------------------

    (ii) The General Counsel, or designee, may in his or her discretion 
and for good cause, disclose or authorize disclosure of any exempt 
record or testimony by a current or former officer, director, employee, 
agent of the Corporation, or third party, sought in connection with any 
civil or criminal hearing, proceeding or investigation without the 
service of a judicial subpoena, or other legal process requiring such 
disclosure or testimony, if he or she determines that the records or 
testimony are relevant to the hearing, proceeding or investigation and 
that disclosure is in the best interests of justice and not otherwise 
prohibited by Federal statute. Customer financial records shall not be 
disclosed to any federal agency pursuant to this paragraph that is not a 
federal financial supervisory agency, unless the records are sought 
under the Federal Rules of Civil Procedure (28 U.S.C. appendix) or the 
Federal Rules of Criminal Procedure (18 U.S.C. appendix) or comparable 
rules of other courts and in connection with litigation to which the 
receiving federal agency, employee, officer, director, or agent, and the 
customer are parties, or disclosure is otherwise subject to the relevant 
exceptions in the RFPA. Where the General Counsel or designee authorizes 
a current or former officer, director, employee or agent of the 
Corporation to testify or disclose exempt records pursuant to this 
paragraph (b)(8), he or she may, in his or her discretion, limit the 
authorization to so much of the record or testimony as is relevant to 
the issues at such hearing, proceeding or investigation, and he or she 
shall give authorization only upon fulfillment of such conditions as he 
or she deems necessary and practicable to protect the confidential 
nature of such records or testimony.
    (9) Authorization for disclosure by the Chairman of the 
Corporation's Board of Directors. Except where expressly prohibited by 
law, the Chairman of the Corporation's Board of Directors may in his or 
her discretion, authorize the disclosure of any Corporation records. 
Except where disclosure is required by law, the Chairman may direct any 
current or former officer, director, employee or agent of the 
Corporation to refuse to disclose any record or to give testimony if the 
Chairman determines, in his or her discretion, that refusal to permit 
such disclosure is in the public interest.
    (10) Limitations on disclosure. All steps practicable shall be taken 
to protect the confidentiality of exempt records and information. Any 
disclosure permitted by paragraph (b) of this section is discretionary 
and nothing in paragraph (b) of this section shall be construed as 
requiring the disclosure of information. Further, nothing in paragraph 
(b) of this section shall be construed as restricting, in any manner, 
the authority of the Board of Directors, the Chairman of the Board of 
Directors, the Director of the Corporation's Division having primary 
authority over the exempt records, the Corporation's General Counsel, or 
their designees, or any other Corporation Division or Office head, in 
their discretion and in light of the facts and circumstances attendant 
in any given case, to require conditions upon and to limit the form, 
manner, and extent of any disclosure permitted by this section. Wherever 
practicable, disclosure of exempt records shall be made pursuant to a 
protective order and redacted to exclude all irrelevant or non-
responsive exempt information.

[60 FR 61465, Nov. 30, 1995, as amended at 63 FR 16408, Apr. 3, 1998; 67 
FR 71071, Nov. 29, 2002]



Sec. 309.7  Service of process.

    (a) Service. Any subpoena or other legal process to obtain 
information maintained by the FDIC shall be duly issued by a court 
having jurisdiction over the FDIC, and served upon either the Executive 
Secretary (or designee), FDIC, 550 17th Street, NW., Washington, DC 
20429, or the Regional Director or Regional Manager of the FDIC region 
where the legal action from which the subpoena or process was issued is 
pending. A list of the FDIC's regional offices is available from the 
Office of Public Affairs, FDIC, 550 17th

[[Page 145]]

Street, NW., Washington, DC 20429 (telephone 202-898-6996). Where the 
FDIC is named as a party, service of process shall be made pursuant to 
the Federal Rules of Civil Procedure, and upon the Executive Secretary 
(or designee), FDIC, 550 17th Street NW., Washington, DC 20429, or upon 
the agent designated to receive service of process in the state, 
territory, or jurisdiction in which any insured depository institution 
is located. Identification of the designated agent in the state, 
territory, or jurisdiction may be obtained from the Executive Secretary 
or from the Office of the General Counsel, FDIC, 550 17th Street NW., 
Washington, DC 20429. The Executive Secretary (or designee), Regional 
Director or designated agent shall immediately forward any subpoena, 
court order or legal process to the General Counsel. The Corporation may 
require the payment of fees, in accordance with the fee schedule 
referred to in Sec. 309.5(c)(3), prior to the release of any records 
requested pursuant to any subpoena or other legal process.
    (b) Notification by person served. If any current or former officer, 
director, employee or agent of the Corporation, or any other person who 
has custody of records belonging to the FDIC, is served with a subpoena, 
court order, or other process requiring that person's attendance as a 
witness concerning any matter related to official duties, or the 
production of any exempt record of the Corporation, such person shall 
promptly advise the General Counsel of such service, of the testimony 
and records described in the subpoena, and of all relevant facts which 
may be of assistance to the General Counsel in determining whether the 
individual in question should be authorized to testify or the records 
should be produced. Such person should also inform the court or tribunal 
which issued the process and the attorney for the party upon whose 
application the process was issued, if known, of the substance of this 
section.
    (c) Appearance by person served. Absent the written authorization of 
the Corporation's General Counsel, or designee, to disclose the 
requested information, any current or former officer, director, 
employee, or agent of the Corporation, and any other person having 
custody of records of the Corporation, who is required to respond to a 
subpoena or other legal process, shall attend at the time and place 
therein specified and respectfully decline to produce any such record or 
give any testimony with respect thereto, basing such refusal on this 
section.

[60 FR 61465, Nov. 30, 1995, as amended at 67 FR 71071, Nov. 29, 2002]



PART 310_PRIVACY ACT REGULATIONS--Table of Contents




Sec.
310.1 Purpose and scope.
310.2 Definitions.
310.3 Procedures for requests pertaining to individual records in a 
          system of records.
310.4 Times, places, and requirements for identification of individuals 
          making requests.
310.5 Disclosure of requested information to individuals.
310.6 Special procedures: Medical records.
310.7 Request for amendment of record.
310.8 Agency review of request for amendment of record.
310.9 Appeal of adverse initial agency determination on access or 
          amendment.
310.10 Disclosure of record to person other than the individual to whom 
          it pertains.
310.11 Fees.
310.12 Penalties.
310.13 Exemptions.

    Authority: 5 U.S.C. 552a.

    Source: 40 FR 46274, Oct. 6, 1975, unless otherwise noted.



Sec. 310.1  Purpose and scope.

    The purpose of this part is to establish regulations implementing 
the Privacy Act of 1974, 5 U.S.C. 552a. These regulations delineate the 
procedures that an individual must follow in exercising his or her 
access or amendment rights under the Privacy Act to records maintained 
by the Corporation in systems of records.

[61 FR 43419, Aug. 23, 1996]



Sec. 310.2  Definitions.

    For purposes of this part:
    (a) The term Corporation means the Federal Deposit Insurance 
Corporation;
    (b) The term individual means a natural person who is either a 
citizen of the United States or an alien lawfully admitted for permanent 
residence;

[[Page 146]]

    (c) The term maintain includes maintain, collect, use, disseminate, 
or control;
    (d) The term record means any item, collection or grouping of 
information about an individual that contains his/her name, or the 
identifying number, symbol, or other identifying particular assigned to 
the individual;
    (e) The term system of records means a group of any records under 
the control of the Corporation from which information is retrieved by 
the name of the individual or some identifying number, symbol or other 
identifying particular assigned to the individual;
    (f) The term designated system of records means a system of records 
which has been listed and summarized in the Federal Register pursuant to 
the requirements of 5 U.S.C. 552a(e);
    (g) The term routine use means, with respect to disclosure of a 
record, the use of such record for a purpose which is compatible with 
the purpose for which it was created;
    (h) The terms amend or amendment mean any correction, addition to or 
deletion from a record; and
    (i) The term system manager means the agency official responsible 
for a designated system of records, as denominated in the Federal 
Register publication of ``Systems of Records Maintained by the Federal 
Deposit Insurance Corporation.''

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977]



Sec. 310.3  Procedures for requests pertaining to individual records in 
a system of rec[chyph]ords.

    (a) Any present or former employee of the Corporation seeking access 
to, or amendment of, his/her official personnel records maintained by 
the Corporation shall submit his/her request in such manner as is 
prescribed by the United States Office of Personnel Management in part 
297 of its rules and regulations (5 CFR part 297). For access to, or 
amendment of, other government-wide records systems maintained by the 
Corporation, the procedures prescribed in the respective Federal 
Register Privacy Act system notice shall be followed.
    (b) Requests by individuals for access to records pertaining to them 
and maintained within one of the Corporation's designated systems of 
records should be submitted in writing to the Freedom of Information 
Act/Privacy Act Group, Legal Division (``FOIA/PA Group''), Federal 
Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 
20429. Each such request should contain a reasonable description of the 
records sought, the system or systems in which such record may be 
contained, and any additional identifying information, as specified in 
the Corporation's Federal Register ``Notice of Systems of Records'' for 
that particular system, copies of which are available upon request from 
the FOIA/PA Group .

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 61 
FR 43419, Aug. 23, 1996; 67 FR 71071, Nov. 29, 2002]



Sec. 310.4  Times, places, and requirements for identification of 
individuals making requests.

    (a) Individuals may request access to records pertaining to 
themselves by submitting a written request as provided in Sec. 310.3 of 
these regulations, or by appearing in person on weekdays, other than 
official holidays, at the FOIA/PA Group, Legal Division, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429, 
between the hours of 8:30 a.m. and 5 p.m.
    (b) Individuals appearing in person at the Corporation seeking 
access to or amendment of their records shall present two forms of 
reasonable identification, such as employment identification cards, 
driver's licenses, or other identification cards or documents typically 
used for identification purposes.
    (c) Except for records that must be publicly disclosed pursuant to 
the Freedom of Information Act, 5 U.S.C. 552, where the Corporation 
determines it to be necessary for the individual's protection, a 
certification of a duly commissioned notary public, of any state or 
territory, attesting to the requesting individual's identity, or an 
unsworn declaration subscribed to as true under the penalty of perjury 
under the laws of the United States of America, at the election of the 
individual,

[[Page 147]]

may be required before a written request seeking access to or amendment 
of a record will be honored. The Corporation may also require that 
individuals provide minimal identifying data such as full name, date and 
place of birth, or other personal information necessary to ensure proper 
identity before processing requests for records.

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 61 
FR 43419, Aug. 23, 1996; 67 FR 71071, Nov. 29, 2002]



Sec. 310.5  Disclosure of requested information to individuals.

    (a) Except to the extent that Corporation records pertaining to an 
individual:
    (1) Are exempt from disclosure under Sec. Sec. 310.6 and 310.13 of 
this part, or
    (2) Were compiled in reasonable anticipation of a civil action or 
proceeding, the Corporation will make such records available upon 
request for purposes of inspection and copying by the individual (after 
proper identity verification as provided in Sec. 310.4) and, upon the 
individual's request and written authorization, by another person of the 
individual's own choosing.
    (b) The FOIA/PA Group will notify, in writing, the individual making 
a request, whenever practicable within ten business days following 
receipt of the request, whether any specified designated system of 
records maintained by the Corporation contains a record pertaining to 
the individual. Where such a record does exist, the FOIA/PA Group also 
will inform the individual of the system manager's decision whether to 
grant or deny the request for access. In the event existing records are 
determined not to be disclosable, the notification will inform the 
individual of the reasons for which disclosure will not be made and will 
provide a description of the individual's right to appeal the denial, as 
more fully set forth in Sec. 310.9. Where access is to be granted, the 
notification will specify the procedures for verifying the individual's 
identity, as set forth in Sec. 310.4.
    (c) Individuals will be granted access to records disclosable under 
this part 310 as soon as is practicable. The FOIA/PA Group will give 
written notification of a reasonable period within which individuals may 
inspect disclosable records pertaining to themselves at the offices of 
the FOIA/PA Group during normal business hours. Alternatively, 
individuals granted access to records under this part may request that 
copies of such rec[chyph]ords be forwarded to them. Fees for copying 
such records will be assessed as provided in Sec. 310.11.

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 67 
FR 71071, Nov. 29, 2002]



Sec. 310.6  Special procedures: Medical rec[chyph]ords.

    Medical records shall be disclosed on request to the individuals to 
whom they pertain, except, if in the judgment of the Corporation, the 
transmission of the medical information directly to the requesting 
individual could have an adverse effect upon such individual. In the 
event medical information is withheld from a requesting individual due 
to any possible adverse effect such information may have upon the 
individual, the Corporation shall transmit such information to a medical 
doctor named by the requesting individual for release of the patient.

[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.7  Request for amendment of record.

    The Corporation will maintain all rec[chyph]ords it uses in making 
any determination about any individual with such accuracy, relevance, 
timeliness and completeness as is reasonably necessary to assure 
fairness to the individual in the determination. An individual may 
request that the Corporation amend any portion of a record pertaining to 
that individual which the Corporation maintains in a designated system 
of records. Such a request should be submitted in writing to the FOIA/PA 
Group, Legal Division, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429 and should contain the individual's 
reason for requesting the amendment and a description of the record 
(including the name of the appropriate designated system and category 
thereof) sufficient to enable the Corporation to

[[Page 148]]

identify the particular record or portion thereof with respect to which 
amendment is sought.

[40 FR 46274, Oct. 6, 1975, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 310.8  Agency review of request for amendment of record.

    (a) Requests by individuals for the amendment of records will be 
acknowledged by the Senior Attorney, FOIA/PA Group, and referred to the 
system manager of the system of rec[chyph]ords in which the record is 
contained for determination, within ten business days following receipt 
of such requests. Promptly thereafter, the Senior Attorney, FOIA/PA 
Group will notify the individual of the system manager's decision to 
grant or deny the request to amend.
    (b) If the system manager denies a request to amend a record, the 
notification of such denial shall contain the reason for the denial and 
a description of the individual's right to appeal the denial as more 
fully set forth in Sec. 310.9.

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 67 
FR 71071, Nov. 29, 2002]



Sec. 310.9  Appeal of adverse initial agency determination on access 
or amendment.

    (a) A system manager's denial of an individual's request for access 
to or amendment of a record pertaining to him/her may be appealed in 
writing to the Corporation's General Counsel (or designee) within 30 
business days following receipt of notification of the denial. Such an 
appeal should be addressed to the FOIA/PA Group, Legal Division, FDIC, 
550 17th Street NW., Washington, DC 20429, and contain all the 
information specified for requests for access in Sec. 310.3 or for 
initial requests to amend in Sec. 310.7, as well as any other 
additional information the individual deems relevant for the 
consideration by the General Counsel (or designee) of the appeal.
    (b) The General Counsel (or designee) will normally make a final 
determination with respect to an appeal made under this part within 30 
business days following receipt by the Office of the Executive Secretary 
of the appeal. The General Counsel (or designee) may, however, extend 
this 30-day time period for good cause. Where such an extension is 
required, the individual making the appeal will be notified of the 
reason for the extension and the expected date upon which a final 
decision will be given.
    (c) If the General Counsel (or designee) affirms the initial denial 
of a request for access or to amend, he or she will inform the 
individual affected of the decision, the reason therefor, and the right 
of judicial review of the decision. In addition, as pertains to a 
request for amendment, the individual may at that point submit to the 
Corporation a concise statement setting forth his or her reasons for 
disagreeing with the Corporation's refusal to amend.
    (d) Any statement of disagreement with the Corporation's refusal to 
amend, filed with the Corporation by an individual pursuant to Sec. 
310.9(c), will be included in the disclosure of any records under the 
authority of Sec. 310.10(b). The Corporation may in its discretion also 
include a copy of a concise statement of its reasons for not making the 
requested amendment.
    (e) The General Counsel (or designee) may on his or her own motion 
refer an appeal to the Board of Directors for a determination, and the 
Board of Directors on its own motion may consider an appeal.

[52 FR 34290, Sept. 10, 1987, as amended at 61 FR 43420, Aug. 23, 1996; 
67 FR 71071, Nov. 29, 2002]



Sec. 310.10  Disclosure of record to person other than the individual 
to whom it pertains.

    (a) Except as provided in paragraph (b) of this section, the 
Corporation will not disclose any record contained in a designated 
system of records to any person or agency except with the prior written 
consent of the individual to whom the record pertains.
    (b) The restrictions on disclosure in paragraph (a) of this section 
do not apply to any of the following disclosures:
    (1) To those officers and employees of the Corporation who have a 
need for the record in the performance of their duties;
    (2) Which is required under the Freedom of Information Act (5 U.S.C. 
552);

[[Page 149]]

    (3) For a routine use listed with respect to a designated system of 
records;
    (4) To the Bureau of the Census for purposes of planning or carrying 
out a census or survey or related activity pursuant to the provisions of 
title 13 U.S.C.;
    (5) To a recipient who has provided the Corporation with advance 
adequate written assurance that the record will be used solely as a 
statistical research or reporting record, and the record is to be 
transferred in a form that is not individually identifiable;
    (6) To the National Archives and Records Administration as a record 
which has sufficient historical or other value to warrant its continued 
preservation by the United States Government, or for evaluation by the 
Archivist of the United States or his or her designee to determine 
whether the record has such value;
    (7) To another agency or to an instrumentality of any governmental 
jurisdiction within or under the control of the United States for a 
civil or criminal law enforcement activity if the activity is authorized 
by law, and if the head of the agency or instrumentality has made a 
written request to the Corporation specifying the particular portion 
desired and the law enforcement activity for which the record is sought;
    (8) To a person pursuant to a showing of compelling circumstances 
affecting the health or safety of an individual if, upon such 
disclosure, notification is transmitted to the last known address of 
such individual;
    (9) To either House of Congress, or, to the extent of matter within 
its jurisdiction, any committee or subcommittee thereof, any joint 
committee of Congress or subcommittee of any such joint committee;
    (10) To the Comptroller General, or any of his or her authorized 
representatives, in the course of the performance of the duties of the 
General Accounting Office;
    (11) Pursuant to the order of a court of competent jurisdiction.
    (12) To a consumer reporting agency in accordance with section 
3711(f) of Title 31.
    (c) The Corporation will adhere to the following procedures in the 
case of disclosure of any record pursuant to the authority of paragraphs 
(b)(3) through (b)(12) of this section.
    (1) The Corporation will keep a record of the date, nature and 
purpose of each such disclosure, as well as the name and address of the 
person or agency to whom such disclosure is made; and
    (2) The Corporation will retain and, with the exception of 
disclosures made pursuant to paragraph (b)(7) of this section, make 
available to the individual named in the record for the greater of five 
years or the life of the record all material compiled under paragraph 
(d)(1) of this section with respect to disclosure of such record.
    (d) Whenever a record which has been disclosed by the Corporation 
under authority of paragraph (b) of this section is, within a reasonable 
amount of time after such disclosure, either amended by the Corporation 
or the subject of a statement of disagreement, the Corporation will 
transmit such additional information to any person or agency to whom the 
record was disclosed, if such disclosure was subject to the accounting 
requirements of paragraph (c)(1) of this section.

[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.11  Fees.

    The Corporation, upon a request for records disclosable pursuant to 
the Privacy Act of 1974 (5 U.S.C. 552a), shall charge a fee of $0.10 per 
page for duplicating, except as follows:
    (a) If the Corporation determines that it can grant access to a 
record only by providing a copy of the record, no fee will be charged 
for providing the first copy of the record or any portion thereof;
    (b) Whenever the aggregate fees computed under this section do not 
exceed $10 for any one request, the fee will be deemed waived by the 
Corporation; or
    (c) Whenever the Corporation determines that a reduction or waiver 
is warranted, it may reduce or waive any fees imposed for furnishing 
requested information pursuant to this section.

[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]

[[Page 150]]



Sec. 310.12  Penalties.

    Subsection (i)(3) of the Privacy Act of 1974 (5 U.S.C. 552a(i)(3)) 
imposes criminal penalties for obtaining Corporation records on 
individuals under false pretenses. The subsection provides as follows:

    Any person who knowingly and willfully requests or obtains any 
record concerning an individual from an agency under false pretenses 
shall be guilty of a misdemeanor and fined not more than $5,000.



Sec. 310.13  Exemptions.

    The following systems of records are exempt from Sec. Sec. 310.3 
through 310.9 and Sec. 310.10(c)(2) of these rules:
    (a) Investigatory material compiled for law enforcement purposes in 
the following systems of records is exempt from Sec. Sec. 310.3 through 
310.9 and Sec. 310.10(c)(2) of these rules;

    Provided, however, That if any individual is denied any right, 
privilege, or benefit to which he/she would otherwise be entitled under 
Federal law, or for which he/she would otherwise be eligible, as a 
result of the maintenance of such material, such material shall be 
disclosed to such individual, except to the extent that the disclosure 
of such material would reveal the identity of a source who furnished 
information to the Government under an express promise that the identity 
of the source would be held in confidence, or, prior to September 27, 
1975, under an implied promise that the identity of the source would be 
held in confidence:

    30-64-0002--Financial institutions investigative and enforcement 
records system.
    30-64-0010--Investigative files and records.

    (b) Investigatory material compiled solely for the purpose of 
determining suitability, eligibility, or qualifications for Corporation 
employment to the extent that disclosure of such material would reveal 
the identity of a source who furnished information to the Corporation 
under an express promise that the identity of the source would be held 
in confidence, or, prior to September 27, 1975, under an implied promise 
that the identity of the source would be held in confidence, in the 
following systems of records, is exempt from Sec. Sec. 310.3 through 
310.9 and Sec. 310.10(c)(2) of these rules:

    30-64-0001--Attorney-legal intern applicant system.
    30-64-0010--Investigative files and records.

    (c) Testing or examination material used solely to determine or 
assess individual qualifications for appointment or promotion in the 
Corporation's service, the disclosure of which would compromise the 
objectivity or fairness of the testing, evaluation, or examination 
process in the following system of records, is exempt from Sec. Sec. 
310.3 through 310.9 and Sec. 310.10(c)(2) of these rules:

30-64-0009--Examiner training and education records.

[42 FR 6797, Feb. 4, 1977, as amended at 42 FR 33720, July 1, 1977; 54 
FR 38507, Sept. 19, 1989; 61 FR 43420, Aug. 23, 1996]



PART 311_RULES GOVERNING PUBLIC OBSERVATION OF MEETINGS OF THE 
CORPORATION'S BOARD OF DIRECTORS--Table of Contents




Sec.
311.1 Purpose.
311.2 Definitions.
311.3 Meetings.
311.4 Procedures for announcing meetings.
311.5 Regular procedure for closing meetings.
311.6 Expedited procedure for announcing and closing certain meetings.
311.7 General Counsel certification.
311.8 Transcripts and minutes of meetings.

    Authority: 5 U.S.C. 552b and 12 U.S.C. 1819.

    Source: 42 FR 14675, Mar. 16, 1977, unless otherwise noted.



Sec. 311.1  Purpose.

    This part implements the policy of the ``Government in the Sunshine 
Act'', section 552b of title 5 U.S.C., which is to provide the public 
with as much information as possible regarding the decision making 
process of certain Federal agencies, including the Federal Deposit 
Insurance Corporation, while preserving the rights of individuals and 
the ability of the agency to carry out its responsibilities.



Sec. 311.2  Definitions.

    For purposes of this part:
    (a) Board means Board of Directors of the Federal Deposit Insurance 
Corporation and includes any subdivision of the Board authorized to act 
on behalf of the Corporation.

[[Page 151]]

    (b) Meeting means the deliberations (including those conducted by 
conference telephone call, or by any other method) of at least three 
members where such deliberations determine or result in the joint 
conduct or disposition of agency business but does not include:
    (1) Deliberations to determine whether meetings will be open or 
closed or whether information pertaining to closed meetings will be 
withheld;
    (2) Informal background discussions among Board members and staff 
which clarify issues and expose varying views;
    (3) Decision-making by circulating written material to individual 
Board members;
    (4) Sessions with individuals from outside the Corporation where 
Board members listen to a presentation and may elicit additional 
information.
    (c) Member means a member of the Board.
    (d) Open to public observation and open to the public mean that 
individuals may witness the meeting, but not participate in the 
deliberations. The meeting may be recorded, photographed, or otherwise 
reproduced if the reproduction does not disturb the meeting.
    (e) Public announcement and publicly announce mean making reasonable 
effort under the particular circumstances of each case to fully inform 
the public. This may include posting notice on the Corporation's public 
notice bulletin board maintained in the lobby of its offices located at 
550 17th Street, NW., Washington, DC 20429, issuing a press release and 
employing other methods of notification that may be desirable in a 
particular situation.

[42 FR 14675, Mar. 16, 1977, as amended at 42 FR 59494, Nov. 18, 1977; 
54 FR 38965, Sept. 22, 1989; 61 FR 38357, July 24, 1996]



Sec. 311.3  Meetings.

    (a) Open meetings. Except as provided in paragraph (b) of this 
section, every portion of every meeting of the Corporation's Board will 
be open to public observation. Board members will not jointly conduct or 
dispose of Corporation business other than in accordance with this part.
    (b) When meetings may be closed and announcements and disclosures 
withheld. Except where the Board finds that the public interest requires 
otherwise, a meeting or portion thereof may be closed, and announcements 
and disclosure pertaining thereto may be withheld when the Board 
determines that such meeting or portion of the meeting or the disclosure 
of such information is likely to:
    (1) Disclose matters that are: (i) Specifically authorized under 
criteria established by an Executive order to be kept secret in the 
interests of national defense or foreign policy and (ii) in fact 
properly classified pursuant to such Executive order;
    (2) Relate solely to the internal personnel rules and practices of 
the Corporation;
    (3) Disclose matters specifically exempted from disclosure by 
statute (other than the Freedom of Information Act, 5 U.S.C. 552): 
Provided, That such statute: (i) Requires that the matters be withheld 
from the public in such a manner as to leave no discretion on the issue, 
or (ii) establishes particular types of matters to be withheld;
    (4) Disclose trade secrets and commercial or financial information 
obtained from a person and privileged or confidential;
    (5) Involve accusing any person of a crime, or formally censuring 
any person;
    (6) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Disclose investigatory records compiled for law enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would: (i) Interfere with enforcement proceedings, (ii) 
deprive a person of a right to a fair trial or an impartial 
adjudication, (iii) constitute an unwarranted invasion of personal 
privacy, (iv) disclose the identity of a confidential source, (v) 
disclose investigative techniques and procedures, or (vi) endanger the 
life or physical safety of law enforcement personnel;
    (8) Disclose information contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the Corporation or any other agency responsible

[[Page 152]]

for the supervision of financial institutions;
    (9) Disclose information the premature disclosure of which would be 
likely to:
    (i)(A) Lead to significant financial speculation in currencies, 
securities, or commodities, or
    (B) Significantly endanger the stability of any financial 
institution; or
    (ii) Significantly frustrate implementation of a proposed 
Corporation action, except that this paragraph (b)(9)(ii) shall not 
apply in any instance where the Corporation has already disclosed to the 
public the content or nature of its proposed action, or where the 
Corporation is required by law to make such disclosure on its own 
initiative prior to taking final action on such proposal; or
    (10) Specifically concern the Corporation's issuance of a subpoena, 
or the Corporation's participation in a civil action or proceeding, an 
action in a foreign court or international tribunal, or an arbitration, 
or the initiation, conduct, or disposition by the Corporation of a 
particular case of formal agency adjudication pursuant to the procedures 
in 5 U.S.C. 554 or otherwise involving a determination on the record 
after opportunity for a hearing.



Sec. 311.4  Procedures for announcing meetings.

    (a) Scope. Except to the extent that such announcements are exempt 
from disclosure under Sec. 311.3(b), announcements relating to open 
meetings, and meetings closed under the regular closing procedures of 
Sec. 311.5, will be made in the manner set forth in this section.
    (b) Time and content of announcement. The Corporation will make 
public announcement at least seven days before the meeting of the time, 
place, and subject matter of the meeting, whether it is to be open or 
closed to the public, and the name and telephone number of the official 
designated by the Corporation to respond to requests for information 
about the meeting. This announcement will be made unless a majority of 
the Board determines by a recorded vote that Corporation business 
requires that a meeting be called on lesser notice. In such cases, the 
Corporation will make public announcement of the time, place, and 
subject matter of the meeting, and whether it is open or closed to the 
public, at the earliest practicable time, which may be later than the 
commencement of the meeting.
    (c) Changing time or place of meeting. The time or place of a 
meeting may be changed following the public announcement required by 
paragraph (b) of this section only if the Corporation publicly announces 
the change at the earliest practicable time, which may be later than the 
commencement of the meeting.
    (d) Changing subject matter or nature of meeting. The subject matter 
of a meeting, or the determination to open or close a meeting or a 
portion of a meeting, may be changed following the public announcement 
only if:
    (1) A majority of the entire Board determines by recorded vote that 
agency business so requires and that no earlier announcement of the 
change was possible; and,
    (2) The Corporation publicly announces the change and the vote of 
each member upon such change at the earliest practicable time, which may 
be later than the commencement of the meeting.
    (e) Publication of announcements in Federal Register. Immediately 
following each public announcement under this section, such announcement 
will be submitted for publication in the Federal Register by the 
Executive Secretary.

[42 FR 14675, Mar. 16, 1977, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 311.5  Regular procedure for closing meetings.

    (a) Scope. Unless Sec. 311.6 is applicable, the procedures for 
closing meetings will be those set forth in this section.
    (b) Procedure. (1) A decision to close a meeting or portion of a 
meeting will be taken only when a majority of the entire Board votes to 
take such action. In deciding whether to close a meeting or portion of a 
meeting, the Board will consider whether the public interest requires an 
open meeting. A separate vote of the Board will be taken with respect to 
each meeting which is proposed to be closed in whole or in part to the 
public. A single vote may be

[[Page 153]]

taken with respect to a series of meetings which are proposed to be 
closed in whole or in part to the public, or with respect to any 
information concerning such series of meetings, so long as each meeting 
in the series involves the same particular matters and is scheduled to 
be held no more than thirty days after the initial meeting in the 
series. The vote of each Board member will be recorded and no proxies 
will be allowed.
    (2) Any individual whose interests may be directly affected may 
request that the Corporation close any portion of a meeting for any of 
the reasons referred to in paragraph (b) (5), (6), or (b)(7) of Sec. 
311.3. Requests should be directed to the Executive Secretary, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429. After receiving notice that an individual desires a portion of a 
meeting to be closed, the Board, upon request of any one of its members, 
will vote by recorded vote whether to close the relevant portion of the 
meeting. This procedure will apply even if the individual's request is 
made subsequent to the announcement of a decision to hold an open 
meeting.
    (3) The Corporation's General Counsel will make the public 
certification required by Sec. 311.7.
    (4) Within 1 day after any vote taken pursuant to paragraphs (b)(1) 
or (2) of this section, the Corporation will make publicly available a 
written copy of the vote, reflecting the vote of each Board member. 
Except to the extent that such information is exempt from disclosure, if 
a meeting or portion of a meeting is to be closed to the public, the 
Corporation will make publicly available within 1 day after the required 
vote a full written explanation of its action, together with a list of 
all persons expected to attend the meeting and their affiliation.
    (5) The Corporation will publicly announce the time, place, and 
subject matter of the meeting, with determinations as to open and closed 
portions, in the manner and within the time limits prescribed in Sec. 
311.4.

[42 FR 14675, Mar. 16, 1977; 42 FR 16616, Mar. 29, 1977, as amended at 
42 FR 59494, Nov. 18, 1977; 67 FR 71071, Nov. 29, 2002]



Sec. 311.6  Expedited procedure for announcing and closing certain meetings.

    (a) Scope. Since a majority of its meetings may properly be closed 
pursuant to paragraph (b)(4), (8), (9)(i), or (b)(10) of Sec. 311.3, 
subsection (d)(4) of the Government in the Sunshine Act (5 U.S.C. 552b) 
allows the Corporation to use expedited procedures in closing meetings 
under these four subparagraphs. Absent a compelling public interest to 
the contrary, meetings or portions of meetings that can be expected to 
be closed using these procedures include, but are not limited to: 
Administrative enforcement proceedings under section 8 of the Federal 
Deposit Insurance Act (12 U.S.C. 1818); appointment of the Corporation 
as conservator of a depository institution, or as receiver, liquidator 
or liquidating agent of a closed depository institution or a depository 
institution in danger of closing; and certain management and liquidation 
activities pursuant to such appointments; possible financial assistance 
by the Corporation under section 13 of the Federal Deposit Insurance Act 
(12 U.S.C. 1823); certain depository institution applications including 
applications to establish or move branches, applications to merge, and 
applications for insurance; and investigatory activity under section 
10(c) of the Federal Deposit Insurance Act (12 U.S.C. 1820(c)). In 
announcing and closing meetings or portions of meetings under this 
section, the following procedures will be observed.
    (b) Announcement. Except to the extent that such information is 
exempt from disclosure under the provisions of Sec. 311.3(b) the 
Corporation will make public announcement of the time, place and subject 
matter of the meeting and of each portion thereof at the earliest 
practicable time. This announcement will be published in the Federal 
Register if publication can be effected at least 1 day prior to the 
scheduled date of the meeting.
    (c) Procedure for closing. (1) The Corporation's General Counsel 
will make the public certification required by Sec. 311.7.
    (2) At the beginning of a meeting or portion of a meeting to be 
closed under this section, a recorded vote of the

[[Page 154]]

Board will be taken. The Board will determine by its vote whether to 
proceed with the closing. If a majority of the entire Board votes to 
close, the meeting will be closed to public observation. Even though a 
meeting or portion thereof could properly be closed under this section, 
a majority of the entire Board may find that the public interest 
requires an open session and vote, reflecting the vote of each Board 
member, will be made available to the public.

[42 FR 14675, Mar. 16, 1977; 42 FR 16616, Mar. 29, 1977, as amended at 
54 FR 38965, Sept. 22, 1989]



Sec. 311.7  General Counsel certification.

    For every meeting or portion thereof closed under Sec. 311.5 or 
Sec. 311.6, the Corporation's General Counsel will publicly certify 
that, in the opinion of such General Counsel, the meeting may be closed 
to the public and will state each relevant exemptive provision. In the 
absence of the General Counsel, the next ranking official in the Legal 
Division may perform the certification. If the General Counsel and such 
next ranking official in the Legal Division are both absent, the 
official in the Legal Division who is then next in rank may provide the 
required certification. A copy of this certification, together with a 
statement from the presiding officer of the meeting setting forth the 
time and place of the meeting, and the persons present, will be retained 
in the Board's permanent files.

[42 FR 14675, Mar. 16, 1977, as amended at 61 FR 38357, July 24, 1996]



Sec. 311.8  Transcripts and minutes of meetings.

    (a) When required. The Corporation will maintain a complete 
transcript, identifying each speaker, to record fully the proceedings of 
each meeting or portion of a meeting closed to the public, except that 
in the case of a meeting or portions of a meeting closed to the public 
pursuant to paragraph (b)(8), (9)(i), or (10) of Sec. 311.3, the 
Corporation may, in lieu of a transcript, maintain a set of minutes.
    (b) Content of minutes. If minutes are maintained, they will fully 
and clearly describe all matters discussed and will provide a full and 
accurate summary of any actions taken, and the reasons for taking such 
action. Minutes will also include a description of each of the views 
expressed by each person in attendance on any item and the record of any 
roll call vote, reflecting the vote of each member. All documents 
considered in connection with any action will be identified in the 
minutes.
    (c) Available material. The Corporation will maintain a complete 
verbatim copy of the transcript or minutes of each meeting or portion of 
a meeting closed to the public for a period of at least 2 years after 
the meeting, or until 1 year after the conclusion of any proceeding with 
respect to which the meeting or portion was held, whichever occurs 
later. The Corporation will make promptly available to the public the 
transcript, identifying each speaker, or minutes of items on the agenda 
or testimony of any witness received at the closed meeting except that 
in cases where the Privacy Act of 1974 (5 U.S.C. 552a) does not apply, 
the Corporation may withhold information exempt from disclosure under 
Sec. 311.3(b). For the convenience of members of the public who may be 
unable to attend open meetings of the Board, the Corporation will 
maintain for at least 2 years a set of minutes of each meeting of the 
Board or portion thereof open to public observation.
    (d) Procedures for inspecting or copying available material. (1) An 
individual may inspect materials made available under paragraph (c) of 
this section at the offices of the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429, 
during normal business hours. If the individual desires a copy of such 
material, the Corporation will furnish copies at a cost of 10 cents per 
page. Whenever the Corporation determines that in the public interest a 
reduction or waiver is warranted, it may reduce or waive any fees 
imposed under this section.
    (2) An individual may also submit a written request for transcripts 
or minutes, reasonably identifying the records sought, to the Executive 
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.

[[Page 155]]

    (e) Procedures for obtaining documents identified in minutes. Copies 
of documents identified in minutes or considered by the Board in 
connection with any action identified in the minutes may be made 
available to the public upon request, to the extent permitted by the 
Freedom of Information Act, under the provisions of 12 CFR part 309, 
Disclosure of Information.

[42 FR 14675, Mar. 16, 1977, as amended at 61 FR 38357, July 24, 1996; 
67 FR 71071, Nov. 29, 2002]



PART 312_ASSESSMENT OF FEES UPON ENTRANCE TO OR EXIT FROM THE BANK 

INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND--Table of 
Contents




Sec.
312.1 Definitions.
312.2 Bank Insurance Fund reserve ratio.
312.3 Savings Association Insurance Fund reserve ratio.
312.4 Entrance fees assessed in connection with conversion transactions 
          from the Savings Association Insurance Fund to the Bank 
          Insurance Fund.
312.5 Exit fees assessed in connection with conversion transactions from 
          the Savings Association Insurance Fund to the Bank Insurance 
          Fund.
312.6 Entrance fees assessed in connection with conversion transactions 
          from the Bank Insurance Fund to the Savings Association 
          Insurance Fund.
312.7 Exit fees assessed in connection with conversion transactions from 
          the Bank Insurance Fund to the Savings Association Insurance 
          Fund.
312.8 Entrance and exit fees assessed in connection with insured deposit 
          transfers from the Savings Association Insurance Fund to the 
          Bank Insurance Fund.
312.9 Entrance and exit fees assessed in connection with insured deposit 
          transfers from the Bank Insurance Fund to the Savings 
          Association Insurance Fund.
312.10 Payment of entrance and exit fees.

    Authority: 12 U.S.C. 1815(d); 12 U.S.C. 1819.

    Source: 54 FR 40380, Oct. 2, 1989, unless otherwise noted.



Sec. 312.1  Definitions.

    For purposes of this part:
    (a) The term Bank Insurance Fund shall mean the fund established by 
section 11(a)(5) of the Federal Deposit Insurance Act, 12 U.S.C. 
1821(a)(5). The term Savings Association Insurance Fund shall mean the 
fund established by section 11(a)(6) of the Federal Deposit Insurance 
Act, 12 U.S.C. 1821(a)(6).
    (b) The terms Bank Insurance Fund member and Savings Association 
Insurance Fund member shall have the meanings given them in sections 
7(l) (4) and (5) of the Federal Deposit Insurance Act, 12 U.S.C. 1817(l) 
(4), (5), respectively.
    (c) The term Bank Insurance Fund reserve ratio shall mean the ratio 
of the net worth of the Bank Insurance Fund to the value of the 
aggregate total domestic deposits held in all Bank Insurance Fund 
members. The term ``Savings Association Insurance Fund reserve ratio'' 
shall mean the ratio of the value of the net worth of the Savings 
Association Insurance Fund to the value of the aggregate total domestic 
deposits held in all Savings Association Insurance Fund members.
    (d) The term conversion transaction shall have the meaning given it 
in section 5(d)(2)(B) of the Federal Deposit Insurance Act, 12 U.S.C. 
1815(d)(2)(B).
    (e) The terms default and in danger of default shall have the 
meanings given them in section 3(x) of the Federal Deposit Insurance 
Act, 12 U.S.C. 1813(x).
    (f) The term deposit broker shall have the meaning given it in 
section 29 of the Federal Deposit Insurance Act, 12 U.S.C. 1831f.
    (g) The term entrance fee deposit base generally refers to those 
deposits which the Federal Deposit Insurance Corporation, in its 
discretion, estimates to have a high probability of remaining with the 
acquiring or resulting depository institution for a reasonable period of 
time following the acquisition, in excess of those deposits that would 
have remained in the insurance fund of the depository institution in 
default or in danger of default had such institution been resolved by 
means of an insured deposit transfer. The estimated dollar amount of the 
entrance fee deposit base shall be determined on a case-by-case basis by 
the Federal Deposit Insurance Corporation at the time offers to acquire 
an insured depository institution (or any part thereof) are solicited by 
the Federal Deposit Insurance Corporation or the Resolution Trust 
Corporation.

[[Page 156]]

    (h) The term insured deposit transfer shall mean a transaction 
wherein the insured deposits of an insured depository institution in 
default or in danger of default, are paid by means of a transferred 
deposit pursuant to a written agreement between the Federal Deposit 
Insurance Corporation or the Resolution Trust Corporation and an insured 
depository institution. The term transferred deposit shall have the 
meaning given it in section 3(n) of the Federal Deposit Insurance Act, 
12 U.S.C. 1813 (n).
    (i) The term premium shall mean the amount paid by an insured 
depository institution in consideration for the right to enter into an 
insured deposit transfer agreement. The premium shall not include the 
amount of any transferred deposits, nor shall the premium include any 
amount paid for the purchase of assets or the right to purchase assets 
of a depository institution in default or in danger of default.
    (j) The term retained deposit base shall mean the total deposits 
transferred from a Savings Association Insurance Fund Member to a Bank 
Insurance Fund Member, or from a Bank Insurance Fund member to a Savings 
Association Insurance Fund member, less the following deposits:
    (1) Any deposit acquired, directly or indirectly, by or through any 
deposit broker; and
    (2) Any portion of any deposit account exceeding $80,000.

[54 FR 40380, Oct. 2, 1989; 54 FR 43521, Oct. 25, 1989, as amended at 55 
FR 10412, Mar. 21, 1990]



Sec. 312.2  Bank Insurance Fund reserve ratio.

    The Bank Insurance Fund reserve ratio to be used in computing the 
entrance fee under this part with respect to any particular conversion 
transaction shall be the most recent Bank Insurance Fund reserve ratio 
calculated quarterly by the Federal Deposit Insurance Corporation prior 
to the date on which deposit liabilities are transferred from a Savings 
Association Insurance Fund member to a Bank Insurance Fund member in 
connection with that conversion transaction.

[56 FR 29895, July 1, 1991]



Sec. 312.3  Savings Association Insurance Fund reserve ratio.

    The Savings Association Insurance Fund reserve ratio to be used in 
computing the entrance fee under this part with respect to any 
particular conversion transaction shall be the most recent Savings 
Association Insurance Fund reserve ratio calculated quarterly by the 
Federal Deposit Insurance Corporation prior to the date on which deposit 
liabilities are transferred from a Bank Insurance Fund member to a 
Savings Association Insurance Fund member in connection with that 
conversion transaction.

[56 FR 29895, July 1, 1991]



Sec. 312.4  Entrance fees assessed in connection with conversion 

transactions from the Savings Association Insurance Fund to the Bank 
Insurance Fund.

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Savings Association Insurance Fund member to a Bank 
Insurance Fund member shall pay an entrance fee to the Bank Insurance 
Fund.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Savings Association 
Insurance Fund member to the Bank Insurance Fund member by the Bank 
Insurance Fund reserve ratio.
    (c) Notwithstanding paragraph (b) of this section, the entrance fee 
to be assessed against an insured depository institution participating 
in a conversion transaction:
    (1) Occurring in connection with the acquisition of a Savings 
Association Insurance Fund member in default or in danger of default, or
    (2) Otherwise arranged by the Federal Deposit Insurance Corporation 
in its capacity as exclusive manager of the Resolution Trust 
Corporation, shall be the product derived by multiplying the dollar 
amount of the entrance fee deposit base transferred from the Savings 
Association Insurance Fund member to the Bank Insurance Fund member by 
the Bank Insurance Fund ratio.

[55 FR 10413, Mar. 21, 1990]

[[Page 157]]



Sec. 312.5  Exit fees assessed in connection with conversion 

transactions from the Savings Association Insurance Fund to the Bank 
Insurance Fund.

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Savings Association Insurance Fund member to a Bank 
Insurance Fund member shall pay an exit fee.
    (b) The exit fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Savings Association 
Insurance Fund member to the Bank Insurance Fund member by 0.90 percent 
(0.0090).
    (c) Notwithstanding paragraph (b) of this section, the exit fee to 
be assessed against an insured depository institution participating in a 
conversion transaction:
    (1) Occurring in connection with the acquisition of a Savings 
Association Insurance Fund member in default or in danger of default, or
    (2) Otherwise arranged by the Federal Deposit Insurance Corporation 
in its capacity as exclusive manager of the Resolution Trust 
Corporation, shall be the product derived by multiplying the dollar 
amount of the retained deposit base transferred from the Savings 
Association Insurance Fund member to the Bank Insurance Fund member by 
0.90 percent (0.0090).
    (d) The exit fee required to be paid by this section shall be paid 
to the Savings Association Insurance Fund or, if the Secretary of the 
Treasury determines that the Financing Corporation has exhausted all 
other sources of funding for interest payments on the obligations of the 
Financing Corporation and orders that such exit fee be paid to the 
Financing Corporation.
    (e) Exit fees paid to the Savings Association Insurance Fund 
pursuant to paragraph (d) of this section shall be held in a reserve 
account until such time as the Federal Deposit Insurance Corporation and 
the Secretary of the Treasury determine that it is not necessary to 
reserve such funds for the payment of interest on the obligations of the 
Financing Corporation.
    (f) Before January 1, 1997, amendments to this section shall be 
determined jointly by the Federal Deposit Insurance Corporation and the 
Secretary of the Treasury.

[55 FR 10413, Mar. 21, 1990]



Sec. 312.6  Entrance fees assessed in connection with conversion 
transactions from the Bank Insurance Fund 

to the Savings Association Insurance Fund.

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Bank Insurance Fund member to a Savings Association 
Insurance Fund member shall pay an entrance fee to the Savings 
Association Insurance Fund.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Bank Insurance Fund 
member to the Savings Association Insurance Fund member by the Savings 
Association Insurance Fund reserve ratio, or by .01 percent (0.0001), 
whichever is greater.
    (c) Notwithstanding paragraph (b) of this section, the entrance fee 
to be assessed against an insured depository institution participating 
in a conversion transaction occurring in connection with the acquisition 
of a Bank Insurance Fund member in default or in danger of default shall 
be the product derived by multiplying the dollar amount of the entrance 
fee deposit base transferred from the Bank Insurance Fund member to the 
Savings Association Insurance Fund member by the Savings Association 
Insurance Fund reserve ratio, or by .01 percent (0.0001), whichever is 
greater.
    (d) Interim entrance fee until initial calculation of Savings 
Association Insurance Fund reserve ratio. Notwithstanding paragraphs (b) 
and (c) of this section, until such time as the Savings Association 
Insurance Fund reserve ratio is initially calculated and made publicly 
available, the entrance fee for all conversions from the Bank Insurance 
Fund to the Savings Association Insurance Fund shall be the product 
derived by multiplying the dollar amount of total deposits transferred 
from the Bank Insurance Fund member to the Savings Association Insurance 
Fund member by

[[Page 158]]

.01 percent (0.0001), unless the conversion transaction is occurring in 
connection with the acquisition of a Bank Insurance Fund member in 
default or in danger of default, where it shall be the product derived 
by multiplying the dollar amount of the entrance fee deposit base 
transferred from the Bank Insurance Fund member to the Savings 
Association Insurance Fund member by 0.01 percent (0.0001).

[55 FR 10413, Mar. 21, 1990]



Sec. 312.7  Exit fees assessed in connection with conversion transactions 
from the Bank Insurance Fund to the Savings Association Insurance Fund.

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Bank Insurance Fund member to a Savings Association 
Insurance Fund member shall pay an exit fee to the Bank Insurance Fund.
    (b) The exit fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Bank Insurance Fund 
member to the Savings Association Insurance Fund member by .01 percent 
(0.0001).
    (c) Notwithstanding paragraph (b) of this section, the exit fee to 
be assessed against an insured depository institution participating in a 
conversion transaction occurring in connection with the acquisition of a 
Bank Insurance Fund member in default or in danger of default shall be 
the product derived by multiplying the dollar amount of the retained 
deposit base transferred from the Bank Insurance Fund member to the 
Savings Association Insurance Fund member by 0.01 percent (0.0001).

[55 FR 10413, Mar. 21, 1990]



Sec. 312.8  Entrance and exit fees assessed in connection with insured 

deposit transfers from the Savings Association Insurance Fund to the 
Bank Insurance 
          Fund.

    (a) Insured deposit transfers resulting in a transfer of insured 
deposits from a Savings Association Insurance Fund member to a Bank 
Insurance Fund member, shall be subject to an entrance fee and an exit 
fee.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Savings Association 
Insurance Fund member in default or in danger of default by the Bank 
Insurance Fund ratio.
    (c) The exit fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Savings Association 
Insurance Fund member in default or in danger of default by 0.90 percent 
(0.0090).
    (d) Notwithstanding paragraphs (a), (b), and (c) of this section, 
the sum total of the entrance fee and the exit fee required by this 
section shall in no event exceed the amount of the premium.
    (e) The entrance and exit fees required by this section shall be 
paid by the acquiring institution from the premium as follows. First, 
the premium shall be allocated in payment of the exit fee to one-third 
of the premium received. Second, the remaining premium shall be 
allocated to the entrance fee. Third, if any premium remains, it shall 
be applied to the remaining balance (if any) owing on the exit fee. 
Fourth, any amount remaining after application pursuant to steps one 
through three shall be allocated to the Resolution Trust Corporation.
    (f) The entrance fee required by this section shall be paid to the 
Bank Insurance Fund. The exit fee required by this section shall be paid 
to the Savings Association Insurance Fund or, if the Secretary of the 
Treasury determines that the Financing Corporaiton has exhausted all 
other sources of funding for interest payments on the obligations of the 
Financing Corporation and orders that such exit fee be paid to the 
Financing Corporation.
    (g) Exit fees paid to the Savings Association Insurance Fund 
pursuant to paragraph (f) of this section shall be held in a reserve 
account until such time as the Federal Deposit Insurance Corporation and 
the Secretary of the Treasury determine that it is not necessary to 
reserve such funds for the payment of interest on the obligations of the 
Financing Corporation.
    (h) Insured deposit transfers occurring before March 21, 1990 shall 
not be

[[Page 159]]

subject to the assessment of entrance or exit fees.
    (i) Before January 1, 1997, amendments to this section concerning 
exit fees assessed in connection with insured deposit transfers from the 
Savings Association Insurance Fund to the Bank Insurance Fund shall be 
determined jointly by the Federal Deposit Insurance Corporation and the 
Secretary of the Treasury.

[55 FR 10414, Mar. 21, 1990]



Sec. 312.9  Entrance and exit fees assessed in connection with 

insured deposit transfers from the Bank Insurance Fund to the 
Savings Association Insurance 
          Fund.

    (a) Insured deposit transfers resulting in a transfer of insured 
deposits from a Bank Insurance Fund member to a Savings Association 
Insurance Fund member, shall be subject to an entrance fee and in exit 
fee.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Bank Insurance Fund 
member in default or in danger of default by the Savings Association 
Insurance Fund ratio or by .01 percent (0.0001), whichever is greater.
    (c) The exit fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Bank Insurance Fund 
member by 0.01 percent (0.0001).
    (d) Notwithstanding paragraphs (a), (b), and (c) of this section, 
the sum total of the entrance fee and the exit fee required by this 
section shall in no event exceed the amount of the premium.
    (e) The entrance and exit fees required by this section shall be 
paid by the acquiring institution from the premium as follows. First, 
the premium shall be allocated in payment of the exit fee to one-third 
of the premium received. Second, the remaining premium will be allocated 
to the entrance fee. Third, if any premium remains, it shall be applied 
to the remaining balance (if any) owing on the exit fee. Fourth, any 
amount remaining after application pursuant to steps one through three 
shall be allocated to the Federal Deposit Insurance Corporation.
    (f) The entrance fee required by this section shall be paid to the 
Savings Association Insurance Fund. The exit fee required by this 
section shall be paid to the Bank Insurance Fund.
    (g) Insured deposit transfers occurring before March 21, 1990 shall 
not be subject to the assessment of entrance or exit fees.

[55 FR 10414, Mar. 21, 1990]



Sec. 312.10  Payment of entrance and exit fees.

    (a) A resulting or acquiring depository institution shall be liable 
for the payment of the entrance and exit fees required by this part.
    (b) Notwithstanding paragraph (a) of this section, an acquiring 
depository institution participating in an insured deposit transfer 
pursuant to Sec. 312.8 or Sec. 312.9 of this part shall pay the 
entrance and exit fees from the premium, and in any event, shall not be 
liable for the payment of that portion of the entrance and exit fees 
that exceeds the premium paid by such acquiring depository institution.
    (c) The ``conversion transaction payment date'' shall be either 
March 31st or September 30th, whichever occurs first following the 
expiration of 30 days from the date the deposits are transferred.
    (d) A resulting or acquiring depository institution shall pay the 
entrance and exit fees required by this part on the conversion 
transaction payment date.
    (e) Notwithstanding paragraph (d) of this section, where the sum of 
the entrance and exit fees required to be paid by an insured depository 
institution pursuant to Sec. Sec. 312.4, 312.5, 312.6, or 312.7 of this 
part exceeds $5,000, a resulting or acquiring depository institution 
may, at its option, and upon notification to the Federal Deposit 
Insurance Corporation, pay the entrance and exit fees in equal annual 
installments, interest-free, over a period of not more than five years. 
The first such installment shall be paid on the date described in 
paragraph (c) of this section.
    (f) Entrance and exit fees required to be paid by an insured 
depository institution as the result of an insured deposit transfer 
pursuant to Sec. Sec. 312.8 or 312.9 of this part shall be paid on the

[[Page 160]]

conversion transaction payment date described in paragraph (c) of this 
section.

[55 FR 10414, Mar. 21, 1990]



PART 313_PROCEDURES FOR CORPORATE DEBT COLLECTION--Table of Contents




   Subpart A_Scope, Purpose, Definitions and Delegations of Authority

Sec.
313.1 Scope.
313.2 Purpose.
313.3 Definitions.
313.4 Delegations of authority.
313.5-313.19 [Reserved]

                     Subpart B_Administrative Offset

313.20 Applicability and scope.
313.21 Definitions.
313.22 Collection.
313.23 Offset prior to completion of procedures.
313.24 Omission of procedures.
313.25 Debtor's rights.
313.26 Interest.
313.27 Refunds.
313.28 No requirement for duplicate notice.
313.29 Requests for offset to other federal agencies.
313.30 Requests for offset from other federal agencies.
313.31-313.39 [Reserved]

                         Subpart C_Salary Offset

313.40 Scope.
313.41 Notice requirement where FDIC is creditor agency.
313.42 Procedures to request a hearing.
313.43 Failure to timely submit request for hearing.
313.44 Procedure for hearing.
313.45 Certification of debt by FDIC as creditor agency.
313.46 Notice of salary offset where FDIC is the paying agency.
313.47 Voluntary repayment agreements as alternative to salary offset 
          where the FDIC is the creditor agency.
313.48 Special review of repayment agreement or salary offset due to 
          changed circumstances.
313.49 Coordinating salary offset with other agencies.
313.50 Interest, penalties, and administrative costs.
313.51 Refunds.
313.52 Request from a creditor agency for services of a hearing 
          official.
313.53 Non-waiver of rights by payments.
313.54 Exception to due process procedures.
313.55 Salary adjustments.
313.56-313.79 [Reserved]

                Subpart D_Administrative Wage Garnishment

313.80 Scope and purpose.
313.81 Notice.
313.82 Debtor's rights.
313.83 Form of hearing.
313.84 Effect of timely request.
313.85 Failure to timely request a hearing.
313.86 Hearing official.
313.87 Procedure.
313.88 Format of hearing.
313.89 Date of decision.
313.90 Content of decision.
313.91 Finality of agency action.
313.92 Failure to appear.
313.93 Wage garnishment order.
313.94 Certification by employer.
313.95 Amounts withheld.
313.96 Exclusions from garnishment.
313.97 Financial hardship.
313.98 Ending garnishment.
313.99 Prohibited actions by employer.
313.100 Refunds.
313.101 Right of action.
313.102-313.119 [Reserved]

                       Subpart E_Tax Refund Offset

313.120 Scope.
313.121 Definitions.
313.122 Notification of debt to FMS.
313.123 Certification and referral of debt.
313.124 Pre-offset notice and consideration of evidence.
313.125 Referral of past-due, legally enforceable debt.
313.126 Correcting and updating referral.
313.127 Disposition of amounts collected.
313.128-313.139 [Reserved]

      Subpart F_Civil Service Retirement and Disability Fund Offset

313.140 Future benefits.
313.141 Notification to OPM.
313.142 Request for administrative offset.
313.143 Cancellation of deduction.
313.144-313.159 [Reserved]

          Subpart G_Mandatory Centralized Administrative Offset

313.160 Treasury notification.
313.161 Certification of debt.
313.162 Compliance with 31 CFR part 285.
313.163 Notification of debts of 180 days or less.
313.164-313.180 [Reserved]

    Authority: 12 U.S.C. 1819(a); 5 U.S.C. 5514; Pub. L. 104-143, 110 
Stat. 1321 (31 U.S.C. 3711, 3716).

    Source: 67 FR 48527, July 25, 2002, unless otherwise noted.

[[Page 161]]



   Subpart A_Scope, Purpose, Definitions and Delegations of Authority



Sec. 313.1  Scope.

    This part establishes FDIC procedures for the collection of certain 
debts owed to the United States.
    (a) This part applies to collections by the FDIC from:
    (1) Federal employees who are indebted to the FDIC;
    (2) Employees of the FDIC who are indebted to other agencies; and
    (3) Other persons, organizations, or entities that are indebted to 
the FDIC, except those excluded in paragraph (b)(3) of this section.
    (b) This part does not apply:
    (1) To debts or claims arising under the Internal Revenue Code of 
1986 (Title 26, U.S. Code), the Social Security Act (42 U.S.C. 301 et 
seq.), or the tariff laws of the United States;
    (2) To a situation to which the Contract Disputes Act (41 U.S.C. 601 
et seq.) applies; or
    (3) In any case where collection of a debt is explicitly provided 
for or prohibited by another statute.
    (c) This part applies only to debts owed to and payments made by the 
FDIC acting in its corporate capacity; that is, in connection with 
employee matters such as travel-related claims and erroneous 
overpayments, contracting activities involving corporate operations, 
debts related to requests to the FDIC for documents under the Freedom of 
Information Act (FOIA) or where a request for an offset is received by 
the FDIC from another federal agency. It does not apply to debts owed to 
or payments made by the FDIC in connection with the FDIC's liquidation, 
supervision, enforcement, or insurance responsibilities, nor does it 
limit or affect the FDIC's authority with respect to debts and/or claims 
pursuant to 12 U.S.C. 1819(a) and 1820(a).
    (d) Nothing in this part 313 precludes the compromise, suspension, 
or termination of collection actions, where appropriate, under: 
standards implementing the Debt Collection Improvement Act (DCIA) (31 
U.S.C. 3711 et seq.), the Federal Claims Collection Standards (FCCS) (31 
CFR chapter IX and parts 900 through 904); or any other applicable law.



Sec. 313.2  Purpose.

    (a) The purpose of this part is to implement federal statutes and 
regulatory standards authorizing the FDIC to collect debts owed to the 
United States. This part is consistent with the following federal 
statutes and regulations:
    (1) DCIA at 31 U.S.C. 3711 (collection and compromise of claims); 
section 3716 (administrative offset), section 3717 (interest and penalty 
on claims), and section 3718 (contracts for collection services);
    (2) 5 U.S.C. 5514 (salary offset);
    (3) 5 U.S.C. 5584 (waiver of claims for overpayment);
    (4) 31 CFR chapter IX and parts 900 through 904 (Federal Claims 
Collection Standards);
    (5) 5 CFR part 550, subpart K (salary offset);
    (6) 31 U.S.C. 3720D, 31 CFR 285.11 (administrative wage 
garnishment);
    (7) 26 U.S.C. 6402(d), 31 U.S.C. 3720A and 31 CFR 285.2 (tax refund 
offset); and
    (8) 5 CFR 831.1801 through 1808 (U. S. Office of Personnel 
Management (OPM) offset).
    (b) Collectively, these statutes and regulations prescribe the 
manner in which federal agencies should proceed to establish the 
existence and validity of debts owed to the federal government and 
describe the remedies available to agencies to offset valid debts.



Sec. 313.3  Definitions.

    Except where the context clearly indicates otherwise or where the 
term is defined elsewhere in this subpart, the following definitions 
shall apply to this subpart.
    (a) Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of government, including government corporations.
    (b) Board means the Board of Directors of the FDIC.
    (c) Centralized administrative offset means the mandatory referral 
to the Secretary of the Treasury by a creditor agency of a past due debt 
which is

[[Page 162]]

more than 180 days delinquent, for the purpose of collection under the 
Treasury's centralized offset program.
    (d) Certification means a written statement transmitted from a 
creditor agency to a paying agency for purposes of administrative or 
salary offset, or to the Secretary of the Treasury for centralized 
administrative offset. The certification confirms the existence and 
amount of the debt and verifies that required procedural protections 
have been afforded the employee. Where the debtor requests a hearing on 
a claimed debt, the decision by a hearing official or administrative law 
judge constitutes a certification.
    (e) Chairman means the Chairman of the FDIC.
    (f) Compromise means the settlement or forgiveness of a debt under 
31 U.S.C. 3711, in accordance with standards set forth in the FCCS and 
applicable federal law.
    (g) Creditor agency means an agency of the federal government to 
which the debt is owed, or a debt collection center when acting on 
behalf of a creditor agency to collect a debt.
    (h) Debt means an amount owed to the United States from loans 
insured or guaranteed by the United States and all other amounts due the 
United States from fees, leases, rents, royalties, services, sales of 
real or personal property, overpayments, penalties, damages, interest, 
fines and forfeitures, and all other similar sources. For purposes of 
this part, a debt owed to the FDIC constitutes a debt owed to the United 
States.
    (i) Debt collection center means the Department of the Treasury or 
other government agency or division designated by the Secretary of the 
Treasury with authority to collect debts on behalf of creditor agencies 
in accordance with 31 U.S.C. 3711(g).
    (j) Director means the Director of the Division of Finance (DOF) or 
the Director of the Division of Administration (DOA), as applicable, or 
the applicable Director's delegate.
    (k) Disposable pay means that part of current adjusted basic pay, 
special pay, incentive pay, retired pay, retainer pay, and, in the case 
of an employee not entitled to adjusted basic pay, other authorized pay, 
remaining for each pay period after the deduction of any amount required 
by law to be withheld. The FDIC shall allow the following deductions in 
determining the amount of disposable pay that is subject to salary 
offset:
    (1) Federal employment taxes;
    (2) Federal, state, or local income taxes to the extent authorized 
or required by law, but no greater than would be the case if the 
employee claimed all dependents to which he or she is entitled and such 
additional amounts for which the employee presents evidence of a tax 
obligation supporting the additional withholding;
    (3) Medicare deductions;
    (4) Health insurance premiums;
    (5) Normal retirement contributions, including employee 
contributions to the Thrift Savings Plan or the FDIC 401(k) Plan;
    (6) Normal life insurance premiums (e.g., Serviceman's Group Life 
Insurance and ``Basic Life'' Federal Employee's Group Life Insurance 
premiums), not including amounts deducted for supplementary coverage;
    (7) Amounts mandatorily withheld for the United States Soldiers' and 
Airmen's Home;
    (8) Fines and forfeiture ordered by a court-martial or by a 
commanding officer.
    (l) Division of Administration (DOA) means the Division of 
Administration of the FDIC.
    (m) Division of Finance (DOF) means the Division of Finance of the 
FDIC.
    (n) Federal Claims Collection Standards (FCCS) means standards 
published at 31 CFR chapter IX and parts 900 through 904.
    (o) Garnishment means the process of withholding amounts from the 
disposable pay of a person employed outside the federal government, and 
the paying of those amounts to a creditor in satisfaction of a 
withholding order.
    (p) Hearing official means an administrative law judge or other 
individual authorized to conduct a hearing and issue a final decision in 
response to a debtor's request for hearing. A hearing official may not 
be under the supervision or control of the Chairman or FDIC Board when 
the FDIC is the creditor agency.

[[Page 163]]

    (q) Notice of Intent to Offset or Notice of Intent means a written 
notice from a creditor agency to an employee, organization, or entity 
that claims a debt and informs the debtor that the creditor agency 
intends to collect the debt by administrative offset. The notice also 
informs the debtor of certain procedural rights with respect to the 
claimed debt and offset.
    (r) Notice of Salary Offset means a written notice from a paying 
agency to its employee informing the employee that salary offset to 
collect a debt due to the creditor agency will begin at the next 
officially established pay interval. The paying agency transmits this 
notice to its employee after receiving a certification from the creditor 
agency.
    (s) Paying agency means the agency of the federal government that 
employs the individual who owes a debt to an agency of the federal 
government. The same agency may be both the creditor agency and the 
paying agency.
    (t) Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deduction(s) at one or more officially 
established pay intervals from the current pay account of an employee 
without his or her consent.
    (u) Waiver means the cancellation, remission, forgiveness or non-
recovery of a debt allegedly owed by an employee to an agency, as 
authorized or required by 5 U.S.C. 5584 or any other law.
    (v) Withholding order means any order for withholding or garnishment 
of pay issued by an agency, or judicial or administrative body. For 
purposes of administrative wage garnishment, the terms ``wage 
garnishment order'' and ``garnishment order'' have the same meaning as 
``withholding order.''



Sec. 313.4  Delegations of authority.

    Authority to conduct the following activities is delegated to the 
Director of DOA or Director of DOF, as applicable, or the applicable 
Director's delegate, to:
    (a) Initiate and carry out the debt collection process on behalf of 
the FDIC, in accordance with the FCCS;
    (b) Accept or reject compromise offers and suspend or terminate 
collection actions to the full extent of the FDIC's legal authority 
under 12 U.S.C. 1819(a) and 1820(a), 31 U.S.C. 3711(a)(2), and any other 
applicable statute or regulation, provided, however, that no such claim 
shall be compromised or collection action terminated, except upon the 
concurrence of the FDIC General Counsel or his or her designee;
    (c) Report to consumer reporting agencies certain data pertaining to 
delinquent debts, where appropriate;
    (d) Use administrative offset procedures, including salary offset, 
to collect debts; and
    (e) Take any other action necessary to promptly and effectively 
collect debts owed to the United States in accordance with the policies 
contained herein and as otherwise provided by law.



Sec. Sec. 313.5-313.19  [Reserved]



                     Subpart B_Administrative Offset



Sec. 313.20  Applicability and scope.

    The provisions of this subpart apply to the collection of debts owed 
to the United States arising from transactions with the FDIC. 
Administrative offset is authorized under the DCIA. This subpart is 
consistent with the FCCS on administrative offset issued by the 
Department of Justice.



Sec. 313.21  Definitions.

    (a) Administrative offset means withholding funds payable by the 
United States to, or held by the United States for, a person to satisfy 
a debt.
    (b) Person includes a natural person or persons, profit or nonprofit 
corporation, partnership, association, trust, estate, consortium, or 
other entity which is capable of owing a debt to the United States 
Government except that agencies of the United States, or any state or 
local government shall be excluded.



Sec. 313.22  Collection.

    (a) The Director may collect a claim from a person by administrative 
offset of monies payable by the Government only after:
    (1) Providing the debtor with due process required under this part; 
and
    (2) Providing the paying agency with written certification that the 
debtor

[[Page 164]]

owes the debt in the amount stated and that the FDIC, as creditor 
agency, has complied with this part.
    (b) Prior to initiating collection by administrative offset, the 
Director should determine that the proposed offset is within the scope 
of this remedy, as set forth in 31 CFR 901.3(a). Administrative offset 
under 31 U.S.C. 3716 may not be used to collect debts more than 10 years 
after the federal government's right to collect the debt first accrued, 
except as otherwise provided by law. In addition, administrative offset 
may not be used when a statute explicitly prohibits its use to collect 
the claim or type of claim involved.
    (c) Unless otherwise provided, debts or payments not subject to 
administrative offset under 31 U.S.C. 3716 may be collected by 
administrative offset under common law, or any other applicable 
statutory authority.



Sec. 313.23  Offset prior to completion of procedures.

    The FDIC may collect a debt by administrative offset prior to the 
completion of the procedures described in Sec. 313.25, if:
    (a) Failure to offset a payment would substantially prejudice the 
FDIC's ability to collect the debt; and
    (b) The time before the payment is to be made does not reasonably 
permit completion of the procedures described in Sec. 313.25. Such 
prior offsetting shall be followed promptly by the completion of the 
procedures described in Sec. 313.25.



Sec. 313.24  Omission of procedures.

    The FDIC shall not be required to follow the procedures described in 
Sec. 313.25 where:
    (a) The offset is in the nature of a recoupment (i.e., the FDIC may 
offset a payment due to the debtor when both the payment due to the 
debtor and the debt owed to the FDIC arose from the same transaction); 
or
    (b) The debt arises under a contract as set forth in Cecile 
Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993), which 
provides that procedural protections under administrative offset do not 
supplant or restrict established procedures for contractual offsets 
accommodated by the Contracts Disputes Act; or
    (c) In the case of non-centralized administrative offsets, the FDIC 
first learns of the existence of a debt due when there would be 
insufficient time to afford the debtor due process under these 
procedures before the paying agency makes payment to the debtor; in such 
cases, the Director shall give the debtor notice and an opportunity for 
review as soon as practical and shall refund any money ultimately found 
not to be due to the U.S. Government.



Sec. 313.25  Debtor's rights.

    Unless the procedures described in Sec. 313.23 are used, prior to 
collecting any claim by administrative offset or referring such claim to 
another agency for collection through administrative offset, the 
Director shall provide the debtor with the following:
    (a) Written notification of the nature and amount of the claim, the 
intention of the Director to collect the claim through administrative 
offset, and a statement of the rights of the debtor under this 
paragraph;
    (b) An opportunity to inspect and copy the records of the FDIC with 
respect to the claim, unless such records are exempt from disclosure;
    (c) An opportunity to have the FDIC's determination of indebtedness 
reviewed by the Director:
    (1) Any request by the debtor for such review shall be in writing 
and shall be submitted to the FDIC within 30 calendar days of the date 
of the notice of the offset. The Director may waive the time limit for 
requesting review for good cause shown by the debtor;
    (2) Upon acceptance of a request for review by the debtor, the FDIC 
shall provide the debtor with a reasonable opportunity for an oral 
hearing when the determination turns on an issue of credibility or 
veracity, or the Director determines that the question of the 
indebtedness cannot be resolved by review of the documentary evidence 
alone. Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although the 
Director shall document all significant matters discussed at the 
hearing. In cases where an oral hearing is not required by this section, 
the Director shall

[[Page 165]]

make his determination based on a documentary hearing consisting of a 
review of the written record; and
    (d) An opportunity to enter into a written agreement for the 
voluntary repayment of the amount of the claim at the discretion of the 
Director.



Sec. 313.26  Interest.

    Pursuant to 31 U.S.C. 3717, the FDIC shall assess interest, 
penalties and administrative costs on debts owed to the United States. 
The FDIC is authorized to assess interest and related charges on debts 
that are not subject to 31 U.S.C. 3717 to the extent authorized under 
the common law or other applicable statutory authority.



Sec. 313.27  Refunds.

    Amounts recovered by administrative offset but later found not to be 
owed to the Government shall be promptly refunded. Unless required by 
law or contract, such refunds shall not bear interest.



Sec. 313.28  No requirement for duplicate notice.

    Where the Director has previously given a debtor any of the required 
notice and review opportunities with respect to a particular debt, the 
Director is not required to duplicate such notice and review 
opportunities prior to initiating administrative offset.



Sec. 313.29  Requests for offset to other federal agencies.

    The Director may request that a debt owed to the FDIC be 
administratively offset against funds due and payable to a debtor by 
another federal agency. In requesting administrative offset, the FDIC, 
as the creditor agency, will certify in writing to the federal agency 
holding funds payable to the debtor:
    (a) That the debtor owes the debt;
    (b) The amount and basis of the debt; and
    (c) That the FDIC has complied with the requirements of its own 
administrative offset regulations and the applicable provisions of 31 
U.S.C. 3716 with respect to providing the debtor with due process, 
unless otherwise provided.



Sec. 313.30  Requests for offset from other federal agencies.

    Any federal agency may request that funds due and payable to its 
debtor by the FDIC be administratively offset by the FDIC in order to 
collect a debt owed to such agency by the debtor. The FDIC shall 
initiate the requested offset only upon:
    (a) Receipt of written certification from the creditor agency 
stating:
    (1) That the debtor owes the debt;
    (2) The amount and basis of the debt; and
    (3) That the agency has complied with its own administrative offset 
regulations and with the applicable provisions of 31 CFR 901.3, 
including providing any required hearing or review.
    (b) A determination by the creditor agency that collection by offset 
against funds payable by the FDIC would be in the best interest of the 
United States and that such offset would not otherwise be contrary to 
law.



Sec. Sec. 313.31-313.39  [Reserved]



                         Subpart C_Salary Offset



Sec. 313.40  Scope.

    These salary offset regulations are issued in compliance with 5 
U.S.C. 5514 and 5 CFR part 550, subpart K, and apply to the collection 
of debts owed by employees of the FDIC or other federal agencies. These 
salary offset procedures do not apply where an employee consents to the 
recovery of a debt from his current pay account. These procedures do not 
apply to debts arising under the Internal Revenue Code, the tariff laws 
of the United States or to any case where collection of a debt by salary 
offset is explicitly provided for or prohibited by another statute 
(e.g., travel advances under 5 U.S.C. 5705 and employee training 
expenses under 5 U.S.C. 4108). These procedures do not preclude an 
employee from requesting waiver of an erroneous payment under 5 U.S.C. 
5584, or in any way questioning the amount or validity of a debt, in the 
manner specified by law or these agency regulations. This section also 
does not preclude an employee from requesting waiver of the collection 
of a debt under any

[[Page 166]]

other applicable statutory authority. When possible, salary offset 
through centralized administrative offset procedures should be attempted 
before seeking salary offset from a paying agency different than the 
creditor agency.



Sec. 313.41  Notice requirement where FDIC is creditor agency.

    Where the FDIC seeks salary offset under 5 U.S.C. 5514 as the 
creditor agency, the FDIC shall first provide the employee with a 
written Notice of Intent to Offset at least 30 calendar days before 
salary offset is to commence. The Notice of Intent to Offset shall 
include the following information and statements:
    (a) That the Director has determined that a debt is owed to the FDIC 
and intends to collect the debt by means of deduction from the 
employee's current disposable pay account until the debt and all 
accumulated interest is paid in full or otherwise resolved;
    (b) The amount of the debt and the factual basis for the debt;
    (c) A salary offset schedule stating the frequency and amount of 
each deduction, stated as a fixed dollar amount or percentage of 
disposable pay (not to exceed 15%);
    (d) That in lieu of salary offset, the employee may propose a 
voluntary repayment plan to satisfy the debt on terms acceptable to the 
FDIC, which must be documented in writing, signed by the employee and 
the Director or the Director's designee, and documented in the FDIC's 
files;
    (e) The FDIC's policy concerning interest, penalties, and 
administrative costs, and a statement that such assessments must be 
made, unless excused in accordance with the FCCS;
    (f) That the employee has the right to inspect and copy FDIC records 
not exempt from disclosure relating to the debt claimed, or to receive 
copies of such records if the employee or the employee's representative 
is unable personally to inspect the records, due to geographical or 
other constraints:
    (1) That such requests be made in writing, and identify by name and 
address the Director or other designated individual to whom the request 
should be sent; and
    (2) That upon receipt of such a request, the Director or the 
Director's designee shall notify the employee of the time and location 
where the records may be inspected and copied;
    (g) That the employee has a right to request a hearing regarding the 
existence and amount of the debt claimed or the salary offset schedule 
proposed by the FDIC, provided that the employee files a request for 
such a hearing with the FDIC in accordance with Sec. 313.42 that such a 
hearing will be conducted by an impartial official who is an 
administrative law judge or other hearing official not under the 
supervision or control of the Board;
    (h) The procedure and deadline for requesting a hearing, including 
the name, address, and telephone number of the Director or other 
designated individual to whom a request for hearing must be sent;
    (i) That a request for hearing must be received by the FDIC on or 
before the 30th calendar day following receipt of the Notice of Intent, 
and that filing of a request for hearing will stay the collection 
proceedings;
    (j) That the FDIC will initiate salary offset procedures not less 
than 30 days from the date of the employee's receipt of the Notice of 
Intent to Offset, unless the employee files a timely request for a 
hearing;
    (k) That if a hearing is held, the administrative law judge or other 
hearing official will issue a decision at the earliest practical date, 
but not later than 60 days after the filing of the request for the 
hearing, unless the employee requests a delay in the proceedings which 
is granted by the hearing official;
    (l) That any knowingly false or frivolous statements, 
representations, or evidence may subject the employee to:
    (1) Disciplinary procedures appropriate under 5 U.S.C. chapter 75, 5 
CFR part 752, or any other applicable statutes or regulations;
    (2) Penalties under the False Claims Act, 31 U.S.C. 3729 through 
3731, or under any other applicable statutory authority; or
    (3) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002 or 
under any other applicable statutory authority;

[[Page 167]]

    (m) That the employee also has the right to request waiver of 
overpayment pursuant to 5 U.S.C. 5584, and may exercise any other rights 
and remedies available under statutes or regulations governing the 
program for which the collection is being made; and
    (n) That amounts paid on or deducted from debts that are later 
waived or found not to be owed to the United States will be promptly 
refunded to the employee, unless there are applicable contractual or 
statutory provisions to the contrary.



Sec. 313.42  Procedures to request a hearing.

    (a) To request a hearing, an employee must send a written request to 
the Director. The request must be received by the Director within 30 
calendar days after the employee's receipt of the Notice of Intent.
    (b) The request must be signed by the employee and must fully 
identify and explain with reasonable specificity all the facts, 
evidence, and witnesses, if any, that the employee believes support his 
or her position. The request for hearing must state whether the employee 
is requesting an oral or documentary hearing. If an oral hearing is 
requested, the request shall explain why the matter cannot be resolved 
by a review of documentary evidence alone.



Sec. 313.43  Failure to timely submit request for hearing.

    If the Director does not receive an employee's request for hearing 
within the 30-day period set forth in Sec. 313.42(a), the employee 
shall not be entitled to a hearing. However, the Director may accept an 
untimely request for hearing if the employee can show that the delay was 
the result of circumstances beyond his or her control or that he or she 
failed to receive actual notice of the filing deadline.



Sec. 313.44  Procedure for hearing.

    (a) Obtaining the services of a hearing official. When the FDIC is 
the creditor agency and the debtor is an FDIC employee, the FDIC shall 
designate an administrative law judge or contact any agent of another 
agency designated in appendix A to 5 CFR part 581 to arrange for a 
hearing official. When the FDIC is the creditor agency and the debtor is 
not an FDIC employee (i.e., the debtor is employed by another federal 
agency, also known as the paying agency), and the FDIC cannot provide a 
prompt and appropriate hearing before an administrative law judge or a 
hearing official furnished pursuant to a lawful arrangement, the FDIC 
may contact an agent of the paying agency designated in appendix A to 5 
CFR part 581 to arrange for a hearing official. The paying agency must 
cooperate with the FDIC to provide a hearing official, as required by 
the FCCS.
    (b) Notice and format of hearing. (1) Notice. The hearing official 
shall determine whether the hearing shall be oral or documentary and 
shall notify the employee of the form of the hearing. If the hearing 
will be oral, the notice shall set forth the date, time, and location of 
the hearing, which must be held within 30 calendar days after the 
request is received, unless the employee requests that the hearing be 
delayed. If the hearing will be documentary, the employee shall be 
notified to submit evidence and written arguments in support of his or 
her case to the hearing official within 30 calendar days.
    (2) Oral hearing. The hearing official may grant a request for an 
oral hearing if he or she determines that the issues raised by the 
employee cannot be resolved by review of documentary evidence alone 
(e.g., where credibility or veracity are at issue). An oral hearing is 
not required to be an adversarial adjudication, and the hearing official 
is not required to apply rules of evidence. Witnesses who testify in 
oral hearings shall do so under oath or affirmation. Oral hearings may 
take the form of, but are not limited to:
    (i) Informal conferences with the hearing official in which the 
employee and agency representative are given full opportunity to present 
evidence, witnesses, and argument;
    (ii) Informal meetings in which the hearing examiner interviews the 
employee; or
    (iii) Formal written submissions followed by an opportunity for oral 
presentation.
    (3) Documentary hearing. If the hearing official determines that an 
oral

[[Page 168]]

hearing is not necessary, he or she shall decide the issues raised by 
the employee based upon a review of the written record.
    (4) Record. The hearing official shall maintain a summary record of 
any hearing conducted under this section.
    (c) Rescheduling of the hearing date. The hearing official shall 
reschedule a hearing if requested to do so by both parties, who shall be 
given reasonable notice of the time and place of this new hearing.
    (d) Failure to appear. In the absence of good cause, an employee who 
fails to appear at a hearing shall be deemed, for the purpose of this 
subpart, to admit the existence and amount of the debt as described in 
the Notice of Intent. If the representative of the creditor agency fails 
to appear, the hearing official shall proceed with the hearing as 
scheduled, and issue a decision based upon the oral testimony presented 
and the documentation submitted by both parties.
    (e) Date of decision. The hearing official shall issue a written 
decision based upon the evidence and information developed at the 
hearing, as soon as practicable after the hearing, but not later than 60 
calendar days after the date on which the request for hearing was 
received by the FDIC, unless the hearing was delayed at the request of 
the employee. In the event of such a delay, the 60-day decision period 
shall be extended by the number of days by which the hearing was 
postponed. The decision of the hearing official shall be final.
    (f) Content of decision. The written decision shall include:
    (1) A summary of the facts concerning the origin, nature, and amount 
of the debt;
    (2) The hearing official's findings, analysis, and conclusions; and
    (3) The terms of the repayment schedule, if applicable.
    (g) Official certification of debt. The hearing official's decision 
shall constitute an official certification regarding the existence and 
amount of the debt for purposes of executing salary offset under 5 
U.S.C. 5514. Where the FDIC is the creditor agency but not the current 
paying agency, the FDIC may make a certification regarding the existence 
and amount of the debt owed to the FDIC, based on the hearing official's 
certification. The FDIC may make this certification to: the Secretary of 
the Treasury so that Treasury may offset the employee's current pay 
account by means of centralized administrative offset (5 CFR 550.1108); 
or to the current paying agency (5 CFR 550.1109). If the hearing 
official determines that a debt may not be collected through salary 
offset but the FDIC as the creditor agency determines that the debt is 
still valid, the FDIC may seek collection of the debt through other 
means, including administrative offset of other federal payments or 
litigation.



Sec. 313.45  Certification of debt by FDIC as creditor agency.

    The Director may also issue a certification of the debt where there 
has not been a hearing, if the employee has admitted the debt, or failed 
to contest the existence and amount of the debt in a timely manner 
(e.g., by failing to request a hearing). The certification shall be in 
writing and shall state:
    (a) The amount and basis of the debt owed by the employee;
    (b) The date the FDIC's right to collect the debt first accrued;
    (c) That the FDIC's debt collection regulations have been approved 
by OPM pursuant to 5 CFR part 550, subpart K;
    (d) If the collection is to be made by lump-sum payment, the amount 
and date such payment will be collected;
    (e) If the collection is to be made in installments through salary 
offset, the number of installments to be collected, the amount of each 
installment, and the date of the first installment, if a date other than 
the next officially established pay period; and
    (f) The date the employee was notified of the debt, the action(s) 
taken pursuant to the FDIC's regulations, and the dates such actions 
were taken.



Sec. 313.46  Notice of salary offset where FDIC is the paying agency.

    (a) Upon issuance of a proper certification by the Director for 
debts owed to the FDIC, or upon receipt of a proper certification from a 
creditor agency, the Director shall send the employee a

[[Page 169]]

written notice of salary offset. Such notice shall advise the employee:
    (1) That certification has been issued by the Director or received 
from another creditor agency;
    (2) Of the amount of the debt and of the deductions to be made; and
    (3) Of the initiation of salary offset at the next officially 
established pay interval or as otherwise provided for in the 
certification.
    (b) Where appropriate, the Director shall provide a copy of the 
notice to the creditor agency and advise such agency of the dollar 
amount to be offset and the pay period when the offset will begin.



Sec. 313.47  Voluntary repayment agreements as alternative to salary 
offset where the FDIC is the creditor agency.

    (a) In response to a Notice of Intent, an employee may propose to 
voluntarily repay the debt through scheduled voluntary payments, in lieu 
of salary offset. An employee who wishes to repay a debt in this manner 
shall submit to the Director a written agreement proposing a repayment 
schedule. This proposal must be received by the Director within 30 
calendar days after receipt of the Notice of Intent.
    (b) The Director shall notify the employee whether the employee's 
proposed voluntary repayment agreement is acceptable. It is within the 
discretion of the Director whether to accept or reject the debtor's 
proposal, or whether to propose to the debtor a modification of the 
proposed repayment agreement:
    (1) If the Director decides that the proposed repayment agreement is 
unacceptable, he or she shall notify the employee and the employee shall 
have 30 calendar days from the date he or she received notice of the 
decision in which to file a request for a hearing on the proposed 
repayment agreement, as provided in Sec. 313.42; or
    (2) If the Director decides that the proposed repayment agreement is 
acceptable or the debtor agrees to a modification proposed by the 
Director, the agreement shall be put in writing and signed by both the 
employee and the Director.



Sec. 313.48  Special review of repayment agreement or salary offset 
due to changed circumstances.

    (a) An employee subject to a voluntary repayment agreement or salary 
offset payable to the FDIC as creditor agency may request a special 
review by the Director of the amount of the salary offset or voluntary 
repayment, based on materially changed circumstances, including, but not 
limited to, catastrophic illness, divorce, death, or disability. A 
request for special review may be made at any time.
    (b) In support of a request for special review, the employee shall 
submit to the Director a detailed statement and supporting documents for 
the employee, his or her spouse, and dependents indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Monthly expenses for food, housing, clothing, and 
transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) The employee shall also file an alternative proposed offset or 
payment schedule and a statement, with supporting documents, showing why 
the current salary offset or payments result in extreme financial 
hardship to the employee.
    (d) The Director shall evaluate the statement and supporting 
documents and determine whether the original salary offset or repayment 
schedule imposes extreme financial hardship on the employee, for 
example, by preventing the employee from meeting essential subsistence 
expenses such as food, housing, clothing, transportation, and medical 
care. The Director shall notify the employee in writing within 30 
calendar days of his or her determination.
    (e) If the special review results in a revised salary offset or 
repayment schedule, the Director shall provide a new certification to 
the paying agency.



Sec. 313.49  Coordinating salary offset with other agencies.

    (a) Responsibility of the FDIC as the creditor agency. Upon 
completion of the procedures established in Sec. 313.40

[[Page 170]]

through Sec. 313.45, the Director shall take the following actions:
    (1) Submit a debt claim to the paying agency, containing the 
information described in paragraphs (a)(2) and (a)(3) of this section, 
together with the certification of debt or an installment agreement (or 
other instruction regarding the payment schedule, if applicable).
    (2) If the collection must be made in installments, inform the 
paying agency of the amount or percentage of disposable pay to be 
collected in each installment. The Director may also inform the paying 
agency of the commencement date and number of installments to be paid, 
if a date other than the next officially established pay period is 
required.
    (3) Unless the employee has consented to the salary offset in 
writing or has signed a statement acknowledging receipt of the required 
procedures and the written consent or statement is forwarded to the 
paying agency, the Director must also advise the paying agency of the 
actions the FDIC has taken under 5 U.S.C. 5514 and state the dates such 
action was taken.
    (4) If the employee is in the process of separating from employment, 
the Director shall submit the debt claim to the employee's paying agency 
for collection by lump-sum deduction from the employee's final check. 
The paying agency shall certify the total amount of its collection and 
furnish a copy of the certification to the FDIC and to the employee.
    (5) If the employee is already separated and all payments due from 
his or her former paying agency have been paid, the Director may, unless 
otherwise prohibited, request that money due and payable to the employee 
from the federal government, including payments from the Civil Service 
Retirement and Disability Fund (5 CFR 831.1801), be administratively 
offset to collect the debt.
    (6) In the event an employee transfers to another paying agency, the 
Director shall not repeat the procedures described in Sec. 313.40 
through Sec. 313.45 in order to resume collecting the debt. Instead, 
the FDIC shall review the debt upon receiving the former paying agency's 
notice of the employee's transfer and shall ensure that collection is 
resumed by the new paying agency. The FDIC must submit a properly 
certified claim to the new paying agency before collection can be 
resumed.
    (b) Responsibility of the FDIC as the paying agency. (1) Complete 
claim. When the FDIC receives a properly certified claim from a creditor 
agency, the employee shall be given written notice of the certification, 
the date salary offset will begin, and the amount of the periodic 
deductions. The FDIC shall schedule deductions to begin at the next 
officially established pay interval or as otherwise provided for in the 
certification.
    (2) Incomplete claim. When the FDIC receives an incomplete 
certification of debt from a creditor agency, the FDIC shall return the 
debt claim with notice that procedures under 5 U.S.C. 5514 and 5 CFR 
550.1104 must be followed and that a properly certified debt claim must 
be received before action will be taken to collect from the employee's 
current pay account.
    (3) Review. The FDIC is not authorized to review the merits of the 
creditor agency's determination with respect to the amount or validity 
of the debt certified by the creditor agency.
    (4) Employees who transfer from one paying agency to another agency. 
If, after the creditor agency has submitted the debt claim to the FDIC, 
the employee transfers to a different paying agency before the debt is 
collected in full, the FDIC must certify the total amount collected on 
the debt. One copy of the certification shall be furnished to the 
employee, and one copy shall be sent to the creditor agency along with 
notice of the employee's transfer. If the FDIC is aware that the 
employee is entitled to payments from the Civil Service Retirement and 
Disability Fund, or other similar payments, it must provide written 
notification to the agency responsible for making such payments that the 
debtor owes a debt (including the amount) and that the requirements set 
forth herein and in the OPM's regulation (5 CFR part 550, subpart K) 
have been fully met.



Sec. 313.50  Interest, penalties, and administrative costs.

    Where the FDIC is the creditor agency, it shall assess interest, 
penalties,

[[Page 171]]

and administrative costs pursuant to 31 U.S.C. 3717 and 31 CFR parts 900 
through 904.



Sec. 313.51  Refunds.

    (a) Where the FDIC is the creditor agency, it shall promptly refund 
any amount deducted under the authority of 5 U.S.C. 5514 when the debt 
is compromised or otherwise found not to be owing to the United States, 
or when an administrative or judicial order directs the FDIC to make a 
refund.
    (b) Unless required by law or contract, such refunds shall not bear 
interest.



Sec. 313.52  Request from a creditor agency for services of a hearing official.

    (a) The FDIC may provide a hearing official upon request of the 
creditor agency when the debtor is employed by the FDIC and the creditor 
agency cannot provide a prompt and appropriate hearing before a hearing 
official furnished pursuant to another lawful arrangement.
    (b) The FDIC may provide a hearing official upon request of a 
creditor agency when the debtor works for the creditor agency and that 
agency cannot arrange for a hearing official.
    (c) The Director shall arrange for qualified personnel to serve as 
hearing officials.
    (d) Services rendered under paragraph (a) of this section shall be 
provided on a fully reimbursable basis pursuant to 31 U.S.C. 1535.



Sec. 313.53  Non-waiver of rights by payments.

    A debtor's payment, whether voluntary or involuntary, of all or any 
portion of a debt being collected pursuant to this section shall not be 
construed as a waiver of any rights that the debtor may have under any 
statute, regulation, or contract except as otherwise provided by law or 
contract.



Sec. 313.54  Exception to due process procedures.

    (a) The procedures set forth in this subpart shall not apply to 
routine intra-agency salary adjustments of pay, including the following:
    (1) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a federal benefits program 
requiring periodic deductions from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (2) A routine adjustment of pay that is made to correct an 
overpayment attributable to clerical or administrative errors or delays 
in processing pay documents, if the overpayment occurred within the four 
pay periods preceding the adjustment and, at the time of such adjustment 
or as soon thereafter as is practical, the individual is provided 
written notice of the nature and amount of the adjustment and the point 
of contact for contesting such adjustment; or
    (3) Any adjustment to collect a debt amount to $50 or less, if, at 
the time of such adjustment, or as soon thereafter as is practical, the 
individual is provided written notice of the nature and amount of the 
adjustment and the point of contact for contesting such adjustment.
    (b) The procedure for notice to the employee and collection of such 
adjustments is set forth in Sec. 313.55.



Sec. 313.55  Salary adjustments.

    Any negative adjustment to pay arising out of an employee's election 
of coverage, or a change in coverage, under a federal benefits program 
requiring periodic deductions from pay shall not be considered 
collection of a ``debt'' for the purposes of this section if the amount 
to be recovered was accumulated over four pay periods or less. In such 
cases, the FDIC shall not apply this subpart C, but will provide a clear 
and concise statement in the employee's earnings statement advising the 
employee of the previous overpayment at the time the adjustment is made.



Sec. Sec. 313.56-313.79  [Reserved]



                Subpart D_Administrative Wage Garnishment



Sec. 313.80  Scope and purpose.

    (a) These administrative wage garnishment regulations are issued in 
compliance with 31 U.S.C. 3720D and 31 CFR 285.11(f). The subpart 
provides procedures for the FDIC to collect money

[[Page 172]]

from a debtor's disposable pay by means of administrative wage 
garnishment. The receipt of payments pursuant to this subpart does not 
preclude the FDIC from pursuing other debt collection remedies, 
including the offset of federal payments. The FDIC may pursue such debt 
collection remedies separately or in conjunction with administrative 
wage garnishment. This subpart does not apply to the collection of 
delinquent debts from the wages of federal employees from their federal 
employment. Federal pay is subject to the federal salary offset 
procedures set forth in 5 U.S.C. 5514 and other applicable laws.



Sec. 313.81  Notice.

    At least 30 days before the initiation of garnishment proceedings, 
the Director will send, by first class mail to the debtor's last known 
address, a written notice informing the debtor of:
    (a) The nature and amount of the debt;
    (b) The FDIC's intention to initiate proceedings to collect the debt 
through deductions from the debtor's pay until the debt and all 
accumulated interest penalties and administrative costs are paid in 
full;
    (c) An explanation of the debtor's rights as set forth in Sec. 
313.82(c); and
    (d) The time frame within which the debtor may exercise these 
rights. The FDIC shall retain a stamped copy of the notice indicating 
the date the notice was mailed.



Sec. 313.82  Debtor's rights.

    The FDIC shall afford the debtor the opportunity:
    (a) To inspect and copy records related to the debt;
    (b) To enter into a written repayment agreement with the FDIC, under 
terms agreeable to the FDIC; and
    (c) To the extent that a debt owed has not been established by 
judicial or administrative order, to request a hearing concerning the 
existence or amount of the debt or the terms of the repayment schedule. 
With respect to debts established by a judicial or administrative order, 
a debtor may request a hearing concerning the payment or other discharge 
of the debt. The debtor is not entitled to a hearing concerning the 
terms of the proposed repayment schedule if these terms have been 
established by written agreement.



Sec. 313.83  Form of hearing.

    (a) If the debtor submits a timely written request for a hearing as 
provided in Sec. 313.82(c), the FDIC will afford the debtor a hearing, 
which at the FDIC's option may be oral or written. The FDIC will provide 
the debtor with a reasonable opportunity for an oral hearing when the 
Director determines that the issues in dispute cannot be resolved by 
review of the documentary evidence, for example, when the validity of 
the claim turns on the issue of credibility or veracity.
    (b) If the FDIC determines that an oral hearing is appropriate, the 
time and location of the hearing shall be established by the FDIC. An 
oral hearing may, at the debtor's option, be conducted either in person 
or by telephone conference. All travel expenses incurred by the debtor 
in connection with an in-person hearing will be borne by the debtor. All 
telephonic charges incurred during the hearing will be the 
responsibility of the agency.
    (c) In cases when it is determined that an oral hearing is not 
required by this section, the FDIC will accord the debtor a ``paper 
hearing,'' that is, the FDIC will decide the issues in dispute based 
upon a review of the written record.



Sec. 313.84  Effect of timely request.

    If the FDIC receives a debtor's written request for hearing within 
15 business days of the date the FDIC mailed its notice of intent to 
seek garnishment, the FDIC shall not issue a withholding order until the 
debtor has been provided the requested hearing, and a decision in 
accordance with Sec. 313.88 and Sec. 313.89 has been rendered.



Sec. 313.85  Failure to timely request a hearing.

    If the FDIC receives a debtor's written request for hearing after 15 
business days of the date the FDIC mailed its notice of intent to seek 
garnishment, the FDIC shall provide a hearing to the debtor. However, 
the FDIC will not delay issuance of a withholding

[[Page 173]]

order unless it determines that the untimely filing of the request was 
caused by factors over which the debtor had no control, or the FDIC 
receives information that the FDIC believes justifies a delay or 
cancellation of the withholding order.



Sec. 313.86  Hearing official.

    A hearing official may be any qualified individual, as determined by 
the FDIC, including an administrative law judge.



Sec. 313.87  Procedure.

    After the debtor requests a hearing, the hearing official shall 
notify the debtor of:
    (a) The date and time of a telephonic hearing;
    (b) The date, time, and location of an in-person oral hearing; or
    (c) The deadline for the submission of evidence for a written 
hearing.



Sec. 313.88  Format of hearing.

    The FDIC will have the burden of proof to establish the existence or 
amount of the debt. Thereafter, if the debtor disputes the existence or 
amount of the debt, the debtor must prove by a preponderance of the 
evidence that no debt exists, or that the amount of the debt is 
incorrect. In addition, the debtor may present evidence that the terms 
of the repayment schedule are unlawful, would cause a financial hardship 
to the debtor, or that collection of the debt may not be pursued due to 
operation of law. The hearing official shall maintain a record of any 
hearing held under this section. Hearings are not required to be formal, 
and evidence may be offered without regard to formal rules of evidence. 
Witnesses who testify in oral hearings shall do so under oath or 
affirmation.



Sec. 313.89  Date of decision.

    The hearing official shall issue a written opinion stating his or 
her decision as soon as practicable, but not later than sixty (60) days 
after the date on which the request for such hearing was received by the 
FDIC. If the FDIC is unable to provide the debtor with a hearing and 
decision within sixty (60) days after the receipt of the request for 
such hearing:
    (a) The FDIC may not issue a withholding order until the hearing is 
held and a decision rendered; or
    (b) If the FDIC had previously issued a withholding order to the 
debtor's employer, the withholding order will be suspended beginning on 
the 61st day after the date the FDIC received the hearing request and 
continuing until a hearing is held and a decision is rendered.



Sec. 313.90  Content of decision.

    The written decision shall include:
    (a) A summary of the facts presented;
    (b) The hearing official's findings, analysis and conclusions; and
    (c) The terms of any repayment schedule, if applicable.



Sec. 313.91  Finality of agency action.

    Unless the FDIC on its own initiative orders review of a decision by 
a hearing official pursuant to 17 CFR 201.431(c), a decision by a 
hearing official shall become the final decision of the FDIC for the 
purpose of judicial review under the Administrative Procedure Act.



Sec. 313.92  Failure to appear.

    In the absence of good cause shown, a debtor who fails to appear at 
a scheduled hearing will be deemed as not having timely filed a request 
for a hearing.



Sec. 313.93  Wage garnishment order.

    (a) Unless the FDIC receives information that it believes justifies 
a delay or cancellation of the withholding order, the FDIC will send by 
first class mail a withholding order to the debtor's employer within 30 
days after the debtor fails to make a timely request for a hearing 
(i.e., within 15 business days after the mailing of the notice of the 
FDIC's intent to seek garnishment) or, if a timely request for a hearing 
is made by the debtor, within 30 days after a decision to issue a 
withholding order becomes final.
    (b) The withholding order sent to the employer will be in the form 
prescribed by the Secretary of the Treasury, on the FDIC's letterhead, 
and signed by the head of the agency or delegate. The order will contain 
all information necessary for the employer to comply with the 
withholding order, including the

[[Page 174]]

debtor's name, address, and social security number, as well as 
instructions for withholding and information as to where payments should 
be sent.
    (c) The FDIC will keep a stamped copy of the order indicating the 
date it was mailed.



Sec. 313.94  Certification by employer.

    Along with the withholding order, the FDIC will send to the employer 
a certification in a form prescribed by the Secretary of the Treasury. 
The employer shall complete and return the certification to the FDIC 
within the time frame prescribed in the instructions to the form. The 
certification will address matters such as information about the 
debtor's employment status and disposable pay available for withholding.



Sec. 313.95  Amounts withheld.

    (a) Upon receipt of the garnishment order issued under this section, 
the employer shall deduct from all disposable pay paid to the debtor 
during each pay period the amount of garnishment described in paragraphs 
(b) through (d) of this section.
    (b) Subject to the provisions of paragraphs (c) and (d) of this 
section, the amount of garnishment shall be the lesser of:
    (1) The amount indicated on the garnishment order up to 15% of the 
debtor's disposable pay; or
    (2) The amount set forth in 15 U.S.C. 1673(a)(2). The amount set 
forth at 15 U.S.C. 1673(a)(2) is the amount by which the debtor's 
disposable pay exceeds an amount equivalent to thirty times the minimum 
wage. See 29 CFR 870.10.
    (c) When a debtor's pay is subject to withholding orders with 
priority, the following shall apply:
    (1) Unless otherwise provided by federal law, withholding orders 
issued under this section shall be paid in the amounts set forth under 
paragraph (b) of this section and shall have priority over other 
withholding orders which are served later in time. However, withholding 
orders for family support shall have priority over withholding orders 
issued under this section.
    (2) If amounts are being withheld from a debtor's pay pursuant to a 
withholding order served on an employer before a withholding order 
issued pursuant to this section, or if a withholding order for family 
support is served on an employer at any time, the amounts withheld 
pursuant to the withholding order issued under this section shall be the 
lesser of:
    (i) The amount calculated under paragraph (b) of this section; or
    (ii) An amount equal to 25% of the debtor's disposable pay less the 
amount(s) withheld under the withholding order(s) with priority.
    (3) If a debtor owes more than one debt to the FDIC, the FDIC may 
issue multiple withholding orders. The total amount garnished from the 
debtor's pay for such orders will not exceed the amount set forth in 
paragraph (b) of this section.
    (d) An amount greater than that set forth in paragraphs (b) and (c) 
of this section may be withheld upon the written consent of the debtor.
    (e) The employer shall promptly pay to the FDIC all amounts withheld 
in accordance with the withholding order issued pursuant to this 
section.
    (f) An employer shall not be required to vary its normal pay and 
disbursement cycles in order to comply with the withholding order.
    (g) Any assignment or allotment by the employee of the employee's 
earnings shall be void to the extent it interferes with or prohibits 
execution of the withholding order under this section, except for any 
assignment or allotment made pursuant to a family support judgment or 
order.
    (h) The employer shall withhold the appropriate amount from the 
debtor's wages for each pay period until the employer receives 
notification from the FDIC to discontinue wage withholding. The 
garnishment order shall indicate a reasonable period of time within 
which the employer is required to commence wage withholding.



Sec. 313.96  Exclusions from garnishment.

    The FDIC will not garnish the wages of a debtor it knows has been 
involuntarily separated from employment until the debtor has been re-
employed continuously for at least 12 months. The debtor has the burden 
of informing

[[Page 175]]

the FDIC of the circumstances surrounding an involuntary separation from 
employment.



Sec. 313.97  Financial hardship.

    (a) A debtor whose wages are subject to a wage withholding order 
under this section, may, at any time, request a review by the FDIC of 
the amount garnished, based on materially changed circumstances such as 
disability, divorce, or catastrophic illness which result in financial 
hardship.
    (b) A debtor requesting a review under this section shall submit the 
basis for claiming that the current amount of garnishment results in a 
financial hardship to the debtor, along with supporting documentation.
    (c) If a financial hardship is found, the FDIC will downwardly 
adjust, by an amount and for a period of time agreeable to the FDIC, the 
amount garnished to reflect the debtor's financial condition. The FDIC 
will notify the employer of any adjustments to the amounts to be 
withheld.



Sec. 313.98  Ending garnishment.

    (a) Once the FDIC has fully recovered the amounts owed by the 
debtor, including interest, penalties, and administrative costs 
consistent with the FCCS, the FDIC will send the debtor's employer 
notification to discontinue wage withholding.
    (b) At least annually, the FDIC will review its debtors' accounts to 
ensure that garnishment has been terminated for accounts that have been 
paid in full.



Sec. 313.99  Prohibited actions by employer.

    The DCIA prohibits an employer from discharging, refusing to employ, 
or taking disciplinary action against the debtor due to the issuance of 
a withholding order under this subpart.



Sec. 313.100  Refunds.

    (a) If a hearing official determines that a debt is not legally due 
and owing to the United States, the FDIC shall promptly refund any 
amount collected by means of administrative wage garnishment.
    (b) Unless required by federal law or contract, refunds under this 
section shall not bear interest.



Sec. 313.101  Right of action.

    The FDIC may sue any employer for any amount that the employer fails 
to withhold from wages owed and payable to its employee in accordance 
with this subpart. However, a suit will not be filed before the 
termination of the collection action involving a particular debtor, 
unless earlier filing is necessary to avoid expiration of any applicable 
statute of limitations. For purposes of this subpart, ``termination of 
the collection action'' occurs when the agency has terminated collection 
action in accordance with the FCCS (31 CFR 903.1 through 903.5) or other 
applicable standards. In any event, termination of the collection action 
will have been deemed to occur if the FDIC has not received any payments 
to satisfy the debt from the particular debtor whose wages were subject 
to garnishment, in whole or in part, for a period of one (1) year.



Sec. Sec. 313.102-313.119  [Reserved]



                       Subpart E_Tax Refund Offset



Sec. 313.120  Scope.

    The provisions of 26 U.S.C. 6402(d) and 31 U.S.C. 3720A authorize 
the Secretary of the Treasury to offset a delinquent debt owed to the 
United States Government from the tax refund due a taxpayer when other 
collection efforts have failed to recover the amount due. In addition, 
the FDIC is authorized to collect debts by means of administrative 
offset under 31 U.S.C. 3716 and, as part of the debt collection process, 
to notify the Financial Management Service (FMS), a bureau of the 
Department of the Treasury, of the amount of such debt for collection by 
tax refund offset.



Sec. 313.121  Definitions.

    For purposes of this subpart E:
    (a) Debt or claim means an amount of money, funds or property which 
has been determined by the FDIC to be due to the United States from any 
person, organization, or entity, except another federal agency.

[[Page 176]]

    (b) Debtor means a person who owes a debt or a claim. The term 
``person'' includes any individual, organization or entity, except 
another federal agency.
    (c) Tax refund offset means withholding or reducing a tax refund 
payment by an amount necessary to satisfy a debt owed by the payee(s) of 
a tax refund payment.
    (d) Tax refund payment means any overpayment of federal taxes to be 
refunded to the person making the overpayment after the Internal Revenue 
Service (IRS) makes the appropriate credits.



Sec. 313.122  Notification of debt to FMS.

    The FDIC shall notify FMS of the amount of any past due, legally 
enforceable non-tax debt owed to it by a person, for the purpose of 
collecting such debt by tax refund offset. Notification and referral to 
FMS of such debts does not preclude FDIC's use of any other debt 
collection procedures, such as wage garnishment, either separately or in 
conjunction with tax refund offset.



Sec. 313.123  Certification and referral of debt.

    When the FDIC refers a past-due, legally enforceable debt to FMS for 
tax refund offset, it will certify to FMS that:
    (a) The debt is past due and legally enforceable in the amount 
submitted to FMS and that the FDIC will ensure that collections are 
properly credited to the debt;
    (b) Except in the case of a judgment debt or as otherwise allowed by 
law, the debt is referred for offset within ten years after the FDIC's 
right of action accrues;
    (c) The FDIC has made reasonable efforts to obtain payment of the 
debt, in that it has:
    (1) Submitted the debt to FMS for collection by administrative 
offset and complied with the provisions of 31 U.S.C. 3716(a) and related 
regulations;
    (2) Notified, or has made a reasonable attempt to notify, the debtor 
that the debt is past-due, and unless repaid within 60 days after the 
date of the notice, will be referred to FMS for tax refund offset;
    (3) Given the debtor at least 60 days to present evidence that all 
or part of the debt is not past-due or legally enforceable, considered 
any evidence presented by the debtor, and determined that the debt is 
past-due and legally enforceable; and
    (4) Provided the debtor with an opportunity to make a written 
agreement to repay the debt; and
    (d) The debt is at least $25.



Sec. 313.124  Pre-offset notice and consideration of evidence.

    (a) For purposes of Sec. 313.123(c)(2), the FDIC has made a 
reasonable effort to notify the debtor if it uses the current address 
information contained in its records related to the debt. The FDIC may, 
but is not required to, obtain address information from the IRS pursuant 
to 26 U.S.C. 6103(m)(2), (4), (5).
    (b) For purposes of Sec. 313.123(c)(3), if evidence presented by a 
debtor is considered by an agent of the FDIC, or other entities or 
persons acting on behalf of the FDIC, the debtor must be accorded at 
least 30 days from the date the agent or other entity or person 
determines that all or part of the debt is past-due and legally 
enforceable to request review by an officer or employee of the FDIC of 
any unresolved dispute. The FDIC must then notify the debtor of its 
decision.



Sec. 313.125  Referral of past-due, legally enforceable debt.

    The FDIC shall submit past-due, legally enforceable debt information 
for tax refund offset to FMS, as prescribed by FMS. For each debt, the 
FDIC will include the following information:
    (a) The name and taxpayer identification number (as defined in 26 
U.S.C. 6109) of the debtor;
    (b) The amount of the past-due and legally enforceable debt;
    (c) The date on which the debt became past-due; and
    (d) The designation of FDIC as the agency referring the debt.



Sec. 313.126  Correcting and updating referral.

    If, after referring a past-due legally enforceable debt to FMS as 
provided in Sec. 313.125, the FDIC determines that an error has been 
made with respect to

[[Page 177]]

the information transmitted to FMS, or if the FDIC receives a payment or 
credits a payment to the account of the debtor referred to FMS for 
offset, or if the debt amount is otherwise incorrect, the FDIC shall 
promptly notify FMS and make the appropriate correction of the FDIC's 
records. FDIC will provide certification as required under Sec. 313.123 
for any increases to amounts owed. In the event FMS rejects an FDIC 
certification for failure to comply with Sec. 323.123, the FDIC may 
resubmit the debt with a corrected certification.



Sec. 313.127  Disposition of amounts collected.

    FMS will transmit amounts collected for past-due, legally 
enforceable debts, less fees charged under this section, to the FDIC's 
account. The FDIC will reimburse FMS and the IRS for the cost of 
administering the tax refund offset program. FMS will deduct the fees 
from amounts collected prior to disposition and transmit a portion of 
the fees deducted to reimburse the IRS for its share of the cost of 
administering the tax refund offset program. To the extent allowed by 
law, the FDIC may add the offset fees to the debt.



Sec. Sec. 313.128-313.139  [Reserved]



      Subpart F_Civil Service Retirement and Disability Fund Offset



Sec. 313.140  Future benefits.

    Unless otherwise prohibited by law, the FDIC may request that a 
debtor's anticipated or future benefit payments under the Civil Service 
Retirement and Disability Fund (Fund) be administratively offset in 
accordance with regulations at 5 CFR 831.1801 through 831.1808.



Sec. 313.141  Notification to OPM.

    When making a request for administrative offset under Sec. 313.140, 
the FDIC shall provide OPM with a written certification that:
    (a) The debtor owes the FDIC a debt, including the amount of the 
debt;
    (b) The FDIC has complied with the applicable statutes, regulations, 
and procedures of OPM; and
    (c) The FDIC has complied with the requirements of 31 CFR parts 900 
through 904, including any required hearing or review.



Sec. 313.142  Request for administrative offset.

    The Director shall request administrative offset under Sec. 
313.140, as soon as practical after completion of the applicable 
procedures in order to help ensure that offset be initiated prior to 
expiration of the applicable statute of limitations. At such time as the 
debtor makes a claim for payments from the Fund, if at least a year has 
elapsed since the offset request was originally made, the debtor shall 
be permitted to offer a satisfactory repayment plan in lieu of offset 
upon establishing that changed financial circumstances would render the 
offset unjust.



Sec. 313.143  Cancellation of deduction.

    If the FDIC collects part or all of the debt by other means before 
deductions are made or completed pursuant to Sec. 313.140, the FDIC 
shall act promptly to modify or terminate its request for such offset.



          Subpart G_Mandatory Centralized Administrative Offset



Sec. 313.160  Treasury notification.

    (a) In accordance with 31 U.S.C. 3716, the FDIC as a creditor agency 
must notify the Secretary of the Treasury of all debts that are 
delinquent (over 180 days past due), as defined in the FCCS, to enable 
the Secretary to seek collection by centralized administrative offset. 
This includes debts the FDIC seeks to recover from the pay account of an 
employee of another agency by means of salary offset.
    (b) For purposes of centralized administrative offset, a claim or 
debt is not delinquent if:
    (1) It is in litigation or foreclosure;
    (2) It will be disposed of under an asset sale program within one 
year after becoming eligible for sale;
    (3) It has been referred to a private collection contractor for 
collection;
    (4) It has been referred to a debt collection center;
    (5) It will be collected under internal offset, if such offset is 
sufficient to collect the claim within three years after

[[Page 178]]

the date the debt or claim is first delinquent; and
    (6) It is within a specific class of claims or debts which the 
Secretary of the Treasury has determined to be exempt, at the request of 
an agency.



Sec. 313.161  Certification of debt.

    Prior to referring a delinquent debt to the Secretary of the 
Treasury, the Director must have complied with the requirements of 5 
U.S.C. 5514, and 5 CFR part 550, subpart K, governing salary offset, and 
the FDIC regulations. The Director shall certify, in a form acceptable 
to the Secretary, that:
    (a) The debt is past due and legally enforceable; and
    (b) The FDIC has complied with all due process requirements under 31 
U.S.C. 3716 and the FDIC's administrative offset regulations.



Sec. 313.162  Compliance with 31 CFR part 285.

    The Director shall also comply with applicable procedures for 
referring a delinquent debt for purposes of centralized offset which are 
set forth at 31 CFR part 285 and the FCCS.



Sec. 313.163  Notification of debts of 180 days or less.

    The Director, in his discretion, may also notify the Secretary of 
the Treasury of debts that have been delinquent for 180 days or less, 
including debts the FDIC seeks to recover by means of salary offset.



Sec. Sec. 313.164-313.180  [Reserved]

[[Page 179]]



        SUBCHAPTER B_REGULATIONS AND STATEMENTS OF GENERAL POLICY





PART 323_APPRAISALS--Table of Contents




Sec.
323.1 Authority, purpose, and scope.
323.2 Definitions.
323.3 Appraisals required; transactions requiring a State certified or 
          licensed appraiser.
323.4 Minimum appraisal standards.
323.5 Appraiser independence.
323.6 Professional association membership; competency.
323.7 Enforcement.

    Authority: 12 U.S.C. 1818, 1819 [``Seventh'' and ``Tenth''], and 
3331-3352.

    Source: 55 FR 33888, Aug. 20, 1990, unless otherwise noted.



Sec. 323.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under 12 U.S.C. 1818, 1819 
[``Seventh'' and ``Tenth''] and title XI of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (``FIRREA'') (Pub. L. 101-
73, 103 Stat. 183, 12 U.S.C. 3331 et seq. (1989)).
    (b) Purpose and scope. (1) Title XI provides protection for federal 
financial and public policy interests in real estate related 
transactions by requiring real estate appraisals used in connection with 
federally related transactions to be performed in writing, in accordance 
with uniform standards, by appraisers whose competency has been 
demonstrated and whose professional conduct will be subject to effective 
supervision. This part implements the requirements of title XI and 
applies to all federally related transactions entered into by the FDIC 
or by institutions regulated by the FDIC (regulated institutions).
    (2) This part: (i) Identifies which real estate-related financial 
transactions require the services of an appraiser;
    (ii) Prescribes which categories of federally related transactions 
shall be appraised by a State certified appraiser and which by a State 
licensed appraiser; and
    (iii) Prescribes minimum standards for the performance of real 
estate appraisals in connection with federally related transactions 
under the jurisdiction of the FDIC.



Sec. 323.2  Definitions.

    (a) Appraisal means a written statement independently and 
impartially prepared by a qualified appraiser setting forth an opinion 
as to the market value of an adequately described property as of a 
specific date(s), supported by the presentation and analysis of relevant 
market information.
    (b) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, as a not-for-profit corporation under the laws of 
Illinois.
    (c) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (d) Business loan means a loan or extension of credit to any 
corporation, general or limited partnership, business trust, joint 
venture, pool, syndicate, sole proprietorship, or other business entity.
    (e) Complex 1-to-4 family residential property appraisal means one 
in which the property to be appraised, the form of ownership, or market 
conditions are atypical.
    (f) Federally related transaction means any real estate-related 
financial transactions entered into after the effective date hereof 
that:
    (1) The FDIC or any regulated institution engages in or contracts 
for; and
    (2) Requires the services of an appraiser.
    (g) Market value means the most probable price which a property 
should bring in a competitive and open market under all conditions 
requisite to a fair sale, the buyer and seller each acting prudently and 
knowledgeably, and assuming the price is not affected by undue stimulus. 
Implicit in this definition is the consummation of a sale as of a 
specified date and the passing of title from seller to buyer under 
conditions whereby:
    (1) Buyer and seller are typically motivated;

[[Page 180]]

    (2) Both parties are well informed or well advised, and acting in 
what they consider their own best interests;
    (3) A reasonable time is allowed for exposure in the open market;
    (4) Payment is made in terms of cash in U.S. dollars or in terms of 
financial arrangements comparable thereto; and
    (5) The price represents the normal consideration for the property 
sold unaffected by special or creative financing or sales concessions 
granted by anyone associated with the sale.
    (h) Real estate or real property means an identified parcel or tract 
of land, with improvements, and includes easements, rights of way, 
undivided or future interests and similar rights in a tract of land, but 
does not include mineral rights, timber rights, growing crops, water 
rights and similar interests severable from the land when the 
transaction does not involve the associated parcel or tract of land.
    (i) Real estate-related financial transaction means any transaction 
involving:
    (1) The sale, lease, purchase, investment in or exchange of real 
property, including interests in property, or the financing thereof; or
    (2) The refinancing of real property or interests in real property; 
or
    (3) The use of real property or interests in property as security 
for a loan or investment, including mortgage-backed securities.
    (j) State certified appraiser means any individual who has satisfied 
the requirements for certification in a State or territory whose 
criteria for certification as a real estate appraiser currently meet the 
minimum criteria for certification issued by the Appraiser 
Qualifications Board of the Appraisal Foundation. No individual shall be 
a State certified appraiser unless such individual has achieved a 
passing grade upon a suitable examination administered by a State or 
territory that is consistent with and equivalent to the Uniform State 
Certification Examination issued or endorsed by the Appraiser 
Qualifications Board. In addition, the Appraisal Subcommittee must not 
have issued a finding that the policies, practices, or procedures of a 
State or territory are inconsistent with title XI of FIRREA. The FDIC 
may, from time to time, impose additional qualification criteria for 
certified appraisers performing appraisals in connection with federally 
related transactions within its jurisdiction.
    (k) State licensed appraiser means any individual who has satisfied 
the requirements for licensing in a State or territory where the 
licensing procedures comply with title XI of FIRREA and where the 
Appraisal Subcommittee has not issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI. The FDIC may, from time to time, impose additional 
qualification criteria for licensed appraisers performing appraisals in 
connection with federally related transactions within its jurisdiction.
    (l) Tract development means a project of five units or more that is 
constructed or is to be constructed as a single development.
    (m) Transaction value means: (1) For loans or other extensions of 
credit, the amount of the loan or extension of credit;
    (2) For sales, leases, purchases, and investments in or exchanges of 
real property, the market value of the real property interest involved; 
and
    (3) For the pooling of loans or interests in real property for 
resale or purchase, the amount of the loan or market value of the real 
property calculated with respect to each such loan or interest in real 
property.

[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9049, Mar. 16, 1992; 59 
FR 29501, June 7, 1994]



Sec. 323.3  Appraisals required; transactions requiring a State 
certified or licensed appraiser.

    (a) Appraisals required. An appraisal performed by a State certified 
or licensed appraiser is required for all real estate-related financial 
transactions except those in which:
    (1) The transaction value is $250,000 or less;
    (2) A lien on real estate has been taken as collateral in an 
abundance of caution;
    (3) The transaction is not secured by real estate;

[[Page 181]]

    (4) A lien on real estate has been taken for purposes other than the 
real estate's value;
    (5) The transaction is a business loan that:
    (i) Has a transaction value of $1 million or less; and
    (ii) Is not dependent on the sale of, or rental income derived from, 
real estate as the primary source of repayment;
    (6) A lease of real estate is entered into, unless the lease is the 
economic equivalent of a purchase or sale of the leased real estate;
    (7) The transaction involves an existing extension of credit at the 
lending institution, provided that:
    (i) There has been no obvious and material change in market 
conditions or physical aspects of the property that threatens the 
adequacy of the institution's real estate collateral protection after 
the transaction, even with the advancement of new monies; or
    (ii) There is no advancement of new monies, other than funds 
necessary to cover reasonable closing costs;
    (8) The transaction involves the purchase, sale, investment in, 
exchange of, or extension of credit secured by, a loan or interest in a 
loan, pooled loans, or interests in real property, including mortgaged-
backed securities, and each loan or interest in a loan, pooled loan, or 
real property interest met FDIC regulatory requirements for appraisals 
at the time of origination;
    (9) The transaction is wholly or partially insured or guaranteed by 
a United States government agency or United States government sponsored 
agency;
    (10) The transaction either:
    (i) Qualifies for sale to a United States government agency or 
United States government sponsored agency; or
    (ii) Involves a residential real estate transaction in which the 
appraisal conforms to the Federal National Mortgage Association or 
Federal Home Loan Mortgage Corporation appraisal standards applicable to 
that category of real estate;
    (11) The regulated institution is acting in a fiduciary capacity and 
is not required to obtain an appraisal under other law; or
    (12) The FDIC determines that the services of an appraiser are not 
necessary in order to protect Federal financial and public policy 
interests in real estate-related financial transactions or to protect 
the safety and soundness of the institution.
    (b) Evaluations required. For a transaction that does not require 
the services of a State certified or licensed appraiser under paragraph 
(a)(1), (a)(5) or (a)(7) of this section, the institution shall obtain 
an appropriate evaluation of real property collateral that is consistent 
with safe and sound banking practices.
    (c) Appraisals to address safety and soundness concerns. The FDIC 
reserves the right to require an appraisal under this part whenever the 
agency believes it is necessary to address safety and soundness 
concerns.
    (d) Transactions requiring a State certified appraiser--(1) All 
transactions of $1,000,000 or more. All federally related transactions 
having a transaction value of $1,000,000 or more shall require an 
appraisal prepared by a State certified appraiser.
    (2) Nonresidential transactions of $250,000 or more. All federally 
related transactions having a transaction value of $250,000 or more, 
other than those involving appraisals of 1-to-4 family residential 
properties, shall require an appraisal prepared by a State certified 
appraiser.
    (3) Complex residential transactions of $250,000 or more. All 
complex 1-to-4 family residential property appraisals rendered in 
connection with federally related transactions shall require a State 
certified appraiser if the transaction value is $250,000 or more. A 
regulated institution may presume that appraisals of 1-to-4 family 
residential properties are not complex, unless the institution has 
readily available information that a given appraisal will be complex. 
The regulated institution shall be responsible for making the final 
determination of whether the appraisal is complex. If during the course 
of the appraisal a licensed appraiser identifies factors that would 
result in the property, form of ownership, or market conditions being 
considered atypical, then either:

[[Page 182]]

    (i) The regulated institution may ask the licensed appraiser to 
complete the appraisal and have a certified appraiser approve and co-
sign the appraisal; or
    (ii) The institution may engage a certified appraiser to complete 
the appraisal.
    (e) Transactions requiring either a State certified or licensed 
appraiser. All appraisals for federally related transactions not 
requiring the services of a State certified appraiser shall be prepared 
by either a State certified appraiser or a State licensed appraiser.
    (f) Effective date. Regulated institutions are required to use state 
certified or licensed appraisers as set forth in this section no later 
than December 31, 1992, unless otherwise required by law.

[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9050, Mar. 16, 1992; 59 
FR 29501, June 7, 1994]



Sec. 323.4  Minimum appraisal standards.

    For federally related transactions, all appraisals shall, at a 
minimum:
    (a) Conform to generally accepted appraisal standards as evidenced 
by the Uniform Standards of Professional Appraisal Practice (USPAP) 
promulgated by the Appraisal Standards Board of the Appraisal 
Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless 
principles of safe and sound banking require compliance with stricter 
standards;
    (b) Be written and contain sufficient information and analysis to 
support the institution's decision to engage in the transaction;
    (c) Analyze and report appropriate deductions and discounts for 
proposed construction or renovation, partially leased buildings, non-
market lease terms, and tract developments with unsold units;
    (d) Be based upon the definition of market value as set forth in 
this part; and
    (e) Be performed by State licensed or certified appraisers in 
accordance with requirements set forth in this part.

[59 FR 29502, June 7, 1994]



Sec. 323.5  Appraiser independence.

    (a) Staff appraisers. If an appraisal is prepared by a staff 
appraiser, that appraiser must be independent of the lending, 
investment, and collection functions and not involved, except as an 
appraiser, in the federally related transaction, and have no direct or 
indirect interest, financial or otherwise, in the property. If the only 
qualified persons available to perform an appraisal are involved in the 
lending, investment, or collection functions of the regulated 
institution, the regulated institution shall take appropriate steps to 
ensure that the appraisers exercise independent judgment and that the 
appraisal is adequate. Such steps include, but are not limited to, 
prohibiting an individual from performing appraisals in connection with 
federally related transactions in which the appraiser is otherwise 
involved and prohibiting directors and officers from participating in 
any vote or approval involving assets on which they performed an 
appraisal.
    (b) Fee appraisers. (1) If an appraisal is prepared by a fee 
appraiser, the appraiser shall be engaged directly by the regulated 
institution or its agent, and have no direct or indirect interest, 
financial or otherwise, in the property or the transaction.
    (2) A regulated institution also may accept an appraisal that was 
prepared by an appraiser engaged directly by another financial services 
institution, if:
    (i) The appraiser has no direct or indirect interest, financial or 
otherwise, in the property or the transaction; and
    (ii) The regulated institution determines that the appraisal 
conforms to the requirements of this part and is otherwise acceptable.

[55 FR 33888, Aug. 20, 1990, as amended by 59 FR 29502, June 7, 1994]



Sec. 323.6  Professional association membership; competency.

    (a) Membership in appraisal organizations. A State certified 
appraiser or a State licensed appraiser may not be excluded from 
consideration for an assignment for a federally related transaction 
solely by virtue of membership or lack of membership in any particular 
appraisal organization.
    (b) Competency. All staff and fee appraisers performing appraisals 
in connection with federally related transactions must be State 
certified or licensed, as appropriate. However, a

[[Page 183]]

State certified or licensed appraiser may not be considered competent 
solely by virtue of being certified or licensed. Any determination of 
competency shall be based upon the individual's experience and 
educational background as they relate to the particular appraisal 
assignment for which he or she is being considered.



Sec. 323.7  Enforcement.

    Institutions and institution-affiliated parties, including staff 
appraisers and fee appraisers, may be subject to removal and/or 
prohibition orders, cease and desist orders, and the imposition of civil 
money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 
1811 et seq., as amended, or other applicable law.

                           PART 324 [RESERVED]



PART 325_CAPITAL MAINTENANCE--Table of Contents




                 Subpart A_Minimum Capital Requirements

Sec.
325.1 Scope.
325.2 Definitions.
325.3 Minimum leverage capital requirement.
325.4 Inadequate capital as an unsafe or unsound practice or condition.
325.5 Miscellaneous.
325.6 Issuance of directives.

                   Subpart B_Prompt Corrective Action

325.101 Authority, purpose, scope, other supervisory authority, and 
          disclosure of capital categories.
325.102 Notice of capital category.
325.103 Capital measures and capital category definitions.
325.104 Capital restoration plans.
325.105 Mandatory and discretionary supervisory actions under section 
          38.

Appendix A to Part 325--Statement of Policy on Risk-Based Capital
Appendix B to Part 325--Statement of Policy on Capital Adequacy
Appendix C to Part 325--Risk-Based Capital for State Non-Member Banks: 
          Market Risk

    Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 1761, 
1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236, 
2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 2233 (12 U.S.C. 
1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, as amended by Pub. L. 
102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note).



                 Subpart A_Minimum Capital Requirements



Sec. 325.1  Scope.

    The provisions of this subpart A apply to those circumstances for 
which the Federal Deposit Insurance Act or this chapter requires an 
evaluation of the adequacy of an insured depository institution's 
capital structure. The FDIC is required to evaluate capital before 
approving various applications by insured depository institutions. The 
FDIC also must evaluate capital, as an essential component, in 
determining the safety and soundness of state nonmember banks it insures 
and supervises and in determining whether depository institutions are in 
an unsafe or unsound condition. This subpart A establishes the criteria 
and standards the FDIC will use in calculating the minimum leverage 
capital requirement and in determining capital adequacy. In addition, 
appendix A to this subpart sets forth the FDIC's risk-based capital 
policy statement and appendix B to this subpart includes a statement of 
policy on capital adequacy that provides interpretational guidance as to 
how this subpart will be administered and enforced. In accordance with 
subpart B of part 325, the FDIC also must evaluate an institution's 
capital for purposes of determining whether the institution is subject 
to the prompt corrective action provisions set forth in section 38 of 
the Federal Deposit Insurance Act (12 U.S.C. 1831o).

[58 FR 8219, Feb. 12, 1993]



Sec. 325.2  Definitions.

    (a) Allowance for loan and lease losses means those general 
valuation allowances that have been established through charges against 
earnings to absorb losses on loans and lease financing receivables. 
Allowances for loan and lease losses exclude allocated transfer risk 
reserves established pursuant to 12 U.S.C. 3904 and specific reserves 
created against identified losses.
    (b) Assets classified loss means:
    (1) When measured as of the date of examination of an insured 
depository

[[Page 184]]

institution, those assets that have been determined by an evaluation 
made by a state or federal examiner as of that date to be a loss; and
    (2) When measured as of any other date, those assets:
    (i) That have been determined--
    (A) By an evaluation made by a state or federal examiner at the most 
recent examination of an insured depository institution to be a loss; or
    (B) By evaluations made by the insured depository institution since 
its most recent examination to be a loss; and
    (ii) That have not been charged off from the insured depository 
institution's books or collected.
    (c) Bank means an FDIC-insured, state-chartered commercial or 
savings bank that is not a member of the Federal Reserve System and 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)).
    (d) Common stockholders' equity means the sum of common stock and 
related surplus, undivided profits, disclosed capital reserves that 
represent a segregation of undivided profits, and foreign currency 
translation adjustments, less net unrealized holding losses on 
available-for-sale equity securities with readily determinable fair 
values.
    (e)(1) Control has the same meaning assigned to it in section 2 of 
the Bank Holding Company Act (12 U.S.C. 1841), and the term controlled 
shall be construed consistently with the term control.
    (2) Exclusion for fiduciary ownership. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares in a 
fiduciary capacity. Shares shall not be deemed to have been acquired in 
a fiduciary capacity if the acquiring insured depository institution or 
company has sole discretionary authority to exercise voting rights with 
respect thereto.
    (3) Exclusion for debts previously contracted. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares acquired in 
securing or collecting a debt previously contracted in good faith, until 
two years after the date of acquisition. The two-year period may be 
extended at the discretion of the appropriate federal banking agency for 
up to three one-year periods.
    (f) Controlling person means any person having control of an insured 
depository institution and any company controlled by that person.
    (g)(1) Credit-enhancing interest-only strip means an on-balance 
sheet asset that, in form or in substance:
    (i) Represents the contractual right to receive some or all of the 
interest due on transferred assets; and
    (ii) Exposes the bank to credit risk directly or indirectly 
associated with the transferred assets that exceeds a pro rata share of 
the bank's claim on the assets, whether through subordination provisions 
or other credit enhancement techniques.
    (2) Reservation of authority. In determining whether a particular 
interest cash flow functions, directly or indirectly, as a credit-
enhancing interest-only strip, the FDIC will consider the economic 
substance of the transaction. The FDIC, through the Director of 
Supervision, or other designated FDIC official reserves the right to 
identify other interest cash flows or related assets as credit-enhancing 
interest-only strips.
    (h) Face amount means the notional principal, or face value, amount 
of an off-balance sheet item; the amortized cost of an asset not held 
for trading purposes; and the fair value of a trading asset.
    (i)(1) Highly leveraged transaction means an extension of credit to 
or investment in a business by an insured depository institution where 
the financing transaction involves a buyout, acquisition, or 
recapitalization of an existing business and one of the following 
criteria is met:
    (i) The transaction results in a liabilities-to-assets leverage 
ratio higher than 75 percent; or
    (ii) The transaction at least doubles the subject company's 
liabilities and results in a liabilities-to-assets leverage ratio higher 
than 50 percent; or
    (iii) The transaction is designated an HLT by a syndication agent or 
a federal bank regulator.

[[Page 185]]

    (2) Notwithstanding paragraph (g)(1) of this section, loans and 
exposures to any obligor in which the total financing package, including 
all obligations held by all participants is $20 million or more, or such 
lower level as the FDIC may establish by order on a case-by-case basis, 
will be excluded from this definition.
    (j) Identified losses means:
    (1) When measured as of the date of examination of an insured 
depository institution, those items that have been determined by an 
evaluation made by a state or federal examiner as of that date to be 
chargeable against income, capital and/or general valuation allowances 
such as the allowance for loan and lease losses (examples of identified 
losses would be assets classified loss, off-balance sheet items 
classified loss, any provision expenses that are necessary for the 
institution to record in order to replenish its general valuation 
allowances to an adequate level, liabilities not shown on the 
institution's books, estimated losses in contingent liabilities, and 
differences in accounts which represent shortages); and
    (2) When measured as of any other date, those items:
    (i) That have been determined--
    (A) By an evaluation made by a state or federal examiner at the most 
recent examination of an insured depository institution to be chargeable 
against income, capital and/or general valuation allowances; or
    (B) By evaluations made by the insured depository institution since 
its most recent examination to be chargeable against income, capital 
and/or general valuation allowances; and
    (ii) For which the appropriate accounting entries to recognize the 
loss have not yet been made on the insured depository institution's 
books nor has the item been collected or otherwise settled.
    (k) Insured depository institution means any depository institution 
(except for a foreign bank having an insured branch) the deposits of 
which are insured in accordance with the provisions of the Federal 
Deposit Insurance Act (12 U.S.C. 1811 et seq.)
    (l) Intangible assets means those assets that are required to be 
reported as intangible assets in a banking institution's ``Reports of 
Condition and Income'' (Call Report) or in a savings association's 
``Thrift Financial Report.''
    (m) Leverage ratio means the ratio of Tier 1 capital to total 
assets, as calculated under this part.
    (n) Management fee means any payment of money or provision of any 
other thing of value to a company or individual for the provision of 
management services or advice to the bank or related overhead expenses, 
including payments related to supervisory, executive, managerial, or 
policymaking functions, other than compensation to an individual in the 
individual's capacity as an officer or employee of the bank.
    (o) Minority interests in consolidated subsidiaries means minority 
interests in equity capital accounts of those subsidiaries that have 
been consolidated for the purpose of computing regulatory capital under 
this part, except that minority interests which fail to provide 
meaningful capital support are excluded from this definition.
    (p) Mortgage servicing assets means those assets (net of any related 
valuation allowances) that result from contracts to service loans 
secured by real estate (that have been securitized or are owned by 
others) for which the benefits of servicing are expected to more than 
adequately compensate the servicer for performing the servicing. For 
purposes of determining regulatory capital under this part, mortgage 
servicing assets will be recognized only to the extent that the assets 
meet the conditions, limitations, and restrictions described in Sec. 
325.5 (f).
    (q) Noncumulative perpetual preferred stock means perpetual 
preferred stock (and related surplus) where the issuer has the option to 
waive payment of dividends and where the dividends so waived do not 
accumulate to future periods nor do they represent a contingent claim on 
the issuer. Preferred stock issues where the dividend is reset 
periodically based, in whole or in part, upon the bank's current credit 
standing, including but not limited to, auction rate, money market and 
remarketable preferred stock, are excluded from this definition of 
noncumulative perpetual preferred stock,

[[Page 186]]

regardless of whether the dividends are cumulative or noncumulative.
    (r) Perpetual preferred stock means a preferred stock that does not 
have a maturity date, that cannot be redeemed at the option of the 
holder, and that has no other provisions that will require future 
redemption of the issue. It includes those issues of preferred stock 
that automatically convert into common stock at a stated date. It 
excludes those issues, the rate on which increases, or can increase, in 
such a manner that would effectively require the issuer to redeem the 
issue.
    (s) Risk-weighted assets means total risk-weighted assets, as 
calculated in accordance with the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to part 325).
    (t) Savings association means any federally-chartered savings 
association, any state-chartered savings association, and any 
corporation (other than a bank) that the Board of Directors of the FDIC 
and the Director of the Office of Thrift Supervision jointly determine 
to be operating in substantially the same manner as a savings 
association.
    (u) Tangible equity means the amount of core capital elements as 
defined in Section I.A.1. of the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to this Part 325), plus the amount of 
outstanding cumulative perpetual preferred stock (including related 
surplus), minus all intangible assets except mortgage servicing assets 
to the extent that the FDIC determines pursuant to Sec. 325.5(f) of 
this part that mortgage servicing assets may be included in calculating 
the bank's Tier 1 capital.
    (v) Tier 1 capital or core capital means the sum of common 
stockholders' equity, noncumulative perpetual preferred stock (including 
any related surplus), and minority interests in consolidated 
subsidiaries, minus all intangible assets (other than mortgage servicing 
assets, nonmortgage servicing assets, and purchased credit card 
relationships eligible for inclusion in core capital pursuant to Sec. 
325.5(f)), minus credit-enhancing interest-only strips that are not 
eligible for inclusion in core capital pursuant to Sec. 325.5(f), minus 
deferred tax assets in excess of the limit set forth in Sec. 325.5(g), 
minus identified losses (to the extent that Tier 1 capital would have 
been reduced if the appropriate accounting entries to reflect the 
identified losses had been recorded on the insured depository 
institution's books), minus investments in financial subsidiaries 
subject to 12 CFR part 362, subpart E, and minus the amount of the total 
adjusted carrying value of nonfinancial equity investments that is 
subject to a deduction from Tier 1 capital as set forth in section 
II.B.(6) of appendix A to this part.
    (w) Tier 1 risk-based capital ratio means the ratio of Tier 1 
capital to risk-weighted assets, as calculated in accordance with the 
FDIC's Statement of Policy on Risk-Based Capital (appendix A to part 
325).
    (x) Total assets means the average of total assets required to be 
included in a banking institution's ``Reports of Condition and Income'' 
(Call Report) or, for savings associations, the consolidated total 
assets required to be included in the ``Thrift Financial Report,'' as 
these reports may from time to time be revised, as of the most recent 
report date (and after making any necessary subsidiary adjustments for 
state nonmember banks as described in Sec. Sec. 325.5(c) and 325.5(d) 
of this part), minus intangible assets (other than mortgage servicing 
assets, nonmortgage servicing assets, and purchased credit card 
relationships eligible for inclusion in core capital pursuant to Sec. 
325.5(f)), minus credit-enhancing interest-only strips that are not 
eligible for inclusion in core capital pursuant to Sec. 325.5(f), minus 
deferred tax assets in excess of the limit set forth in Sec. 325.5(g), 
minus assets classified loss and any other assets that are deducted in 
determining Tier 1 capital, and minus the amount of the total adjusted 
carrying value of nonfinancial equity investments that is subject to a 
deduction from Tier 1 capital as set forth in section II.B.(6) of 
appendix A to this part. For banking institutions, the average of total 
assets is found in the Call Report schedule of quarterly averages. For 
savings associations, the consolidated total assets figure is found in 
Schedule CSC of the Thrift Financial Report.
    (y) Total risk-based capital ratio means the ratio of qualifying 
total capital to

[[Page 187]]

risk-weighted assets, as calculated in accordance with the FDIC's 
Statement of Policy on Risk-Based Capital (appendix A to part 325).
    (z) Written agreement means an agreement in writing executed by 
authorized representatives entered into with the FDIC by an insured 
depository institution which is enforceable by an action under section 
8(a) and/or section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 
1818 (a), (b)).

[56 FR 10160, Mar. 11, 1991, as amended at 57 FR 44899, Sept. 29, 1992; 
58 FR 6368, 6369, Jan. 28, 1993; 58 FR 8219, Feb. 12, 1993; 58 FR 60103, 
Nov. 15, 1993; 59 FR 66666, Dec. 28, 1994; 60 FR 8187, Feb. 13, 1995; 60 
FR 39232, Aug. 1, 1995; 63 FR 42677, Aug. 10, 1998; 66 FR 59652; Nov. 
29, 2001; 67 FR 3804, Jan. 25, 2002]



Sec. 325.3  Minimum leverage capital requirement.

    (a) General. Banks must maintain at least the minimum leverage 
capital requirement set forth in this section. The capital standards in 
this part are the minimum acceptable for banks whose overall financial 
condition is fundamentally sound, which are well-managed and which have 
no material or significant financial weaknesses. Thus, the FDIC is not 
precluded from requiring an institution to maintain a higher capital 
level based on the institution's particular risk profile. Where the FDIC 
determines that the financial history or condition, managerial resources 
and/or the future earnings prospects of a bank are not adequate, or 
where a bank has sizable off-balance sheet or funding risks, significant 
risks from concentrations of credit or nontraditional activities, 
excessive interest rate risk exposure, or a significant volume of assets 
classified substandard, doubtful or loss or otherwise criticized, the 
FDIC will take these other factors into account in analyzing the bank's 
capital adequacy and may determine that the minimum amount of capital 
for that bank is greater than the minimum standards stated in this 
section. These same criteria will apply to any insured depository 
institution making an application to the FDIC that requires the FDIC to 
consider the adequacy of the institution's capital structure.
    (b) Minimum leverage capital requirement. (1) The minimum leverage 
capital requirement for a bank (or an insured depository institution 
making application to the FDIC) shall consist of a ratio of Tier 1 
capital to total assets of not less than 3 percent if the FDIC 
determines that the institution is not anticipating or experiencing 
significant growth and has well-diversified risk, including no undue 
interest rate risk exposure, excellent asset quality, high liquidity, 
good earnings and in general is considered a strong banking 
organization, rated composite 1 under the Uniform Financial Institutions 
Rating System (the CAMELS rating system) established by the Federal 
Financial Institutions Examination Council.
    (2) For all but the most highly-rated institutions meeting the 
conditions set forth in paragraph (b)(1) of this section, the minimum 
leverage capital requirement for a bank (or for an insured depository 
institution making an application to the FDIC) shall consist of a ratio 
of Tier 1 capital to total assets of not less than 4 percent.
    (c) Insured depository institutions with less than the minimum 
leverage capital requirement. (1) A bank (or an insured depository 
institution making an application to the FDIC) operating with less than 
the minimum leverage capital requirement does not have adequate capital 
and therefore has inadequate financial resources.
    (2) Any insured depository institution operating with an inadequate 
capital structure, and therefore inadequate financial resources, will 
not receive approval for an application requiring the FDIC to consider 
the adequacy of its capital structure or its financial resources.
    (3) As required under Sec. 325.104(a)(1) of this part, a bank must 
file a written capital restoration plan with the appropriate FDIC 
regional director within 45 days of the date that the bank receives 
notice or is deemed to have notice that the bank is undercapitalized, 
significantly undercapitalized or critically undercapitalized, unless 
the FDIC notifies the bank in writing that the plan is to be filed 
within a different period.
    (4) In any merger, acquisition or other type of business combination 
where the FDIC must give its approval, where it is required to consider 
the

[[Page 188]]

adequacy of the financial resources of the existing and proposed 
institutions, and where the resulting entity is either insured by the 
FDIC or not otherwise federally insured, approval will not be granted 
when the resulting entity does not meet the minimum leverage capital 
requirement.
    (d) Exceptions. Notwithstanding the provisions of paragraphs (a), 
(b) and (c) of this section:
    (1) The FDIC, in its discretion, may approve an application pursuant 
to the Federal Deposit Insurance Act where it is required to consider 
the adequacy of capital if it finds that such approval must be taken to 
prevent the closing of a depository institution or to facilitate the 
acquisition of a closed depository institution, or, when severe 
financial conditions exist which threaten the stability of an insured 
depository institution or of a significant number of depository 
institutions insured by the FDIC or of insured depository institutions 
possessing significant financial resources, such action is taken to 
lessen the risk to the FDIC posed by an insured depository institution 
under such threat of instability.
    (2) The FDIC, in its discretion, may approve an application pursuant 
to the Federal Deposit Insurance Act where it is required to consider 
the adequacy of capital or the financial resources of the insured 
depository institution where it finds that the applicant has committed 
to and is in compliance with a reasonable plan to meet its minimum 
leverage capital requirements within a reasonable period of time.

(Approved by the Office of Management and Budget under control number 
3064-0075 for use through December 31, 1993)

[56 FR 10162, Mar. 11, 1991, as amended at 58 FR 8219, Feb. 12, 1993; 59 
FR 64564, Dec. 15, 1994; 60 FR 45609, Aug. 31, 1995; 62 FR 55493, Oct. 
24, 1997; 64 FR 10200, Mar. 2, 1999; 66 FR 59652, Nov. 29, 2001]



Sec. 325.4  Inadequate capital as an unsafe or unsound practice or condition.

    (a) General. As a condition of federal deposit insurance, all 
insured depository institutions must remain in a safe and sound 
condition.
    (b) Unsafe or unsound practice. Any bank which has less than its 
minimum leverage capital requirement is deemed to be engaged in an 
unsafe or unsound practice pursuant to section 8(b)(1) and/or 8(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(1) and/or 1818(c)). 
Except that such a bank which has entered into and is in compliance with 
a written agreement with the FDIC or has submitted to the FDIC and is in 
compliance with a plan approved by the FDIC to increase its Tier 1 
leverage capital ratio to such level as the FDIC deems appropriate and 
to take such other action as may be necessary for the bank to be 
operated so as not to be engaged in such an unsafe or unsound practice 
will not be deemed to be engaged in an unsafe or unsound practice 
pursuant to section 8(b)(1) and/or 8(c) of the Federal Deposit Insurance 
Act (12 U.S.C. 1818(b)(1) and/or 1818(c)) on account of its capital 
ratios. The FDIC is not precluded from taking section 8(b)(1), section 
8(c) or any other enforcement action against a bank with capital above 
the minimum requirement if the specific circumstances deem such action 
to be appropriate. Under the conditions set forth in section 8(t) of the 
Federal Deposit Insurance Act (12 U.S.C. 1818(t)), the FDIC also may 
take section 8(b)(1) and/or 8(c) enforcement action against any savings 
association that is deemed to be engaged in an unsafe or unsound 
practice on account of its inadequate capital structure.
    (c) Unsafe or unsound condition. Any insured depository institution 
with a ratio of Tier 1 capital to total assets that is less than two 
percent is deemed to be operating in an unsafe or unsound condition 
pursuant to section 8(a) of the Federal Deposit Insurance Act (12 U.S.C. 
1818(a)).
    (1) A bank with a ratio of Tier 1 capital to total assets of less 
than two percent which has entered into and is in compliance with a 
written agreement with the FDIC (or any other insured depository 
institution with a ratio of Tier 1 capital to total assets of less than 
two percent which has entered into and is in compliance with a written 
agreement with its primary federal regulator and to which agreement the 
FDIC is a party) to increase its Tier 1 leverage capital ratio to such 
level as the FDIC deems appropriate and to

[[Page 189]]

take such other action as may be necessary for the insured depository 
institution to be operated in a safe and sound manner, will not be 
subject to a proceeding by the FDIC pursuant to 12 U.S.C. 1818(a) on 
account of its capital ratios.
    (2) An insured depository institution with a ratio of Tier 1 capital 
to total assets that is equal to or greater than two percent may be 
operating in an unsafe or unsound condition. The FDIC is not precluded 
from bringing an action pursuant to 12 U.S.C. 1818(a) where an insured 
depository institution has a ratio of Tier 1 capital to total assets 
that is equal to or greater than two percent.

[56 FR 10162, Mar. 11, 1991]



Sec. 325.5  Miscellaneous.

    (a) Intangible assets. Any intangible assets that were explicitly 
approved by the FDIC as part of the bank's regulatory capital on a 
specific case basis will be included in capital under the terms and 
conditions that were approved by the FDIC, provided that the intangible 
asset is being amortized over a period not to exceed 15 years or its 
estimated useful life, whichever is shorter. However, pursuant to 
section 18(n) of the Federal Deposit Insurance Act (12 U.S.C. 1828(n)), 
an unidentifiable intangible asset such as goodwill, if acquired after 
April 12, 1989, cannot be included in calculating regulatory capital 
under this part.
    (b) Reservation of authority. Notwithstanding the definition of Tier 
1 capital in Sec. 325.2(t) of this subpart and the risk-based capital 
definitions of Tier 1 and Tier 2 capital in appendix A to this subpart, 
the Director of the Division of Supervision and Consumer Protection 
(DSC) may, if the Director finds a newly developed or modified capital 
instrument or a particular balance sheet entry or account to be the 
functional equivalent of a component of Tier 1 or Tier 2 capital, permit 
one or more insured depository institutions to include all or a portion 
of such instrument, entry, or account as Tier 1 or Tier 2 capital, 
permanently, or on a temporary basis, for purposes of this part. 
Similarly, the Director of the Division of Supervision and Consumer 
Protection (DSC) may, if the Director finds that a particular Tier 1 or 
Tier 2 capital component or balance sheet entry or account has 
characteristics or terms that diminish its contribution to an insured 
depository institution's ability to absorb losses, require the deduction 
of all or a portion of such component, entry, or account from Tier 1 or 
Tier 2 capital.
    (c) Securities subsidiary. For purposes of this part, any securities 
subsidiary subject to 12 CFR 337.4 shall not be consolidated with its 
bank parent and any investment therein shall be deducted from the bank 
parent's Tier 1 capital and total assets.
    (d) Depository institution subsidiary. Any domestic depository 
institution subsidiary that is not consolidated in the ``Reports of 
Condition and Income'' (Call Report) of its insured parent bank shall be 
consolidated with the insured parent bank for purposes of this part. The 
financial statements of the subsidiary that are to be used for this 
consolidation must be prepared in the same manner as the ``Reports of 
Condition and Income'' (Call Report). A domestic depository institution 
subsidiary of a savings association shall be consolidated for purposes 
of this part if such consolidation also is required pursuant to the 
capital requirements of the association's primary federal regulator.
    (e) Restrictions relating to capital components. To qualify as Tier 
1 capital under this part or Tier 1 or Tier 2 capital under appendix A 
to this part, a capital instrument must not contain or be subject to any 
conditions, covenants, terms, restrictions, or provisions that are 
inconsistent with safe and sound banking practices. A condition, 
covenant, term, restriction, or provision is inconsistent with safe and 
sound banking practices if it:
    (1) Unduly interferes with the ability of the issuer to conduct 
normal banking operations;
    (2) Results in significantly higher dividends or interest payments 
in the event of deterioration in the financial condition of the issuer;
    (3) Impairs the ability of the issuer to comply with statutory or 
regulatory requirements regarding the disposition of assets or 
incurrence of additional debt; or

[[Page 190]]

    (4) Limits the ability of the FDIC or a similar regulatory authority 
to take any necessary action to resolve a problem bank or failing bank 
situation.

Other conditions and covenants that are not expressly listed in 
paragraphs (e)(1) through (e)(4) of this section also may be 
inconsistent with safe and sound banking practices.
    (f) Treatment of mortgage servicing assets, purchased credit card 
relationships, nonmortgage servicing assets, and credit-enhancing 
interest-only strips. For purposes of determining Tier 1 capital under 
this part, mortgage servicing assets, purchased credit card 
relationships, nonmortgage servicing assets, and credit-enhancing 
interest-only strips will be deducted from assets and from common 
stockholders' equity to the extent that these items do not meet the 
conditions, limitations, and restrictions described in this section. 
Banks may elect to deduct disallowed servicing assets and disallowed 
credit-enhancing interest-only strips on a basis that is net of a 
proportional amount of any associated deferred tax liability recorded on 
the balance sheet. Any deferred tax liability netted in this manner 
cannot also be netted against deferred tax assets when determining the 
amount of deferred tax assets that are dependent upon future taxable 
income and calculating the maximum allowable amount of these assets 
under paragraph (g) of this section.
    (1) Valuation. The fair value of mortgage servicing assets, 
purchased credit card relationships, nonmortgage servicing assets, and 
credit-enhancing interest-only strips shall be estimated at least 
quarterly. The quarterly fair value estimate shall include adjustments 
for any significant changes in the original valuation assumptions, 
including changes in prepayment estimates or attrition rates. The FDIC 
in its discretion may require independent fair value estimates on a 
case-by-case basis where it is deemed appropriate for safety and 
soundness purposes.
    (2) Fair value limitation. For purposes of calculating Tier 1 
capital under this part (but not for financial statement purposes), the 
balance sheet assets for mortgage servicing assets, purchased credit 
card relationships, and nonmortgage servicing assets will each be 
reduced to an amount equal to the lesser of:
    (i) 90 percent of the fair value of these assets, determined in 
accordance with paragraph (f)(1) of this section; or
    (ii) 100 percent of the remaining unamortized book value of these 
assets (net of any related valuation allowances), determined in 
accordance with the instructions for the preparation of the ``Reports of 
Income and Condition'' (Call Reports).
    (3) Tier 1 capital limitations. (i) The maximum allowable amount of 
mortgage servicing assets, purchased credit card relationships, and 
nonmortgage servicing assets in the aggregate will be limited to the 
lesser of:
    (A) 100 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed purchased credit card relationships, any disallowed 
nonmortgage servicing assets, any disallowed credit-enhancing interest-
only strips, any disallowed deferred tax assets, and any nonfinancial 
equity investments; or
    (B) The sum of the amounts of mortgage servicing assets, purchased 
credit card relationships, and nonmortgage servicing assets, determined 
in accordance with paragraph (f)(2) of this section.
    (ii) The maximum allowable amount of credit-enhancing interest-only 
strips, whether purchased or retained, will be limited to the lesser of:
    (A) 25 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed purchased credit card relationships, any disallowed 
nonmortgage servicing assets, any disallowed credit-enhancing interest-
only strips, any disallowed deferred tax assets, and any nonfinancial 
equity investments; or
    (B) The sum of the face amounts of all credit-enhancing interest-
only strips.
    (4) Tier 1 capital sublimit. In addition to the aggregate limitation 
on mortgage servicing assets, purchased credit card relationships, and 
nonmortgage servicing assets set forth in paragraph (f)(3) of this 
section, a sublimit will

[[Page 191]]

apply to purchased credit card relationships and nonmortgage servicing 
assets. The maximum allowable amount of the aggregate of purchased 
credit card relationships and nonmortgage servicing assets will be 
limited to the lesser of:
    (i) 25 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed purchased credit card relationships, any disallowed 
nonmortgage servicing assets, any disallowed credit-enhancing interest-
only strips, any disallowed deferred tax assets, and any nonfinancial 
equity investments; or
    (ii) The sum of the amounts of purchased credit card relationships 
and nonmortgage servicing assets determined in accordance with paragraph 
(f)(2) of this section.
    (g) Treatment of deferred tax assets. For purposes of calculating 
Tier 1 capital under this part (but not for financial statement 
purposes), deferred tax assets are subject to the conditions, 
limitations, and restrictions described in this section.
    (1) Deferred tax assets that are dependent upon future taxable 
income. These assets are:
    (i) Deferred tax assets arising from deductible temporary 
differences that exceed the amount of taxes previously paid that could 
be recovered through loss carrybacks if existing temporary differences 
(both deductible and taxable and regardless of where the related 
deferred tax effects are reported on the balance sheet) fully reverse at 
the calendar quarter-end date; and
    (ii) Deferred tax assets arising from operating loss and tax credit 
carryforwards.
    (2) Tier 1 capital limitations. (i) The maximum allowable amount of 
deferred tax assets that are dependent upon future taxable income, net 
of any valuation allowance for deferred tax assets, will be limited to 
the lesser of:
    (A) The amount of deferred tax assets that are dependent upon future 
taxable income that is expected to be realized within one year of the 
calendar quarter-end date, based on projected future taxable income for 
that year; or
    (B) 10 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed nonmortgage servicing assets, any disallowed purchased credit 
card relationships, any disallowed credit-enhancing interest-only 
strips, any disallowed deferred tax assets, and any nonfinancial equity 
investments.
    (ii) For purposes of this limitation, all existing temporary 
differences should be assumed to fully reverse at the calendar quarter-
end date. The recorded amount of deferred tax assets that are dependent 
upon future taxable income, net of any valuation allowance for deferred 
tax assets, in excess of this limitation will be deducted from assets 
and from equity capital for purposes of determining Tier 1 capital under 
this part. The amount of deferred tax assets that can be realized from 
taxes paid in prior carryback years and from the reversal of existing 
taxable temporary differences generally would not be deducted from 
assets and from equity capital. However, notwithstanding the first three 
sentences in this paragraph, the amount of carryback potential that may 
be considered in calculating the amount of deferred tax assets that a 
member of a consolidated group (for tax purposes) may include in Tier 1 
capital may not exceed the amount which the member could reasonably 
expect to have refunded by its parent.
    (3) Projected future taxable income. Projected future taxable income 
should not include net operating loss carryforwards to be used within 
one year of the most recent calendar quarter-end date or the amount of 
existing temporary differences expected to reverse within that year. 
Projected future taxable income should include the estimated effect of 
tax planning strategies that are expected to be implemented to realize 
tax carryforwards that will otherwise expire during that year. Future 
taxable income projections for the current fiscal year (adjusted for any 
significant changes that have occurred or are expected to occur) may be 
used when applying the capital limit at an interim calendar quarter-end 
date rather then preparing a new projection each quarter.
    (4) Unrealized holding gains and losses on available-for-sale debt 
securities. The deferred tax effects of any unrealized

[[Page 192]]

holding gains and losses on available-for-sale debt securities may be 
excluded from the determination of the amount of deferred tax assets 
that are dependent upon future taxable income and the calculation of the 
maximum allowable amount of such assets. If these deferred tax effects 
are excluded, this treatment must be followed consistently over time.
    (5) Intangible assets acquired in nontaxable purchase business 
combinations. A deferred tax liability that is specifically related to 
an intangible asset (other than mortgage servicing assets, nonmortgage 
servicing assets, and purchased credit card relationships) acquired in a 
nontaxable purchase business combination may be netted against this 
intangible asset. Only the net amount of the intangible asset must be 
deducted from Tier 1 capital. When a deferred tax liability is netted in 
this manner, the taxable temporary difference that gives rise to this 
deferred tax liability must be excluded from existing taxable temporary 
differences when determining the amount of deferred tax assets that are 
dependent upon future taxable income and calculating the maximum 
allowable amount of such assets.

[56 FR 10163, Mar. 11, 1991, as amended at 57 FR 7647, Mar. 4, 1992; 58 
FR 6369, Jan. 28, 1993; 58 FR 8219, Feb. 12, 1993; 60 FR 8187, Feb. 13, 
1995; 60 FR 39232, Aug. 1, 1995; 63 FR 42677, Aug. 10, 1998; 66 FR 
59652, Nov. 29, 2001; 65 FR 3804, Jan. 25, 2002]



Sec. 325.6  Issuance of directives.

    (a) General. A directive is a final order issued to a bank that 
fails to maintain capital at or above the minimum leverage capital 
requirement as set forth in Sec. Sec. 325.3 and 325.4. A directive 
issued pursuant to this section, including a plan submitted under a 
directive, is enforceable in the same manner and to the same extent as a 
final cease-and-desist order issued under 12 U.S.C. 1818(b).
    (b) Issuance of directives. If a bank is operating with less than 
the minimum leverage capital requirement established by this regulation, 
the Board of Directors, or its designee(s), may issue and serve upon any 
insured state nonmember bank a directive requiring the bank to restore 
its capital to the minimum leverage capital requirement within a 
specified time period. The directive may require the bank to submit to 
the appropriate FDIC regional director, or other specified official, for 
review and approval, a plan describing the means and timing by which the 
bank shall achieve the minimum leverage capital requirement. After the 
FDIC has approved the plan, the bank may be required under the terms of 
the directive to adhere to and monitor compliance with the plan. The 
directive may be issued during the course of an examination of the bank, 
or at any other time that the FDIC deems appropriate, if the bank is 
found to be operating with less than the minimum leverage capital 
requirement.
    (c) Notice and opportunity to respond to issuance of a directive. 
(1) If the FDIC makes an initial determination that a directive should 
be issued to a bank pursuant to paragraph (b) of this section, the FDIC, 
through the appropriate designated official(s), shall serve written 
notification upon the bank of its intent to issue a directive. The 
notice shall include the current Tier 1 leverage capital ratio, the 
basis upon which said ratio was calculated, the proposed capital 
injection, the proposed date for achieving the minimum leverage capital 
requirement and any other relevant information concerning the decision 
to issue a directive. When deemed appropriate, specific requirements of 
a proposed plan for meeting the minimum leverage capital requirement may 
be included in the notice.
    (2) Within 14 days of receipt of notification, the bank may file 
with the appropriate designated FDIC official(s) a written response, 
explaining why the directive should not be issued, seeking modification 
of its terms, or other appropriate relief. The bank's response shall 
include any information, mitigating circumstances, documentation or 
other relevant evidence which supports its position, and may include a 
plan for attaining the minimum leverage capital requirement.
    (3) After considering the bank's response, the appropriate 
designated FDIC official(s) shall serve upon the bank a written 
determination addressing the bank's response and setting

[[Page 193]]

forth the FDIC's findings and conclusions in support of any decision to 
issue or not to issue a directive. The directive may be issued as 
originally proposed or in modified form. The directive may order the 
bank to:
    (i) Achieve the minimum leverage capital requirement established by 
this regulation by a certain date;
    (ii) Submit for approval and adhere to a plan for achieving the 
minimum leverage capital requirement;
    (iii) Take other action as is necessary to achieve the minimum 
leverage capital requirement; or
    (iv) A combination of the above actions.

If a directive is to be issued, it may be served upon the bank along 
with the final determination.
    (4) Any bank, upon a change in circumstances, may request the FDIC 
to reconsider the terms of a directive and may propose changes in the 
plan under which it is operating to meet the minimum leverage capital 
requirement. The directive and plan continue in effect while such 
request is pending before the FDIC.
    (5) All papers filed with the FDIC must be postmarked or received by 
the appropriate designated FDIC official(s) within the prescribed time 
limit for filing.
    (6) Failure by the bank to file a written response to notification 
of intent to issue a directive within the specified time period shall 
constitute consent to the issuance of such directive.
    (d) Enforcement of a directive. (1) Whenever a bank fails to follow 
the directive or to submit or adhere to its capital adequacy plan, the 
FDIC may seek enforcement of the directive in the appropriate United 
States district court, pursuant to 12 U.S.C. 3907(b)(2)(B)(ii), in the 
same manner and to the same extent as if the directive were a final 
cease-and-desist order. In addition to enforcement of the directive, the 
FDIC may seek assessment of civil money penalties for violation of the 
directive against any bank, any officer, director, employee, agent, or 
other person participating in the conduct of the affairs of the bank, 
pursuant to 12 U.S.C. 3909(d).
    (2) The directive may be issued separately, in conjunction with, or 
in addition to, any other enforcement mechanisms available to the FDIC, 
including cease-and-desist orders, orders of correction, the approval or 
denial of applications, or any other actions authorized by law. In 
addition to addressing a bank's minimum leverage capital requirement, 
the capital directive may also address minimum risk-based capital 
requirements that are to be maintained and calculated in accordance with 
appendix A to this part.

[56 FR 10164, Mar. 11, 1991]



                   Subpart B_Prompt Corrective Action

    Source: 57 FR 44900, Sept. 29, 1992, unless otherwise noted.



Sec. 325.101  Authority, purpose, scope, other supervisory authority, 
and disclosure of capital categories.

    (a) Authority. This subpart is issued by the FDIC pursuant to 
section 38 (section 38) of the Federal Deposit Insurance Act (FDI Act), 
as added by section 131 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (Pub. L. 102-242, 105 Stat. 2236 (1991)) (12 
U.S.C. 1831o).
    (b) Purpose. Section 38 of the FDI Act establishes a framework of 
supervisory actions for insured depository institutions that are not 
adequately capitalized. The principal purpose of this subpart is to 
define, for FDIC-insured state-chartered nonmember banks, the capital 
measures and capital levels, and for insured branches of foreign banks, 
comparable asset-based measures and levels, that are used for 
determining the supervisory actions authorized under section 38 of the 
FDI Act. This subpart also establishes procedures for submission and 
review of capital restoration plans and for issuance and review of 
directives and orders pursuant to section 38.
    (c) Scope. This subpart implements the provisions of section 38 of 
the FDI Act as they apply to FDIC-insured state-chartered nonmember 
banks and insured branches of foreign banks for which the FDIC is the 
appropriate Federal banking agency. Certain of these

[[Page 194]]

provisions also apply to officers, directors and employees of those 
insured institutions. In addition, certain provisions of this subpart 
apply to all insured depository institutions that are deemed critically 
undercapitalized.
    (d) Other supervisory authority. Neither section 38 nor this subpart 
in any way limits the authority of the FDIC under any other provision of 
law to take supervisory actions to address unsafe or unsound practices, 
deficient capital levels, violations of law, unsafe or unsound 
conditions, or other practices. Action under section 38 of the FDI Act 
and this subpart may be taken independently of, in conjunction with, or 
in addition to any other enforcement action available to the FDIC, 
including issuance of cease and desist orders, capital directives, 
approval or denial of applications or notices, assessment of civil money 
penalties, or any other actions authorized by law.
    (e) Disclosure of capital categories. The assignment of a bank or 
insured branch under this subpart within a particular capital category 
is for purposes of implementing and applying the provisions of section 
38. Unless permitted by the FDIC or otherwise required by law, no bank 
may state in any advertisement or promotional material its capital 
category under this subpart or that the FDIC or any other federal 
banking agency has assigned the bank to a particular capital category.



Sec. 325.102  Notice of capital category.

    (a) Effective date of determination of capital category. A bank 
shall be deemed to be within a given capital category for purposes of 
section 38 of the FDI Act and this subpart as of the date the bank is 
notified of, or is deemed to have notice of, its capital category, 
pursuant to paragraph (b) of this section.
    (b) Notice of capital category. A bank shall be deemed to have been 
notified of its capital levels and its capital category as of the most 
recent date:
    (1) A Consolidated Report of Condition and Income (Call Report) is 
required to be filed with the FDIC;
    (2) A final report of examination is delivered to the bank; or
    (3) Written notice is provided by the FDIC to the bank of its 
capital category for purposes of section 38 of the FDI Act and this 
subpart or that the bank's capital category has changed as provided in 
Sec. 325.103(d).
    (c) Adjustments to reported capital levels and capital category--(1) 
Notice of adjustment by bank. A bank shall provide the appropriate FDIC 
regional director with written notice that an adjustment to the bank's 
capital category may have occurred no later than 15 calendar days 
following the date that any material event has occurred that would cause 
the bank to be placed in a lower capital category from the category 
assigned to the bank for purposes of section 38 and this subpart on the 
basis of the bank's most recent Call Report or report of examination.
    (2) Determination by the FDIC to change capital category. After 
receiving notice pursuant to paragraph (c)(1) of this section, the FDIC 
shall determine whether to change the capital category of the bank and 
shall notify the bank of the FDIC's determination.



Sec. 325.103  Capital measures and capital category definitions.

    (a) Capital measures. For purposes of section 38 and this subpart, 
the relevant capital measures shall be:
    (1) The total risk-based capital ratio;
    (2) The Tier 1 risk-based capital ratio; and
    (3) The leverage ratio.
    (b) Capital categories. For purposes of section 38 and this subpart, 
a bank shall be deemed to be:
    (1) Well capitalized if the bank:
    (i) Has a total risk-based capital ratio of 10.0 percent or greater; 
and
    (ii) Has a Tier 1 risk-based capital ratio of 6.0 percent or 
greater; and
    (iii) Has a leverage ratio of 5.0 percent or greater; and
    (iv) Is not subject to any written agreement, order, capital 
directive, or prompt corrective action directive issued by the FDIC 
pursuant to section 8 of the FDI Act (12 U.S.C. 1818), the International 
Lending Supervision Act of 1983 (12 U.S.C. 3907), or section 38 of the 
FDI Act (12 U.S.C. 1831o), or any regulation thereunder, to meet and 
maintain a specific capital level for any capital measure.
    (2) Adequately capitalized if the bank:

[[Page 195]]

    (i) Has a total risk-based capital ratio of 8.0 percent or greater; 
and
    (ii) Has a Tier 1 risk-based capital ratio of 4.0 percent or 
greater; and
    (iii) Has:
    (A) A leverage ratio of 4.0 percent or greater; or
    (B) A leverage ratio of 3.0 percent or greater if the bank is rated 
composite 1 under the CAMELS rating system in the most recent 
examination of the bank and is not experiencing or anticipating 
significant growth; and
    (iv) Does not meet the definition of a well capitalized bank.
    (3) Undercapitalized if the bank:
    (i) Has a total risk-based capital ratio that is less than 8.0 
percent; or
    (ii) Has a Tier 1 risk-based capital ratio that is less than 4.0 
percent; or
    (iii)(A) Except as provided in paragraph (b)(3)(iii)(B) of this 
section, has a leverage ratio that is less than 4.0 percent; or
    (B) Has a leverage ratio that is less than 3.0 percent if the bank 
is rated composite 1 under the CAMELS rating system in the most recent 
examination of the bank and is not experiencing or anticipating 
significant growth.
    (4) Significantly undercapitalized if the bank has:
    (i) A total risk-based capital ratio that is less than 6.0 percent; 
or
    (ii) A Tier 1 risk-based capital ratio that is less than 3.0 
percent; or
    (iii) A leverage ratio that is less than 3.0 percent.
    (5) Critically undercapitalized if the insured depository 
institution has a ratio of tangible equity to total assets that is equal 
to or less than 2.0 percent.
    (c) Capital categories for insured branches of foreign banks. For 
purposes of the provisions of section 38 and this subpart, an insured 
branch of a foreign bank shall be deemed to be:
    (1) Well capitalized if the insured branch:
    (i) Maintains the pledge of assets required under Sec. 347.210 of 
this chapter; and
    (ii) Maintains the eligible assets prescribed under Sec. 347.211 of 
this chapter at 108 percent or more of the preceding quarter's average 
book value of the insured branch's third-party liabilities; and
    (iii) Has not received written notification from:
    (A) The OCC to increase its capital equivalency deposit pursuant to 
12 CFR 28.15(b), or to comply with asset maintenance requirements 
pursuant to 12 CFR 28.20; or
    (B) The FDIC to pledge additional assets pursuant to Sec. 347.210 
of this chapter or to maintain a higher ratio of eligible assets 
pursuant to Sec. 347.211 of this chapter.
    (2) Adequately capitalized if the insured branch:
    (i) Maintains the pledge of assets required under Sec. 347.210 of 
this chapter; and
    (ii) Maintains the eligible assets prescribed under Sec. 347.211 of 
this chapter at 106 percent or more of the preceding quarter's average 
book value of the insured branch's third-party liabilities; and
    (iii) Does not meet the definition of a well capitalized insured 
branch.
    (3) Undercapitalized if the insured branch:
    (i) Fails to maintain the pledge of assets required under Sec. 
347.210 of this chapter; or
    (ii) Fails to maintain the eligible assets prescribed under Sec. 
347.211 of this chapter at 106 percent or more of the preceding 
quarter's average book value of the insured branch's third-party 
liabilities.
    (4) Significantly undercapitalized if it fails to maintain the 
eligible assets prescribed under Sec. 347.211 of this chapter at 104 
percent or more of the preceding quarter's average book value of the 
insured branch's third-party liabilities.
    (5) Critically undercapitalized if it fails to maintain the eligible 
assets prescribed under Sec. 347.211 of this chapter at 102 percent or 
more of the preceding quarter's average book value of the insured 
branch's third-party liabilities.
    (d) Reclassifications based on supervisory criteria other than 
capital. The FDIC may reclassify a well capitalized bank as adequately 
capitalized and may require an adequately capitalized bank or an 
undercapitalized bank to comply with certain mandatory or discretionary 
supervisory actions as if the bank were in the next lower capital 
category (except that the FDIC may

[[Page 196]]

not reclassify a significantly undercapitalized bank as critically 
undercapitalized) (each of these actions are hereinafter referred to 
generally as ``reclassifications'') in the following circumstances:
    (1) Unsafe or unsound condition. The FDIC has determined, after 
notice and opportunity for hearing pursuant to Sec. 308.202(a) of this 
chapter, that the bank is in unsafe or unsound condition; or
    (2) Unsafe or unsound practice. The FDIC has determined, after 
notice and opportunity for hearing pursuant to Sec. 308.202(a) of this 
chapter, that, in the most recent examination of the bank, the bank 
received and has not corrected a less-than-satisfactory rating for any 
of the categories of asset quality, management, earnings, or liquidity.

[57 FR 44900, Sept. 29, 1992, as amended at 63 FR 17074, Apr. 8, 1998; 
66 FR 59653, Nov. 29, 2001]



Sec. 325.104  Capital restoration plans.

    (a) Schedule for filing plan--(1) In general. A bank shall file a 
written capital restoration plan with the appropriate FDIC regional 
director within 45 days of the date that the bank receives notice or is 
deemed to have notice that the bank is undercapitalized, significantly 
undercapitalized, or critically undercapitalized, unless the FDIC 
notifies the bank in writing that the plan is to be filed within a 
different period. An adequately capitalized bank that has been required 
pursuant to Sec. 325.103(d) of this subpart to comply with supervisory 
actions as if the bank were undercapitalized is not required to submit a 
capital restoration plan solely by virtue of the reclassification.
    (2) Additional capital restoration plans. Notwithstanding paragraph 
(a)(1) of this section, a bank that has already submitted and is 
operating under a capital restoration plan approved under section 38 and 
this subpart is not required to submit an additional capital restoration 
plan based on a revised calculation of its capital measures or a 
reclassification of the institution under Sec. 325.103 unless the FDIC 
notifies the bank that it must submit a new or revised capital plan. A 
bank that is notified that it must submit a new or revised capital 
restoration plan shall file the plan in writing with the appropriate 
FDIC regional director within 45 days of receiving such notice, unless 
the FDIC notifies the bank in writing that the plan must be filed within 
a different period.
    (b) Contents of plan. All financial data submitted in connection 
with a capital restoration plan shall be prepared in accordance with the 
instructions provided on the Call Report, unless the FDIC instructs 
otherwise. The capital restoration plan shall include all of the 
information required to be filed under section 38(e)(2) of the FDI Act. 
A bank that is required to submit a capital restoration plan as a result 
of a reclassification of the bank pursuant to Sec. 325.103(d) of this 
subpart shall include a description of the steps the bank will take to 
correct the unsafe or unsound condition or practice. No plan shall be 
accepted unless it includes any performance guarantee described in 
section 38(e)(2)(C) of the FDI Act by each company that controls the 
bank.
    (c) Review of capital restoration plans. Within 60 days after 
receiving a capital restoration plan under this subpart, the FDIC shall 
provide written notice to the bank of whether the plan has been 
approved. The FDIC may extend the time within which notice regarding 
approval of a plan shall be provided.
    (d) Disapproval of capital plan. If a capital restoration plan is 
not approved by the FDIC, the bank shall submit a revised capital 
restoration plan within the time specified by the FDIC. Upon receiving 
notice that its capital restoration plan has not been approved, any 
undercapitalized bank (as defined in Sec. 325.103(b) of this subpart) 
shall be subject to all of the provisions of section 38 and this subpart 
applicable to significantly undercapitalized institutions. These 
provisions shall be applicable until such time as a new or revised 
capital restoration plan submitted by the bank has been approved by the 
FDIC.
    (e) Failure to submit capital restoration plan. A bank that is 
undercapitalized (as defined in Sec. 325.103(b) of this subpart) and 
that fails to submit a written capital restoration plan within the 
period provided in this section shall, upon the expiration of that 
period, be

[[Page 197]]

subject to all of the provisions of section 38 and this subpart 
applicable to significantly undercapitalized institutions.
    (f) Failure to implement capital restoration plan. Any 
undercapitalized bank that fails in any material respect to implement a 
capital restoration plan shall be subject to all of the provisions of 
section 38 and this subpart applicable to significantly undercapitalized 
institutions.
    (g) Amendment of capital restoration plan. A bank that has filed an 
approved capital restoration plan may, after prior written notice to and 
approval by the FDIC, amend the plan to reflect a change in 
circumstance. Until such time as a proposed amendment has been approved, 
the bank shall implement the capital restoration plan as approved prior 
to the proposed amendment.
    (h) Performance guarantee by companies that control a bank--(1) 
Limitation on liability--(i) Amount limitation. The aggregate liability 
under the guarantee provided under section 38 and this subpart for all 
companies that control a specific bank that is required to submit a 
capital restoration plan under this subpart shall be limited to the 
lesser of:
    (A) An amount equal to 5.0 percent of the bank's total assets at the 
time the bank was notified or deemed to have notice that the bank was 
undercapitalized; or
    (B) The amount necessary to restore the relevant capital measures of 
the bank to the levels required for the bank to be classified as 
adequately capitalized, as those capital measures and levels are defined 
at the time that the bank initially fails to comply with a capital 
restoration plan under this subpart.
    (ii) Limit on duration. The guarantee and limit of liability under 
section 38 and this subpart shall expire after the FDIC notifies the 
bank that it has remained adequately capitalized for each of four 
consecutive calendar quarters. The expiration or fulfillment by a 
company of a guarantee of a capital restoration plan shall not limit the 
liability of the company under any guarantee required or provided in 
connection with any capital restoration plan filed by the same bank 
after expiration of the first guarantee.
    (iii) Collection on guarantee. Each company that controls a given 
bank shall be jointly and severally liable for the guarantee for such 
bank as required under section 38 and this subpart, and the FDIC may 
require and collect payment of the full amount of that guarantee from 
any or all of the companies issuing the guarantee.
    (2) Failure to provide guarantee. In the event that a bank that is 
controlled by any company submits a capital restoration plan that does 
not contain the guarantee required under section 38(e)(2) of the FDI 
Act, the bank shall, upon submission of the plan, be subject to the 
provisions of section 38 and this subpart that are applicable to banks 
that have not submitted an acceptable capital restoration plan.
    (3) Failure to perform guarantee. Failure by any company that 
controls a bank to perform fully its guarantee of any capital plan shall 
constitute a material failure to implement the plan for purposes of 
section 38(f) of the FDI Act. Upon such failure, the bank shall be 
subject to the provisions of section 38 and this subpart that are 
applicable to banks that have failed in a material respect to implement 
a capital restoration plan.



Sec. 325.105  Mandatory and discretionary supervisory actions under 
section 38.

    (a) Mandatory supervisory actions--(1) Provisions applicable to all 
banks. All banks are subject to the restrictions contained in section 
38(d) of the FDI Act on payment of capital distributions and management 
fees.
    (2) Provisions applicable to undercapitalized, significantly 
undercapitalized, and critically undercapitalized banks. Immediately 
upon receiving notice or being deemed to have notice, as provided in 
Sec. 325.102 of this subpart, that the bank is undercapitalized, 
significantly undercapitalized, or critically undercapitalized, the bank 
shall become subject to the provisions of section 38 of the FDI Act:
    (i) Restricting payment of capital distributions and management fees 
(section 38(d));

[[Page 198]]

    (ii) Requiring that the FDIC monitor the condition of the bank 
(section 38(e)(1));
    (iii) Requiring submission of a capital restoration plan within the 
schedule established in this subpart (section 38(e)(2));
    (iv) Restricting the growth of the bank's assets (section 38(e)(3)); 
and
    (v) Requiring prior approval of certain expansion proposals (section 
38(e)(4)).
    (3) Additional provisions applicable to significantly 
undercapitalized, and critically undercapitalized banks. In addition to 
the provisions of section 38 of the FDI Act described in paragraph 
(a)(2) of this section, immediately upon receiving notice or being 
deemed to have notice, as provided in Sec. 325.102 of this subpart, 
that the bank is significantly undercapitalized, or critically 
undercapitalized, or that the bank is subject to the provisions 
applicable to institutions that are significantly undercapitalized 
because the bank failed to submit or implement in any material respect 
an acceptable capital restoration plan, the bank shall become subject to 
the provisions of section 38 of the FDI Act that restrict compensation 
paid to senior executive officers of the institution (section 38(f)(4)).
    (4) Additional provisions applicable to critically undercapitalized 
institutions. (i) In addition to the provisions of section 38 of the FDI 
Act described in paragraphs (a)(2) and (a)(3) of this section, 
immediately upon receiving notice or being deemed to have notice, as 
provided in Sec. 325.102 of this subpart, that the insured depository 
institution is critically undercapitalized, the institution is 
prohibited from doing any of the following without the FDIC's prior 
written approval:
    (A) Entering into any material transaction other than in the usual 
course of business, including any investment, expansion, acquisition, 
sale of assets, or other similar action with respect to which the 
depository institution is required to provide notice to the appropriate 
Federal banking agency;
    (B) Extending credit for any highly leveraged transaction;
    (C) Amending the institution's charter or bylaws, except to the 
extent necessary to carry out any other requirement of any law, 
regulation, or order;
    (D) Making any material change in accounting methods;
    (E) Engaging in any covered transaction (as defined in section 
23A(b) of the Federal Reserve Act (12 U.S.C. 371c(b));
    (F) Paying excessive compensation or bonuses;
    (G) Paying interest on new or renewed liabilities at a rate that 
would increase the institution's weighted average cost of funds to a 
level significantly exceeding the prevailing rates of interest on 
insured deposits in the institution's normal market areas; and
    (H) Making any principal or interest payment on subordinated debt 
beginning 60 days after becoming critically undercapitalized except that 
this restriction shall not apply, until July 15, 1996, with respect to 
any subordinated debt outstanding on July 15, 1991, and not extended or 
otherwise renegotiated after July 15, 1991.
    (ii) In addition, the FDIC may further restrict the activities of 
any critically undercapitalized institution to carry out the purposes of 
section 38 of the FDI Act.
    (5) Exception for certain savings associations. The restrictions in 
paragraph (a)(4) of this section shall not apply, before July 1, 1994, 
to any insured savings association if:
    (i) The savings association had submitted a plan meeting the 
requirements of section 5(t)(6)(A)(ii) of the Home Owners' Loan Act (12 
U.S.C. 1464(t)(6)(A)(ii)) prior to December 19, 1991;
    (ii) The Director of OTS had accepted the plan prior to December 19, 
1991; and
    (iii) The savings association remains in compliance with the plan or 
is operating under a written agreement with the appropriate federal 
banking agency.
    (b) Discretionary supervisory actions. In taking any action under 
section 38 that is within the FDIC's discretion to take in connection 
with:
    (1) An insured depository institution that is deemed to be 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized, or has been reclassified as undercapitalized, or 
significantly undercapitalized; or

[[Page 199]]

    (2) An officer or director of such institution, the FDIC shall 
follow the procedures for issuing directives under Sec. Sec. 308.201 
and 308.203 of this chapter, unless otherwise provided in section 38 or 
this subpart.

    Appendix A to Part 325--Statement of Policy on Risk-Based Capital

    Capital adequacy is one of the critical factors that the FDIC is 
required to analyze when taking action on various types of applications 
and when conducting supervisory activities related to the safety and 
soundness of individual banks and the banking system. In view of this, 
the FDIC's Board of Directors has adopted part 325 of its regulations, 
which sets forth (1) minimum standards of capital adequacy for insured 
state nonmember banks and (2) standards for determining when an insured 
bank is in an unsafe or unsound condition by reason of the amount of its 
capital.
    This capital maintenance regulation was designed to establish, in 
conjunction with other Federal bank regulatory agencies, uniform capital 
standards for all federally-regulated banking organizations, regardless 
of size. The uniform capital standards were based on ratios of capital 
to total assets. While those leverage ratios have served as a useful 
tool for assessing capital adequacy, the FDIC believes there is a need 
for a capital measure that is more explicitly and systematically 
sensitive to the risk profiles of individual banks. As a result, the 
FDIC's Board of Directors has adopted this Statement of Policy on Risk-
Based Capital to supplement the part 325 regulation. This statement of 
policy does not replace or eliminate the existing part 325 capital-to-
total assets leverage ratios.
    The framework set forth in this statement of policy consists of (1) 
a definition of capital for risk-based capital purposes, and (2) a 
system for calculating risk-weighted assets by assigning assets and off 
balance sheet items to broad risk categories. A bank's risk-based 
capital ratio is calculated by dividing its qualifying total capital 
base (the numerator of the ratio) by its risk-weighted assets (the 
denominator).\1\ Table I outlines the definition of capital and provides 
a general explanation of how the risk-based capital ratio is calculated, 
Table II summarizes the risk weights and risk categories, and Table III 
sets forth the credit conversation factors for off-balance sheet items. 
Additional explanations of the capital definitions, the risk-weighted 
asset calculations, and the minimum risk-based capital ratio guidelines 
are provided in Sections I, II and III of this statement of policy.
---------------------------------------------------------------------------

    \1\ Period-end amounts, rather than average balances, normally will 
be used when calculating risk-based capital ratios. However, on a case-
by-case basis, ratios based on average balances may also be required if 
supervisory concerns render it appropriate.
---------------------------------------------------------------------------

    In addition, when certain banks that engage in trading activities 
calculate their risk-based capital ratio under this appendix A, they 
must also refer to appendix C of this part, which incorporates capital 
charges for certain market risks into the risk-based capital ratio. When 
calculating their risk-based capital ratio under this appendix A, such 
banks are required to refer to appendix C of this part for supplemental 
rules to determine qualifying and excess capital, calculate risk-
weighted assets, calculate market risk equivalent assets and add them to 
risk-weighted assets, and calculate risk-based capital ratios as 
adjusted for market risk.
    This statement of policy applies to all FDIC-insured state-chartered 
banks (excluding insured branches of foreign banks) that are not members 
of the Federal Reserve System, hereafter referred to as state nonmember 
banks, regardless of size, and to all circumstances in which the FDIC is 
required to evaluate the capital of a banking organization. Therefore, 
the risk-based capital framework set forth in this statement of policy 
will be used in the examination and supervisory process as well as in 
the analysis of applications that the FDIC is required to act upon.
    The risk-based capital ratio focuses principally on broad categories 
of credit risk, however, the ratio does not take account of many other 
factors that can affect a bank's financial condition. These factors 
include overall interest rate risk exposure, liquidity, funding and 
market risks; the quality and level of earnings; investment, loan 
portfolio, and other concentrations of credit risk, certain risks 
arising from nontraditional activities; the quality of loans and 
investments; the effectiveness of loan and investment policies; and 
management's overall ability to monitor and control financial and 
operating risks, including the risk presented by concentrations of 
credit and nontraditional activities. In addition to evaluating capital 
ratios, an overall assessment of capital adequacy must take account of 
each of these other factors, including, in particular, the level and 
severity of problem and adversely classified assets as well as a bank's 
interest rate risk as measured by the bank's exposure to declines in the 
economic value of its capital due to changes in interest rates. For this 
reason, the final supervisory judgment on a bank's capital adequacy may 
differ significantly from the conclusions that might be drawn solely 
from the absolute level of the bank's risk-based capital ratio.
    In light of these other considerations, banks generally are expected 
to operate above the minimum risk-based capital ratio.

[[Page 200]]

Banks contemplating significant expansion plans, as well as those 
institutions with high or inordinate levels of risk, should hold capital 
commensurate with the level and nature of the risks to which they are 
exposed.

        I. Definition of Capital for the Risk-Based Capital Ratio

    A bank's qualifying total capital base consists of two types of 
capital elements: core capital elements (Tier 1) and supplementary 
capital elements (Tier 2). To qualify as an element of Tier 1 or Tier 2 
capital, a capital instrument should not contain or be subject to any 
conditions, covenants, terms, restrictions, or provisions that are 
inconsistent with safe and sound banking practices.

          A. The Components of Qualifying Capital (see Table I)

    1. Core capital elements (Tier 1) consists of:
    i. Common stockholders' equity capital (includes common stock and 
related surplus, undivided profits, disclosed capital reserves that 
represent a segregation of undivided profits, and foreign currency 
translation adjustments, less net unrealized holding losses on 
available-for-sale equity securities with readily determinable fair 
values);
    ii. Noncumulative perpetual preferred stock,\2\ including any 
related surplus; and
---------------------------------------------------------------------------

    \2\ Preferred stock issues where the dividend is reset periodically 
based, in whole or in part, upon the bank's current credit standing, 
including but not limited to, auction rate, money market or remarketable 
preferred stock, are assigned to Tier 2 capital, regardless of whether 
the dividends are cumulative or noncumulative.
---------------------------------------------------------------------------

    iii. Minority interests in the equity capital accounts of 
consolidated subsidiaries.
    (a) At least 50 percent of the qualifying total capital base should 
consist of Tier 1 capital. Core (Tier 1) capital is defined as the sum 
of core capital elements minus all intangible assets (other than 
mortgage servicing assets, nonmortgage servicing assets and purchased 
credit card relationships eligible for inclusion in core capital 
pursuant to Sec. 325.5(f)),\3\ minus credit-enhancing interest-only 
strips that are not eligible for inclusion in core capital pursuant to 
Sec. 325.5(f)), minus any disallowed deferred tax assets, and minus any 
amount of nonfinancial equity investments required to be deducted 
pursuant to section II.B.(6) of this Appendix.
---------------------------------------------------------------------------

    \3\ An exception is allowed for intangible assets that are 
explicitly approved by the FDIC as part of the bank's regulatory capital 
on a specific case basis. These intangibles will be included in capital 
for risk-based capital purposes under the terms and conditions that are 
specifically approved by the FDIC.
---------------------------------------------------------------------------

    (b) Although nonvoting common stock, noncumulative perpetual 
preferred stock, and minority interests in the equity capital accounts 
of consolidated subsidiaries are normally included in Tier 1 capital, 
voting common stockholders' equity generally will be expected to be the 
dominant form of Tier 1 capital. Thus, banks should avoid undue reliance 
on nonvoting equity, preferred stock and minority interests.
    (c) Although minority interests in consolidated subsidiaries are 
generally included in regulatory capital, exceptions to this general 
rule will be made if the minority interests fail to provide meaningful 
capital support to the consolidated bank. Such a situation could arise 
if the minority interests are entitled to a preferred claim on 
essentially low risk assets of the subsidiary. Similarly, although 
credit-enhancing interest-only strips and intangible assets in the form 
of mortgage servicing assets, nonmortgage servicing assets and purchased 
credit card relationships are generally recognized for risk-based 
capital purposes, the deduction of part or all of the credit-enhancing 
interest-only strips, mortgage servicing assets, nonmortgage servicing 
assets and purchased credit card relationships may be required if the 
carrying amounts of these assets are excessive in relation to their 
market value or the level of the bank's capital accounts. Credit-
enhancing interest-only strips, mortgage servicing assets, nonmortgage 
servicing assets, purchased credit card relationships and deferred tax 
assets that do not meet the conditions, limitations and restrictions 
described in Sec. 325.5(f) and (g) of this part will not be recognized 
for risk-based capital purposes.
    (d) Minority interests in small business investment companies, 
investment funds that hold nonfinancial equity investments (as defined 
in section II.B.(6)(ii) of this appendix A), and subsidiaries that are 
engaged in nonfinancial activities are not included in a bank's Tier 1 
or total capital base if the bank's interest in the company or fund is 
held under one of the legal authorities listed in section II.B.(6)(ii) 
of this appendix A.
    (e) Minority interests in consolidated asset-backed commercial paper 
programs (as defined in section II.B.6. of this appendix) that are 
sponsored by a bank are not to be included in the bank's tier 1 or total 
capital base if the bank excludes the consolidated assets of such 
programs from risk-weighted assets pursuant to section II.B.6. of this 
appendix. This capital treatment for minority interests in consolidated 
asset-backed commercial paper programs will be effective from July 1, 
2003 and will expire on April 1, 2004.
    2. Supplementary capital elements (Tier 2) consist of:
    i. Allowance for loan and lease losses, up to a maximum of 1.25 
percent of risk-weighted assets;

[[Page 201]]

    ii. Cumulative perpetual preferred stock, long-term preferred stock 
(original maturity of at least 20 years), and any related surplus;
    iii. Perpetual preferred stock (and any related surplus) where the 
dividend is reset periodically based, in whole or part, on the bank's 
current credit standing, regardless of whether the dividends are 
cumulative or noncumulative;
    iv. Hybrid capital instruments, including mandatory convertible debt 
securities;
    v. Term subordinated debt and intermediate-term preferred stock 
(original average maturity of five years or more) and any related 
surplus; and
    vi. Net unrealized holding gains on equity securities (subject to 
the limitations discussed in paragraph I.A.2.(f) of this section).
    The maximum amount of Tier 2 capital that may be recognized for 
risk-based capital purposes is limited to 100 percent of Tier 1 capital 
(after any deductions for disallowed intangibles and disallowed deferred 
tax assets). In addition, the combined amount of term subordinated debt 
and intermediate-term preferred stock that may be treated as part of 
Tier 2 capital for risk-based capital purposes is limited to 50 percent 
of Tier 1 capital. Amounts in excess of these limits may be issued but 
are not included in the calculation of the risk-based capital ratio.
    (a) Allowance for loan and lease losses. Allowances for loan and 
lease losses are reserves that have been established through a charge 
against earnings to absorb future losses on loans or lease financing 
receivables. Allowances for loan and lease losses exclude allocated 
transfer risk reserves, \4\ and reserves created against identified 
losses.
---------------------------------------------------------------------------

    \4\ Allocated transfer risk reserves are reserves that have been 
established in accordance with section 905(a) of the International 
Lending Supervision Act of 1983 against certain assets whose value has 
been found by the U.S. supervisory authorities to have been 
significantly impaired by protracted transfer risk problems.
---------------------------------------------------------------------------

    This risk-based capital framework provides a phasedown during the 
transition period of the extent to which the allowance for loan and 
lease losses may be included in an institution's capital base. By year-
end 1990, the allowance for loan and lease losses, as an element of 
supplementary capital, may constitute no more than 1.5 percent of risk-
weighted assets and, by year-end 1992, no more than 1.25 percent of 
risk-weighted assets.\5\
---------------------------------------------------------------------------

    \5\ The amount of the allowance for loan and lease losses that may 
be included as a supplementary capital element is based on a percentage 
of gross risk-weighted assets. A bank may deduct reserves for loan and 
lease losses that are in excess of the amount permitted to be included 
in capital, as well as allocated transfer risk reserves, from gross 
risk-weighted assets when computing the denominator of the risk-based 
capital ratio.
---------------------------------------------------------------------------

    (b) Preferred stock. Perpetual preferred stock is defined as 
preferred stock that does not have a maturity date, that cannot be 
redeemed at the option of the holder, and that has no other provisions 
that will require future redemption of the issue. Long-term preferred 
stock includes limited-life preferred stock with an original maturity of 
20 years or more, provided that the stock cannot be redeemed at the 
option of the holder prior to maturity, except with the prior approval 
of the FDIC.
    Cumulative perpetual preferred stock and long-term preferred stock 
qualify for inclusion in supplementary capital provided that the 
instruments can absorb losses while the issuer operates as a going 
concern (a fundamental characteristic of equity capital) and provided 
the issuer has the option to defer payment of dividends on these 
instruments. Given these conditions, and the perpetual or long-term 
nature of the intruments, there is no limit on the amount of these 
preferred stock instruments that may be included with Tier 2 capital.
    Noncumulative perpetual preferred stock where the dividend is reset 
periodically based, in whole or in part, on the bank's current credit 
standing, including auction rate, money market, or remarketable 
preferred stock, are also assigned to Tier 2 capital without limit, 
provided the above conditions are met.
    (c) Hybrid capital instruments. Hybrid capital instruments include 
instruments that have certain characteristics of both debt and equity. 
In order to be included as supplementary capital elements, these 
instruments should meet the following criteria:
    (1) The instrument should be unsecured, subordinated to the claims 
of depositors and general creditors, and fully paid-up.
    (2) The instrument should not be redeemable at the option of the 
holder prior to maturity, except with the prior approval of the FDIC. 
This requirement implies that holders of such instruments may not 
accelerate the payment of principal except in the event of bankruptcy, 
insolvency, or reorganization.
    (3) The instrument should be available to participate in losses 
while the issuer is operating as a going concern. (Term subordinated 
debt would not meet this requirement.) To satisfy this requirement, the 
instrument should convert to common or perpetual preferred stock in the 
event that the sum of the undivided profits and capital surplus accounts 
of the issuer results in a negative balance.
    (4) The instrument should provide the option for the issuer to defer 
principal and interest payments if: (a) The issuer does not

[[Page 202]]

report a profit in the preceding annual period, defined as combined 
profits (i.e., net income) for the most recent four quarters, and (b) 
the issuer eliminates cash dividends on its common and preferred stock.
    Mandatory convertible debt securities, which are subordinated debt 
instruments that require the issuer to convert such instruments into 
common or perpetual preferred stock by a date at or before the maturity 
of the debt instruments, will qualify as hybrid capital instruments 
provided the maturity of these instruments is 12 years or less and the 
instruments meet the criteria set forth below for ``term subordinated 
debt.'' There is no limit on the amount of hybrid capital instruments 
that may be included within Tier 2 capital.
    (d) Term subordinated debt and intermediate-term preferred stock. 
The aggregate amount of term subordinated debt (excluding mandatory 
convertible debt securities) and intermediate-term preferred stock 
(including any related surplus) that may be treated as Tier 2 capital 
for risk-based capital purposes is limited to 50 percent of Tier 1 
capital. Term subordinated debt and intermediate-term preferred stock 
should have an original average maturity of at least five years to 
qualify as supplementary capital and should not be redeemable at the 
option of the holder prior to maturity, except with the prior approval 
of the FDIC. For state nonmember banks, a term subordinated debt 
instrument is an obligation other than a deposit obligation that:
    (1) Bears on its face, in boldface type, the following: This 
obligation is not a deposit and is not insured by the Federal Deposit 
Insurance Corporation;
    (2)(i) Has a maturity of at least five years; or
    (ii) In the case of an obligation or issue that provides for 
scheduled repayments of principal, has an average maturity of at least 
five years; provided that the Director of the Division of Supervision 
and Consumer Protection (DSC) may permit the issuance of an obligation 
or issue with a shorter maturity or average maturity if the Director has 
determined that exigent circumstances require the issuance of such 
obligation or issue; provided further that the provisions of this 
paragraph I.A.2.(d)(2) shall not apply to mandatory convertible debt 
obligations or issues;
    (3) States express that the obligation:
    (i) Is subordinated and junior in right of payment to the issuing 
bank's obligations to its depositors and to the bank's other obligations 
to its general and secured creditors; and
    (ii) Is ineligible as collateral for a loan by the issuing bank;
    (4) Is unsecured;
    (5) States expressly that the issuing bank may not retire any part 
of its obligation without the prior written consent of the FDIC or other 
primary federal regulator; and
    (6) Includes, if the obligation is issued to a depository 
institution, a specific waiver of the right of offset by the lending 
depository institution.

Subordinated debt obligations issued prior to December 2, 1987 that 
satisfied the definition of the term ``subordinated note and debenture'' 
that was in effect prior to that date also will be deemed to be term 
subordinated debt for risk-based capital purposes. An optional 
redemption (``call'') provision in a subordinated debt instrument that 
is exercisable by the issuing bank in less than five years will not be 
deemed to constitute a maturity of less than five years, provided that 
the obligation otherwise has a stated contractual maturity of at least 
five years; the call is exercisable solely at the discretion or option 
of the issuing bank, and not at the discretion or option of the holder 
of the obligation; and the call is exercisable only with the express 
prior written consent of the FDIC under 12 U.S.C. 1828(i)(1) at the time 
early redemption or retirement is sought, and such consent has not been 
given in advance at the time of issuance of the obligation. Optional 
redemption provisions will be accorded similar treatment when 
determining the perpetual nature and/or maturity of preferred stock and 
other capital instruments.
    (e) Discount of limited-life supplementary capital instruments. As a 
limited-life capital instrument approaches maturity, the instrument 
begins to take on charcteristics of a short-term obligation and becomes 
less like a component of capital. Therefore, for risk-based capital 
purposes, the outstanding amount of term subordinated debt and limited-
life preferred stock eligible for inclusion in capital will be adjusted 
downward, or discounted, as the instruments approach maturity. Each 
limited-life capital instrument will be discounted by reducing the 
outstanding amount of the capital instrument eligible for inclusion as 
supplementary capital by a fifth of the original amount (less 
redemptions) each year during the instrument's last five years before 
maturity. Such instruments, therefore, will have no capital value when 
they have a remaining maturity of less than a year.
    (f) Unrealized gains on equity securities and unrealized gains 
(losses) on other assets. Up to 45 percent of pretax net unrealized 
holding gains (that is, the excess, if any, of the fair value over 
historical cost) on available-for-sale equity securities with readily 
determinable fair values may be included in supplementary capital. 
However, the FDIC may exclude all or a portion of these unrealized gains 
from Tier 2 capital if the FDIC determines that the equity securities 
are not prudently valued. Unrealized gains (losses) on other types of 
assets, such as bank premises

[[Page 203]]

and available-for-sale debt securities, are not included in 
supplementary capital, but the FDIC may take these unrealized gains 
(losses) into account as additional factors when assessing a bank's 
overall capital adequacy.

            B. Deductions from Capital and Other Adjustments

    Certain assets are deducted from a bank's capital base for the 
purpose of calculating the numerator of the risk-based capital ratio.\6\ 
These assets include:
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    \6\ Any assets deducted from capital when computing the numerator of 
the risk-based capital ratio will also be excluded from risk-weighted 
assets when computing the denominator of the ratio.
---------------------------------------------------------------------------

    (1) All intangible assets other than mortgage servicing assets, 
nonmortgage servicing assets and purchased credit card relationships.\7\ 
These disallowed intangibles are deducted from the core capital (Tier 1) 
elements.
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    \7\ In addition to mortgage servicing assets, nonmortgage servicing 
assets and purchased credit card relationships, certain other 
intangibles may be allowed if explicitly approved by the FDIC as part of 
the bank's regulatory capital on a specific case basis. In evaluating 
whether other types of intangibles should be recognized for regulatory 
capital purposes on a specific case basis, the FDIC will accord special 
attention to the general characteristics of the intangibles, including: 
(1) The separability of the intangible asset and the ability to sell it 
separate and apart from the bank or the bulk of the bank's assets, (2) 
the certainty that a readily identifiable stream of cash flows 
associated with the intangible asset can hold its value notwithstanding 
the future prospects of the bank, and (3) the existence of a market of 
sufficient depth to provide liquidity for the intangible asset.
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    (2) Investments in unconsolidated banking and finance 
subsidiaries.\8\ This includes any equity or debt capital investments in 
banking or finance subsidaries if the subsidiaries are not consolidated 
for regulatory capital requirements.\9\ Generally, these investments 
include equity and debt capital securities and any other instruments or 
commitments that are deemed to be capital of the subsidiary. These 
investments are deducted from the bank's total (Tier 1 plus Tier 2) 
capital base.
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    \8\ For risk-based capital purposes, these subsidiaries are 
generally defined as any company that is primarily engaged in banking or 
finance and in which the bank, either directly or indirectly, owns more 
than 50 percent of the outstanding voting stock but does not consolidate 
the company for regulatory capital purposes. In addition to investments 
in unconsolidated banking and finance subsidiaries, the FDIC may, on a 
case-by-case basis, deduct investments in associated companies or joint 
ventures, which are generally defined as any companies in which the 
bank, either directly or indirectly, owns 20 to 50 percent of the 
outstanding voting stock. Alternatively, the FDIC may, in certain cases, 
apply an appropriate risk-weighted capital charge against a bank's 
proportionate interest in the assets of associated companies and joint 
ventures. The definitions for subsidiaries, associated companies and 
joint ventures are contained in the instructions for the preparation of 
the Consolidated Reports of Condition and Income.
    \9\ Consolidation requirements for regulatory capital purposes 
generally follow the consolidation requirements set forth in the 
instructions for preparation of the consolidated Reports of Condition 
and Income. However, although investments in subsidiaries representing 
majority ownership in another Federally-insured depository institution 
are not consolidated for purposes of the consolidated Reports of 
Condition and Income that are filed by the parent bank, they are 
generally consolidated for purposes of determining FDIC regulatory 
capital requirements. Therefore, investments in these depository 
institution subsidiaries generally will not be deducted for risk-based 
capital purposes; rather, assets and liabilities of such subsidiaries 
will be consolidated with those of the parent bank when calculating the 
risk-based capital ratio. In addition, although securities subsidiaries 
established pursuant to 12 CFR 337.4 are consolidated for Report of 
Condition and Income purposes, they are not consolidated for regulatory 
capital purposes.
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    (3) Investments in securities subsidiaries established pursuant to 
12 CFR 337.4. The FDIC may also consider deducting investments in other 
subsidiaries, either on a case-by-case basis or, as with securities 
subsidiaries, based on the general characteristics or functional nature 
of the subsidiaries.
    (4) Reciprocal holdings of capital instruments of banks that 
represent intentional cross-holdings by the banks. These holdings are 
deducted from the bank's total capital base.
    (5) Deferred tax assets in excess of the limit set forth in Sec. 
325.5(g). These disallowed deferred tax assets are deducted from the 
core capital (Tier 1) elements.
    On a case-by-case basis, and in conjunction with supervisory 
examinations, other deductions from capital may also be required, 
including any adjustments deemed appropriate for assets classified as 
loss.

[[Page 204]]

            II. Procedures For Computing Risk-Weighted Assets

                          A. General Procedures

    1. Under the risk-based capital framework, a bank's balance sheet 
assets and credit equivalent amounts of off-balance sheet items are 
assigned to one of four broad risk categories according to the obligor 
or, if relevent, the guarantor or the nature of the collateral. The 
aggregate dollar amount in each category is then multiplied by the risk 
weight assigned to that category. The resulting weighted values from 
each of the four risk categories are added together and this sum is the 
risk-weighted assets total that, as adjusted.\10\ comprises the 
denominator of the risk-based capital ratio.
---------------------------------------------------------------------------

    \10\ Any asset deducted from a bank's capital accounts when 
computing the numerator of the risk-based capital ratio will also be 
excluded from risk-weighted assets when calculating the denominator for 
the ratio.
---------------------------------------------------------------------------

    2. The risk-weighted amounts for all off-balance sheet items are 
determined by a two-step process. First, the notional principal, or face 
value, amount of each off-balance sheet item generally is multiplied by 
a credit conversion factor to arrive at a balance sheet credit 
equivalent amount. Second, the credit equivalent amount generally is 
assigned to the appropriate risk category, like any balance sheet asset, 
according to the obligor or, if relevant, the guarantor or the nature of 
the collateral.
    3. The Director of the Division of Supervision and Consumer 
Protection (DSC) may, on a case-by-case basis, determine the appropriate 
risk weight for any asset or credit equivalent amount that does not fit 
wholly within one of the risk categories set forth in this Appendix A or 
that imposes risks on a bank that are not commensurate with the risk 
weight otherwise specified in this Appendix A for the asset or credit 
equivalent amount. In addition, the Director of the Division of 
Supervision and Consumer Protection (DSC) may, on a case-by-case basis, 
determine the appropriate credit conversion factor for any off-balance 
sheet item that does not fit wholly within one of the credit conversion 
factors set forth in this Appendix A or that imposes risks on a bank 
that are not commensurate with the credit conversion factor otherwise 
specified in this Appendix A for the off-balance sheet item. In making 
such a determination, the Director of the Division of Supervision and 
Consumer Protection (DSC) will consider the similarity of the asset or 
off-balance sheet item to assets or off-balance sheet items explicitly 
treated in sections II.B and II.C of this appendix A, as well as other 
relevant factors.

                         B. Other Considerations

    1. Indirect Holdings of Assets. Some of the assets on a bank's 
balance sheet may represent an indirect holding of a pool of assets; for 
example, mutual funds. An investment in shares of a mutual fund whose 
portfolio consists solely of various securities or money market 
instruments that, if held separately, would be assigned to different 
risk categories, generally is assigned to the risk category appropriate 
to the highest risk-weighted asset that the fund is permitted to hold in 
accordance with the stated investment objectives set forth in its 
prospectus. The bank may, at its option, assign the investment on a pro 
rata basis to different risk categories according to the investment 
limits in the fund's prospectus, but in no case will indirect holdings 
through shares in any mutual fund be assigned to a risk weight less than 
20 percent. If the bank chooses to assign its investment on a pro rata 
basis, and the sum of the investment limits in the fund's prospectus 
exceeds 100 percent, the bank must assign risk weights in descending 
order. If, in order to maintain a necessary degree of short-term 
liquidity, a fund is permitted to hold an insignificant amount of its 
assets in short-term, highly liquid securities of superior credit 
quality that do not qualify for a preferential risk weight, such 
securities will generally be disregarded in determining the risk 
category to which the bank's holdings in the overall fund should be 
assigned. The prudent use of hedging instruments by a mutual fund to 
reduce the risk of its assets will not increase the risk weighting of 
the mutual fund investment. For example, the use of hedging instruments 
by a mutual fund to reduce the interest rate risk of its government bond 
portfolio will not increase the risk weight of that fund above the 20 
percent category. Nonetheless, if the fund engages in any activities 
that appear speculative in nature or has any other characteristics that 
are inconsistent with the preferential risk weighting assigned to the 
fund's assets, holdings in the fund will be assigned to the 100 percent 
risk category.
    2. Collateral. In determining risk weights of various assets, the 
only forms of collateral that are formally recognized by the risk-based 
capital framework are cash on deposit in the lending bank; securities 
issued or guaranteed by the central governments of the OECD-based group 
of countries,\11\ U.S.

[[Page 205]]

Government agencies, or U.S. Government-sponsored agencies; and 
securities issued or guaranteed by multilateral lending institutions or 
regional development banks. Claims fully secured by such collateral are 
assigned to the 20 percent risk category. The extent to which these 
securities are recognized as collateral for risk-based capital purposes 
is determined by their current market value. If a claim is partially 
secured, the portion of the claim that is not covered by the collateral 
is assigned to the risk category appropriate to the obligor or, if 
relevant, the guarantor.
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    \11\ The OECD-based group of countries comprises all full members of 
the Organization for Economic Cooperation and Development (OECD) 
regardless of entry date, as well as countries that have concluded 
special lending arrangements with the International Monetary Fund (IMF) 
associated with the IMF's General Arrangements to Borrow, but excludes 
any country that has rescheduled its external sovereign debt within the 
previous five years. As of November 1995, the OECD included the 
following countries: Australia, Austria, Belgium, Canada, Denmark, 
Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, 
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, 
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United 
States; and Saudi Arabia had concluded special lending arrangements with 
the IMF associated with the IMF's General Arrangements to Borrow. A 
rescheduling of external sovereign debt generally would include any 
renegotiation of terms arising from a country's inability or 
unwillingness to meet its external debt service obligations, but 
generally would not include renegotiations of debt in the normal course 
of business, such as a renegotiation to allow the borrower to take 
advantage of a decline in interest rates or other change in market 
conditions.
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    3. Guarantees. Guarantees of the OECD and non-OECD central 
governments, U.S. Government agencies, U.S. Government-sponsored 
agencies, state and local governments of the OECD-based group of 
countries, multilateral lending institutions and regional development 
banks, U.S. depository institutions, foreign banks, and qualifying OECD-
based securities firms are also recognized. If a claim is partially 
guaranteed, the portion of the claim that is not fully covered by the 
guarantee is assigned to the risk category appropriate to the obligor 
or, if relevant, the collateral.
    4. Maturity. Maturity is generally not a factor in assigning items 
to risk categories with the exceptions of claims on non-OECD banks, 
commitments, and interest rate and foreign exchange rate related 
contracts. Except for commitments, short-term is defined as one year or 
less remaining maturity and long-term is defined as over one year 
remaining maturity. In the case of commitments, short-term is defined as 
one year or less original maturity and long-term is defined as over one 
year original maturity.\12\
---------------------------------------------------------------------------

    \12\ Through year-end 1992, remaining rather than original maturity 
may be used for determining term to maturity for commitments.
---------------------------------------------------------------------------

    5. Recourse, Direct Credit Substitutes, Residual Interests and 
Mortgage- and Asset-Backed Securities. For purposes of this section 
II.B.5 of this appendix A, the following definitions will apply.
    (a) Definitions. (1) Credit derivative means a contract that allows 
one party (the protection purchaser) to transfer the credit risk of an 
asset or off-balance sheet credit exposure to another party (the 
protection provider). The value of a credit derivative is dependent, at 
least in part, on the credit performance of a ``reference asset.''
    (2) Credit-enhancing interest-only strip is defined in Sec. 
325.2(g).
    (3) Credit-enhancing representations and warranties means 
representations and warranties that are made or assumed in connection 
with a transfer of assets (including loan servicing assets) and that 
obligate a bank to protect investors from losses arising from credit 
risk in the assets transferred or the loans serviced. Credit-enhancing 
representations and warranties include promises to protect a party from 
losses resulting from the default or nonperformance of another party or 
from an insufficiency in the value of the collateral. Credit-enhancing 
representations and warranties do not include:
    (i) Early-default clauses and similar warranties that permit the 
return of, or premium refund clauses covering, 1-4 family residential 
first mortgage loans (as described in section II.C, Category 3-50 
Percent Risk Weight, of this appendix A) for a period of 120 days from 
the date of transfer. These warranties may cover only those loans that 
were originated within 1 year of the date of transfer;
    (ii) Premium refund clauses covering assets guaranteed, in whole or 
in part, by the U.S. Government, a U.S. Government agency, or a U.S. 
Government-sponsored agency, provided the premium refund clauses are for 
a period not to exceed 120 days from the date of transfer; or
    (iii) Warranties that permit the return of assets in instances of 
fraud, misrepresentation, or incomplete documentation.
    (4) Direct credit substitute means an arrangement in which a bank 
assumes, in form or in substance, credit risk directly or indirectly 
associated with an on-or off-balance sheet asset or exposure that was 
not previously owned by the bank (third-party asset) and the risk 
assumed by the bank exceeds the pro rata share of the bank's interest in 
the third-party asset. If the bank has no claim on the asset, then the 
bank's assumption of any credit risk is a direct credit substitute. 
Direct credit substitutes include, but are not limited to:

[[Page 206]]

    (i) Financial standby letters of credit, which includes any letter 
of credit or similar arrangement, however named or described, that 
support financial claims on a third party that exceed a bank's pro rata 
share in the financial claim;
    (ii) Guarantees, surety arrangements, credit derivatives, and 
irrevocable guarantee-type instruments backing financial claims such as 
outstanding securities, loans, or other financial claims, or that back 
off-balance-sheet items against which risk-based capital must be 
maintained;
    (iii) Purchased subordinated interests or securities that absorb 
more than their pro rata share of credit losses from the underlying 
assets. Purchased subordinated interests that are credit-enhancing 
interest-only strips are subject to the higher capital charge specified 
in section II.B.5.(f) of this Appendix A;
    (iv) Entering into a credit derivative contract under which the bank 
assumes more than its pro rata share of credit risk on a third-party 
asset or exposure;
    (v) Loans or lines of credit that provide credit enhancement for the 
financial obligations of an account party;
    (vi) Purchased loan servicing assets if the servicer:
    (A) Is responsible for credit losses associated with the loans being 
serviced,
    (B) Is responsible for making mortgage servicer cash advances 
(unless the advances are not direct credit substitutes because they meet 
the conditions specified in paragraph B.5(a)(9) of this appendix A), or
    (C) Makes or assumes credit-enhancing representations and warranties 
on the serviced loans; and
    (vii) Clean-up calls on third party assets. Clean-up calls that are 
exercisable at the option of the bank (as servicer or as an affiliate of 
the servicer) when the pool balance is 10 percent or less of the 
original pool balance are not direct credit substitutes.
    (5) Externally rated means, with respect to an instrument or 
obligation, that an instrument or obligation has received a credit 
rating from at least one nationally recognized statistical rating 
organization.
    (6) Face amount is defined in Sec. 325.2(h).
    (7) Financial asset means cash, evidence of an ownership interest in 
an entity, or a contract that conveys to a second entity a contractual 
right:
    (i) To receive cash or another financial instrument from a first 
entity; or
    (ii) To exchange other financial instruments on potentially 
favorable terms with the first entity.
    (8) Financial standby letter of credit means a letter of credit or 
similar arrangement that represents an irrevocable obligation to a 
third-party beneficiary:
    (i) To repay money borrowed by, or advanced to, or for the account 
of, a second party (the account party); or
    (ii) To make payment on behalf of the account party, in the event 
that the account party fails to fulfill its obligation to the 
beneficiary.
    (9) Mortgage servicer cash advance means funds that a residential 
mortgage servicer advances to ensure an uninterrupted flow of payments 
or the timely collection of residential mortgage loans, including 
disbursements made to cover foreclosure costs or other expenses arising 
from a mortgage loan to facilitate its timely collection. A mortgage 
servicer cash advance is not a recourse obligation or a direct credit 
substitute if:
    (i) The mortgage servicer is entitled to full reimbursement or, for 
any one residential mortgage loan, nonreimbursable advances are 
contractually limited to an insignificant amount of the outstanding 
principal on that loan, and
    (ii) The servicer's entitlement to reimbursement is not 
subordinated.
    (10) Nationally recognized statistical rating organization (NRSRO) 
means an entity recognized by the Division of Market Regulation of the 
Securities and Exchange Commission (or any successor Division) 
(Commission) as a nationally recognized statistical rating organization 
for various purposes, including the Commission's uniform net capital 
requirements for brokers and dealers (17 CFR 240.15c3-1).
    (11) Recourse means an arrangement in which a bank retains, in form 
or in substance, any credit risk directly or indirectly associated with 
an asset it has sold (in accordance with generally accepted accounting 
principles) that exceeds a pro rata share of the bank's claim on the 
asset. If a bank has no claim on an asset it has sold, then the 
retention of any credit risk is recourse. A recourse obligation 
typically arises when an institution transfers assets in a sale and 
retains an obligation to repurchase the assets or absorb losses due to a 
default of principal or interest or any other deficiency in the 
performance of the underlying obligor or some other party. Recourse may 
exist implicitly where a bank provides credit enhancement beyond any 
contractual obligation to support assets it has sold. The following are 
examples of recourse arrangements:
    (i) Credit-enhancing representations and warranties made on the 
transferred assets;
    (ii) Loan servicing assets retained pursuant to an agreement under 
which the bank:
    (A) Is responsible for losses associated with the loans serviced,
    (B) Is responsible for making mortgage servicer cash advances 
(unless the advances are not a recourse obligation because they meet the 
conditions of paragraph B.5(a)(9) of this appendix A), or

[[Page 207]]

    (C) Makes credit-enhancing representations and warranties on the 
serviced loans;
    (iii) Retained subordinated interests that absorb more than their 
pro rata share of losses from the underlying assets;
    (iv) Assets sold under an agreement to repurchase, if the assets are 
not already included on the balance sheet;
    (v) Loan strips sold without contractual recourse where the maturity 
of the transferred portion of the loan is shorter than the maturity of 
the commitment under which the loan is drawn;
    (vi) Credit derivative contracts under which the bank retains more 
than its pro rata share of credit risk on transferred assets; and
    (vii) Clean-up calls. Clean-up calls that are exercisable at the 
option of the bank (as servicer or as an affiliate of the servicer) when 
the pool balance is 10 percent or less of the original pool balance, are 
not recourse.
    (12) Residual interest means any on-balance sheet asset that 
represents an interest (including a beneficial interest) created by a 
transfer that qualifies as a sale (in accordance with generally accepted 
accounting principles) of financial assets, whether through a 
securitization or otherwise, and that exposes a bank to credit risk 
directly or indirectly associated with the transferred asset that 
exceeds a pro rata share of that bank's claim on the asset, whether 
through subordination provisions or other credit enhancement techniques. 
Residual interests generally include credit-enhancing interest-only 
strips, spread accounts, cash collateral accounts, retained subordinated 
interests and other forms of over-collateralization, and similar assets 
that function as a credit enhancement. Residual interests further 
include those exposures that, in substance, cause the bank to retain the 
credit risk of an asset or exposure that had qualified as a residual 
interest before it was sold. Residual interests generally do not include 
interests purchased from a third party, except that purchased credit-
enhancing interest-only strips are residual interests.
    (13) Risk participation means a participation in which the 
originating bank remains liable to the beneficiary for the full amount 
of an obligation (e.g. a direct credit substitute) notwithstanding that 
another party has acquired a participation in that obligation.
    (14) Securitization means the pooling and repackaging by a special 
purpose entity of assets or other credit exposures into securities that 
can be sold to investors. Securitization includes transactions that 
generally create stratified credit risk positions whose performance is 
dependent upon an underlying pool of credit exposures, including loans 
and commitments.
    (15) Sponsor means a bank that establishes an asset-backed 
commercial paper program; approves the sellers permitted to participate 
in the program; approves the asset pools to be purchased by the program; 
or administers the asset-backed commercial paper program by monitoring 
the assets, arranging for debt placement, compiling monthly reports, or 
ensuring compliance with the program documents and with the program's 
credit and investment policy.
    (16) Structured finance program means a program where receivable 
interests and asset-backed securities issued by multiple participants 
are purchased by a special purpose entity that repackages those 
exposures into securities that can be sold to investors. Structured 
finance programs allocate credit risks, generally, between the 
participants and the credit enhancement provided to the program.
    (17) Traded position means a position or asset-backed security 
retained, assumed or issued in connection with a securitization that is 
externally rated, where there is a reasonable expectation that, in the 
near future, the rating will be relied upon by:
    (i) Unaffiliated investors to purchase the position; or
    (ii) An unaffiliated third party to enter into a transaction 
involving the position, such as a purchase, loan or repurchase 
agreement.
    (b) Credit equivalent amounts and risk weights of recourse 
obligations and direct credit substitutes--(1) General rule for 
determining the credit-equivalent amount. Except as otherwise provided, 
the credit-equivalent amount for a recourse obligation or direct credit 
substitute is the full amount of the credit-enhanced assets for which 
the bank directly or indirectly retains or assumes credit risk 
multiplied by a 100% conversion factor. Thus, a bank that extends a 
partial direct credit substitute, e.g., a financial standby letter of 
credit that absorbs the first 10 percent of loss on a transaction, must 
maintain capital against the full amount of the assets being supported.
    (2) Risk-weight factor. To determine the bank's risk-weighted assets 
for an off-balance sheet recourse obligation or a direct credit 
substitute, the credit equivalent amount is assigned to the risk 
category appropriate to the obligor in the underlying transaction, after 
considering any associated guarantees or collateral. For a direct credit 
substitute that is an on-balance sheet asset, e.g., a purchased 
subordinated security, a bank must calculate risk-weighted assets using 
the amount of the direct credit substitute and the full amount of the 
assets it supports, i.e., all the more senior positions in the 
structure. The treatment covered in this paragraph (b) is subject to the 
low-level exposure rule provided in section II.B.5(h)(1) of this 
appendix A.
    (c) Credit equivalent amount and risk weight of participations in, 
and syndications of, direct credit substitutes. Subject to the low-level 
exposure rule provided in section II.B.5(h)(1) of

[[Page 208]]

this appendix A, the credit equivalent amount for a participation 
interest in, or syndication of, a direct credit substitute (excluding 
purchased credit-enhancing interest-only strips) is calculated and risk 
weighted as follows:
    (1) Treatment for direct credit substitutes for which a bank has 
conveyed a risk participation. In the case of a direct credit substitute 
in which a bank has conveyed a risk participation, the full amount of 
the assets that are supported by the direct credit substitute is 
converted to a credit equivalent amount using a 100% conversion factor. 
However, the pro rata share of the credit equivalent amount that has 
been conveyed through a risk participation is then assigned to whichever 
risk-weight category is lower: the risk-weight category appropriate to 
the obligor in the underlying transaction, after considering any 
associated guarantees or collateral, or the risk-weight category 
appropriate to the party acquiring the participation. The pro rata share 
of the credit equivalent amount that has not been participated out is 
assigned to the risk-weight category appropriate to the obligor, 
guarantor, or collateral. For example, the pro rata share of the full 
amount of the assets supported, in whole or in part, by a direct credit 
substitute conveyed as a risk participation to a U.S. domestic 
depository institution or an OECD bank is assigned to the 20 percent 
risk category.\13\
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    \13\ A risk participation with a remaining maturity of one year or 
less that is conveyed to a non-OECD bank is also assigned to the 20 
percent risk category.
---------------------------------------------------------------------------

    (2) Treatment for direct credit substitutes in which the bank has 
acquired a risk participation. In the case of a direct credit substitute 
in which the bank has acquired a risk participation, the acquiring 
bank's pro rata share of the direct credit substitute is multiplied by 
the full amount of the assets that are supported by the direct credit 
substitute and converted using a 100% credit conversion factor. The 
resulting credit equivalent amount is then assigned to the risk-weight 
category appropriate to the obligor in the underlying transaction, after 
considering any associated guarantees or collateral.
    (3) Treatment for direct credit substitutes related to syndications. 
In the case of a direct credit substitute that takes the form of a 
syndication where each party is obligated only for its pro rata share of 
the risk and there is no recourse to the originating entity, each bank's 
credit equivalent amount will be calculated by multiplying only its pro 
rata share of the assets supported by the direct credit substitute by a 
100% conversion factor. The resulting credit equivalent amount is then 
assigned to the risk-weight category appropriate to the obligor in the 
underlying transaction, after considering any associated guarantees or 
collateral.
    (d) Externally rated positions: credit-equivalent amounts and risk 
weights.--(1) Traded positions. With respect to a recourse obligation, 
direct credit substitute, residual interest (other than a credit-
enhancing interest-only strip) or mortgage- or asset-backed security 
that is a ``traded position'' and that has received an external rating 
on a long-term position that is one grade below investment grade or 
better or a short-term position that is investment grade, the bank may 
multiply the face amount of the position by the appropriate risk weight, 
determined in accordance with Table A or B of this appendix A, as 
appropriate.\14\ If a traded position receives more than one external 
rating, the lowest rating will apply.
---------------------------------------------------------------------------

    \14\ Stripped mortgage-backed securities and similar instruments, 
such as interest-only strips that are not credit-enhancing and 
principal-only strips, must be assigned to the 100% risk category.

                                 Table A
------------------------------------------------------------------------
                                                            Risk weight
     Long-term rating category            Examples         (In percent)
------------------------------------------------------------------------
Highest or second highest           AAA, AA.............              20
 investment grade.
Third highest investment grade....  A...................              50
Lowest investment grade...........  BBB.................             100
One category below investment       BB..................             200
 grade.
------------------------------------------------------------------------


                                 Table B
------------------------------------------------------------------------
                                                            Risk weight
    Short-term rating category            Examples         (In percent)
------------------------------------------------------------------------
Highest investment grade..........  A-1, P-1............              20
Second highest investment grade...  A-2, P-2............              50
Lowest investment grade...........  A-3, P-3............             100
------------------------------------------------------------------------


[[Page 209]]

    (2) Non-traded positions. A recourse obligation, direct credit 
substitute, residual interest (but not a credit-enhancing interest-only 
strip) or mortgage- or asset-backed security extended in connection with 
a securitization that is not a ``traded position'' may be assigned a 
risk weight in accordance with section II.B.5(d)(1) of this appendix A 
if:
    (i) It has been externally rated by more than one NRSRO;
    (ii) It has received an external rating on a long-term position that 
is one category below investment grade or better or a short-term 
position that is investment grade by all NRSROs providing a rating;
    (iii) The ratings are publicly available; and
    (iv) The ratings are based on the same criteria used to rate traded 
positions. If the ratings are different, the lowest rating will 
determine the risk category to which the recourse obligation, direct 
credit substitute, residual interest, or mortgage- or asset-backed 
security will be assigned.
    (e) Senior positions not externally rated. For a recourse 
obligation, direct credit substitute, residual interest or mortgage- or 
asset-backed security that is not externally rated but is senior in all 
features to a traded position (including collateralization and 
maturity), a bank may apply a risk weight to the face amount of the 
senior position in accordance with section II.B.5(d)(1) of this appendix 
A, based upon the risk weight of the traded position, subject to any 
current or prospective supervisory guidance and the bank satisfying the 
FDIC that this treatment is appropriate. This section will apply only if 
the traded position provides substantial credit support for the entire 
life of the unrated position.
    (f) Residual interests--(1) Concentration limit on credit-enhancing 
interest-only strips. In addition to the capital requirement provided by 
section II.B.5(f)(2) of this appendix A, a bank must deduct from Tier 1 
capital the face amount of all credit-enhancing interest-only strips in 
excess of 25 percent of Tier 1 capital in accordance with Sec. 
325.5(f)(3).
    (2) Credit-enhancing interest-only strip capital requirement. After 
applying the concentration limit to credit-enhancing interest-only 
strips in accordance with Sec. 325.5(f)(3), a bank must maintain risk-
based capital for a credit-enhancing interest-only strip, equal to the 
remaining face amount of the credit-enhancing interest-only strip (net 
of the remaining proportional amount of any existing associated deferred 
tax liability recorded on the balance sheet), even if the amount of 
risk-based capital required to be maintained exceeds the full risk-based 
capital requirement for the assets transferred. Transactions that, in 
substance, result in the retention of credit risk associated with a 
transferred credit-enhancing interest-only strip will be treated as if 
the credit-enhancing interest-only strip was retained by the bank and 
not transferred.
    (3) Other residual interests capital requirement. Except as 
otherwise provided in section II.B.5(d) or (e) of this appendix A, a 
bank must maintain risk-based capital for a residual interest (excluding 
a credit-enhancing interest-only strip) equal to the face amount of the 
residual interest (net of any existing associated deferred tax liability 
recorded on the balance sheet), even if the amount of risk-based capital 
required to be maintained exceeds the full risk-based capital 
requirement for the assets transferred. Transactions that, in substance, 
result in the retention of credit risk associated with a transferred 
residual interest will be treated as if the residual interest was 
retained by the bank and not transferred.
    (4) Residual interests and other recourse obligations. Where the 
aggregate capital requirement for residual interests (including credit-
enhancing interest-only strips) and recourse obligations arising from 
the same transfer of assets exceed the full risk-based capital 
requirement for assets transferred, a bank must maintain risk-based 
capital equal to the greater of the risk-based capital requirement for 
the residual interest as calculated under sections II.B.5(f)(2) through 
(3) of this appendix A or the full risk-based capital requirement for 
the assets transferred.
    (g) Positions that are not rated by an NRSRO. A bank's position 
(other than a residual interest) in a securitization or structured 
finance program that is not rated by an NRSRO may be risk-weighted based 
on the bank's determination of the credit rating of the position, as 
specified in Table C of this appendix A, multiplied by the face amount 
of the position. In order to qualify for this treatment, the bank's 
system for determining the credit rating of the position must meet one 
of the three alternative standards set out in section II.B.5(g)(1) 
through (3) of this appendix A.

                                 Table C
------------------------------------------------------------------------
                                                            Risk Weight
          Rating category                 Examples         (In percent)
------------------------------------------------------------------------
Investment grade..................  BBB or better.......             100
One category below investment       BB..................             200
 grade.
------------------------------------------------------------------------


[[Page 210]]

    (1) Internal risk rating used for asset-backed programs. A bank 
extends a direct credit substitute (but not a purchased credit-enhancing 
interest-only strip) to an asset-backed commercial paper program 
sponsored by the bank and the bank is able to demonstrate to the 
satisfaction of the FDIC, prior to relying upon its use, that the bank's 
internal credit risk rating system is adequate. Adequate internal credit 
risk rating systems usually contain the following criteria:\15\
---------------------------------------------------------------------------

    \15\ The adequacy of a bank's use of its internal credit risk rating 
system must be demonstrated to the FDIC considering the criteria listed 
in this section and the size and complexity of the credit exposures 
assumed by the bank.
---------------------------------------------------------------------------

    (i) The internal credit risk rating system is an integral part of 
the bank's risk management system that explicitly incorporates the full 
range of risks arising from a bank's participation in securitization 
activities;
    (ii) Internal credit ratings are linked to measurable outcomes, such 
as the probability that the position will experience any loss, the 
position's expected loss given default, and the degree of variance in 
losses given default on that position;
    (iii) The internal credit risk rating system must separately 
consider the risk associated with the underlying loans or borrowers, and 
the risk associated with the structure of a particular securitization 
transaction;
    (iv) The internal credit risk rating system identifies gradations of 
risk among ``pass'' assets and other risk positions;
    (v) The internal credit risk rating system must have clear, explicit 
criteria (including for subjective factors), that are used to classify 
assets into each internal risk grade;
    (vi) The bank must have independent credit risk management or loan 
review personnel assigning or reviewing the credit risk ratings;
    (vii) An internal audit procedure should periodically verify that 
internal risk ratings are assigned in accordance with the bank's 
established criteria;
    (viii) The bank must monitor the performance of the internal credit 
risk ratings assigned to nonrated, nontraded direct credit substitutes 
over time to determine the appropriateness of the initial credit risk 
rating assignment and adjust individual credit risk ratings, or the 
overall internal credit risk ratings system, as needed; and
    (ix) The internal credit risk rating system must make credit risk 
rating assumptions that are consistent with, or more conservative than, 
the credit risk rating assumptions and methodologies of NRSROs.
    (2) Program Ratings. A bank extends a direct credit substitute or 
retains a recourse obligation (but not a residual interest) in 
connection with a structured finance program and an NRSRO has reviewed 
the terms of the program and stated a rating for positions associated 
with the program. If the program has options for different combinations 
of assets, standards, internal credit enhancements and other relevant 
factors, and the NRSRO specifies ranges of rating categories to them, 
the bank may apply the rating category applicable to the option that 
corresponds to the bank's position. In order to rely on a program 
rating, the bank must demonstrate to the FDIC's satisfaction that the 
credit risk rating assigned to the program meets the same standards 
generally used by NRSROs for rating traded positions. The bank must also 
demonstrate to the FDIC's satisfaction that the criteria underlying the 
NRSRO's assignment of ratings for the program are satisfied for the 
particular position issued by the bank. If a bank participates in a 
securitization sponsored by another party, the FDIC may authorize the 
bank to use this approach based on a program rating obtained by the 
sponsor of the program.
    (3) Computer Program. A bank is using an acceptable credit 
assessment computer program that has been developed by an NRSRO to 
determine the rating of a direct credit substitute or recourse 
obligation (but not a residual interest) extended in connection with a 
structured finance program. In order to rely on the rating determined by 
the computer program, the bank must demonstrate to the FDIC's 
satisfaction that ratings under the program correspond credibly and 
reliably with the ratings of traded positions. The bank must also 
demonstrate to the FDIC's satisfaction the credibility of the program in 
financial markets, the reliability of the program in assessing credit 
risk, the applicability of the program to the bank's position, and the 
proper implementation of the program.
    (h) Limitations on risk-based capital requirements--(1) Low-level 
exposure rule. If the maximum exposure to loss retained or assumed by a 
bank in connection with a recourse obligation, a direct credit 
substitute, or a residual interest is less than the effective risk-based 
capital requirement for the credit-enhanced assets, the risk-based 
capital required under this appendix A is limited to the bank's maximum 
contractual exposure, less any recourse liability account established in 
accordance with generally accepted accounting principles. This 
limitation does not apply when a bank provides credit enhancement beyond 
any contractual obligation to support assets it has sold.
    (2) Mortgage-related securities or participation certificates 
retained in a mortgage loan swap. If a bank holds a mortgage-related 
security or a participation certificate as a result of a mortgage loan 
swap with recourse, capital is required to support the recourse

[[Page 211]]

obligation plus the percentage of the mortgage-related security or 
participation certificate that is not covered by the recourse 
obligation. The total amount of capital required for the on-balance 
sheet asset and the recourse obligation, however, is limited to the 
capital requirement for the underlying loans, calculated as if the bank 
continued to hold these loans as an on-balance sheet asset.
    (3) Related on-balance sheet assets. If a recourse obligation or 
direct credit substitute also appears as a balance sheet asset, the 
asset is risk-weighted only under this section II.B.5 of this appendix 
A, except in the case of loan servicing assets and similar arrangements 
with embedded recourse obligations or direct credit substitutes. In that 
case, the on-balance sheet servicing assets and the related recourse 
obligations or direct credit substitutes must both be separately risk 
weighted and incorporated into the risk-based capital calculation.
    (i) Alternative Capital Calculation for Small Business Obligations.
    (1) Definitions. For purposes of this section II.B. 5(i):
    (i) Qualified bank means a bank that:
    (A) Is well capitalized as defined in Sec. 325.103(b)(1) without 
applying the capital treatment described in this section II.B.5(i), or
    (B) Is adequately capitalized as defined in Sec. 325.103(b)(2) 
without applying the capital treatment described in this section 
II.B.5(i) and has received written permission by order of the FDIC to 
apply the capital treatment described in this section II.B.5(i).
    (iii) Small business means a business that meets the criteria for a 
small business concern established by the Small Business Administration 
in 13 CFR part 121 pursuant to 15 U.S.C. 632.
    (2) Capital and reserve requirements. Notwithstanding the risk-based 
capital treatment outlined in any other paragraph (other than paragraph 
(i) of this section II.B.5), with respect to a transfer with recourse of 
a small business loan or a lease to a small business of personal 
property that is a sale under generally accepted accounting principles, 
and for which the bank establishes and maintains a non-capital reserve 
under generally accepted accounting principles sufficient to meet the 
reasonable estimated liability of the bank under the recourse 
arrangement; a qualified bank may elect to include only the face amount 
of its recourse in its risk-weighted assets for purposes of calculating 
the bank's risk-based capital ratio.
    (3) Limit on aggregate amount of recourse. The total outstanding 
amount of recourse retained by a qualified bank with respect to 
transfers of small business loans and leases to small businesses of 
personal property and included in the risk-weighted assets of the bank 
as described in section II.B.5(i)(2) of this appendix A may not exceed 
15 percent of the bank's total risk-based capital, unless the FDIC 
specifies a greater amount by order.
    (4) Bank that ceases to be qualified or that exceeds aggregate 
limit. If a bank ceases to be a qualified bank or exceeds the aggregate 
limit in section II.B.5(i)(3) of this appendix A, the bank may continue 
to apply the capital treatment described in section II.B.5(i)(2) of this 
appendix A to transfers of small business loans and leases to small 
businesses of personal property that occurred when the bank was 
qualified and did not exceed the limit.
    (5) Prompt correction action not affected. (i) A bank shall compute 
its capital without regard to this section II.B.5(i) for purposes of 
prompt corrective action (12 U.S.C. 1831o) unless the bank is a well 
capitalized bank (without applying the capital treatment described in 
this section II.B.5(i)) and, after applying the capital treatment 
described in this section II.B.5(i), the bank would be well capitalized.
    (ii) A bank shall compute its capital without regard to this section 
II.B.5(i) for purposes of 12 U.S.C. 1831o(g) regardless of the bank's 
capital level.
    (6) Nonfinancial equity investments. (i) General. A bank must deduct 
from its Tier 1 capital the sum of the appropriate percentage (as 
determined below) of the adjusted carrying value of all nonfinancial 
equity investments held by the bank or by its direct or indirect 
subsidiaries. For purposes of this section II.B.(6), investments held by 
a bank include all investments held directly or indirectly by the bank 
or any of its subsidiaries.
    (ii) Scope of nonfinancial equity investments. A nonfinancial equity 
investment means any equity investment held by the bank in a 
nonfinancial company: through a small business investment company (SBIC) 
under section 302(b) of the Small Business Investment Act of 1958 (15 
U.S.C. 682(b));\16\ under the portfolio investment provisions of 
Regulation K issued by the Board of Governors of the Federal Reserve 
System (12 CFR 211.8(c)(3)); or under section 24 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831a), other than an investment held in 
accordance with section 24(f) of that Act.\17\ A nonfinancial company is 
an entity that engages in any activity that has

[[Page 212]]

not been determined to be permissible for the bank to conduct directly, 
or to be financial in nature or incidental to financial activities under 
section 4(k) of the Bank Holding Company Act (12 U.S.C. 1843(k)).
---------------------------------------------------------------------------

    \16\ An equity investment made under section 302(b) of the Small 
Business Investment Act of 1958 in a SBIC that is not consolidated with 
the bank is treated as a nonfinancial equity investment.
    \17\ The Board of Directors of the FDIC, acting directly, may, in 
exceptional cases and after a review of the proposed activity, permit a 
lower capital deduction for investments approved by the Board of 
Directors under section 24 of the FDI Act so long as the bank's 
investments under section 24 and SBIC investments represent, in the 
aggregate, less than 15 percent of the Tier 1 capital of the bank. The 
FDIC reserves the authority to impose higher capital charges on any 
investment where appropriate.
---------------------------------------------------------------------------

    (iii) Amount of deduction from core capital. (A) The bank must 
deduct from its Tier 1 capital the sum of the appropriate percentages, 
as set forth in the table following this paragraph, of the adjusted 
carrying value of all nonfinancial equity investments held by the bank. 
The amount of the percentage deduction increases as the aggregate amount 
of nonfinancial equity investments held by the bank increases as a 
percentage of the bank's Tier 1 capital.

              Deduction for Nonfinancial Equity Investments
------------------------------------------------------------------------
 Aggregate adjusted carrying value
     of all nonfinancial equity
    investments held directly or     Deduction from Tier 1 Capital (as a
    indirectly by the bank (as a     percentage of the adjusted carrying
percentage of the Tier 1 capital of        value of the investment)
           the bank) \1\
------------------------------------------------------------------------
Less than 15 percent...............  8 percent.
15 percent to 24.99 percent........  12 percent.
25 percent and above...............  25 percent.
------------------------------------------------------------------------
\1\ For purposes of calculating the adjusted carrying value of
  nonfinancial equity investments as a percentage of Tier 1 capital,
  Tier 1 capital is defined as the sum of core capital elements net of
  goodwill and net of all identifiable intangible assets other than
  mortgage servicing assets, nonmortgage servicing assets and purchased
  credit card relationships, but prior to the deduction for any
  disallowed mortgage servicing assets, any disallowed nonmortgage
  servicing assets, any disallowed purchased credit card relationships,
  any disallowed credit-enhancing interest-only strips (both purchased
  and retained), any disallowed deferred tax assets, and any
  nonfinancial equity investments.

    (B) These deductions are applied on a marginal basis to the portions 
of the adjusted carrying value of nonfinancial equity investments that 
fall within the specified ranges of the parent bank's Tier 1 capital. 
For example, if the adjusted carrying value of all nonfinancial equity 
investments held by a bank equals 20 percent of the Tier 1 capital of 
the bank, then the amount of the deduction would be 8 percent of the 
adjusted carrying value of all investments up to 15 percent of the 
bank's Tier 1 capital, and 12 percent of the adjusted carrying value of 
all investments in excess of 15 percent of the bank's Tier 1 capital.
    (C) The total adjusted carrying value of any nonfinancial equity 
investment that is subject to deduction under this paragraph is excluded 
from the bank's risk-weighted assets for purposes of computing the 
denominator of the bank's risk-based capital ratio and from total assets 
for purposes of calculating the denominator of the leverage ratio.\18\
---------------------------------------------------------------------------

    \18\ For example, if 8 percent of the adjusted carrying value of a 
nonfinancial equity investment is deducted from Tier 1 capital, the 
entire adjusted carrying value of the investment will be excluded from 
both risk-weighted assets and total assets in calculating the respective 
denominators for the risk-based capital and leverage ratios.
---------------------------------------------------------------------------

    (D) This Appendix establishes minimum risk-based capital ratios and 
banks are at all times expected to maintain capital commensurate with 
the level and nature of the risks to which they are exposed. The risk to 
a bank from nonfinancial equity investments increases with its 
concentration in such investments and strong capital levels above the 
minimum requirements are particularly important when a bank has a high 
degree of concentration in nonfinancial equity investments (e.g., in 
excess of 50 percent of Tier 1 capital). The FDIC intends to monitor 
banks and apply heightened supervision to equity investment activities 
as appropriate, including where the bank has a high degree of 
concentration in nonfinancial equity investments, to ensure that each 
bank maintains capital levels that are appropriate in light of its 
equity investment activities. The FDIC also reserves authority to impose 
a higher capital charge in any case where the circumstances, such as the 
level of risk of the particular investment or portfolio of investments, 
the risk management systems of the bank, or other information, indicate 
that a higher minimum capital requirement is appropriate.
    (iv) SBIC investments. (A) No deduction is required for nonfinancial 
equity investments that are held by a bank through one or more SBICs 
that are consolidated with the bank or in one or more SBICs that are not 
consolidated with the bank to the extent that all such investments, in 
the aggregate, do not exceed 15 percent of the bank's Tier 1 capital. 
Any nonfinancial equity investment that is held through an SBIC or in an 
SBIC and that is not required to be deducted from Tier 1 capital under 
this section II.B.(6)(iv)

[[Page 213]]

will be assigned a 100 percent risk-weight and included in the bank's 
consolidated risk-weighted assets.\19\
---------------------------------------------------------------------------

    \19\ If a bank has an investment in a SBIC that is consolidated for 
accounting purposes but that is not wholly owned by the bank, the 
adjusted carrying value of the bank's nonfinancial equity investments 
through the SBIC is equal to the bank's proportionate share of the 
adjusted carrying value of the SBIC's investments in nonfinancial 
companies. The remainder of the SBIC's adjusted carrying value (i.e., 
the minority interest holders' proportionate share) is excluded from the 
risk-weighted assets of the bank. If a bank has an investment in a SBIC 
that is not consolidated for accounting purposes and has current 
information that identifies the percentage of the SBIC's assets that are 
equity investments in nonfinancial companies, the bank may reduce the 
adjusted carrying value of its investment in the SBIC proportionately to 
reflect the percentage of the adjusted carrying value of the SBIC's 
assets that are not equity investments in nonfinancial companies. If a 
bank reduces the adjusted carrying value of its investment in a non-
consolidated SBIC to reflect financial investments of the SBIC, the 
amount of the adjustment will be risk weighted at 100 percent and 
included in the bank's risk-weighted assets.
---------------------------------------------------------------------------

    (B) To the extent the adjusted carrying value of all nonfinancial 
equity investments that a bank holds through one or more SBICs that are 
consolidated with the bank or in one or more SBICs that are not 
consolidated with the bank exceeds, in the aggregate, 15 percent of the 
bank's Tier 1 capital, the appropriate percentage of such amounts (as 
set forth in the table in section II.B.(6)(iii)(A)) must be deducted 
from the bank's common stockholders' equity in determining the bank's 
Tier 1 capital. In addition, the aggregate adjusted carrying value of 
all nonfinancial equity investments held by a bank through a 
consolidated SBIC and in a non-consolidated SBIC (including any 
investments for which no deduction is required) must be included in 
determining, for purposes of the table in section II.B.(6)(iii)(A), the 
total amount of nonfinancial equity investments held by the bank in 
relation to its Tier 1 capital.
    (v) Transition provisions. No deduction under this section II.B.(6) 
is required to be made with respect to the adjusted carrying value of 
any nonfinancial equity investment (or portion of such an investment) 
that was made by the bank prior to March 13, 2000, or that was made by 
the bank after such date pursuant to a binding written commitment \20\ 
entered into prior to March 13, 2000, provided that in either case the 
bank has continuously held the investment since the relevant investment 
date.\21\ For purposes of this section II.B.(6)(v) a nonfinancial equity 
investment made prior to March 13, 2000, includes any shares or other 
interests received by the bank through a stock split or stock dividend 
on an investment made prior to March 13, 2000, provided the bank 
provides no consideration for the shares or interests received and the 
transaction does not materially increase the bank's proportional 
interest in the company. The exercise on or after March 13, 2000, of 
options or warrants acquired prior to March 13, 2000, is not considered 
to be an investment made prior to March 13, 2000, if the bank provides 
any consideration for the shares or interests received upon exercise of 
the options or warrants. Any nonfinancial equity investment (or portion 
thereof) that is not required to be deducted from Tier 1 capital under 
this section II.B.(6)(v) must be included in determining the total 
amount of nonfinancial equity investments held by the bank in relation 
to its Tier 1 capital for purposes of the table in section 
II.B.(6)(iii)(A). In addition, any nonfinancial equity investment (or 
portion thereof) that is not required to be deducted from Tier 1 capital 
under this section II.B.(6)(v) will be assigned a 100-percent risk 
weight and included in the bank's consolidated risk-weighted assets.
---------------------------------------------------------------------------

    \20\ A ``binding written commitment'' means a legally binding 
written agreement that requires the bank to acquire shares or other 
equity of the company, or make a capital contribution to the company, 
under terms and conditions set forth in the agreement. Options, 
warrants, and other agreements that give a bank the right to acquire 
equity or make an investment, but do not require the bank to take such 
actions, are not considered a binding written commitment for purposes of 
this section II.B.(6)(v).
    \21\ For example, if a bank made an equity investment in 100 shares 
of a nonfinancial company prior to March 13, 2000, the adjusted carrying 
value of that investment would not be subject to a deduction under this 
section II.B.(6). However, if the bank made any additional equity 
investment in the company after March 13, 2000, such as by purchasing 
additional shares of the company (including through the exercise of 
options or warrants acquired before or after March 13, 2000) or by 
making a capital contribution to the company and such investment was not 
made pursuant to a binding written commitment entered into before March 
13, 2000, the adjusted carrying value of the additional investment would 
be subject to a deduction under this section II.B.(6). In addition, if 
the bank sold and repurchased, after March 13, 2000, 40 shares of the 
company, the adjusted carrying value of those 40 shares would be subject 
to a deduction under this section II.B.(6).

---------------------------------------------------------------------------

[[Page 214]]

    (vi) Adjusted carrying value. (A) For purposes of this section 
II.B.(6), the ``adjusted carrying value'' of investments is the 
aggregate value at which the investments are carried on the balance 
sheet of the bank reduced by any unrealized gains on those investments 
that are reflected in such carrying value but excluded from the bank's 
Tier 1 capital and associated deferred tax liabilities. For example, for 
equity investments held as available-for-sale (AFS), the adjusted 
carrying value of the investments would be the aggregate carrying value 
of those investments (as reflected on the consolidated balance sheet of 
the bank) less any unrealized gains on those investments that are 
included in other comprehensive income and not reflected in Tier 1 
capital, and associated deferred tax liabilities.\22\
---------------------------------------------------------------------------

    \22\ Unrealized gains on available-for-sale equity investments may 
be included in Tier 2 capital to the extent permitted under section 
I.A.(2)(f) of this appendix A. In addition, the net unrealized losses on 
available-for-sale equity investments are deducted from Tier 1 capital 
in accordance with section I.A.(1) of this appendix A.
---------------------------------------------------------------------------

    (B) As discussed above with respect to consolidated SBICs, some 
equity investments may be in companies that are consolidated for 
accounting purposes. For investments in a nonfinancial company that is 
consolidated for accounting purposes under generally accepted accounting 
principles, the bank's adjusted carrying value of the investment is 
determined under the equity method of accounting (net of any intangibles 
associated with the investment that are deducted from the bank's core 
capital in accordance with section I.A.(1) of this appendix A). Even 
though the assets of the nonfinancial company are consolidated for 
accounting purposes, these assets (as well as the credit equivalent 
amounts of the company's off-balance sheet items) should be excluded 
from the bank's risk-weighted assets for regulatory capital purposes.
    (vii) Equity investments. For purposes of this section II.B.(6), an 
equity investment means any equity instrument (including common stock, 
preferred stock, partnership interests, interests in limited liability 
companies, trust certificates and warrants and call options that give 
the holder the right to purchase an equity instrument), any equity 
feature of a debt instrument (such as a warrant or call option), and any 
debt instrument that is convertible into equity where the instrument or 
feature is held under one of the legal authorities listed in section 
II.B.(6)(ii) of this appendix A. An investment in any other instrument 
(including subordinated debt) may be treated as an equity investment if, 
in the judgment of the FDIC, the instrument is the functional equivalent 
of equity or exposes the bank to essentially the same risks as an equity 
instrument.
    6. Asset-backed commercial paper programs. a. An asset-backed 
commercial paper (ABCP) program typically is a program through which a 
bank provides funding to its corporate customers by sponsoring and 
administering a bankruptcy-remote special purpose entity that purchases 
asset pools from, or extends loans to, the bank's customers. The ABCP 
program raises the cash to provide the funding through the issuance of 
commercial paper in the market.
    b. A bank that qualifies as a primary beneficiary and must 
consolidate an ABCP program that is defined as a variable interest 
entity under generally accepted accounting principles may exclude the 
consolidated ABCP program assets from risk-weighted assets provided that 
the bank is the sponsor of the consolidated ABCP program. If a bank 
excludes such consolidated ABCP program assets, the bank must assess the 
appropriate risk-based capital charge against any risk exposures of the 
bank arising in connection with such ABCP programs, including direct 
credit substitutes, recourse obligations, residual interests, liquidity 
facilities, and loans, in accordance with sections II.B.5., II.C., and 
II.D. of this appendix.
    c. This capital treatment for consolidated assets of certain ABCP 
programs will be effective from July 1, 2003 and will expire on April 1, 
2004.

         C. Risk Weights for Balance Sheet Assets (see Table II)

    The risk-based capital framework contains four risk weight 
categories--0 percent, 20 percent, 50 percent and 100 percent. In 
general, if a particular item can be placed in more than one risk 
category, it is assigned to the category that has the lowest risk 
weight. An explanation of the components of each category follows:
    Category 1--Zero Percent Risk Weight. a. This category includes cash 
(domestic and foreign) owned and held in all offices of the bank or in 
transit; balances due from Federal Reserve Banks and central banks in 
other OECD countries; the portions of local currency claims on or 
unconditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency; and gold bullion 
held in the bank's own vaults or in another bank's vaults on an 
allocated basis, to the extent it is offset by gold bullion 
liabilities.\23\
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    \23\ All other bullion holdings are to be assigned to the 100 
percent risk weight category.

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[[Page 215]]

    b. The zero percent risk category also includes direct claims \24\ 
(including securities, loans, and leases) on, and the portions of claims 
that are unconditionally guaranteed by, OECD central governments \25\ 
and U.S. Government agencies.\26\ Federal Reserve Bank stock also is 
included in this category.
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    \24\ For purposes of determining the appropriate risk weights for 
this risk-based capital framework, the terms claims and securities refer 
to loans or other debt obligations of the entity on whom the claim is 
held. Investments in the form of stock or equity holdings in commercial 
or financial firms are generally assigned to the 100 percent risk 
category.
    \25\ A central government is defined to include departments and 
ministries, including the central bank, of the central government. The 
U.S. central bank includes the 12 Federal Reserve Banks. The definition 
of central government does not include state, provincial or local 
governments or commercial enterprises owned by the central government. 
In addition, it does not include local government entities or commercial 
enterprises whose obligations are guaranteed by the central government. 
OECD central governments are defined as central governments of the OECD-
based group of countries. Non-OECD central governments are defined as 
central governments of countries that do not belong to the OECD-based 
group of countries.
    \26\ For risk-based capital purposes U.S. Government agency is 
defined as an instrumentality of the U.S. Government whose debt 
obligations are fully and explicitly guaranteed as to the timely payment 
of principal and interest by the full faith and credit of the U.S. 
Government. These agencies include the Government National Mortgage 
Association (GNMA), the Veterans Administration (VA), the Federal 
Housing Administration (FHA), the Farmers Home Administration (FHA), the 
Export-Import Bank (Exim Bank), the Overseas Private Investment 
Corporation (OPIC), the Commodity Credit Corporation (CCC), and the 
Small Business Administration (SBA). U.S. Government agencies generally 
do not directly issue securities to the public; however, a number of 
U.S. Government agencies, such as GNMA, guarantee securities that are 
publicly held.
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    c. This category also includes claims on, and claims guaranteed by, 
qualifying securities firms incorporated in the United States or other 
members of the OECD-based group of countries that are collateralized by 
cash on deposit in the lending bank or by securities issued or 
guaranteed by the United States or OECD central governments (including 
U.S. government agencies), provided that a positive margin of collateral 
is required to be maintained on such a claim on a daily basis, taking 
into account any change in a bank's exposure to the obligor or 
counterparty under the claim in relation to the market value of the 
collateral held in support of the claim.
    Category 2--20 Percent Risk Weight. a. This category includes short-
term claims (including demand deposits) on, and portions of short-term 
claims that are guaranteed \27\ by, U.S. depository institutions \28\ 
and foreign banks;\29\ portions of claims collateralized by cash held in 
a segregated deposit account of the lending bank; cash items in process 
of collection, both foreign and domestic; and long-term claims on, and 
portions of long-term claims guaranteed by, U.S. depository institutions 
and OECD banks.\30\This category

[[Page 216]]

also includes a claim \31\ on, or guaranteed by, qualifying securities 
firms incorporated in the United States or other member of the OECD-
based group of countries \32\ provided that: the qualifying securities 
firm has a long-term issuer credit rating, or a rating on at least one 
issue of long-term debt, in one of the three highest investment grade 
rating categories from a nationally recognized statistical rating 
organization; or the claim is guaranteed by the firm's parent company 
and the parent company has such a rating. If ratings are available from 
more than one rating agency, the lowest rating will be used to determine 
whether the rating requirement has been met. This category also includes 
a collateralized claim on a qualifying securities firm in such a 
country, without regard to satisfaction of the rating standard, provided 
that the claim arises under a contract that:
    (1) Is a reverse repurchase/repurchase agreement or securities 
lending/borrowing transaction executed using standard industry 
documentation;
    (2) Is collateralized by debt or equity securities that are liquid 
and readily marketable;
    (3) Is marked-to-market daily;
    (4) Is subject to a daily margin maintenance requirement under the 
standardized documentation; and
    (5) Can be liquidated, terminated, or accelerated immediately in 
bankruptcy or similar proceeding, and the security or collateral 
agreement will not be stayed or avoided, under applicable law of the 
relevant jurisdiction.\33\
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    \27\ Claims guaranteed by U.S. depository institutions and foreign 
banks include risk participations in both bankers acceptances and 
standby letters of credit, as well as participations in commitments, 
that are conveyed to other U.S. depository institutions or foreign 
banks.
    \28\ U.S. depository institutions are defined to include branches 
(foreign and domestic) of federally-insured banks and depository 
institutions chartered and headquartered in the 50 states of the United 
States, the District of Columbia, Puerto Rico, and U.S. territories and 
possessions. The definition encompasses banks, mutual or stock savings 
banks, savings or building and loan associations, cooperative banks, 
credit unions, international banking facilities of domestic depository 
institutions, and U.S.-chartered depository institutions owned by 
foreigners. However, this definition excludes branches and agencies of 
foreign banks located in the U.S. and bank holding companies.
    \29\ Foreign banks are distinguished as either OECD banks or non-
OECD banks. OECD banks include banks and their branches (foreign and 
domestic) organized under the laws of countries (other than the U.S.) 
that belong to the OECD-based group of countries. Non-OECD banks include 
banks and their branches (foreign and domestic) organized under the laws 
of countries that do not belong to the OECD-based group of countries. 
For risk-based capital purposes, a bank is defined as an institution 
that engages in the business of banking; is recognized as a bank by the 
bank supervisory or monetary authorities of the country of its 
organization or principal banking operations; receives deposits to a 
substantial extent in the regular course of business; and has the power 
to accept demand deposits.
    \30\ Long-term claims on, or guaranteed by, non-OECD banks and all 
claims on bank holding companies are assigned to the 100 percent risk 
weight category, as are holdings of bank-issued securities that qualify 
as capital of the issuing banks for risk-based capital purposes.
    \31\ Claims on a qualifying securities firm that are instruments the 
firm, or its parent company, uses to satisfy its applicable capital 
requirements are not eligible for this risk weight.
    \32\ With regard to securities firms incorporated in the United 
States, qualifying securities firms are those securities firms that are 
broker-dealers registered with the Securities and Exchange Commission 
(SEC) and are in compliance with the SEC's net capital rule, 17 CFR 
240.15c3-1. With regard to securities firms incorporated in any other 
country in the OECD-based group of countries, qualifying securities 
firms are those securities firms that a bank is able to demonstrate are 
subject to consolidated supervision and regulation (covering their 
direct and indirect subsidiaries, but not necessarily their parent 
organizations) comparable to that imposed on banks in OECD countries. 
Such regulation must include risk-based capital requirements comparable 
to those applied to banks under the Accord on International Convergence 
of Capital Measurement and Capital Standards (1988, as amended in 1998) 
(Basel Accord). Claims on a qualifying securities firm that are 
instruments the firm, or its parent company, uses to satisfy its 
applicable capital requirements are not eligible for this risk weight 
and are generally assigned to at least a 100 percent risk weight. In 
addition, certain claims on qualifying securities firms are eligible for 
a zero percent risk weight if the claims are collateralized by cash on 
deposit in the lending bank or by securities issued or guaranteed by the 
United States or OECD central governments (including U.S. government 
agencies), provided that a positive margin of collateral is required to 
be maintained on such a claim on a daily basis, taking into account any 
change in a bank's exposure to the obligor or counterparty under the 
claim in relation to the market value of the collateral held in support 
of the claim.
    \33\ For example, a claim is exempt from the automatic stay in 
bankruptcy in the United States if it arises under a securities contract 
or a repurchase agreement subject to section 555 or 559 of the 
Bankruptcy Code, respectively (11 U.S.C. 555 or 559), a qualified 
financial contract under section 11(e)(8) of the Federal Deposit 
Insurance Act (12 U.S.C. 1821(e)(8)), or a netting contract between 
financial institutions under sections 401-407 of the Federal Deposit 
Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4401-4407), or 
the Board's Regulation EE (12 CFR part 231).
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    b. This category also includes claims on, or portions of claims 
guaranteed by, U.S. Government-sponsored agencies;\34\ and portions of 
claims (including repurchase agreements) collateralized by securities 
issued or guaranteed by OECD central governments, U.S. Government 
agencies, or U.S. Government-sponsored agencies. Also included in the 20 
percent risk category are portions of claims that are conditionally 
guaranteed by OECD central governments and U.S. Government

[[Page 217]]

agencies,\35\ as well as portions of local currency claims that are 
conditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency.
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    \34\ For risk-based capital purposes, U.S. Government-sponsored 
agencies are defined as agencies originally established or chartered by 
the U.S. Government to serve public purposes specified by the U.S. 
Congress but whose debt obligations are not explicitly guaranteed by the 
full faith and credit of the U.S. Government. These agencies include the 
Federal Home Loan Mortgage Corporation (FHLMC), the Federal National 
Mortgage Association (FNMA), the Farm Credit System, the Federal Home 
Loan Bank System, and the Student Loan Marketing Association (SLMA). For 
risk-based capital purposes, claims on U.S. Government-sponsored 
agencies also include capital stock in a Federal Home Loan Bank that is 
held as a condition of membership in that Bank.
    \35\ For risk-based capital purposes, a conditional guarantee is 
deemed to exist if the validity of the guarantee by the OECD central 
government or the U.S. Government agency is dependent upon some 
affirmative action (e.g., servicing requirements on the part of the 
beneficiary of the guarantee). Portions of claims that are 
unconditionally guaranteed by OECD central governments or U.S. 
Government agencies are assigned to the zero percent risk category.
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    c. General obligation claims on, or portions of claims guaranteed 
by, the full faith and credit of states or other political subdivisions 
of the United States or other countries of the OECD-based group are also 
assigned to this 20 percent risk category.\36\ In addition, this 
category includes claims on the International Bank for Reconstruction 
and Development (World Bank), International Finance Corporation the 
Inter-American Development Bank, the Asian Development Bank, the African 
Development Bank, the European Investment Bank, the European Bank for 
Reconstruction and Development, the Nordic Investment Bank, and other 
multilateral lending institutions or regional development institutions 
in which the U.S. Government is a shareholder or contributing member, as 
well as portions of claims guaranteed by such organizations or 
collateralized by their securities.
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    \36\ Claims on, or guaranteed by, states or other political 
subdivisions of countries that do not belong to the OECD-based group of 
countries are to be placed in the 100 percent risk weight category.
---------------------------------------------------------------------------

    d. This category also includes recourse obligations, direct credit 
substitutes, residual interests (other than a credit-enhancing interest-
only strip) and asset- or mortgage-backed securities rated in the 
highest or second highest investment grade category, e.g., AAA, AA, in 
the case of long-term ratings, or the highest rating category, e.g., A-
1, P-1, in the case of short-term ratings.
    a. Category 3--50 Percent Risk Weight. This category includes loans 
fully secured by first liens \37\ on one-to-four family residential 
properties, provided that such loans have been approved in accordance 
with prudent underwriting standards, including standards relating to the 
loan amount as a percent of the appraised value of the property,\38\ and 
provided that the loans are not past due 90 days or more or carried in 
nonaccrual status.\39\ The types of loans that qualify as loans secured 
by one-to-four family residential properties are listed in the 
instructions for preparation of the Consolidated Reports of Condition 
and Income. These properties may be either owner-occupied or rented. In 
addition, for risk-based capital purposes, loans secured by one-to-four 
family residential properties include loans to builders with substantial 
project equity for the construction of one-to-four family residences 
that have been presold under firm contracts to purchasers who have 
obtained firm commitments for permanent qualifying mortgage loans and 
have made substantial earnest money deposits. Such loans to builders 
will be considered prudently underwritten only if the bank has obtained 
sufficient documentation that the buyer of the home intends to purchase 
the home (i.e., has a legally binding written sales contract) and has 
the ability to obtain a mortgage loan sufficient to purchase the home 
(i.e., has a firm written commitment for permanent financing of the home 
upon completion), provided the following criteria are met:
    (1) The purchaser is an individual(s) who intends to occupy the 
residence and is not a partnership, joint venture, trust, corporation, 
or any other entity (including an entity acting as a sole 
proprietorship) that is purchasing one or more of the homes for 
speculative purposes;
    (2) The builder must incur at least the first ten percent of the 
direct costs (i.e., actual costs of the land, labor, and material) 
before any drawdown is made under the construction loan and the 
construction loan may not exceed 80 percent of the sales price of the 
presold home;
    (3) The purchaser has made a substantial ``earnest money deposit'' 
of no less than three percent of the sales price of the home and the 
deposit must be subject to forfeiture if the purchaser terminates the 
sales contract; and
    (4) The earnest money deposit must be held in escrow by the bank 
financing the builder

[[Page 218]]

or by an independent party in a fiduciary capacity and the escrow 
agreement must provide that, in the event of default arising from the 
cancellation of the sales contract by the buyer, the escrow funds must 
first be used to defray any costs incurred by the bank.
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    \37\ If a bank holds the first and junior lien(s) on a residential 
property and no other party holds an intervening lien, the transactions 
are treated as a single loan secured by a first lien for purposes of 
determining the loan-to-value ratio and assigning a risk weight.
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    By order of the Board of Directors.
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    \38\ For risk-based capital purposes, the loan-to-value ratio 
generally is based upon the most current appraised value of the 
property. The appraisal should be performed in a manner consistent with 
the Federal banking agencies' real estate appraisal guidelines and with 
the bank's own appraisal guidelines.
    \39\ Real estate loans that do not meet all of the specified 
criteria or that are made for the purpose of property development are 
placed in the 100 percent risk category.
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    b. This category also includes loans fully secured by first liens on 
multifamily residential properties,\40\ provided that:
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    \40\ The types of loans that qualify as loans secured by multifamily 
residential properties are listed in the instructions for preparation of 
the Consolidated Reports of Condition and Income. In addition, from the 
standpoint of the selling bank, when a multifamily residential property 
loan is sold subject to a pro rata loss sharing arrangement which 
provides for the purchaser of the loan to share in any loss incurred on 
the loan on a pro rata basis with the selling bank, that portion of the 
loan is not subject to the risk-based capital standards. In connection 
with sales of multifamily residential property loans in which the 
purchaser of the loan shares in any loss incurred on the loan with the 
selling bank on other than a pro rata basis, the selling bank must treat 
these other loss sharing arrangements in accordance with section II.B.5 
of this appendix A.
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    (1) The loan amount does not exceed 80 percent of the value \41\ of 
the property securing the loan as determined by the most current 
appraisal or evaluation, whichever may be appropriate (75 percent if the 
interest rate on the loan changes over the term of the loan);
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    \41\ At the origination of a loan to purchase an existing property, 
the term ``value'' means the lesser of the actual acquisition cost or 
the estimate of value set forth in an appraisal or evaluation, whichever 
may be appropriate.
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    (2) For the property's most recent fiscal year, the ratio of annual 
net operating income generated by the property (before payment of any 
debt service on the loan) to annual debt service on the loan is not less 
than 120 percent (115 percent if the interest rate on the loan changes 
over the term of the loan) or, in the case of a property owned by a 
cooperative housing corporation or nonprofit organization, the property 
generates sufficient cash flow to provide comparable protection to the 
bank;
    (3) Amortization of principal and interest on the loan occurs over a 
period of not more than 30 years;
    (4) The minimum original maturity for repayment of principal on the 
loan is not less than seven years;
    (5) All principal and interest payments have been made on a timely 
basis in accordance with the terms of the loan for at least one year 
before the loan is placed in this category; \42\
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    \42\ In the case where the existing owner of a multifamily 
residential property refinances a loan on that property, all principal 
and interest payments on the loan being refinanced must have been made 
on a timely basis in accordance with the terms of that loan for at least 
the preceding year. The new loan must meet all of the other eligibility 
criteria in order to qualify for a 50 percent risk weight.
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    (6) The loan is not 90 days or more past due or carried in 
nonaccrual status; and
    (7) The loan has been made in accordance with prudent underwriting 
standards.
    c. This category also includes revenue (non-general obligation) 
bonds or similar obligations, including loans and leases, that are 
obligations of states or political subdivisions of the United States or 
other OECD countries, but for which the government entity is committed 
to repay the debt with revenues from the specific projects financed, 
rather than from general tax funds (e.g., municipal revenue bonds). In 
addition, the credit equivalent amount of derivative contracts that do 
not qualify for a lower risk weight are assigned to the 50 percent risk 
category.
    d. This category also includes recourse obligations, direct credit 
substitutes, residual interests (other than a credit-enhancing interest-
only strip) and asset- or mortgage-backed securities rated in the third 
highest investment grade category, e.g., A, in the case of long-term 
ratings, or the second highest rating category, e.g., A-2, P-2, in the 
case of short-term ratings.
    Category 4--100 Percent Risk Weight. (a) All assets not included in 
the categories above in section II.C of this appendix A, except the 
assets specifically included in the 200 percent category below in 
section II.C of this appendix A and assets that are otherwise risk 
weighted in accordance with section II.B.5 of this appendix A, are 
assigned to this category, which comprises standard risk assets. The 
bulk of the assets typically found in a loan portfolio would be assigned 
to the 100 percent category.
    (b) This category includes:
    (1) Long-term claims on, and the portions of long-term claims that 
are guaranteed by, non-OECD banks, and all claims on non-OECD central 
governments that entail some degree of transfer risk; \43\
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    \43\ Such assets include all non-local currency claims on, and the 
portions of claims that are guaranteed by, non-OECD central governments 
and those portions of local currency claims on, or guaranteed by, non-
OECD central governments that exceed the local currency liabilities held 
by the bank.
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    (2) All claims on foreign and domestic private-sector obligors not 
included in the categories above in section II.C of this appendix

[[Page 219]]

A (including loans to nondepository financial institutions and bank 
holding companies);
    (3) Claims on commercial firms owned by the public sector;
    (4) Customer liabilities to the bank on acceptances outstanding 
involving standard risk claims; \44\
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    \44\ Customer liabilities on acceptances outstanding involving 
nonstandard risk claims, such as claims on U.S. depository institutions, 
are assigned to the risk category appropriate to the identity of the 
obligor or, if relevant, the nature of the collateral or guarantees 
backing the claims. Portions of acceptances conveyed as risk 
participations to U.S. depository institutions or foreign banks are 
assigned to the 20 percent risk category appropriate to short-term 
claims guaranteed by U.S. depository institutions and foreign banks.
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    (5) Investments in fixed assets, premises, and other real estate 
owned;
    (6) Common and preferred stock of corporations, including stock 
acquired for debts previously contracted;
    (7) Commercial and consumer loans (except those assigned to lower 
risk categories due to recognized guarantees or collateral and loans 
secured by residential property that qualify for a lower risk weight);
    (8) Recourse obligations, direct credit substitutes, residual 
interests (other than a credit-enhancing interest-only strip) and asset-
or mortgage-backed securities rated in the lowest investment grade 
category, e.g., BBB, as well as certain positions (but not residual 
interests) which the bank rates pursuant to section section II.B.5(g) of 
this appendix A.;
    (9) Industrial-development bonds and similar obligations issued 
under the auspices of states or political subdivisions of the OECD-based 
group of countries for the benefit of a private party or enterprise 
where that party or enterprise, not the government entity, is obligated 
to pay the principal and interest;
    (10) All obligations of states or political subdivisions of 
countries that do not belong to the OECD-based group; and
    (11) Stripped mortgage-backed securities and similar instruments, 
such as interest-only strips that are not credit-enhancing and 
principal-only strips.
    (12) Claims representing capital of a qualifying securities firm.
    (c) The following assets also are assigned a risk weight of 100 
percent if they have not already been deducted from capital: investments 
in unconsolidated companies, joint ventures, or associated companies; 
instruments that qualify as capital issued by other banks; deferred tax 
assets; and mortgage servicing assets, nonmortgage servicing assets, and 
purchased credit card relationships.
    Category 5--200 Percent Risk Weight. This category includes:
    (a) Externally rated recourse obligations, direct credit 
substitutes, residual interests (other than a credit-enhancing interest-
only strip), and asset- and mortgage-backed securities that are rated 
one category below the lowest investment grade category, e.g., BB, to 
the extent permitted in section II.B.5(d) of this appendix A; and
    (b) A position (but not a residual interest) in a securitization or 
structured finance program that is not rated by an NRSRO for which the 
bank determines that the credit risk is equivalent to one category below 
investment grade, e.g., BB, to the extent permitted in section 
II.B.5.(g) of this appendix A.

    D. Conversion Factors for Off-Balance Sheet Items (see Table III)

    The face amount of an off-balance sheet item is generally 
incorporated into the risk-weighted assets in two steps. The face amount 
is first multiplied by a credit conversion factor, except as otherwise 
specified in section II.B.5 of this appendix A for direct credit 
substitutes and recourse obligations. The resultant credit equivalent 
amount is assigned to the appropriate risk category according to the 
obligor or, if relevant, the guarantor or the nature of the 
collateral.\45\ Table III to this appendix A sets forth the conversion 
factors for various types of off-balance-sheet items.
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    \45\ The sufficiency of collateral and guarantees for off-balance-
sheet items is determined by the market value of the collateral or the 
amount of the guarantee in relation to the face amount of the item, 
except for derivative contracts, for which this determination is 
generally made in relation to the credit equivalent amount. Collateral 
and guarantees are subject to the same provisions noted under section 
II.B. of this appendix A.
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    1. Items With a 100 Percent Conversion Factor. (a) Except as 
otherwise provided in section II.B.5. of this appendix A, the full 
amount of an asset or transaction supported, in whole or in part, by a 
direct credit substitute or a recourse obligation. Direct credit 
substitutes and recourse obligations are defined in section II.B.5. of 
this appendix A.
    (b) Sale and repurchase agreements, if not already included on the 
balance sheet, and forward agreements. Forward agreements are legally 
binding contractual obligations to purchase assets with drawdown which 
is certain at a specified future date. Such obligations include forward 
purchases, forward forward deposits placed,\46\ and partly-paid shares 
and securities; they do not include

[[Page 220]]

commitments to make residential mortgage loans or forward foreign 
exchange contracts.
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    \46\ Forward forward deposits accepted are treated as interest rate 
contracts.
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    (c) Securities lent by a bank are treated in one of two ways, 
depending upon whether the lender is exposed to risk of loss. If a bank, 
as agent for a customer, lends the customer's securities and does not 
indemnify the customer against loss, then the securities transaction is 
excluded from the risk-based capital calculation. On the other hand, if 
a bank lends its own securities or, acting as agent for a customer, 
lends the customer's securities and indemnifies the customer against 
loss, the transaction is converted at 100 percent and assigned to the 
risk weight category appropriate to the obligor or, if applicable, to 
the collateral delivered to the lending bank or the independent 
custodian acting on the lending bank's behalf.
    2. Items With a 50 Percent Conversion Factor. Transaction-related 
contingencies are to be converted at 50 percent. Such contingencies 
include bid bonds, performance bonds, warranties, and performance 
standby letters of credit related to particular transactions, as well as 
acquisitions of risk participations in performance standby letters of 
credits. Performance standby letters of credit (performance bonds) are 
irrevocable obligations of the bank to pay a third-party beneficiary 
when a customer (account party) fails to perform on some contractual 
nonfinancial obligation. Thus, performance standby letters of credit 
represent obligations backing the performance of nonfinancial or 
commercial contracts or undertakings. To the extent permitted by law or 
regulation, performance standby letters of credit include arrangements 
backing, among other things, subcontractors' and suppliers' performance, 
labor and materials contracts, and construction bids.
    The unused portion of commitments with an original maturity 
exceeding one year, including underwriting commitments and commercial 
and consumer credit commitments, also are to be converted at 50 percent. 
Original maturity is defined as the length of time between the date the 
commitment is issued and the earliest date on which: (1) The bank can at 
its option, unconditionally (without cause) cancel the commitment,\47\ 
and (2) the bank is scheduled to (and as a normal practice actually 
does) review the facility to determine whether or not it should be 
extended and, on at least an annual basis, continues to regularly review 
the facility. Facilities that are unconditionally cancelable (without 
cause) at any time by the bank are not deemed to be commitments, 
provided the bank makes a separate credit decision before each drawing 
under the facility.
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    \47\ In the case of home equity or mortgage lines of credit secured 
by liens on one-to-four family residential properties, a bank is deemed 
able to unconditionally cancel the commitment if, at its option, it can 
prohibit additional extensions of credit, reduce the credit line, and 
terminate the commitment to the full extent permitted by relevant 
Federal law.
---------------------------------------------------------------------------

    Commitments, for risk-based capital purposes, are defined as any 
arrangements that obligate a bank to extend credit in the form of loans 
or lease financing receivables; to purchase loans, securities, or other 
assets; or to participate in loans and leases. Commitments also include 
overdraft facilities, revolving credit, home equity and mortgage lines 
of credit, and similar transactions. Normally, commitments involve a 
written contract or agreement and a commitment fee, or some other form 
of consideration. Commitments are included in risk-weighted assets 
regardless of whether they contain material adverse change clauses or 
other provisions that are intended to relieve the issuer of its funding 
obligation under certain conditions.
    In the case of commitments structured as syndications where the bank 
is obligated only for its pro rata share, the risk-based capital 
framework includes only the bank's proportional share of such 
commitments. Thus, after a commitment has been converted at 50 percent, 
portions of commitments that have been conveyed to other U.S. depository 
institutions or OECD banks, but for which the originating bank retains 
the full obligation to the borrower if the participating bank fails to 
pay when the commitment is drawn upon, will be assigned to the 20 risk 
category. The acquisition of such a participation in a commitment would 
be converted at 50 percent and the credit equivalent amount would be 
assigned to the risk category that is appropriate for the account party 
obligor or, if relevant, to the nature of the collateral or guarantees.
    Revolving underwriting facilities (RUFs), note issuance facilities 
(NIFs), and other similar arrangements also are converted at 50 percent. 
These are facilities under which a borrower can issue on a revolving 
basis short-term notes in its own name, but for which the underwriting 
banks have a legally binding commitment either to purchase any notes the 
borrower is unable to sell by the rollover date or to advance funds to 
the borrower.
    3. Items With a 20 Percent Conversion Factor. Short-term, self-
liquidating, trade-related contingencies which arise from the movement 
of goods are converted at 20 percent. Such contingencies include 
commercial letters of credit and other documentary letters of credit 
collateralized by the underlying shipments.
    4. Items With a Zero Percent Conversion Factor. These include unused 
portions of commitments with an original maturity of one year or less, 
or which are unconditionally cancellable

[[Page 221]]

at any time (provided a separate credit decision is made before each 
drawing under the facility). Unused portions of retail credit card lines 
and related plans are deemed to be short-term commitments if the bank, 
in accordance with applicable law, has the unconditional option to 
cancel the credit line at any time.
    E. Derivative Contracts (Interest Rate, Exchange Rate, Commodity 
(including precious metal) and Equity Derivative Contracts)
    1. Credit equivalent amounts are computed for each of the following 
off-balance-sheet derivative contracts:
    (a) Interest Rate Contracts
    (i) Single currency interest rate swaps.
    (ii) Basis swaps.
    (iii) Forward rate agreements.
    (iv) Interest rate options purchased (including caps, collars, and 
floors purchased).
    (v) Any other instrument linked to interest rates that gives rise to 
similar credit risks (including when-issued securities and forward 
deposits accepted).
    (b) Exchange Rate Contracts
    (i) Cross-currency interest rate swaps.
    (ii) Forward foreign exchange contracts.
    (iii) Currency options purchased.
    (iv) Any other instrument linked to exchange rates that gives rise 
to similar credit risks.
    (c) Commodity (including precious metal) or Equity Derivative 
Contracts
    (i) Commodity- or equity-linked swaps.
    (ii) Commodity- or equity-linked options purchased.
    (iii) Forward commodity- or equity-linked contracts.
    (iv) Any other instrument linked to commodities or equities that 
gives rise to similar credit risks.
    2. Exchange rate contracts with an original maturity of 14 calendar 
days or less and derivative contracts traded on exchanges that require 
daily receipt and payment of cash variation margin may be excluded from 
the risk-based ratio calculation. Gold contracts are accorded the same 
treatment as exchange rate contracts except gold contracts with an 
original maturity of 14 calendar days or less are included in the risk-
based calculation. Over-the-counter options purchased are included and 
treated in the same way as other derivative contracts.
    3. Credit Equivalent Amounts for Derivative Contracts. (a) The 
credit equivalent amount of a derivative contract that is not subject to 
a qualifying bilateral netting contract in accordance with section 
II.E.5. of this appendix A is equal to the sum of:
    (i) The current exposure (which is equal to the mark-to-market 
value,\48\ if positive, and is sometimes referred to as the replacement 
cost) of the contract; and
---------------------------------------------------------------------------

    \48\ Mark-to-market values are measured in dollars, regardless of 
the currency or currencies specified in the contract and should reflect 
changes in both underlying rates, prices and indices, and counterparty 
credit quality.
---------------------------------------------------------------------------

    (ii) An estimate of the potential future credit exposure.
    (b) The current exposure is determined by the mark-to-market value 
of the contract. If the mark-to-market value is positive, then the 
current exposure is equal to that mark-to-market value. If the mark-to-
market value is zero or negative, then the current exposure is zero.
    (c) The potential future credit exposure of a contract, including a 
contract with a negative mark-to-market value, is estimated by 
multiplying the notional principal amount of the contract by a credit 
conversion factor. Banks should, subject to examiner review, use the 
effective rather than the apparent or stated notional amount in this 
calculation. The credit conversion factors are:

                                            Conversion Factor Matrix
----------------------------------------------------------------------------------------------------------------
                                                                Exchange                  Precious
               Remaining maturity                  Interest     rate and      Equity      metals,       Other
                                                     rate         gold                  except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less...............................         0.0%         1.0%         6.0%         7.0%        10.0%
More than one year to five years...............         0.5%         5.0%         8.0%         7.0%        12.0%
More than five years...........................         1.5%         7.5%        10.0%         8.0%        15.0%
----------------------------------------------------------------------------------------------------------------

    (d) For contracts that are structured to settle outstanding exposure 
on specified dates and where the terms are reset such that the market 
value of the contract is zero on these specified dates, the remaining 
maturity is equal to the time until the next reset date. For interest 
rate contracts with remaining maturities of more than one year and that 
meet these criteria, the conversion factor is subject to a minimum value 
of 0.5 percent.
    (e) For contracts with multiple exchanges of principal, the 
conversion factors are to be multiplied by the number of remaining 
payments in the contract. Derivative contracts not explicitly covered by 
any of the columns of the conversion factor matrix are to be treated as 
``other commodities.''

[[Page 222]]

    (f) No potential future exposure is calculated for single currency 
interest rate swaps in which payments are made based upon two floating 
rate indices (so called floating/floating or basis swaps); the credit 
exposure on these contracts is evaluated solely on the basis of their 
mark-to-market values.
    4. Risk Weights and Avoidance of Double Counting. (a) Once the 
credit equivalent amount for a derivative contract, or a group of 
derivative contracts subject to a qualifying bilateral netting 
agreement, has been determined, that amount is assigned to the risk 
category appropriate to the counterparty, or, if relevant, the guarantor 
or the nature of any collateral. However, the maximum weight that will 
be applied to the credit equivalent amount of such contracts is 50 
percent.
    (b) In certain cases, credit exposures arising from the derivative 
contracts covered by these guidelines may already be reflected, in part, 
on the balance sheet. To avoid double counting such exposures in the 
assessment of capital adequacy and, perhaps, assigning inappropriate 
risk weights, counterparty credit exposures arising from the types of 
instruments covered by these guidelines may need to be excluded from 
balance sheet assets in calculating a bank's risk-based capital ratio.
    (c) The FDIC notes that the conversion factors set forth in section 
II.E.3. of appendix A, which are based on observed volatilities of the 
particular types of instruments, are subject to review and modification 
in light of changing volatilities or market conditions.
    (d) Examples of the calculation of credit equivalent amounts for 
these types of contracts are contained in Table IV of this appendix A.
    5. Netting. (a) For purposes of this appendix A, netting refers to 
the offsetting of positive and negative mark-to-market values when 
determining a current exposure to be used in the calculation of a credit 
equivalent amount. Any legally enforceable form of bilateral netting 
(that is, netting with a single counterparty) of derivative contracts is 
recognized for purposes of calculating the credit equivalent amount 
provided that:
    (i) The netting is accomplished under a written netting contract 
that creates a single legal obligation, covering all included individual 
contracts, with the effect that the bank would have a claim or 
obligation to receive or pay, respectively, only the net amount of the 
sum of the positive and negative mark-to-market values on included 
individual contracts in the event that a counterparty, or a counterparty 
to whom the contract has been validly assigned, fails to perform due to 
default, bankruptcy, liquidation, or similar circumstances;
    (ii) The bank obtains a written and reasoned legal opinion(s) 
representing that in the event of a legal challenge, including one 
resulting from default, insolvency, bankruptcy or similar circumstances, 
the relevant court and administrative authorities would find the bank's 
exposure to be such a net amount under:
    (1) The law of the jurisdiction in which the counterparty is 
chartered or the equivalent location in the case of noncorporate 
entities and, if a branch of the counterparty is involved, then also 
under the law of the jurisdiction in which the branch is located;
    (2) The law that governs the individual contracts covered by the 
netting contract; and
    (3) The law that governs the netting contract.
    (iii) The bank establishes and maintains procedures to ensure that 
the legal characteristics of netting contracts are kept under review in 
the light of possible changes in relevant law; and
    (iv) The bank maintains in its file documentation adequate to 
support the netting of derivative contracts, including a copy of the 
bilateral netting contract and necessary legal opinions.
    (b) A contract containing a walkaway clause is not eligible for 
netting for purposes of calculating the credit equivalent amount.\49\
---------------------------------------------------------------------------

    \49\ For purposes of this section, a walkaway clause means a 
provision in a netting contract that permits a non-defaulting 
counterparty to make lower payments than it would make otherwise under 
the contract, or no payment at all, to a defaulter or to the estate of a 
defaulter, even if a defaulter or the estate of a defaulter is a net 
creditor under the contract.
---------------------------------------------------------------------------

    (c) By netting individual contracts for the purpose of calculating 
its credit equivalent amount, a bank represents that it has met the 
requirements of this appendix A and all the appropriate documents are in 
the bank's files and available for inspection by the FDIC. Upon 
determination by the FDIC that a bank's files are inadequate or that a 
netting contract may not be legally enforceable under any one of the 
bodies of law described in paragraphs (ii)(1) through (3) of section 
II.E.5.(a) of this appendix A, underlying individual contracts may be 
treated as though they were not subject to the netting contract.
    (d) The credit equivalent amount of derivative contracts that are 
subject to a qualifying bilateral netting contract is calculated by 
adding:
    (i) The net current exposure of the netting contract; and
    (ii) The sum of the estimates of potential future exposure for all 
individual contracts subject to the netting contract, adjusted to

[[Page 223]]

take into account the effects of the netting contract.\50\
---------------------------------------------------------------------------

    \50\ For purposes of calculating potential future credit exposure 
for foreign exchange contracts and other similar contracts in which 
notional principal is equivalent to cash flows, total notional principal 
is defined as the net receipts to each party falling due on each value 
date in each currency.
---------------------------------------------------------------------------

    (e) The net current exposure is the sum of all positive and negative 
mark-to-market values of the individual contracts subject to the netting 
contract. If the net sum of the mark-to-market values is positive, then 
the net current exposure is equal to that sum. If the net sum of the 
mark-to-market values is zero or negative, then the net current exposure 
is zero.
    (f) The effects of the bilateral netting contract on the gross 
potential future exposure are recognized through application of a 
formula, resulting in an adjusted add-on amount (Anet). The 
formula, which employs the ratio of net current exposure to gross 
current exposure (NGR) is expressed as:

Anet = (0.4 x Agross) + 0.6(NGR x 
Agross)

    The effect of this formula is that Anet is the weighted 
average of Agross, and Agross adjusted by the NGR.
    (g) The NGR may be calculated in either one of two ways--referred to 
as the counterparty-by-counterparty approach and the aggregate approach.
    (i) Under the counterparty-by-counterparty approach, the NGR is the 
ratio of the net current exposure of the netting contract to the gross 
current exposure of the netting contract. The gross current exposure is 
the sum of the current exposures of all individual contracts subject to 
the netting contract calculated in accordance with section II.E. of this 
appendix A.
    (ii) Under the aggregate approach, the NGR is the ratio of the sum 
of all of the net current exposures for qualifying bilateral netting 
contracts to the sum of all of the gross current exposures for those 
netting contracts (each gross current exposure is calculated in the same 
manner as in section II.E.5.(g)(i) of this appendix A). Net negative 
mark-to-market values to individual counterparties cannot be used to 
offset net positive current exposures to other counterparties.
    (iii) A bank must use consistently either the counterparty-by-
counterparty approach or the aggregate approach to calculate the NGR. 
Regardless of the approach used, the NGR should be applied individually 
to each qualifying bilateral netting contract to determine the adjusted 
add-on for that netting contract.

                  III. Minimum Risk-Based Capital Ratio

    Subject to section II.B.5. of this appendix A, banks generally will 
be expected to meet a minimum ratio of qualifying total capital to risk-
weighted assets of 8 percent, of which at least 4 percentage points 
should be in the form of core capital (Tier 1). Any bank that does not 
meet the minimum risk-based capital ratio, or whose capital is otherwise 
considered inadequate, generally will be expected to develop and 
implement a capital plan for achieving an adequate level of capital, 
consistent with the provisions of this risk-based capital framework and 
Sec. 325.104, the specific circumstances affecting the individual bank, 
and the requirements of any related agreements between the bank and the 
FDIC.

                Table I--Definition of Qualifying Capital
------------------------------------------------------------------------
               Components                      Minimum requirements
------------------------------------------------------------------------
(1) CORE CAPITAL (Tier 1)..............  Must equal or exceed 4% of
                                          weighted-risk assets.
    (a) Common stockholders' equity....  No limit.\1\
    (b) Noncumulative perpetual          No limit.\1\
     preferred stock and any related
     surplus.
    (c) Minority interest in equity      No limit.\1\
     accounts of consolidated.
    (d) Less: All intangible assets      (\2\).
     other than certain mortgage
     servicing assets, nonmortgage
     servicing assets and purchased
     credit card relationships.
    (e) Less: Certain credit-enhancing   (\3\).
     interest-only strips and
     nonfinancial equity investments
     required to be deducted from
     capital.
    (f) Less: Certain deferred tax       (\4\).
     assets.
(2) SUPPLEMENTARY CAPITAL (Tier 2).....  Total of tier 2 is limited to
                                          100% of tier 1.\5\
    (a) Allowance for loan and lease     Limited to 1.25% of weighted-
     losses.                              risk assets.\5\
    (b) Unrealized gains on certain      Limited to 45% of pretax net
     equity securities.\6\.               unrealized gains.\6\
    (c) Cumulative perpetual and long-   No limit within tier 2; long-
     term preferred stock (original       term preferred is amortized
     maturity of 20 years or more) and    for capital purposes as it
     any related surplus.                 approaches maturity.
    (d) Auction rate and similar         No limit within Tier 2.
     preferred stock (both cumulative
     and non-cumulative).
    (e) Hybrid capital instruments       No limit within Tier 2.
     (including mandatory convertible
     debt securities).

[[Page 224]]

 
    (f) Term subordinated debt and       Term subordinated debt and
     intermediate-term preferred stock    intermediate-term preferred
     (original weighted average           stock are limited to 50% of
     maturity of five years or more).     Tier 1 \5\ and amortized for
                                          capital purposes as they
                                          approach maturity.
(3) DEDUCTIONS (from sum of tier 1 and
 tier 2)
    (a) Investments in banking and
     finance subsidiaries that are not
     consolidated for regulatory
     capital purposes
    (b) Intentional, reciprocal cross-
     holdings of capital securities
     issued by banks
    (c) Other deductions (such as        On a case-by-case basis or as a
     investment in other subsidiaries     matter of policy after formal
     or joint ventures) as determined     consideration of relevant
     by supervisory authority.            issues.
(4) TOTAL CAPITAL......................  Must equal or exceed 8% of
                                          weighted-risk assets.
------------------------------------------------------------------------
\1\ No express limits are placed on the amounts of nonvoting common,
  noncumulative perpetual preferred stock, and minority interests that
  may be recognized as part of Tier 1 capital. However, voting common
  stockholders' equity capital generally will be expected to be the
  dominant form of Tier 1 capital and banks should avoid undue reliance
  on other Tier 1 capital elements.
\2\ The amounts of mortgage servicing assets, nonmortgage servicing
  assets and purchased credit card relationships that can be recognized
  for purposes of calculating Tier 1 capital are subject to the
  limitations set forth in Sec.  325.5(f). All deductions are for
  capital purposes only; deductions would not affect accounting
  treatment.
\3\ The amounts of credit-enhancing interest-only strips that can be
  recognized for purposes of calculating Tier 1 capital are subject to
  the limitations set forth in Sec.  325.5(f). The amounts of
  nonfinancial equity investments that must be deducted for purposes of
  calculating Tier 1 capital are set forth in section II.B.(6) of
  appendix A to part 325.
\4\ Deferred tax assets are subject to the capital limitations set forth
  in Sec.  325.5(g).
\5\ Amounts in excess of limitations are permitted but do not qualify as
  capital.
\6\ Unrealized gains on equity securities are subject to the capital
  limitations set forth in paragraph I.A(2)(f) of appendix A to part
  325.

               Calculation of the Risk-Based Capital Ratio

    When calculating the risk-based capital ratio under the framework 
set forth in this statement of policy, qualifying total capital (the 
numerator) is divided by risk-weighted assets (the denominator). The 
process of determining the numerator for the ratio is summarized in 
Table I. The calculation of the denominator is based on the risk weights 
and conversion factors that are summarized in Tables II and III.
    When determining the amount of risk-weighted assets, balance sheet 
assets are assigned an appropriate risk weight (see Table II) and off-
balance sheet items are first converted to a credit equivalent amount 
(see Table III) and then assigned to one of the risk weight categories 
set forth in Table II.
    The balance sheet assets and the credit equivalent amount of off-
balance sheet items are then multiplied by the appropriate risk weight 
percentages and the sum of these risk-weighted amounts is the gross 
risk-weighted asset figure used in determining the denominator of the 
risk-based capital ratio. Any items deducted from capital when computing 
the amount of qualifying capital may also be excluded from risk-weighted 
assets when calculating the denominator for the risk-based capital 
ratio.

          Table II--Summary of Risk Weights and Risk Categories

                  Category 1--Zero Percent Risk Weight

    (1) Cash (domestic and foreign).
    (2) Balances due from Federal Reserve Banks and central banks in 
other OECD countries.
    (3) Direct claims on, and portions of claims unconditionally 
guaranteed by, the U.S. Treasury, U.S. Government agencies,\1\ or 
central governments in other OECD countries.
---------------------------------------------------------------------------

    \1\ For the purpose of calculating the risk-based capital ratio, a 
U.S. Government agency is defined as an instrumentality of the U.S. 
Government whose obligations are fully and explicitly guaranteed as to 
the timely repayment of principal and interest by the full faith and 
credit of the U.S. Government.
---------------------------------------------------------------------------

    (4) Portions of local currency claims on, or unconditionally 
guaranteed by, non-OECD central governments (including non-OECD central 
banks), to the extent the bank has liabilities booked in that currency.
    (5) Gold bullion held in the bank's own vaults or in another bank's 
vaults on an allocated basis, to the extent that it is offset by gold 
bullion liabilities
    (6) Federal Reserve Bank stock.
    (7) Claims on, or guaranteed by, qualifying securities firms 
incorporated in the United States or other members of the OECD-based 
group of countries that are collateralized by cash on deposit in the 
lending bank or by securities issued or guaranteed by the United States 
or OECD central governments (including U.S. government agencies), 
provided that a positive margin of collateral is required to be 
maintained on such a claim on a daily basis, taking into account any 
change in a bank's exposure to the obligor or counterparty under the 
claim in relation to

[[Page 225]]

the market value of the collateral held in support of the claim.

                   Category 2--20 Percent Risk Weight

    (1) Cash items in the process of collection.
    (2) All claims (long- and short-term) on, and portions of claims 
(long- and short-term) guaranteed by, U.S. depository institutions and 
OECD banks.
    (3) Short-term (remaining maturity of one year or less) claims on, 
and portions of short-term claims guaranteed by, non-OECD banks.
    (4) Portions of loans and other claims conditionally guaranteed by 
the U.S. Treasury, U.S. Government agencies,\1\ or central governments 
in other OECD countries and portions of local currency claims 
conditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency.
    (5) Securities and other claims on, and portions of claims 
guaranteed by, U.S. Government-sponsored agencies.\2\
---------------------------------------------------------------------------

    \2\ For the purpose of calculating the risk-based capital ratio, a 
U.S. Government-sponsored agency is defined as an agency originally 
established or chartered to serve public purposes specified by the U.S. 
Congress but whose obligations are not explicitly guaranteed by the full 
faith and credit of the U.S. Government.
---------------------------------------------------------------------------

    (6) Portions of loans and other claims (including repurchase 
agreements) collateralized \3\ by securities issued or guaranteed by the 
U.S. Treasury, U.S. Government agencies, U.S. Government-sponsored 
agencies or central governments in other OECD countries.
---------------------------------------------------------------------------

    \3\ Degree of collateralization is determined by current market 
value.
---------------------------------------------------------------------------

    (7) Portions of loans and other claims collateralized \3\ by cash on 
deposit in the lending bank.
    (8) General obligation claims on, and portions of claims guaranteed 
by, the full faith and credit of states or other political subdivisions 
of OECD countries, including U.S. state and local governments.
    (9) Claims on, and portions of claims guaranteed by, official 
multilateral lending institutions or regional development institutions 
in which the U.S. Government is a shareholder or a contributing member.
    (10) Portions of claims collateralized \3\ by securities issued by 
official multilateral lending institutions or regional development 
institutions in which the U.S. Government is a shareholder or 
contributing member.
    (11) Investments in shares of mutual funds whose portfolios are 
permitted to hold only assets that qualify for the zero or 20 percent 
risk categories.
    (12) Recourse obligations, direct credit substitutes, residual 
interests (other than credit-enhancing interest-only strips) and asset- 
or mortgage-backed securities rated in either of the two highest 
investment grade categories, e.g., AAA or AA, in the case of long-term 
ratings, or the highest rating category, e.g., A-1, P-1, in the case of 
short-term ratings.
    (13) Claims on, and claims guaranteed by, qualifying securities 
firms incorporated in the United States or other member of the OECD-
based group of countries provided that:
    a. The qualifying securities firm has a rating in one of the top 
three investment grade rating categories from a nationally recognized 
statistical rating organization; or
    b. The claim is guaranteed by a qualifying securities firm's parent 
company with such a rating.
    (14) Certain collateralized claims on qualifying securities firms in 
the United States or other member of the OECD-based group of countries, 
without regard to satisfaction of the rating standard, provided that the 
claim arises under a contract that:
    a. Is a reverse repurchase/repurchase agreement or securities 
lending/borrowing transaction executed under standard industry 
documentation;
    b. Is collateralized by liquid and readily marketable debt or equity 
securities;
    c. Is marked to market daily;
    d. Is subject to a daily margin maintenance requirement under the 
standard documentation; and
    e. Can be liquidated, terminated, or accelerated immediately in 
bankruptcy or similar proceeding, and the security or collateral 
agreement will not be stayed or avoided, under applicable law of the 
relevant country.

                   Category 3--50 Percent Risk Weight

    (1) Loans fully secured by first liens on one-to-four family 
residential properties (including certain presold residential 
construction loans), provided that the loans were approved in accordance 
with prudent underwriting standards and are not past due 90 days or more 
or carried in nonaccrual status.
    (2) Loans fully secured by first liens on multifamily residential 
properties that have been prudently underwritten and meet specified 
requirements with respect to loan-to-value ratio, level of annual net 
operating income to required debt service, maximum amortization period, 
minimum original maturity, and demonstrated timely repayment 
performance.
    (3) Recourse obligations, direct credit substitutes, residual 
interests (other than credit-enhancing interest-only strips) and asset- 
or mortgage-backed securities rated in the third-highest investment 
grade category, e.g., A, in the case of long-term ratings, or the second 
highest rating category, e.g., A-2, P-2, in the case of short-term 
ratings.

[[Page 226]]

    (4) Revenue bonds or similar obligations, including loans and 
leases, that are obligations of U.S. state or political subdivisions of 
the United States or other OECD countries but for which the government 
entity is committed to repay the debt only out of revenues from the 
specific projects financed.
    (5) Credit equivalent amounts of interest rate and foreign exchange 
rate related contracts, except for those assigned to a lower risk 
category.

                   Category 4--100 Percent Risk Weight

    (1) All other claims on private obligors.
    (2) Claims on, or guaranteed by, non-OECD banks with a remaining 
maturity exceeding one year.
    (3) Claims on non-OECD central governments that are not included in 
item 4 of Category 1 or item 3 of Category 2, and all claims on non-OECD 
state and local governments.
    (4) Obligations issued by U.S. state or local governments or other 
OECD local governments (including industrial development authorities and 
similar entities) that are repayable solely by a private party or 
enterprise.
    (5) Premises, plant, and equipment; other fixed assets; and other 
real estate owned.
    (6) Investments in any unconsolidated subsidiaries, joint ventures, 
or associated companies--if not deducted from capital.
    (7) Instruments issued by other banking organizations that qualify 
as capital.
    (8) Claims on commercial firms owned by the U.S. Government or 
foreign governments.
    (9) Recourse obligations, direct credit substitutes, residual 
interests (other than credit-enhancing interest-only strips) and asset- 
or mortgage-backed securities rated in the lowest investment grade 
category, e.g., BBB, as well as certain positions (but not residual 
interests) which the bank rates pursuant to section II.B.5(g) of this 
appendix A.
    (10) All other assets, including any intangible assets that are not 
deducted from capital, and the credit equivalent amounts \4\ of off-
balance sheet items not assigned to a different risk category.
---------------------------------------------------------------------------

    \4\ In general, for each off-balance sheet item, a conversion factor 
(see Table III) must be applied to determine the ``credit equivalent 
amount'' prior to assigning the off-balance sheet item to a risk weight 
category.
---------------------------------------------------------------------------

                  Category 5--200 Percent Risk Weight.

    (1) Externally rated recourse obligations, direct credit 
substitutes, residual interests (other than credit-enhancing interest-
only strips), and asset- and mortgage-backed securities that are rated 
one category below the lowest investment grade category, e.g., BB, to 
the extent permitted in section II.B.5(d) of this appendix A; and
    (2) A position (but not a residual interest) extended in connection 
with a securitization or structured financing program that is not rated 
by an NRSRO for which the bank determines that the credit risk is 
equivalent to one category below investment grade, e.g., BB, to the 
extent permitted in section II.B.5.(g) of this appendix A.

    Table III--Credit Conversion Factors for Off-Balance Sheet Items

                      100 Percent Conversion Factor

    (1) The full amount of assets supported by direct credit substitutes 
and recourse obligations (unless a different treatment is otherwise 
specified). For risk participations in such arrangements acquired by the 
bank, the full amount of assets supported by the main obligation 
multiplied by the acquiring bank's percentage share of the risk 
participation.
    (2) Acquisitions of risk participations in bankers acceptances.
    (3) Sale and repurchase agreements, if not already included on the 
balance sheet.
    (4) Forward agreements representing contractual obligations to 
purchase assets, including financing facilities, with drawdown certain 
at a specified future date.
    (5) Securities lent, if the lending bank is exposed to risk of loss.

                      50 Percent Conversion Factor

    (1) Transaction-related contingencies, including bid bonds, 
performance bonds, warranties, and performance standby letters of credit 
backing the nonfinancial performance of other parties.
    (2) Unused portions of commitments with an original maturity 
exceeding one year, including underwriting commitments and commercial 
credit lines.
    (3) Revolving underwriting facilities (RUFs), note issuance 
facilities (NIFs) and other similar arrangements.

                      20 Percent Conversion Factor

    (1) Short-term, self-liquidating, trade-related contingencies, 
including commercial letters of credit.

                     Zero Percent Conversion Factor

    (1) Unused portions of commitments with an original maturity of one 
year or less.
    (2) Unused portions of commitments (regardless of maturity) which 
are unconditionally cancelable at any time, provided a separate credit 
decision is made before each drawing.

[[Page 227]]

 Credit Conversion for Interest Rate and Foreign Exchange Rate Related 
                                Contracts

    The total replacement cost of contracts (obtained by summing the 
positive mark-to-market values of contracts) is added to a measure of 
future potential increases in credit exposure. This future potential 
credit exposure measure is calculated by multiplying the total notional 
value of contracts by one of the following credit conversion factors, as 
appropriate:

                                            Conversion Factor Matrix
----------------------------------------------------------------------------------------------------------------
                                                                Exchange                  Precious
               Remaining maturity                  Interest     rate and      Equity      metals,       Other
                                                     rate         gold                  except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less...............................         0.0%         1.0%         6.0%         7.0%        10.0%
More than one year to five years...............         0.5%         5.0%         8.0%         7.0%        12.0%
More than five years...........................         1.5%         7.5%        10.0%         8.0%        15.0%
----------------------------------------------------------------------------------------------------------------

    No potential exposure is calculated for single currency interest 
rate contracts on which payments are made based on two floating rate 
indices (floating/floating or basis swaps); the credit exposure on these 
contracts is evaluated solely on the basis of their mark-to-market 
values. In the event a netting contract covers transactions that are 
normally not included in the risk-based ratio calculation--for example, 
exchange rate contracts with an original maturity of fourteen calendar 
days or less or instruments traded on exchanges that require daily 
payment of variation margin--an institution may elect to consistently 
either include or exclude all mark-to-market values of such transactions 
when determining a net current exposure. Multiple contracts with the 
same counterparty may be netted for risk-based capital purposes pursuant 
to section II.E.5. of this appendix.

                   Table IV--Calculation of Credit Equivalent Amounts for Derivative Contracts
----------------------------------------------------------------------------------------------------------------
        Potential exposure               +         Current         =       Credit equivalent amount
------------------------------------------------   exposure  ---------------------------------------    Credit
                                      Notional  -------------  Potential     Mark-to      Current     equivalent
    Type of contract (remaining      principal    Conversion    exposure      market      exposure      amount
             maturity)               (dollars)      factor     (dollars)      value      (dollars)
----------------------------------------------------------------------------------------------------------------
(1) 120-Day Forward Foreign           5,000,000          .01       50,000      100,000      100,000      150,000
 Exchange.........................
(2) 4-Year Forward Foreign            6,000,000          .05      300,000     -120,000            0      300,000
 Exchange.........................
(3) 3-Year Single-Currency Fixed/    10,000,000         .005       50,000      200,000      200,000      250,000
 Floating Interest Rate Swap......
(4) 6-Month Oil Swap..............   10,000,000          .10    1,000,000     -250,000            0    1,000,000
(5) 7-Year Cross-Currency Floating/  20,000,000         .075    1,500,000   -1,500,000            0    1,500,000
 Floating Interest Rate Swap......
      Total.......................  ...........  ...........    2,900,000  ...........      300,000    3,200,000
----------------------------------------------------------------------------------------------------------------

    (1) If contracts (1) through (5) above are subject to a qualifying 
bilateral netting contract, then the following applies:

----------------------------------------------------------------------------------------------------------------
                                             Potential
                                               future                                                   Credit
                                              exposure                  Net current                   equivalent
                                               (from                     exposure*                      amount
                                               above)
----------------------------------------------------------------------------------------------------------------
(1).......................................       50,000
(2).......................................      300,000
(3).......................................       50,000
(4).......................................    1,000,000
(5).......................................    1,500,000
      Total...............................    2,900,000  +                        0  =                2,900,000
----------------------------------------------------------------------------------------------------------------
*The total of the mark-to-market values from above is -1,370,000. Since this is a negative amount, the net
  current exposure is zero.

    (2) To recognize the effects of netting on potential future 
exposure, the following formula applies:

Anet = (0.4 x Agross) + 0.6(NGR x 
Agross)

    (3) In the above example:


[[Page 228]]


NGR=0=(0/300,000)
Anet=(0.4x2,900,000)+0.6(0x2,900,000)
Anet=1,160,000

Credit Equivalent Amount: 1,160,000+0=1,160,000

    (4) If the net current exposure was a positive amount, for example, 
$200,000, the credit equivalent amount would be calculated as follows:

NGR = .67 = (200,000/300,000)
Anet = (0.4 x 2,900,000) + 0.6(.67 x 2,900,000)
Anet = 2,325,800

Credit Equivalent Amount: 2,325,800+200,000 = 2,525,800

[54 FR 11509, Mar. 21, 1989]

    Editorial Note: For Federal Register citations affecting Appendix A 
of part 325, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.

     Appendix B to Part 325--Statement of Policy on Capital Adequacy

    Part 325 of the Federal Deposit Insurance Corporation rules and 
regulations (12 CFR part 325) sets forth minimum leverage capital 
requirements for fundamentally sound, well-managed banks having no 
material or significant financial weaknesses. It also defines capital 
and sets forth sanctions which will be used against banks which are in 
violation of the part 325 regulation. This statement of policy on 
capital adequacy provides some interpretational and definitional 
guidance as to how this part 325 regulation will be administered and 
enforced by the FDIC. This statement of policy also addresses certain 
aspects of the FDIC's minimum risk-based capital guidelines that are set 
forth in appendix A to part 325. This statement of policy does not 
address the prompt corrective action provisions mandated by the Federal 
Deposit Insurance Corporation Improvement Act of 1991. However, section 
38 of the Federal Deposit Insurance Act and subpart B of part 325 
provide guidance on the prompt corrective action provisions, which 
generally apply to institutions with inadequate levels of capital.

             I. Enforcement of Minimum Capital Requirements

    Section 325.3(b)(1) specifies that FDIC-supervised, state-chartered 
nonmember commercial and savings banks (or other insured depository 
institutions making applications to the FDIC that require the FDIC to 
consider the adequacy of the institutions' capital structure) must 
maintain a minimum leverage ratio of Tier 1 (or core) capital to total 
assets of at least 3 percent; however, this minimum only applies to the 
most highly-rated banks (i.e., those with a composite CAMELS rating of 1 
under the Uniform Financial Institutions Rating System established by 
the Federal Financial Institutions Examination Council) that are not 
anticipating or experiencing any significant growth. All other state 
nonmember banks would need to meet a minimum leverage ratio that is at 
least 100 to 200 basis points above this minimum. That is, in accordance 
with Sec. 325.3(b)(2), an absolute minimum leverage ratio of not less 
than 4 percent must be maintained by those banks that are not highly-
rated or that are anticipating or experiencing significant growth.
    In addition to the minimum leverage capital standards, section III 
of appendix A to part 325 indicates that state nonmember banks generally 
are expected to maintain a minimum risk-based capital ratio of 
qualifying total capital to risk-weighted assets of 8 percent, with at 
least one-half of that total capital amount consisting of Tier 1 
capital.
    State nonmember banks (hereinafter referred to as ``banks'') 
operating with leverage capital ratios below the minimums set forth in 
part 325 will be deemed to have inadequate capital and will be in 
violation of the part 325 regulation. Furthermore, banks operating with 
risk-based capital ratios below the minimums set forth in appendix A to 
part 325 generally will be deemed to have inadequate capital. Banks 
failing to meet the minimum leverage and/or risk-based capital ratios 
normally can expect to have any application submitted to the FDIC denied 
(if such application requires the FDIC to evaluate the adequacy of the 
institution's capital structure) and also can expect to be subject to 
the use of capital directives or other formal enforcement action by the 
FDIC to increase capital.
    Capital adequacy in banks which have capital ratios at or above the 
minimums will be assessed and enforced based on the following factors 
(these same criteria will apply to any insured depository institutions 
making applications to the FDIC and to any other circumstances in which 
the FDIC is requested or required to evaluate the adequacy of a 
depository institution's capital structure):

         A. Banks Which Are Fundamentally Sound and Well-Managed

    The minimum leverage capital ratios set forth in Sec. 325.3(b)(2) 
and the minimum risk-based capital ratios set forth in section III of 
appendix A to part 325 generally will be viewed as the minimum 
acceptable capital standards for banks whose overall financial condition 
is fundamentally sound, which are well-managed and which have no 
material or significant financial weaknesses. While the FDIC will make 
this determination in each bank based upon its own condition and 
specific circumstances, this definition will generally apply to those 
banks evidencing a

[[Page 229]]

level of risk which is no greater than that normally associated with a 
Composite rating of 1 or 2 under the Uniform Financial Institutions 
Rating System. Banks meeting this definition which are in compliance 
with the minimum leverage and risk-based capital ratio standards will 
not generally be required by the FDIC to raise new capital from external 
sources.
    The FDIC does, however, encourage such banks to maintain capital 
well above the minimums, particularly those institutions that are 
anticipating or experiencing significant growth, and will carefully 
evaluate their earnings and growth trends, dividend policies, capital 
planning procedures and other factors important to the continuous 
maintenance of adequate capital. Adverse trends or deficiencies in these 
areas will be subject to criticism at regular examinations and may be an 
important factor in the FDIC's action on applications submitted by such 
banks. In addition, the FDIC's consideration of capital adequacy in 
banks making applications to the FDIC will also fully examine the 
expected impact of those applications on the bank's ability to maintain 
its capital adequacy. In all cases, banks should maintain capital 
commensurate with the level and nature of risks, including the volume 
and severity of adversely classified assets, to which they are exposed.

                           B. All Other Banks

    Banks not meeting the definition set forth in I.A. of this appendix, 
that is, banks evidencing a level of risk which is at least as great as 
that normally associated with a Composite rating of 3, 4, or 5 under the 
Uniform Financial Institutions Rating System, will be required to 
maintain capital higher than the minimum regulatory requirement and at a 
level deemed appropriate in relation to the degree of risk within the 
institution. These higher capital levels will normally be addressed 
through memorandums of understanding between the FDIC and the bank or, 
in cases of more pronounced risk, through the use of formal enforcement 
actions under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 
1818).

              C. Capital Requirements of Primary Regulator

    Notwithstanding I.A. and B. of this appendix, all banks (or other 
depository institutions making applications to the FDIC that require the 
FDIC to consider the adequacy of the institutions' capital structure) 
will be expected to meet any capital requirements established by their 
primary state or federal regulator which exceed the minimum capital 
requirement set forth in the FDIC's part 325 regulation. In addition, 
the FDIC will, when establishing capital requirements higher than the 
minimum set forth in the regulation, consult with an institution's 
primary state or federal regulator.

                            II. Capital Plans

    Section 325.4(b) specifies that any bank which has less than its 
minimum leverage capital requirement is deemed to be engaging in an 
unsafe or unsound banking practice unless it has submitted, and is in 
compliance with, a plan approved by the FDIC to increase its Tier 1 
leverage capital ratio to such level as the FDIC deems appropriate.
    As required under Sec. 325.104(a)(1) of this part, a bank must file 
a written capital restoration plan with the appropriate FDIC regional 
director within 45 days of the date that the bank receives notice or is 
deemed to have notice that the bank is undercapitalized, significantly 
undercapitalized or critically undercapitalized, unless the FDIC 
notifies the bank in writing that the plan is to be filed within a 
different period. The amount of time allowed to achieve the minimum 
leverage capital requirement will be evaluated by the FDIC on a case-by-
case basis and will depend on a number of factors, including the 
viability of the bank and whether it is fundamentally sound and well-
managed.
    Banks evidencing more than normal levels of risk will normally have 
their minimum capital requirements established in a formal or informal 
enforcement proceeding. The time frames for meeting these requirements 
will be set forth in such actions and will generally require some 
immediate action on the bank's part to meet its minimum capital 
requirement. The reasonableness of capital plans submitted by depository 
institutions in connection with applications as provided for in Sec. 
325.3(d)(2) will be determined in conjunction with the FDIC's 
consideration of the application.

                         III. Written Agreements

    Section 325.4(c) provides that any insured depository institution 
with a Tier 1 capital to total assets (leverage) ratio of less than 2 
percent must enter into and be in compliance with a written agreement 
with the FDIC (or with its primary federal regulator with FDIC as a 
party to the agreement) to increase its Tier 1 leverage capital ratio to 
such level as the FDIC deems appropriate or may be subject to a section 
8(a) termination of insurance action by the FDIC. Except in the very 
rarest of circumstances, the FDIC will require that such agreements 
contemplate immediate efforts by the depository institution to acquire 
the required capital.
    The guidance in this section III is not intended to preclude the 
FDIC from taking section 8(a) or other enforcement action against any 
institution, regardless of its capital level, if the specific 
circumstances deem such action to be appropriate.

[[Page 230]]

                         IV. Capital Components

    Section 325.2 sets forth the definition of Tier 1 capital for the 
leverage standard as well as the definitions for the various instruments 
and accounts which are included therein. Although nonvoting common 
stock, noncumulative perpetual preferred stock, and minority interests 
in consolidated subsidiaries are normally included in Tier 1 capital, 
voting common stockholders' equity generally will be expected to be the 
dominant form of Tier 1 capital. Thus, banks should avoid undue reliance 
on nonvoting equity, preferred stock and minority interests. The 
following provides some additional guidance with respect to some of the 
items that affect the calculation of Tier 1 capital.

                          A. Intangible Assets

    The FDIC permits state nonmember banks to record intangible assets 
on their books and to report the value of such assets in the 
Consolidated Reports of Condition and Income (``Call Report''). As noted 
in the instructions for preparation of the Consolidated Reports of 
Condition and Income (published by the Federal Financial Institutions 
Examination Council), intangible assets may arise from business 
combinations accounted for under the purchase method and acquisitions of 
portions or segments of another institution's business, such as branch 
offices, mortgage servicing portfolios, and credit card portfolios.
    Notwithstanding the authority to report all intangible assets in the 
Consolidated Reports of Condition and Income, Sec. 325.2(v) of the 
regulation specifies that mortgage servicing assets, nonmortgage 
servicing assets and purchased credit card relationships are the only 
intangible assets which will be allowed as Tier 1 capital.\1\ The 
portion of equity capital represented by other types of intangible 
assets will be deducted from equity capital and assets in the 
computation of a bank's Tier 1 capital. Certain of these intangible 
assets may, however, be recognized for regulatory capital purposes if 
explicitly approved by the Director of the Division of Supervision and 
Consumer Protection (DSC) as part of the bank's regulatory capital on a 
specific case basis. These intangibles will be included in regulatory 
capital under the terms and conditions that are specifically approved by 
the FDIC.\2\
---------------------------------------------------------------------------

    \1\ Although intangible assets in the form of mortgage servicing 
assets, nonmortgage servicing assets and purchased credit card 
relationships are generally recognized for regulatory capital purposes, 
the --deduction of part or all of the mortgage servicing assets, 
nonmortgage servicing assets and purchased credit card relationships may 
be required if the carrying amounts of these rights are excessive in 
relation to their market value or the level of the bank's capital 
accounts. In this regard, mortgage servicing assets, nonmortgage 
servicing assets and purchased credit card relationships will be 
recognized for regulatory capital purposes only to the extent the rights 
meet the conditions, limitations and restrictions described in Sec. 
325.5(f).
    \2\ This specific approval must be received in accordance with Sec. 
325.5(b). In evaluating whether other types of intangibles should be 
recognized for regulatory capital purposes, the FDIC will accord special 
attention to the general characteristics of the intangibles, including: 
(1) The separability of the intangible asset and the ability to sell it 
separate and apart from the bank or the bulk of the bank's assets, (2) 
the certainty that a readily identifiable stream of cash flows 
associated with the intangible asset can hold its value notwithstanding 
the future prospects of the bank, and (3) the existence of a market of 
sufficient depth to provide liquidity for the intangible asset. However, 
pursuant to section 18(n) of the Federal Deposit Insurance Act (12 
U.S.C. 1828(n)), specific approval cannot be given for an unidentifiable 
intangible asset, such as goodwill, if acquired after April 12, 1989.
---------------------------------------------------------------------------

    In certain instances banks may have investments in unconsolidated 
subsidiaries or joint ventures that have large volumes of intangible 
assets. In such instances the bank's consolidated statements will 
reflect an investment in a tangible asset even though such investment 
will, in fact, be represented by a large volume of intangible assets. In 
any such situation where this is material, the bank's investment in the 
unconsolidated subsidiary will be divided into a tangible and an 
intangible portion based on the percentage of intangible assets to total 
assets in the subsidiary. The intangible portion of the investment will 
be treated as if it were an intangible asset on the bank's books in the 
calculation of Tier 1 capital. However, intangible assets in the form of 
mortgage servicing assets, nonmortgage servicing assets and purchased 
credit card relationships, including servicing intangibles held by 
mortgage banking subsidiaries, are subject to the specific criteria set 
forth in Sec. 325.5(f).

                      B. Perpetual Preferred Stock

    Perpetual preferred stock is defined as preferred stock that does 
not have a maturity date, that cannot be redeemed at the option of the 
holder, and that has no other provisions that will require future 
redemption of the issue. Also, pursuant to section 18(i)(1) of the 
Federal Deposit Insurance Act (12 U.S.C. 1828(i)(1)), a state nonmember 
bank cannot, without the prior consent of the FDIC, reduce the amount or 
retire any part of its perferred stock. (This prior consent is also

[[Page 231]]

required for the reduction or retirement of any part of a state 
nonmember bank's common stock or capital notes and debentures.)
    Noncumulative perpetual preferred stock is generally included in 
Tier 1 capital. Nonetheless, it is possible for banks to issue preferred 
stock with a dividend rate which escalates to such a high rate that the 
terms become so onerous as to effectively force the bank to call the 
issue (for example, an issue with a low initial rate that is scheduled 
to escalate to much higher rates in subsequent periods). Preferred stock 
issues with such onerous terms have much the same characteristics as 
limited life preferred stock in that the bank would be effectively 
forced to redeem the issue to avoid performance of the onerous terms. 
Such instruments may be disallowed as Tier 1 capital and, for risk-based 
capital purposes, would be included in Tier 2 capital only to the extent 
that the instruments fall within the limitations applicable to 
intermediate-term preferred stock. Banks which are contemplating issues 
bearing terms which may be so characterized are encouraged to submit 
them to the appropriate FDIC regional office for review prior to 
issuance. Nothing herein shall prohibit banks from issuing floating rate 
preferred stock issues where the rate is constant in relation to some 
outside market or index rate. However, noncumulative floating rate 
instruments where the rate paid is based in some part on the current 
credit standing of the bank, and all cumulative preferred stock 
instruments, are excluded from Tier 1 capital. These instruments are 
included in Tier 2 capital for risk-based capital purposes in accordance 
with the limitations set forth in appendix A to part 325.
    The FDIC will also require that issues of perpetual preferred stock 
be consistent with safe and sound banking practices. Issues which would 
unduly enrich insiders or which contain dividend rates or other terms 
which are inconsistent with safe and sound banking practices will likely 
be the subject of appropriate supervisory response from the FDIC. Banks 
contemplating preferred stock issues which may pose safety and soundness 
concerns are encouraged to submit such issues to the appropriate FDIC 
regional office for review prior to sale. Pursuant to Sec. 325.5(e), 
capital instruments that contain or that are subject to any conditions, 
covenants, terms, restrictions or provisions that are inconsistent with 
safe and sound banking practices will not qualify as capital under part 
325.

   C. Other Instruments or Transactions Which Fail to Provide Capital 
                                 Support

    Section 325.5(b) specifies that any capital component or balance 
sheet entry or account which has characteristics or terms that diminish 
its contribution to an insured depository institution's ability to 
absorb losses shall be deducted from capital. An example involves 
certain types of minority interests in consolidated subsidiaries. 
Minority interests in consolidated subsidiaries have been included in 
capital based on the fact that they provide capital support to the risk 
in the consolidated subsidiaries. Certain transactions have been 
structured where a bank forms a subsidiary by transferring essentially 
risk-free or low-risk assets to the subsidiary in exchange for common 
stock of the subsidiary. The subsidiary then sells preferred stock to 
third parties.
    The preferred stock becomes a minority interest in a consolidated 
subsidiary but, in effect, represents an essentially risk-free or low-
risk investment for the preferred stockholders. This type of minority 
interest fails to provide any meaningful capital support to the 
consolidated entity inasmuch as it has a preferred claim on the 
essentially risk-free or low-risk assets of the subsidiary. In addition, 
certain minority interests are not substantially equivalent to permanent 
equity in that the interests must be paid off on specified future dates, 
or at the option of the holders of the minority interests, or contain 
other provisions or features that limit the ability of the minority 
interests to effectively absorb losses. Capital instruments or 
transactions of this nature which fail to absorb losses or provide 
meaningful capital support will be deducted from Tier 1 capital.

                      D. Mandatory Convertible Debt

    Mandatory convertible debt securities are subordinated debt 
instruments that require the issuer to convert such instruments into 
common or perpetual preferred stock by a date at or before the maturity 
of the debt instruments. The maturity of these instruments must be 12 
years or less and the instruments must also meet the other criteria set 
forth in appendix A to part 325. Mandatory convertible debt is excluded 
from Tier 1 capital but, for risk-based capital purposes, is included in 
Tier 2 capital as a ``hybrid capital instrument.''
    So-called ``equity commitment notes,'' which merely require a bank 
to sell common or perpetual preferred stock during the life of the 
subordinated debt obligation, are specifically excluded from the 
definition of mandatory convertible debt securities and are only 
included in Tier 2 capital under the risk-based capital framework to the 
extent that they satisfy the requirements and limitations for ``term 
subordinated debt'' set forth in appendix A to part 325.

                  V. Analysis of Consolidated Companies

    In determining a bank's compliance with its minimum capital 
requirements the FDIC will, with two exceptions, generally utilize

[[Page 232]]

the bank's consolidated statements as defined in the instructions for 
the preparation of Consolidated Reports of Condition and Income.
    The first exception relates to securities subsidiaries of state 
nonmember banks which are subject to Sec. 337.4 of the FDIC's rules and 
regulations (12 CFR 337.4). Any subsidiary subject to this section must 
be a bona fide subsidiary which is adequately capitalized. In addition, 
Sec. 337.4(b)(3) requires that any insured state nonmember bank's 
investment in such a subsidiary shall not be counted towards the bank's 
capital. In those instances where the securities subsidiary is 
consolidated in the bank's Consolidated Report of Condition it will be 
necessary, for the purpose of calculating the bank's Tier 1 capital, to 
adjust the Consolidated Report of Condition in such a manner as to 
reflect the bank's investment in the securities subsidiary on the equity 
method. In this case, and in those cases where the securities subsidiary 
has not been consolidated, the investment in the subsidiary will then be 
deducted from the bank's capital and assets prior to calculation of the 
bank's Tier 1 capital ratio. (Where deemed appropriate, the FDIC may 
also consider deducting investments in other subsidiaries, either on a 
case-by-case basis or, as with securities subsidiaries, based on the 
general characteristics or functional nature of the subsidiaries.)
    The second exception relates to the treatment of subsidiaries of 
insured banks that are domestic depository institutions such as 
commercial banks, savings banks, or savings associations. These 
subsidiaries are not consolidated on a line-by-line basis with the 
insured bank parent in the bank parent's Consolidated Reports of 
Condition and Income. Rather, the instructions for these reports provide 
that bank investments in such depository institution subsidiaries are to 
be reported on an unconsolidated basis in accordance with the equity 
method. Since the FDIC believes that the minimum capital requirements 
should apply to a bank's depository activities in their entirety, 
regardless of the form that the organization's corporate structure 
takes, it will be necessary, for the purpose of calculating the bank's 
Tier 1 leverage and total risk-based capital ratios, to adjust a bank 
parent's Consolidated Report of Condition to consolidate its domestic 
depository institution subsidiaries on a line-by-line basis. The 
financial statements of the subsidiary that are used for this 
consolidation must be prepared in the same manner as the Consolidated 
Report of Condition.
    The FDIC will, in determining the capital adequacy of a bank which 
is a member of a bank holding company or chain banking group, consider 
the degree of leverage and risks undertaken by the parent company or 
other affiliates. Where the level of risk in a holding company system is 
no more than normal and the consolidated company is adequately 
capitalized at all appropriate levels, the FDIC generally will not 
require additional capital in subsidiary banks under its supervision 
over and above that which would be required for the subsidiary bank on 
its own merit. In cases where a holding company or other affiliated 
banks (or other companies) evidence more than a normal degree of risk 
(either by virtue of the quality of their assets, the nature of the 
activities conducted, or other factors) or where the affiliated 
organizations are inadequately capitalized, the FDIC will consider the 
potential impact of the additional risk or excess leverage upon an 
individual bank to determine if such factors will likely result in 
excessive requirements for dividends, management fees, or other support 
to the holding company or affiliated organizations which would be 
detrimental to the bank. Where the excessive risk or leverage in such 
organizations is determined to be potentially detrimental to the bank's 
condition or its ability to maintain adequate capital, the FDIC may 
initiate appropriate supervisory action to limit the bank's ability to 
support its weaker affiliates and/or require higher than minimum capital 
ratios in the bank.

          VI. Applicability of Part 325 to Savings Associations

    Section 325.3(c) indicates that, where the FDIC is required to 
evaluate the adequacy of any depository institution's (including any 
savings association's) capital structure in conjunction with an 
application filed by the institution, the FDIC will not approve the 
application if the depository institution does not meet the minimum 
leverage capital requirement set forth in Sec. 325.3(b).
    Also, Sec. 325.4(b) states that, under certain conditions specified 
in section 8(t) of the Federal Deposit Insurance Act, the FDIC may take 
section 8(b)(1) and/or 8(c) enforcement action against a savings 
association that is deemed to be engaged in an unsafe or unsound 
practice on account of its inadequate capital structure. Section 
325.4(c) further specifies that any insured depository institution with 
a Tier 1 leverage ratio (as defined in part 325) of less than 2 percent 
is deemed to be operating in an unsafe or unsound condition pursuant to 
section 8(a) of the Federal Deposit Insurance Act.
    In addition, the Office of Thrift Supervision (OTS), as the primary 
federal regulator of savings associations, has established minimum core 
capital leverage, tangible capital and risk-based capital requirements 
for savings associations (12 CFR part 567). In this regard, certain 
differences exist between the methods used by the OTS to calculate a 
savings association's capital and the methods set forth by the FDIC in 
part 325. These differences include, among others, the core

[[Page 233]]

capital treatment for investments in subsidiaries and for certain 
intangible assets.
    In determining whether a savings association's application should be 
approved pursuant to Sec. 325.3(c), or whether an unsafe or unsound 
practice or condition exists pursuant to Sec. Sec. 325.4(b) and 
325.4(c), the FDIC will consider the extent of the savings association's 
capital as determined in accordance with part 325. However, the FDIC 
will also consider the extent to which a savings association is in 
compliance with (a) the minimum capital requirements set forth by the 
OTS, (b) any related capital plans for meeting the minimum capital 
requirements approved by the OTS, and/or (c) any other criteria deemed 
by the FDIC as appropriate based on the association's specific 
circumstances.

[56 FR 10166, Mar. 11, 1991, as amended at 58 FR 6369, Jan. 28, 1993; 58 
FR 8219, Feb. 12, 1993; 58 FR 60103, Nov. 15, 1993; 60 FR 39232, Aug. 1, 
1995; 63 FR 42678, Aug. 10, 1998; 66 FR 59661, Nov. 29, 2001]

 Appendix C to Part 325--Risk-Based Capital for State Non-Member Banks: 
                               Market Risk

      Section 1. Purpose, Applicability, Scope, and Effective Date

    (a) Purpose. The purpose of this appendix is to ensure that banks 
with significant exposure to market risk maintain adequate capital to 
support that exposure.\1\ This appendix supplements and adjusts the 
risk-based capital ratio calculations under appendix A of this part with 
respect to those banks.
---------------------------------------------------------------------------

    \1\ This appendix is based on a framework developed jointly by 
supervisory authorities from the countries represented on the Basle 
Committee on Banking Supervision and endorsed by the Group of Ten 
Central Bank Governors. The framework is described in a Basle Committee 
paper entitled ``Amendment to the Capital Accord to Incorporate Market 
Risks,'' January 1996. Also see modifications issued in September 1997.
---------------------------------------------------------------------------

    (b) Applicability. (1) This appendix applies to any insured state 
nonmember bank whose trading activity \2\ (on a worldwide consolidated 
basis) equals:
---------------------------------------------------------------------------

    \2\ Trading activity means the gross sum of trading assets and 
liabilities as reported in the bank's most recent quarterly Consolidated 
Report of Condition and Income (Call Report).
---------------------------------------------------------------------------

    (i) 10 percent or more of total assets; \3\ or
---------------------------------------------------------------------------

    \3\ Total assets means quarter-end total assets as reported in the 
bank's most recent Call Report.
---------------------------------------------------------------------------

    (ii) $1 billion or more.
    (2) The FDIC may additionally apply this appendix to any insured 
state nonmember bank if the FDIC deems it necessary or appropriate for 
safe and sound banking practices.
    (3) The FDIC may exclude an insured state nonmember bank otherwise 
meeting the criteria of paragraph (b)(1) of this section from coverage 
under this appendix if it determines the bank meets such criteria as a 
consequence of accounting, operational, or similar considerations, and 
the FDIC deems it consistent with safe and sound banking practices.
    (c) Scope. The capital requirements of this appendix support market 
risk associated with a bank's covered positions.
    (d) Effective date. This appendix is effective as of January 1, 
1997. Compliance is not mandatory until January 1, 1998. Subject to 
supervisory approval, a bank may opt to comply with this appendix as 
early as January 1, 1997.\4\
---------------------------------------------------------------------------

    \4\ A bank that voluntarily complies with the final rule prior to 
January 1, 1998, must comply with all of its provisions.
---------------------------------------------------------------------------

                         Section 2. Definitions

    For purposes of this appendix, the following definitions apply:
    (a) Covered positions means all positions in a bank's trading 
account, and all foreign exchange \5\ and commodity positions, whether 
or not in the trading account.\6\ Positions include on-balance-sheet 
assets and liabilities and off-balance-sheet items. Securities subject 
to repurchase and lending agreements are included as if they are still 
owned by the lender.
---------------------------------------------------------------------------

    \5\ Subject to FDIC review, a bank may exclude structural positions 
in foreign currencies from its covered positions.
    \6\ The term trading account is defined in the instructions to the 
Call Report.
---------------------------------------------------------------------------

    (b) Market risk means the risk of loss resulting from movements in 
market prices. Market risk consists of general market risk and specific 
risk components.
    (1) General market risk means changes in the market value of covered 
positions resulting from broad market movements, such as changes in the 
general level of interest rates, equity prices, foreign exchange rates, 
or commodity prices.
    (2) Specific risk means changes in the market value of specific 
positions due to factors other than broad market movements and includes 
event and default risk as well as idiosyncratic variations.
    (c) Tier 1 and Tier 2 capital are defined in appendix A of this 
part.
    (d) Tier 3 capital is subordinated debt that is unsecured; is fully 
paid up; has an original maturity of at least two years; is not 
redeemable before maturity without prior approval by the FDIC; includes 
a lock-in clause precluding payment of either interest or principal 
(even at maturity) if the payment

[[Page 234]]

would cause the issuing bank's risk-based capital ratio to fall or 
remain below the minimum required under appendix A of this part; and 
does not contain and is not covered by any covenants, terms, or 
restrictions that are inconsistent with safe and sound banking 
practices.
    (e) Value-at-risk (VAR) means the estimate of the maximum amount 
that the value of covered positions could decline during a fixed holding 
period within a stated confidence level, measured in accordance with 
section 4 of this appendix.

  Section 3. Adjustments to the Risk-Based Capital Ratio Calculations.

    (a) Risk-based capital ratio denominator. A bank subject to this 
appendix shall calculate its risk-based capital ratio denominator as 
follows:
    (1) Adjusted risk-weighted assets. Calculate adjusted risk-weighted 
assets, which equals risk-weighted assets (as determined in accordance 
with appendix A of this part), excluding the risk-weighted amounts of 
all covered positions (except foreign exchange positions outside the 
trading account and over-the-counter derivative positions) \7\ and 
receivables arising from the posting of cash collateral that is 
associated with securities borrowing transactions to the extent the 
receivables are collateralized by the market value of the borrowed 
securities, provided that the following conditions are met:
    (i) The transaction is based on securities includable in the trading 
book that are liquid and readily marketable,
    (ii) The transaction is marked to market daily,
    (iii) The transaction is subject to daily margin maintenance 
requirements,
    (iv) The transaction is a securities contract for the purposes of 
section 555 of the Bankruptcy Code (11 U.S.C. 555), a qualified 
financial contract for the purposes of section 11(e)(8) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(e)(8)), or a netting contract 
between or among financial institutions for the purposes of sections 
401-407 of the Federal Deposit Insurance Corporation Improvement Act of 
1991 (12 U.S.C. 4401-4407), or the Board's Regulation EE (12 CFR Part 
231).
---------------------------------------------------------------------------

    \7\ Foreign exchange positions outside the trading account and all 
over-the-counter derivative positions, whether or not in the trading 
account, must be included in the adjusted risk weighted assets as 
determined in appendix A of this part.
---------------------------------------------------------------------------

    (2) Measure for market risk. Calculate the measure for market risk, 
which equals the sum of the VAR-based capital charge, the specific risk 
add-on (if any), and the capital charge for de minimis exposures (if 
any).
    (i) VAR-based capital charge. The VAR-based capital charge equals 
the higher of:
    (A) The previous day's VAR measure; or
    (B) The average of the daily VAR measures for each of the preceding 
60 business days multiplied by three, except as provided in section 4(e) 
of this appendix;
    (ii) Specific risk add-on. The specific risk add-on is calculated in 
accordance with section 5 of this appendix; and
    (iii) Capital charge for de minimis exposure. The capital charge for 
de minimis exposure is calculated in accordance with section 4(a) of 
this appendix.
    (3) Market risk equivalent assets. Calculate market risk equivalent 
assets by multiplying the measure for market risk (as calculated in 
paragraph (a)(2) of this section) by 12.5.
    (4) Denominator calculation. Add market risk equivalent assets (as 
calculated in paragraph (a)(3) of this section) to adjusted risk-
weighted assets (as calculated in paragraph (a)(1) of this section). The 
resulting sum is the bank's risk-based capital ratio denominator.
    (b) Risk-based capital ratio numerator. A bank subject to this 
appendix shall calculate its risk-based capital ratio numerator by 
allocating capital as follows:
    (1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital equal 
to 8.0 percent of adjusted risk-weighted assets (as calculated in 
paragraph (a)(1) of this section).\8\
---------------------------------------------------------------------------

    \8\ A bank may not allocate Tier 3 capital to support credit risk 
(as calculated under appendix A of this part).
---------------------------------------------------------------------------

    (2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3 
capital equal to the measure for market risk as calculated in paragraph 
(a)(2) of this section. The sum of Tier 2 and Tier 3 capital allocated 
for market risk must not exceed 250 percent of Tier 1 capital allocated 
for market risk. (This requirement means that Tier 1 capital allocated 
in this paragraph (b)(2) must equal at least 28.6 percent of the measure 
for market risk.)
    (3) Restrictions. (i) The sum of Tier 2 capital (both allocated and 
excess) and Tier 3 capital (allocated in paragraph (b)(2) of this 
section) may not exceed 100 percent of Tier 1 capital (both allocated 
and excess).\9\
---------------------------------------------------------------------------

    \9\ Excess Tier 1 capital means Tier 1 capital that has not been 
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess Tier 2 
capital means Tier 2 capital that has not been allocated in paragraph 
(b)(1) and (b)(2) of this section, subject to the restrictions in 
paragraph (b)(3) of this section.
---------------------------------------------------------------------------

    (ii) Term subordinated debt (and intermediate-term preferred stock 
and related surplus) included in Tier 2 capital (both allocated and 
excess) may not exceed 50 percent of Tier 1 capital (both allocated and 
excess).
    (4) Numerator calculation. Add Tier 1 capital (both allocated and 
excess), Tier 2 capital (both allocated and excess), and Tier 3 capital 
(allocated under paragraph (b)(2) of this

[[Page 235]]

section). The resulting sum is the bank's risk-based capital ratio 
numerator.

                       Section 4. Internal Models

    (a) General. For risk-based capital purposes, a bank subject to this 
appendix must use its internal model to measure its daily VAR, in 
accordance with the requirements of this section.\10\ The FDIC may 
permit a bank to use alternative techniques to measure the market risk 
of de minimis exposures so long as the techniques adequately measure 
associated market risk.
---------------------------------------------------------------------------

    \10\ A bank's internal model may use any generally accepted 
measurement techniques, such as variance-covariance models, historical 
simulations, or Monte Carlo simulations. However, the level of 
sophistication and accuracy of a bank's internal model must be 
commensurate with the nature and size of its covered positions. A bank 
that modifies its existing modeling procedures to comply with the 
requirements of this appendix for risk-based capital purposes should, 
nonetheless, continue to use the internal model it considers most 
appropriate in evaluating risks for other purposes.
---------------------------------------------------------------------------

    (b) Qualitative requirements. A bank subject to this appendix must 
have a risk management system that meets the following minimum 
qualitative requirements:
    (1) The bank must have a risk control unit that reports directly to 
senior management and is independent from business trading units.
    (2) The bank's internal risk measurement model must be integrated 
into the daily management process.
    (3) The bank's policies and procedures must identify, and the bank 
must conduct, appropriate stress tests and backtests.\11\ The bank's 
policies and procedures must identify the procedures to follow in 
response to the results of such tests.
---------------------------------------------------------------------------

    \11\ Stress tests provide information about the impact of adverse 
market events on a bank's covered positions. Backtests provide 
information about the accuracy of an internal model by comparing a 
bank's daily VAR measures to its corresponding daily trading profits and 
losses.
---------------------------------------------------------------------------

    (4) The bank must conduct independent reviews of its risk 
measurement and risk management systems at least annually.
    (c) Market risk factors. The bank's internal model must use risk 
factors sufficient to measure the market risk inherent in all covered 
positions. The risk factors must address interest rate risk,\12\ equity 
price risk, foreign exchange rate risk, and commodity price risk.
---------------------------------------------------------------------------

    \12\ For material exposures in the major currencies and markets, 
modeling techniques must capture spread risk and must incorporate enough 
segments of the yield curve--at least six--to capture differences in 
volatility and less than perfect correlation of rates along the yield 
curve.
---------------------------------------------------------------------------

    (d) Quantitative requirements. For regulatory capital purposes, VAR 
measures must meet the following quantitative requirements:
    (1) The VAR measures must be calculated on a daily basis using a 99 
percent, one-tailed confidence level with a price shock equivalent to a 
ten-business day movement in rates and prices. In order to calculate VAR 
measures based on a ten-day price shock, the bank may either calculate 
ten-day figures directly or convert VAR figures based on holding periods 
other than ten days to the equivalent of a ten-day holding period (for 
instance, by multiplying a one-day VAR measure by the square root of 
ten).
    (2) The VAR measures must be based on an historical observation 
period (or effective observation period for a bank using a weighting 
scheme or other similar method) of at least one year. The bank must 
update data sets at least once every three months or more frequently as 
market conditions warrant.
    (3) The VAR measures must include the risks arising from the non-
linear price characteristics of options positions and the sensitivity of 
the market value of the positions to changes in the volatility of the 
underlying rates or prices. A bank with a large or complex options 
portfolio must measure the volatility of options positions by different 
maturities.
    (4) The VAR measures may incorporate empirical correlations within 
and across risk categories, provided that the bank's process for 
measuring correlations is sound. In the event that the VAR measures do 
not incorporate empirical correlations across risk categories, then the 
bank must add the separate VAR measures for the four major risk 
categories to determine its aggregate VAR measure.
    (e) Backtesting. (1) Beginning one year after a bank starts to 
comply with this appendix, a bank must conduct backtesting by comparing 
each of its most recent 250 business days' actual net trading profit or 
loss \13\ with the corresponding daily VAR measures generated for 
internal risk measurement purposes and calibrated to a one-day holding 
period and a 99 percent, one-tailed confidence level.
---------------------------------------------------------------------------

    \13\ Actual net trading profits and losses typically include such 
things as realized and unrealized gains and losses on portfolio 
positions as well as fee income and commissions associated with trading 
activities.
---------------------------------------------------------------------------

    (2) Once each quarter, the bank must identify the number of 
exceptions, that is, the

[[Page 236]]

number of business days for which the magnitude of the actual daily net 
trading loss, if any, exceeds the corresponding daily VAR measure.
    (3) A bank must use the multiplication factor indicated in Table 1 
of this appendix in determining its capital charge for market risk under 
section 3(a)(2)(i)(B) of this appendix until it obtains the next 
quarter's backtesting results, unless the FDIC determines that a 
different adjustment or other action is appropriate.

     Table 1--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor
------------------------------------------------------------------------
4 or fewer..............................................          3.00
5.......................................................          3.40
6.......................................................          3.50
7.......................................................          3.65
8.......................................................          3.75
9.......................................................          3.85
10 or more..............................................          4.00
------------------------------------------------------------------------

                        Section 5. Specific Risk

    (a) Modeled specific risk. A bank may use its internal model to 
measure specific risk. If the bank has demonstrated to the FDIC that its 
internal model measures the specific risk, including event and default 
risk as well as idiosyncratic variation, of covered debt and equity 
positions and includes the specific risk measure in the VAR-based 
capital charge in section 3(a)(2)(i) of this appendix, then the bank has 
no specific risk add-on for purposes of section 3(a)(2)(ii) of this 
appendix. The model should explain the historical price variation in the 
trading portfolio and capture concentration, both magnitude and changes 
in composition. The model should also be robust to an adverse 
environment and have been validated through backtesting which assesses 
whether specific risk is being accurately captured.
    (b) Add-on charge for modeled specific risk. A bank that 
incorporates specific risk in its internal model but fails to 
demonstrate to the FDIC that its internal model adequately measures all 
aspects of specific risk for covered debt and equity positions, 
including event and default risk, as provided by section 5(a) of this 
appendix, must calculate the bank's specific risk add-on for purposes of 
section 3(a)(2)(ii) of this appendix as follows:
    (1) If the model is capable of valid separation of the VAR measure 
into a specific risk portion and a general market risk portion, then the 
specific risk add-on is equal to the previous day's specific risk 
portion.
    (2) If the model does not separate the VAR measure into a specific 
risk portion and a general market risk portion, then the specific risk 
add-on is the sum of the previous day's VAR measures for subportfolios 
of covered debt and equity positions.
    (c) Add-on charge if specific risk is not modeled. If a bank does 
not model specific risk in accordance with paragraph (a) or (b) of this 
section, the bank's specific risk add-on charge for purposes of section 
3(a)(2)(ii) of this appendix equals the sum of the components for 
covered debt and equity positions. If a bank models, in accordance with 
paragraph (a) or (b) of this section, the specific risk of covered debt 
positions but not covered equity positions (or vice versa), then the 
bank's specific risk add-on charge for the positions not modeled is the 
component for covered debt or equity positions as appropriate:
    (1) Covered debt positions. (i) For purposes of this section 5, 
covered debt positions means fixed-rate or floating-rate debt 
instruments located in the trading account and instruments located in 
the trading account with values that react primarily to changes in 
interest rates, including certain non-convertible preferred stock, 
convertible bonds, and instruments subject to repurchase and lending 
agreements. Also included are derivatives (including written and 
purchased options) for which the underlying instrument is a covered debt 
instrument that is subject to a non-zero specific risk capital charge.
    (A) For covered debt positions that are derivatives, a bank must 
risk-weight (as described in paragraph (c)(1)(iii) of this section) the 
market value of the effective notional amount of the underlying debt 
instrument or index portfolio. Swaps must be included as the notional 
position in the underlying debt instrument or index portfolio, with a 
receiving side treated as a long position and a paying side treated as a 
short position; and
    (B) For covered debt positions that are options, whether long or 
short, a bank must risk-weight (as described in paragraph (c)(1)(iii) of 
this section) the market value of the effective notional amount of the 
underlying debt instrument or index multiplied by the option's delta.
    (ii) A bank may net long and short covered debt positions (including 
derivatives) in identical debt issues or indices.
    (iii) A bank must multiply the absolute value of the current market 
value of each net long or short covered debt position by the appropriate 
specific risk weighting factor indicated in Table 2 of this appendix. 
The specific risk capital charge component for covered debt positions is 
the sum of the weighted values.

[[Page 237]]



   Table 2--Specific Risk Weighting Factors for Covered Debt Positions
------------------------------------------------------------------------
                                                               Weighting
              Category                  Remaining maturity    factor (in
                                          (contractual)        percent)
------------------------------------------------------------------------
Government.........................  N/A....................        0.00
Qualifying.........................  6 months or less.......        0.25
                                     Over 6 months to 24            1.00
                                      months.
                                     Over 24 months.........        1.60
Other..............................  N/A....................        8.00
------------------------------------------------------------------------

    (A) The government category includes all debt instruments of central 
governments of OECD-based countries \14\ including bonds, Treasury 
bills, and other short-term instruments, as well as local currency 
instruments of non-OECD central governments to the extent the bank has 
liabilities booked in that currency.
---------------------------------------------------------------------------

    \14\ Organization for Economic Cooperation and Development (OECD)-
based countries is defined in appendix A of this part.
---------------------------------------------------------------------------

    (B) The qualifying category includes debt instruments of U.S. 
government-sponsored agencies, general obligation debt instruments 
issued by states and other political subdivisions of OECD-based 
countries, multilateral development banks, and debt instruments issued 
by U.S. depository institutions or OECD-banks that do not qualify as 
capital of the issuing institution.\15\ This category also includes 
other debt instruments, including corporate debt and revenue instruments 
issued by states and other political subdivisions of OECD countries, 
that are:
---------------------------------------------------------------------------

    \15\ U.S. government-sponsored agencies, multilateral development 
banks, and OECD banks are defined in appendix A of this part.
---------------------------------------------------------------------------

    (1) Rated investment-grade by at least two nationally recognized 
credit rating services;
    (2) Rated investment-grade by one nationally recognized credit 
rating agency and not rated less than investment-grade by any other 
credit rating agency; or
    (3) Unrated, but deemed to be of comparable investment quality by 
the reporting bank and the issuer has instruments listed on a recognized 
stock exchange, subject to review by the FDIC.
    (C) The other category includes debt instruments that are not 
included in the government or qualifying categories.
    (2) Covered equity positions. (i) For purposes of this section 5, 
covered equity positions means equity instruments located in the trading 
account and instruments located in the trading account with values that 
react primarily to changes in equity prices, including voting or non-
voting common stock, certain convertible bonds, and commitments to buy 
or sell equity instruments. Also included are derivatives (including 
written and purchased options) for which the underlying is a covered 
equity position.
    (A) For covered equity positions that are derivatives, a bank must 
risk weight (as described in paragraph (c)(2)(iii) of this section) the 
market value of the effective notional amount of the underlying equity 
instrument or equity portfolio. Swaps must be included as the notional 
position in the underlying equity instrument or index portfolio, with a 
receiving side treated as a long position and a paying side treated as a 
short position; and
    (B) For covered equity positions that are options, whether long or 
short, a bank must risk weight (as described in paragraph (c)(2)(iii) of 
this section) the market value of the effective notional amount of the 
underlying equity instrument or index multiplied by the option's delta.
    (ii) A bank may net long and short covered equity positions 
(including derivatives) in identical equity issues or equity indices in 
the same market.\16\
---------------------------------------------------------------------------

    \16\ A bank may also net positions in depository receipts against an 
opposite position in the underlying equity or identical equity in 
different markets, provided that the bank includes the costs of 
conversion.
---------------------------------------------------------------------------

    (iii)(A) A bank must multiply the absolute value of the current 
market value of each net long or short covered equity position by a risk 
weighting factor of 8.0 percent, or by 4.0 percent if the equity is held 
in a portfolio that is both liquid and well-diversified.\17\ For covered 
equity positions that are index contracts comprising a well-diversified 
portfolio of equity instruments, the net long or short position is 
multiplied by a risk weighting factor of 2.0 percent.
---------------------------------------------------------------------------

    \17\ A portfolio is liquid and well-diversified if: (1) it is 
characterized by a limited sensitivity to price changes of any single 
equity issue or closely related group of equity issues held in the 
portfolio; (2) the volatility of the portfolio's value is not dominated 
by the volatility of any individual equity issue or by equity issues 
from any single industry or economic sector; (3) it contains a large 
number of individual equity positions, with no single position 
representing a substantial portion of the portfolio's total market 
value; and (4) it consists mainly of issues traded on organized 
exchanges or in well-established over-the-counter markets.
---------------------------------------------------------------------------

    (B) For covered equity positions from the following futures-related 
arbitrage strategies, a bank may apply a 2.0 percent risk weighting 
factor to one side (long or short) of each position with the opposite 
side exempt from charge, subject to review by the FDIC:
    (1) Long and short positions in exactly the same index at different 
dates or in different market centers; or

[[Page 238]]

    (2) Long and short positions in index contracts at the same date in 
different but similar indices.
    (C) For futures contracts on broadly-based indices that are matched 
by offsetting positions in a basket of stocks comprising the index, a 
bank may apply a 2.0 percent risk weighting factor to the futures and 
stock basket positions (long and short), provided that such trades are 
deliberately entered into and separately controlled, and that the basket 
of stocks comprises at least 90 percent of the capitalization of the 
index.
    (iv) The specific risk capital charge component for covered equity 
positions is the sum of the weighted values.

[61 FR 47376, Sept. 6, 1996, as amended at 62 FR 68068, Dec. 30, 1997; 
64 FR 19038, Apr. 19, 1999; 65 FR 75859, Dec. 5, 2000]



PART 326_MINIMUM SECURITY DEVICES AND PROCEDURES AND BANK SECRECY 
ACT \1\ COMPLIANCE--Table of Contents



---------------------------------------------------------------------------

    \1\ In its original form, subchapter II of chapter 53 of title 31 
U.S.C., was part of Pub. L. 91-508 which requires recordkeeping for and 
reporting of currency transactions by banks and others and is commonly 
known as the Bank Secrecy Act.
---------------------------------------------------------------------------

                  Subpart A_Minimum Security Procedures

Sec.
326.0 Authority, purpose, and scope.
326.1 Definitions.
326.2 Designation of security officer.
326.3 Security program.
326.4 Reports.

    Subpart B_Procedures for Monitoring Bank Secrecy Act Complianace

326.8 Bank Secrecy Act compliance.

    Authority: 12 U.S.C. 1813, 1815, 1817, 1818, 1819 (Tenth), 1881-
1883; 31 U.S.C. 5311-5314 and 5316-5332.2



                  Subpart A_Minimum Security Procedures

    Source: 56 FR 13581, Apr. 3, 1991, unless otherwise noted.



Sec. 326.0  Authority, purpose, and scope.

    (a) This part is issued by the Federal Deposit Insurance Corporation 
(``FDIC'') pursuant to section 3 of the Bank Protection Act of 1968 (12 
U.S.C. 1882). It applies to insured state banks that are not members of 
the Federal Reserve System. It requires each bank to adopt appropriate 
security procedures to discourage robberies, burglaries, and larcenies 
and to assist in identifying and apprehending persons who commit such 
acts.
    (b) It is the responsibility of the bank's board of directors to 
comply with this part and ensure that a written security program for the 
bank's main office and branches is developed and implemented.

(Approved by the Office of Mana