[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2012 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          Title 12

Banks and Banking


________________________

Parts 500 to 599

                         Revised as of January 1, 2012

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2012
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



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

  Title 12:
          Chapter V--Office of Thrift Supervision, Department 
          of the Treasury                                            3
  Finding Aids:
      Table of CFR Titles and Chapters........................     567
      Alphabetical List of Agencies Appearing in the CFR......     587
      List of CFR Sections Affected...........................     597

[[Page iv]]





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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 500.1 refers 
                       to title 12, part 500, 
                       section 1.

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

[[Page v]]



                               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 
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    To determine whether a Code volume has been amended since its 
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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.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
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[[Page vii]]

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    Director,
    Office of the Federal Register.
    January 1, 2012.







[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of eight volumes. The parts 
in these volumes are arranged in the following order: Parts 1-199, 200-
219, 220-229, 230-299, 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, 
third and fourth volumes containing parts 200-299 are comprised of 
chapter II--Federal Reserve System. The fifth 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 
sixth volume containing parts 500-599 is comprised of chapter V--Office 
of Thrift Supervision, Department of the Treasury. The seventh 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 eighth 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, 2012.

    For this volume, Bonnie Fritts was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of Michael L. 
White, assisted by Ann Worley.


[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                  (This book contains parts 500 to 599)

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

chapter v--Office of Thrift Supervision, Department of the 
  Treasury..................................................         500

[[Page 3]]



   CHAPTER V--OFFICE OF THRIFT SUPERVISION, DEPARTMENT OF THE TREASURY




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


  Editorial Note: Nomenclature changes to chapter V appear at 59 FR 
18475, Apr. 19, 1994, and 60 FR 66715, Dec. 26, 1995.
Part                                                                Page
500             Agency organization and functions...........           5
502             Assessments and fees........................           6
503             Privacy Act.................................          12
505             Freedom of Information Act..................          14
506             Information collection requirements under 
                    the Paperwork Reduction Act.............          15
507             Restrictions on post-employment activities 
                    of senior examiners.....................          16
508             Removals, suspensions, and prohibitions 
                    where a crime is charged or proven......          17
509             Rules of practice and procedure in 
                    adjudicatory proceedings................          21
510             Miscellaneous organizational regulations....          46
512             Rules for investigative proceedings and 
                    formal examination proceedings..........          51
513             Practice before the Office..................          53
516             Application processing procedures...........          60
517             Contracting outreach programs...............          71
528             Nondiscrimination requirements..............          72
533             Disclosure and reporting of CRA-related 
                    agreements..............................          78
535             Unfair or deceptive acts or practices.......          90
536             Consumer protection in sales of insurance...          93
541             Definitions for regulations affecting 
                    Federal savings associations............          97
543             Federal mutual savings associations--
                    incorporation, organization, and 
                    conversion..............................          99
544             Federal mutual savings associations--charter 
                    and bylaws..............................         105
545             Federal savings associations--operations....         113
546             Federal mutual savings associations--merger, 
                    dissolution, reorganization, and 
                    conversion..............................         118
550             Fiduciary powers of savings associations....         120

[[Page 4]]

551             Recordkeeping and confirmation requirements 
                    for securities transactions.............         131
552             Federal stock associations--incorporation, 
                    organization, and conversion............         139
555             Electronic operations.......................         157
557             Deposits....................................         158
558             Possession by conservators and receivers for 
                    Federal and State savings associations..         160
559             Subordinate organizations...................         161
560             Lending and investment......................         168
561             Definitions for regulations affecting all 
                    savings associations....................         191
562             Regulatory reporting standards..............         197
563             Savings associations--operations............         199
563b            Conversions from mutual to stock form.......         235
563c            Accounting requirements.....................         262
563d            Securities of savings associations..........         271
563e            Community reinvestment......................         273
563f            Management official interlocks..............         295
563g            Securities offerings........................         300
564             Appraisals..................................         309
565             Prompt corrective action....................         314
567             Capital.....................................         324
568             Security procedures.........................         419
569             Proxies.....................................         420
570             Safety and soundness guidelines and 
                    compliance procedures...................         421
571             Fair Credit Reporting.......................         433
572             Loans in areas having special flood hazards.         467
573             Privacy of consumer financial information...         471
574             Acquisition of control of savings 
                    associations............................         498
575             Mutual holding companies....................         519
583             Definitions for regulations affecting 
                    savings and loan holding companies......         541
584             Savings and loan holding companies..........         544
585             Prohibited service at savings and loan 
                    holding companies.......................         551
590             Preemption of State usury laws..............         554
591             Preemption of State due-on-sale laws........         560
592-599         [Reserved]

[[Page 5]]



PART 500_AGENCY ORGANIZATION AND FUNCTIONS--Table of Contents



 Subpart A_Functions and Responsibilities of the Director of the Office 
                          of Thrift Supervision

Sec.
500.1 General statement and statutory authority.
500.2-500.5 [Reserved]
500.6 General statement concerning gender-related terminology.

                     Subpart B_General Organization

500.10 The OTS or The Office.

                          Subpart C_Procedures

500.30 General statement concerning procedures and forms.

    Authority: 12 U.S.C. 1462a, 1463, 1464.

    Source: 54 FR 49440, Nov. 30, 1989, unless otherwise noted.



 Subpart A_Functions and Responsibilities of the Director of the Office 

                          of Thrift Supervision



Sec. 500.1  General statement and statutory authority.

    (a) The Director of the Office of Thrift Supervision (referred to in 
this chapter as ``Director'' or ``Office'') is responsible for the 
administration and enforcement of the Home Owners' Loan Act of 1933, 
(``HOLA''), and applicable portions of the Federal Deposit Insurance Act 
and with respect to savings associations subject to provisions of the 
foregoing acts and title, the Bank Protection Act of 1968, the Truth in 
Lending Act, and the Fair Credit Reporting Act.
    (b) The Office is authorized under such rules and regulations as it 
may prescribe to provide for the organization, incorporation, 
examination, operation, and regulation of Federal savings associations. 
Under this authority, the Office's functions include, but are not 
limited to, regulation of the corporate structure of such associations, 
regulation of the distribution of their earnings, regulation of their 
lending and other investment powers, acting upon their applications for 
facility offices (including branch offices, limited facilities, mobile 
facilities and satellite offices), the regulation of mergers, 
conversions, and dissolutions involving such associations, the 
appointment of conservators and receivers for such associations, and the 
enforcement of laws, regulations, or conditions against such 
associations or the officers or directors thereof by proceedings under 
section 5 of the Home Owners' Loan Act of 1933, as amended.
    (c) The Office regulates and examines savings associations within 
the authority conferred by the HOLA and the FDIA and is authorized to 
enforce applicable laws, regulations, or conditions against savings 
associations or the officers or directors thereof by proceedings under 
section 5 of the HOLA and section 8 of the FDIA as amended. The Office 
also regulates and supervises savings and loan holding companies 
pursuant to the provisions of section 10 of the HOLA, as amended, and 
section 8 of the FDIA.
    (d) The Office exercises supervisory and regulatory authority over 
all building and loan or savings and loan associations and similar 
institutions of or doing business in or maintaining offices in the 
District of Columbia.

[54 FR 49440, Nov. 30, 1989, as amended at 60 FR 66868, Dec. 27, 1995]



Sec. 500.2-500.5  [Reserved]



Sec. 500.6  General statement concerning gender-related terminology.

    The statutes administered by the Office and the rules, regulations, 
policies, practices, publications, directives, and guidelines 
promulgated pursuant to such statutes that prescribe the course and 
methods to be followed by the Office that inadvertently use or contain 
gender-related terminology are to be interpreted as equally applicable 
to either sex.



                     Subpart B_General Organization



Sec. 500.10  The OTS or The Office.

    The Office of Thrift Supervision (referred to as ``OTS'' or 
``Office'') is an

[[Page 6]]

office of the Department of the Treasury. Its functions are to charter, 
supervise, regulate and examine Federal savings associations and to 
supervise, regulate and examine all savings associations. It is directed 
by a Director, who is appointed by the President and confirmed by the 
Senate to a five-year term. The Director directs and carries out the 
mission of the OTS with the assistance of offices reporting directly to 
him. One of these offices oversees the direct examination and 
supervision of savings associations by regulatory staff to ensure the 
safety and soundness of the industry.

[57 FR 14335, Apr. 20, 1992, as amended at 60 FR 66869, Dec. 27, 1995]



                          Subpart C_Procedures



Sec. 500.30  General statement concerning procedures and forms.

    (a) Rules and procedures of the Office are published in chapter V of 
title 12 of the Code of Federal Regulations and in supplementary 
material published in the Federal Register. The statutes administered by 
the Office and the rules and regulations promulgated pursuant to such 
statutes prescribe the course and method of the formal procedures to be 
followed in proceedings of the Office. These are supplemented where 
practicable by informal procedures designed to aid the public and 
facilitate the execution of the Office's functions. The informal 
procedures of the Office consist principally in the rendering of advice 
and assistance to members of the public dealing with the Office. 
Opinions expressed by members of the staff do not constitute an official 
expression of the views of the Office, but do represent views of persons 
working with the provisions of the statute or regulation involved. The 
Director may, for good cause and to the extent permitted by statute, 
waive the applicability of any provision of this chapter.
    (b) Information with respect to procedures, forms, and instructions 
of the Office is available to the public at the headquarters of the 
Office. Forms of concern to the public consist principally of periodic 
financial reports and of applications to the Office. The Office may from 
time to time require the completion by individuals or savings 
associations of miscellaneous forms, questionnaires, reports, or other 
papers. In each instance, the individual or savings association is given 
actual and timely notice of the scope and contents of the papers in 
question.

[54 FR 49440, Nov. 30, 1989, as amended at 59 FR 53570, Oct. 25, 1994]



PART 502_ASSESSMENTS AND FEES--Table of Contents



Sec.
502.5 Who must pay assessments and fees?

                          Subpart A_Assessments

             Saving Associations--Calculation of Assessments

502.10 How does OTS calculate the semi-annual assessment for savings 
          associations?
502.15 How does OTS determine my size component?
502.20 How does OTS determine my condition component?
502.25 How does OTS determine my complexity component?

     Savings and Loan Holding Companies--Calculation of Assessments

502.26 How does OTS calculate the semi-annual assessment for savings and 
          loan holding companies?
502.27 How does OTS determine the risk/complexity component for a 
          savings and loan holding company?
502.28 How does OTS determine the organizational form component for a 
          savings and loan holding company?
502.29 How does OTS determine the condition component for a savings and 
          loan holding company?

                         Payment of Assessments

502.30 When must I pay my assessment?
502.35 How do I pay my assessment?
502.40 Will OTS refund or prorate my assessment?
502.45 What will happen if I do not pay my assessment on time?

                             Subpart B_Fees

502.50 What fees does OTS charge?
502.55 Where can I find OTS's fee schedule?
502.60 When will OTS adjust, add, waive, or eliminate a fee?
502.65 When is an application fee due?
502.70 How must I pay an application fee?
502.75 What if I do not pay my fees on time?

    Authority: 12 U.S.C. 1462a, 1463, 1467, 1467a.

    Source: 63 FR 65670, Nov. 30, 1998, unless otherwise noted.

[[Page 7]]



Sec. 502.5  Who must pay assessments and fees?

    (a) Authority. Section 9 of the HOLA, 12 U.S.C. 1467, authorizes the 
Director to charge assessments to recover the costs of examining savings 
associations and their affiliates, to charge fees to recover the costs 
of processing applications and other filings, and to charge fees to 
cover OTS's direct and indirect expenses in regulating savings 
associations and their affiliates.
    (b) Assessments. If you are a savings association or a responsible 
savings and loan holding company, and OTS regulates you on the last day 
of January or on the last day of July of each year, you must pay a semi-
annual assessment due on that day. Subpart A of this part describes 
OTS's assessment procedures and requirements.
    (c) Fees. If you make a filing with OTS or use OTS services, the 
Director may require you to pay a fee to cover the costs of processing 
your submission or providing those services. The Director may charge a 
fee for any filing including notices, applications, and securities 
filings. The Director may charge a fee for any service including 
publications, seminars, certifications for official copies of agency 
documents, and records or services requested by other agencies. The 
Director also assesses fees for examining and investigating savings 
associations that administer trust assets of $1 billion or less, and 
savings association affiliates. If OTS incurs extraordinary expenses 
related to examination, investigation, regulation, or supervision of a 
savings association or its affiliate, the Director may charge the 
savings association or the affiliate a fee to fund those expenses. 
Subpart B of this part describes OTS's fee procedures and requirements.

[63 FR 65670, Nov. 30, 1998, as amended at 67 FR 78151, Dec. 23, 2002; 
69 FR 30568, May 28, 2004]



                          Subpart A_Assessments

    Source: 69 FR 30568, May 28, 2004, unless otherwise noted.

            Savings Associations--Calculation of Assessments



Sec. 502.10  How does OTS calculate the semi-annual assessment for savings 

associations?

    (a) If you are a savings association, OTS determines your semi-
annual assessment by totaling three components: your size, your 
condition, and the complexity of your business. OTS determines the 
amounts of each component under Sec. Sec. 502.15 through 502.25 of this 
part.
    (b) OTS uses the September 30 Thrift Financial Report to determine 
amounts due at the January 31 assessment; and the March 31 Thrift 
Financial Report to determine amounts due at the July 31 assessment. For 
purposes of Sec. Sec. 502.10 through 502.25 of this part, total assets 
are your total assets as reported on Thrift Financial Reports filed with 
OTS.



Sec. 502.15  How does OTS determine my size component?

    (a) Chart. If you are a savings association, OTS uses the following 
chart to calculate your size component:

----------------------------------------------------------------------------------------------------------------
              If your total assets are: . . .                              Your size component is:
----------------------------------------------------------------------------------------------------------------
              Over--*                   But not over--      This amount-- Plus--Marginal   Of assets over--Class
-----------------------------------------------------------     Base           rate                floor
                                                             assessment  ---------------------------------------
                                                               amount
             Column A                      Column B        --------------    Column D            Column E
                                                              Column C
----------------------------------------------------------------------------------------------------------------
0.................................  $67 million...........             C1           D1    0.
$67 million.......................  215 million...........             C2           D2    $67 million.
215 million.......................  1 billion.............             C3           D3    215 million.
1 billion.........................  6.03 billion..........             C4           D4    1 billion.
6.03 billion......................  18 billion............             C5           D5    6.03 billion.
18 billion........................  35 billion............             C6           D6    18 billion.
35 billion........................  ......................             C7           D7    35 billion.
----------------------------------------------------------------------------------------------------------------


[[Page 8]]

    (b) Calculation. To calculate your size component, find the row in 
Columns A and B that describes your total assets. Reading across in that 
same row, find your base assessment amount in Column C, your marginal 
rate in Column D, and your class floor in Column E. Calculate how much 
your total assets exceed your Column E class floor. Multiply this number 
by your Column D marginal rate. Add this number to your Column C base 
assessment amount. The total is your size component. OTS will establish 
the base assessment amounts and the marginal rates in columns C and D in 
a Thrift Bulletin.



Sec. 502.20  How does OTS determine my condition component?

    (a) If you are a savings association, OTS uses the following chart 
to determine your condition component:

------------------------------------------------------------------------
                                          Then your condition component
     If your composite  rating is:                     is:
------------------------------------------------------------------------
1 or 2.................................  Zero.
3......................................  50 percent of your size
                                          component.
4 or 5.................................  100 percent of your size
                                          component.
------------------------------------------------------------------------

    (b) For the purposes of this section, OTS uses the most recent 
composite rating, as defined in 12 CFR part 516, of which you have been 
notified in writing before an assessment's due date.



Sec. 502.25  How does OTS determine my complexity component?

    If you are a savings association and your portfolio exceeds any of 
the thresholds in paragraph (a) of this section, OTS will calculate your 
complexity component according to paragraph (c) of this section. If your 
portfolio does not exceed any of the thresholds in paragraph (a) of this 
section, your complexity component is zero.
    (a) Thresholds for complexity component. OTS uses three separate 
thresholds in calculating your complexity component. You exceed a 
threshold if you have more than $1 billion in any of the following:
    (1) Trust assets that you administer.
    (2) The outstanding principal balances of assets that are covered, 
fully or partially, by your recourse obligations or direct credit 
substitutes.
    (3) The principal amount of loans that you service for others.
    (b) Assessment rates. OTS will establish one or more assessment 
rates for each of the types of activities listed in paragraph (a) of 
this section. OTS will publish those assessment rates in a Thrift 
Bulletin.
    (c) Calculation of complexity component. OTS separately considers 
each of the thresholds in paragraph (a) of this section in calculating 
your complexity component. OTS first calculates the amount by which you 
exceed any of those thresholds. OTS multiplies the amount by which you 
exceed any thresholds in paragraph (a) of this section by the applicable 
assessment rate(s) under paragraph (b) of this section. OTS then totals 
the results. This total is your complexity component.

     Savings and Loan Holding Companies--Calculation of Assessments



Sec. 502.26  How does OTS calculate the semi-annual assessment for savings and 

loan holding companies?

    (a) OTS calculates the semi-annual assessment savings and loan 
holding companies as follows:
    (1) OTS will assess a base assessment amount of $3,500 on 
responsible savings and loan holding companies. The base assessment 
amount reflects OTS's estimate of the base costs of conducting on- and 
off-site supervision of a noncomplex, low risk savings and loan holding 
company structure. OTS will periodically revise this amount to reflect 
changes in inflation based on a readily available index. OTS will 
establish the revised amount of the base assessment in a Thrift 
Bulletin.
    (2) OTS will add three components to the base assessment amount to 
compute the amount of the semi-annual assessment for responsible savings 
and loan holding companies: a component based on the risk or complexity 
of the savings and loan holding company's business, a component based on 
its organizational form, and a component based on its condition. OTS 
determines the amount of each component under Sec. Sec. 502.27 through 
502.29 of this part.
    (b) For purposes of the semi-annual assessment of savings and loan 
holding companies:
    (1) The responsible holding company is the registered holding 
company at the highest level of ownership in a holding

[[Page 9]]

company structure, unless OTS designates another savings and loan 
holding company in the holding company structure. OTS may designate an 
intermediate-tier holding company if the assessment of this entity would 
more accurately reflect OTS costs of supervising the holding company 
structure and:
    (i) There are multiple top-tier holding companies in the holding 
company structure;
    (ii) The top-tier holding company is organized outside of the United 
States, and is subject to the consolidated review of a foreign 
regulator; or
    (iii) Other circumstances indicate that the assessment of the top-
tier holding company is inappropriate.
    (2) Total consolidated holding company assets are the total assets 
as reported on the Thrift Financial Report, Schedule HC. If Schedule HC 
is unavailable, OTS will use total assets reported on report H-(b)11. 
OTS uses information contained in the September 30 Schedule HC or report 
H-(b)11 to determine amounts due at the January 31 assessment; and the 
March 31 Schedule HC or report H-(b)11 to determine amounts due at the 
July 31 assessment.

[69 FR 30568, May 28, 2004, as amended at 74 FR 68665, Dec. 29, 2009]



Sec. 502.27  How does OTS determine the risk/complexity component for a 

savings and loan holding company?

    (a) OTS computes the risk/complexity component for responsible 
savings and loan holding companies using schedules that set out charges 
based on OTS holding company risk/complexity classifications and total 
consolidated holding company assets. OTS will establish these schedules 
in a Thrift Bulletin.
    (b) For the purposes of this section, the holding company risk/
complexity classification is the most recent risk/complexity 
classification of which OTS notified the savings and loan holding 
company in writing before an assessment's due date.
    (1) OTS classifies holding companies as Category I (low risk, 
noncomplex holding company); Category II (complex or high risk holding 
company); or Category III (conglomerate).
    (2) The OTS holding company risk/complexity classifications reflect 
OTS's assessment of a holding company's financial condition, financial 
independence of the savings association and other affiliates that are 
regulated financial entities, operational independence of the savings 
association and other affiliates that are regulated financial entities, 
reputational risks raised by affiliation with the holding company, and 
management experience of the holding company, savings association, and 
affiliates. The OTS holding company risk/complexity classification 
system is more fully described in the OTS Holding Company Handbook.
    (3) A conglomerate is a holding company that: (i) is one of the most 
complex or highest risk holding companies under the holding company 
risk/complexity classification system; (ii) is made up of a number of 
different companies or legal enterprises that offer products from more 
than one financial sector (e.g., insurance, securities, and banking) or 
operate in diversified fields; and (iii) generally manages these 
companies and enterprises along functional lines, rather than as 
separate legal entities.
    (c) OTS uses the following chart to compute the risk/complexity 
component under this section. OTS will establish the amounts in column C 
and D in the Thrift Bulletin for each holding company risk/complexity 
classification. The amounts established for column C and D that are 
applicable to conglomerates will be three times the amounts established 
for column C and D for complex or higher risk holding company 
enterprises of the same asset size.

--------------------------------------------------------------------------------------------------------------------------------------------------------
              If your total consolidated assets are . . .                                    Your risk/complexity component is . . .
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Over . . .                      But not over . . .        This amount . . .   Plus--this marginal rate . .      Of assets over . . .
--------------------------------------------------------------------------------------------               .               -----------------------------
                                                                                            -------------------------------
                 Column A                            Column B                 Column C                  Column D                      Column E
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.......................................  $150 Million................                   C1                           D1   $0
150 Million..............................  250 Million.................                   C2                           D2   150 Million

[[Page 10]]

 
250 Million..............................  500 Million.................                   C3                           D3   250 Million
500 Million..............................  1 Billion...................                   C4                           D4   500 Million
1 Billion................................  5 Billion...................                   C5                           D5   1 Billion
5 Billion................................  50 Billion..................                   C6                           D6   5 Billion
50 Billion...............................  100 Billion.................                   C7                           D7   50 Billion
100 Billion..............................  300 Billion.................                   C8                           D8   100 Billion
Over 300 Billion.......................................................                   C9                           D9   300 Billion
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (d) To compute your risk/complexity component, find the row in the 
appropriate schedule that describes your total consolidated assets by 
referring to the amounts in Columns A and B. In that row, calculate how 
much your total consolidated assets exceed the class floor (Column E); 
multiply this number by your marginal rate (Column D); and add the 
product to the amount in Column C. The total is your risk/complexity 
component.



Sec. 502.28  How does OTS determine the organizational form component for a 

savings and loan holding company?

    OTS will include an organizational form component if you are a 
responsible savings and loan holding company that OTS regulates under 
section 10(l) of the HOLA. OTS will compute your organizational form 
component by adding the base assessment to your risk/complexity 
component, and multiplying this amount by 25 percent.



Sec. 502.29  How does OTS determine the condition component for a savings and 

loan holding company?

    (a) If the most recent examination rating assigned to the 
responsible savings and loan holding company (or most recent examination 
rating assigned to any savings and loan holding company in the holding 
company structure) is a composite rating of 4 or 5, OTS will assess a 
charge under the condition component. The amount of the condition 
component is equal to 100 percent of the sum of the base assessment 
amount, the risk/complexity component, and any organizational form 
component.
    (b) For the purposes of this section, examination ratings are the 
ratings that OTS assigns under the OTS holding company rating system. 
OTS uses the most recent rating of which the savings and loan holding 
company has been notified in writing before an assessment's due date.

[69 FR 30568, May 28, 2004, as amended at 74 FR 68665, Dec. 29, 2009]

                         Payment of Assessments



Sec. 502.30  When must I pay my assessment?

    OTS will bill you semi-annually for your assessments. Assessments 
are due January 31 and July 31 of each year, unless that date is a 
Saturday, Sunday, or Federal holiday. If the due date is a Saturday, 
Sunday or Federal holiday, your assessment is due on the first day 
preceding the due date that is not a Saturday, Sunday or Federal 
holiday. At least seven days before your assessment is due, the Director 
will mail you a notice that indicates the amount of your assessment, 
explains how OTS calculated the amount, and specifies when payment is 
due.



Sec. 502.35  How do I pay my assessment?

    (a) Savings associations. (1) If you are a member of a Federal Home 
Loan Bank that offers demand deposit accounts which permit direct 
debits, you must maintain a demand deposit account at your Federal Home 
Loan Bank with sufficient funds to pay your assessment when due. OTS 
will notify your Federal Home Loan Bank of the amount of your 
assessment. OTS will debit your account for your assessments.
    (2) If paragraph (a)(1) of this section does not apply to you, OTS 
will directly debit an account you must maintain at your association.
    (b) Savings and loan holding companies. You may establish an account 
at

[[Page 11]]

an insured depository institution and authorize OTS to debit the account 
for your semi-annual assessment. If you do not establish an account and 
maintain funds in the account sufficient to pay the semi-annual 
assessment when due, OTS may charge you a fee to cover its 
administrative costs of collecting and billing your assessment. This fee 
is in addition to interest on delinquent assessments charged under Sec. 
502.45 of this part. OTS will establish the amount of the administrative 
fee and publish the amount of the fee in a Thrift Bulletin.



Sec. 502.40  Will OTS refund or prorate my assessment?

    (a) OTS will not refund or prorate your assessment, even if you 
cease to be a savings association or a savings and loan holding company.
    (b) If a conservator or receiver has been appointed, you must 
continue to pay assessments in accordance with this part. OTS will not 
increase or decrease your assessment based on events that occur after 
the date of the Thrift Financial Report or H-(b)11 Annual/Current Report 
upon which your assessment is based.



Sec. 502.45  What will happen if I do not pay my assessment on time?

    (a) Your assessment is delinquent if you do not pay it on the date 
it is due under Sec. 502.30 of this part. The Director will charge 
interest on delinquent assessments. Interest will accrue at a rate (that 
OTS will determine quarterly) equal to 150 percent of the average of the 
bond-equivalent rates of 13-week Treasury bills auctioned during the 
calendar quarter preceding the assessment.
    (b) If a savings and loan holding company fails to pay an assessment 
within 60 days of the date it is due under Sec. 502.30 of this part, 
the Director may assess and collect the assessment with interest from a 
subsidiary savings association. If a savings and loan holding company 
controls more than one savings association, the Director may assess and 
collect the assessment from each savings association as the Director may 
prescribe.



                             Subpart B_Fees



Sec. 502.50  What fees does OTS charge?

    (a) The Director assesses fees for examining or investigating 
savings associations that administer trust assets of $1 billion or less, 
and saving association affiliates. Because OTS recovers the ordinary 
costs of examining and investigating savings and loan holding companies 
through the semi-annual assessment under Sec. Sec. 502.25 through 
502.29 of this part, the Director will not generally charge an 
examination fee to a savings and loan holding company. ``Affiliate'' has 
the meaning in 12 U.S.C. 1462(9), except that, for this part only, 
``affiliate'' does not include any entity that is consolidated with a 
savings association on the Consolidated Statement of Condition of the 
Thrift Financial Report.
    (b) The Director assesses fees for processing notices, applications, 
securities filings, and requests, and for providing other services.

[69 FR 30571, May 28, 2004]



Sec. 502.55  Where can I find OTS's fee schedule?

    OTS will periodically publish a schedule of its fees in a Thrift 
Bulletin. OTS will publish these fees at least 30 days before they are 
effective.



Sec. 502.60  When will OTS adjust, add, waive, or eliminate a fee?

    Under unusual circumstances, the Director may deem it necessary or 
appropriate to adjust, add, waive, or eliminate a fee. For example, the 
Director may:
    (a) Reduce any fee to adjust for any inequities, efficiencies, or 
changed procedures that OTS projects will reduce its applications 
processing costs but that OTS did not consider in determining its fees;
    (b) Reduce or waive any fee if OTS determines that the fee would 
unduly or unjustifiably discourage particular types of applications or 
applications for particular categories of transactions;
    (c) Add a fee for a new type of application;
    (d) Increase a fee for an application that presents unusual or 
particularly

[[Page 12]]

complex issues of law or policy or otherwise causes the agency to incur 
unusually high processing costs; or
    (e) Charge a fee to recover extraordinary expenses related to 
examination, investigation, regulation, or supervision of savings 
associations or their affiliates.



Sec. 502.65  When is an application fee due?

    (a) You must pay the application fee when you file an application. 
OTS will not process your application if you do not include the required 
fee.
    (b) If OTS cannot complete its review of your application because 
the application is materially deficient and it refuses to accept your 
application for processing, you must pay a new application fee upon 
filing a revised application.
    (c) If a transaction involves multiple applications, you must pay 
the appropriate fee for each application, unless OTS specifies otherwise 
by Thrift Bulletin.



Sec. 502.70  How must I pay an application fee?

    You must pay an application fee to the Office of Thrift Supervision. 
You must include a statement of the fee and how you calculated the fee.



Sec. 502.75  What if I do not pay my fees on time?

    (a) Interest. An examination or investigation fee is delinquent if 
OTS does not receive the fee within 30 days of the date specified in a 
bill. The Director will charge interest on a delinquent examination or 
investigation fee. Interest will accrue at a rate (that OTS will 
determine quarterly) equal to 150 percent of the average of the bond-
equivalent rates of 13-week Treasury bills auctioned during the 
preceding calendar quarter.
    (b) Failure to pay. If you are a savings association and your 
holding company, affiliate, or subsidiary fails to pay any fee within 60 
days of the date specified in a bill, the Director may assess and 
collect that fee, with interest, from you. If the holding company, 
affiliate, or subsidiary is related to more than one savings 
association, the Director may assess the fee against and collect it from 
each savings association as the Director may prescribe.

[63 FR 65670, Nov. 30, 1998, as amended at 69 FR 30571, May 28 1, 2004]



PART 503_PRIVACY ACT--Table of Contents



Sec.
503.1 Scope and procedures.
503.2 Exemptions of records containing investigatory material compiled 
          for law enforcement purposes.

    Authority: 5 U.S.C. 552a; 12 U.S.C. 1462a, 1463, 1464.

    Cross Reference: See 31 CFR part 1, subpart C.



Sec. 503.1  Scope and procedures.

    (a) In general. The Privacy Act regulations of the Department of the 
Treasury, 31 CFR part 1, subpart C, apply to the Office as a component 
part of the Department of the Treasury. This part 503 sets forth, for 
the Office, specific notification and access procedures with respect to 
particular systems of records, and identifies the officials designated 
to make the initial determinations with respect to notification and 
access to records and accountings of disclosures of records. This part 
503 also sets forth the specific procedures for requesting amendment of 
records and identifies the officials designated to make the initial and 
appellate determinations with respect to requests for amendment of 
records. It identifies the officials designated to grant extensions of 
time on appeal, the officials with whom ``Statements of Disagreement'' 
may be filed, the official designated to receive service of process and 
the addresses for delivery of requests, appeals, and service of process. 
In addition, it references the notice of systems of records and notices 
of the routine uses of the information in the system required by 5 
U.S.C. 552a(e) (4) and (11) and published annually by the Office of the 
Federal Register in ``Privacy Act Issuances.''
    (b) Requests for notification and access to records and accountings 
of disclosures. Initial determinations under 31 CFR 1.26, whether to 
grant requests for notification and access to records and accountings of 
disclosures for the Office,

[[Page 13]]

will be made by the head of the organizational unit having immediate 
custody of the records requested or an official designated by this 
official. This is indicated in the appropriate system notice in 
``Privacy Act Issuances'' published annually by the Office of the 
Federal Register. Requests for information and specific guidance on 
where to send requests for records may be mailed or delivered personally 
to: Privacy Act Request, Manager, Dissemination Branch, Information 
Management & Services Division, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552.
    (c) Requests for amendment of records. Initial determinations under 
31 CFR 1.27(a) through (d), whether to grant requests to amend records 
will be made by the head of the organizational unit having immediate 
custody of the records or the delegate of such official. Requests for 
amendment should be addressed to: Privacy Act Amendment Request, 
Manager, Dissemination Branch, Information Management & Services 
Division, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.
    (d) Administrative appeal of initial determinations refusing 
amendment of records. Appellate determinations refusing amendment of 
records under 31 CFR 1.27(e) including extensions of time on appeal, 
with respect to records of the Office will be made by the Director of 
the Office of Thrift Supervision (``Director'') or Chief Counsel or the 
delegate of the Director or Chief Counsel. Appeals made by mail should 
be addressed to, or delivered personally to: Privacy Act Amendment 
Appeal, Deputy Chief Counsel for General Law, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552.
    (e) Statements of disagreement. ``Statements of Disagreement'' under 
31 CFR 1.27(e)(4)(i) shall be filed with the Deputy Director for 
Washington Operations at the address indicated in the letter of 
notification within 35 days of the date of such notification and should 
be limited to one page.
    (f) Service of process. Service of process will be received by the 
Chief Counsel's Office or the delegate of such official and shall be 
delivered to the following location: Chief Counsel's Office, Office of 
Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
    (g) Annual notice of systems of records. The annual notice of 
systems of records is published by the Office of the Federal Register, 
as specified in 5 U.S.C. 552a(f). The publication is entitled ``Privacy 
Act Issuance.'' Any specific requirements for access, including 
identification requirements, in addition to the requirements set forth 
in 31 CFR 1.26 and 1.27 are indicated in the notice for the pertinent 
system.

[54 FR 49443, Nov. 30, 1989, as amended at 59 FR 18475, Apr. 19, 1994; 
64 FR 69184, Dec. 10, 1999]



Sec. 503.2  Exemptions of records containing investigatory material compiled 

for law enforcement purposes.

    (a) Scope. The Office has established a system of records, entitled 
the ``Confidential Individual Information System.'' The purpose of this 
system is to assist the Office in the accomplishment of its statutory 
and regulatory responsibilities in connection with supervision of 
savings associations. This system will be exempt from certain provisions 
of the Privacy Act of 1974 for the reasons set forth in paragraph (c) of 
this section.
    (b) Exemptions Under 5 U.S.C. 552a(k)(2). (1) Pursuant to 5 U.S.C. 
552a(k)(2), the head of an agency may issue rules to exempt any system 
of records within the agency from certain provisions of the Privacy Act 
of 1974 if the system contains investigatory material compiled for law 
enforcement purposes.
    (2) Provisions of the Privacy Act of 1974 from which exemptions will 
be made under 5 U.S.C. 552a(k)(2) are as follows:
    (i) 5 U.S.C. 552a(c)(3);
    (ii) 5 U.S.C. 552a(d)(1), (d)(2), (d)(3), and (d)(4);
    (iii) 5 U.S.C. 552a(e)(1);
    (iv) 5 U.S.C. 552a(e)(4)(G), (e)(4)(H), and (e)(4)(I); and
    (v) 5 U.S.C. 552a(f).
    (c) Reasons for exemptions under 5 U.S.C. 552a(k)(2). (1) 5 U.S.C. 
552a(c)(3) requires that an agency make accountings of disclosures of 
records available to individuals named in the records at their request. 
These accountings must state the date, nature, and purpose of

[[Page 14]]

each disclosure of a record and the name and address of the recipient. 
The application of this provision would make known to subjects of an 
investigation that an investigation is taking place and that they are 
the subjects of it. Release of such information could result in the 
alteration or destruction of documentary evidence, improper influencing 
of witnesses, and reluctance of witnesses to offer information, and 
could otherwise impede or compromise an investigation.
    (2) 5 U.S.C. 552a(d)(1), (d)(2), (d)(3), and (d)(4), (e)(4)(G) and 
(e)(4)(H), and (f), relate to an individual's right to be notified of 
the existence of, and the right to examine, records pertaining to such 
individual. Notifying an individual at the individual's request of the 
existence of records and allowing the individual to examine an 
investigative file pertaining to such individual, or granting access to 
an investigative file, could:
    (i) Interfere with investigations and enforcement proceedings;
    (ii) Constitute an unwarranted invasion of the personal privacy of 
others;
    (iii) Disclose the identity of confidential sources and reveal 
confidential information supplied by those sources; or
    (iv) Disclose investigative techniques and procedures.
    (3) 5 U.S.C. 552a(e)(4)(I) requires the publication of the 
categories of sources of records in each system. Application of this 
provision could disclose investigative techniques and procedures and 
cause sources to refrain from giving such information because of fear of 
reprisal, or fear of breach of promises of anonymity and 
confidentiality, thus compromising the agency's ability to conduct 
investigations and to identify, detect, and apprehend violators.
    (4) 5 U.S.C. 552a(e)(1) requires each agency to maintain in its 
records only information about an individual that is relevant and 
necessary to accomplish a purpose of the agency required by statute or 
Executive Order. Limiting the system as described would impede 
enforcement activities because:
    (i) It is not always possible to determine the relevance or 
necessity of specific information in the early stages of an 
investigation; and
    (ii) In any investigation the Office may obtain information 
concerning violations of laws other than those within the scope of its 
jurisdiction. In the interest of effective law enforcement, the Office 
should retain this information to aid in establishing patterns of 
criminal activity, and to provide leads for those law enforcement 
agencies charged with enforcing criminal or civil laws.
    (d) Documents exempted. Exemptions will be applied only when 
appropriate under 5 U.S.C. 552a(k).

[55 FR 31371, Aug. 2, 1990]



PART 505_FREEDOM OF INFORMATION ACT--Table of Contents



Sec.
505.1 Basis and scope.
505.2 Public Reading Room.
505.3 Requests for records.
505.4 Administrative appeal of initial determination to deny records.
505.5 Delivery of process.

    Authority: 5 U.S.C. 552; 12 U.S.C. 1462a, 1463, 1464.

    Cross Reference: See 31 CFR part 1, subpart A.



Sec. 505.1  Basis and scope.

    (a) This part is issued by the Office of Thrift Supervision 
(``OTS'') as a supplement to the Freedom of Information Act regulations 
of the Department of the Treasury, 31 CFR part 1, subpart A, which apply 
to the OTS as a component part of the Department of the Treasury.
    (b) This part is issued by the OTS pursuant to the requirement of 
section 552 of title 5 of the United States Code, which requires every 
federal agency to publish in the Federal Register the established places 
at which, the employees from whom, and the methods whereby, the public 
may obtain information, make submittals on requests, or obtain 
decisions, and the forms available or the places at which forms and 
instructions as to the scope and contents of all papers, reports, or 
examinations may be found. Information about the Public Reading Room is 
set forth in Sec. 505.2 of this part. Procedures for requests for 
records are set forth in Sec. 505.3 of this part. Information about 
administrative appeals is set forth in

[[Page 15]]

Sec. 505.4 of this part. Provisions relating to delivery of process 
upon the OTS are set forth in Sec. 505.5 of this part.

[54 FR 49444, Nov. 30, 1989, as amended at 60 FR 66716, Dec. 26, 1995; 
66 FR 65819, Dec. 21, 2001]



Sec. 505.2  Public Reading Room.

    OTS will make materials available for review on an ad hoc basis when 
necessary. Contact the FOIA Office, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552, or you may visit the Public Reading 
Room at 1700 G Street, NW., by appointment only. (Please identify the 
materials you would like to inspect, to assist us in serving you.) We 
schedule appointments on business days between 10 a.m. and 4 p.m. In 
most cases, appointments will be available the next business day 
following the date we receive your request.

[66 FR 65819, Dec. 21, 2001, as amended at 67 FR 78151, Dec. 23, 2002]



Sec. 505.3  Requests for records.

    A designated official will make the initial determination under 31 
CFR 1.5(g) whether to grant a request for OTS records. Requests may be 
mailed to: Freedom of Information Act Request, FOIA Office, Office of 
Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, or marked 
``FOIA'' and delivered in person to the FOIA Office, 1700 G Street, NW., 
Washington, DC 20552. Requests may also be sent by e-mail or facsimile 
to the e-mail address and facsimile number in Sec. 505.2 of this part.

[67 FR 78151, Dec. 23, 2002]



Sec. 505.4  Administrative appeal of initial determination to deny records.

    A designated official will make appellate determinations under 31 
CFR 1.5(h) with respect to OTS records. Appeals by mail should be 
addressed to: FOIA Appeals, 1700 G Street, NW., Washington, DC 20552. 
Appeals may be delivered personally to FOIA Appeals, Office of Thrift 
Supervision, 1700 G Street, NW., Washington, DC 20552. Appeals may also 
be sent by e-mail or facsimile to the e-mail address and facsimile 
number in Sec. 505.2 of this part.

[67 FR 78151, Dec. 23, 2002]



Sec. 505.5  Delivery of process.

    Service of process will be received as set forth in Sec. 510.4 of 
this chapter.

[54 FR 49444, Nov. 30, 1989]



PART 506_INFORMATION COLLECTION REQUIREMENTS UNDER THE PAPERWORK REDUCTION 

ACT--Table of Contents



    Authority: 44 U.S.C. 3501 et seq.



Sec. 506.1  OMB control numbers assigned pursuant to the Paperwork Reduction 

Act.

    (a) Purpose. This part collects and displays the control numbers 
assigned to information collection requirements contained in regulations 
of the Office of Thrift Supervision by the Office of Management and 
Budget (OMB) pursuant to the Paperwork Reduction Act of 1995, Pub. L. 
104-13, 109 Stat. 163, and is adopted in compliance with the 
requirements of 5 CFR 1320.8. Information collection requirements that 
are not mandated by statute must be assigned control numbers by OMB in 
order to be enforceable. Respondents/recordkeepers are not required to 
comply with any collection of information unless it displays a currently 
valid OMB control number.
    (b) Display.

------------------------------------------------------------------------
  12 CFR part or section where identified
               and described                   Current OMB control No.
------------------------------------------------------------------------
502.70....................................  1550-0053.
510.......................................  1550-0081.
Part 516..................................  1550-0056.
Part 528..................................  1550-0021.
533.4.....................................  1550-0105.
533.6.....................................  1550-0105.
533.7.....................................  1550-0105.
536.40....................................  1550-0106.
543.2.....................................  1550-0005.
543.3.....................................  1550-0005
543.9.....................................  1550-0007.
544.2.....................................  1550-0018.
544.5.....................................  1550-0018.
544.8.....................................  1550-0011.
545.93 and 545.95.........................  1500-0006.
545.96(c).................................  1550-0011.
546.2.....................................  1550-0016.
546.4.....................................  1550-0066.
Part 550..................................  1550-0037.
Part 551..................................  1550-0109.
551.50....................................  1550-0109.
551.70 through 551.100....................  1550-0109.
551.140...................................  1550-0109.
551.150...................................  1550-0109.
552.2-1...................................  1550-0005.
552.2-6...................................  1550-0007.
552.4.....................................  1550-0017.
552.5.....................................  1550-0018.

[[Page 16]]

 
552.11....................................  1550-0011.
552.13....................................  1550-0016, 1550-0025.
555.300...................................  1550-0095.
555.310...................................  1550-0095.
557.20....................................  1550-0092.
559.3.....................................  1550-0077.
559.11....................................  1550-0077.
559.12....................................  1550-0013.
559.13....................................  1550-0065.
560.1.....................................  1550-0078.
560.2.....................................  1550-0078.
560.32....................................  1550-0078.
560.35....................................  1550-0078.
560.93(f).................................  1550-0078.
560.101...................................  1550-0078.
560.170(c)................................  1550-0078.
560.172...................................  1550-0078.
560.210...................................  1550-0078.
562.1.....................................  1550-0011.
562.1(b)..................................  1550-0078.
562.4.....................................  1550-0011.
563.1(b)..................................  1550-0011.
563.3.....................................  1550-0027.
563.22....................................  1550-0016, 1550-0025.
563.41(c)(3) and (4)......................  1550-0078
563.43....................................  1550-0075.
563.47(e).................................  1550-0011.
563.74....................................  1550-0050.
563.76(c).................................  1550-0011.
563.81....................................  1550-0030.
563.143 through 563.146...................  1550-0059.
563.170...................................  1550-0078.
563.177...................................  1550-0041.
563.180...................................  1550-0084.
563.180(d)................................  1550-0003.
563.180(e)................................  1550-0079.
Part 563b.................................  1550-0014.
Part 563d.................................  1550-0019.
Part 563e.................................  1550-0012.
Part 563f.................................  1550-0051.
Part 563g.................................  1550-0035.
Part 564..................................  1550-0078.
Part 568..................................  1550-0062.
572.6.....................................  1550-0088.
572.7.....................................  1550-0088.
572.9.....................................  1550-0088.
572.10....................................  1550-0088.
Part 573..................................  1550-0103.
574.3(b)..................................  1550-0032.
574.4.....................................  1550-0032.
574.5.....................................  1550-0032.
574.6.....................................  1550-0015.
Part 575..................................  1550-0072.
584.1(f)..................................  1550-0011.
584.2-1...................................  1550-0063.
584.2-2...................................  1550-0063.
584.9.....................................  1550-0063.
590.4(h)..................................  1550-0078.
------------------------------------------------------------------------


[60 FR 66716, Dec. 26, 1995, as amended by 61 FR 65178, Dec. 11, 1996; 
62 FR 54764, Oct. 22, 1997; 62 FR 66261, Dec. 18, 1997; 63 FR 71211, 
Dec. 24, 1998; 65 FR 78901, Dec. 18, 2000; 66 FR 15017, Mar. 15, 2001; 
66 FR 65819, Dec. 21, 2001; 67 FR 76298, Dec. 12, 2002; 67 FR 77916, 
Dec. 20, 2002; 67 FR 78151, Dec. 23, 2002; 68 FR 75109, Dec. 30, 2003; 
69 FR 68246, Nov. 24, 2004; 69 FR 76602, Dec. 22, 2004]



PART 507_RESTRICTIONS ON POST-EMPLOYMENT ACTIVITIES OF SENIOR EXAMINERS--Table 

of Contents



Sec.
507.1 What does this part do?
507.2 Who is a senior examiner?
507.3 What post-employment restrictions apply to senior examiners?
507.4 When will OTS waive the post-employment restrictions?
507.5 What are the penalties for violating the post-employment 
          restrictions?

    Authority: 12 U.S.C. 1462a, 1463 and 1820(k).

    Source: 70 FR 69640, Nov. 17, 2005, unless otherwise noted.



Sec. 507.1  What does this part do?

    This part implements section 10(k) of the Federal Deposit Insurance 
Act (FDIA), which prohibits senior examiners from accepting compensation 
from certain companies following the termination of their employment. 
See 12 U.S.C. 1820(k). Except where otherwise provided, the terms used 
in this part have the meanings given in section 3 of the FDIA (12 U.S.C. 
1813).



Sec. 507.2  Who is a senior examiner?

    An individual is a senior examiner for a particular savings 
association or savings and loan holding company if--
    (a) The individual is an officer or employee of OTS (including a 
special government employee) who has been authorized by OTS to conduct 
examinations or inspections of savings associations or savings and loan 
holding companies;
    (b) The individual has been assigned continuing, broad and lead 
responsibility for the examination or inspection of that savings 
association or savings and loan holding company; and
    (c) The individual's responsibilities for examining, inspecting, or 
supervising that savings association or savings and loan holding 
company:
    (1) Represent a substantial portion of the individual's assigned 
responsibilities at OTS; and
    (2) Require the individual to interact on a routine basis with 
officers and employees of the savings association, savings and loan 
holding company, or its affiliates.

[[Page 17]]



Sec. 507.3  What post-employment restrictions apply to senior examiners?

    (a) Prohibition. (1) Senior examiner of savings association. An 
individual who serves as a senior examiner of a savings association for 
two or more of the last 12 months of his or her employment with OTS may 
not, within one year after the termination date of his or her employment 
with OTS, knowingly accept compensation as an employee, officer, 
director, or consultant from--
    (i) The savings association; or
    (ii) A savings and loan holding company, bank holding company, or 
any other company that controls the savings association.
    (2) Senior examiner of a savings and loan holding company. An 
individual who serves as a senior examiner of a savings and loan holding 
company for two or more of the last 12 months of his or her employment 
with OTS may not, within one year after the termination date of his or 
her employment with OTS, knowingly accept compensation as an employee, 
officer, director, or consultant from--
    (i) The savings and loan holding company; or
    (ii) Any depository institution that is controlled by the savings 
and loan holding company.
    (b) Effective date. The post-employment restrictions in paragraph 
(a) of this section do not apply to any senior examiner who terminated 
his employment at OTS before December 17, 2005.
    (c) Definitions. For the purposes of this section--
    (1) Consultant. An individual acts as a consultant for a savings 
association or other company only if he or she directly works on matters 
for, or on behalf of, the savings association or company.
    (2) Control. Control has the same meaning given in part 574 of this 
chapter.



Sec. 507.4  When will OTS waive the post-employment restrictions?

    The post-employment restriction in Sec. 507.3 of this part will not 
apply to a senior examiner if the Director certifies in writing and on a 
case-by-case basis that a waiver of the restriction will not affect the 
integrity of OTS's supervisory program.



Sec. 507.5  What are the penalties for violating the post-employment 

restrictions?

    (a) Penalties. A senior examiner who violates Sec. 507.3 shall, in 
accordance with 12 U.S.C. 1820(k)(6), be subject to one or both of the 
following penalties:
    (1) An order--
    (i) Removing the person from office or prohibiting the person from 
further participating in the conduct of the affairs of the relevant 
depository institution, savings and loan holding company, bank holding 
company or other company for up to five years, and
    (ii) Prohibiting the person from participating in the affairs of any 
insured depository institution for up to five years.
    (2) A civil money penalty not to exceed $250,000.
    (b) Scope of prohibition orders. Any senior examiner who is subject 
to an order issued under paragraph (a)(1) of this section shall be 
subject to 12 U.S. C. 1818(e)(6) and (7) in the same manner and to the 
same extent as a person subject to an order issued under 12 U.S.C. 
1818(e).
    (c) Procedures. 12 U.S.C. 1820(k) describes the procedures that are 
applicable to actions under paragraph (a) of this section and the 
appropriate Federal banking agency authorized to take the action, which 
may be an agency other than OTS. Where OTS is the appropriate Federal 
banking agency, it will conduct administrative proceedings under 12 CFR 
part 509.
    (d) Other penalties. The penalties under this section are not 
exclusive. A senior examiner who violates the restriction in Sec. 507.3 
may also be subject to other administrative, civil, or criminal remedy 
or penalty as provided by law.



PART 508_REMOVALS, SUSPENSIONS, AND PROHIBITIONS WHERE A CRIME IS CHARGED OR 

PROVEN--Table of Contents



Sec.
508.1 Scope.
508.2 Definitions.
508.3 Issuance of Notice or Order.
508.4 Contents and service of the Notice or Order.
508.5 Petition for hearing.

[[Page 18]]

508.6 Initiation of hearing.
508.7 Conduct of hearings.
508.8 Default.
508.9 Rules of evidence.
508.10 Burden of persuasion.
508.11 Relevant considerations.
508.12 Proposed findings and conclusions and recommended decision.
508.13 Decision of the Office.
508.14 Miscellaneous.

    Authority: 12 U.S.C. 1464, 1818.

    Source: 54 FR 49444, Nov. 30, 1989, unless otherwise noted.



Sec. 508.1  Scope.

    The rules in this part apply to hearings, which are exempt from the 
adjudicative provisions of the Administrative Procedure Act, afforded to 
any officer, director, or other person participating in the conduct of 
the affairs of a savings association, affiliate service corporation, 
savings and loan holding company, or subsidiary of such a holding 
company, where such person has been suspended or removed from office or 
prohibited from further participation in the conduct of the affairs of 
one of the aforementioned entities by a Notice or Order served by the 
Office upon the grounds set forth in section 8(g) of the Federal Deposit 
Insurance Act, (12 U.S.C. 1818(g)).



Sec. 508.2  Definitions.

    As used in this part--
    (a) The term Office means the Office of Thrift Supervision.
    (b) The term Secretary means the Secretary to the Office and any 
Assistant or Acting Secretary to the Office.
    (c) The term Notice means a Notice of Suspension or Notice of 
Prohibition issued by the Office pursuant to section 8(g) of the Federal 
Deposit Insurance Act.
    (d) The term Order means an Order of Removal or Order of Prohibition 
issued by the Office pursuant to section 8(g) of the Federal Deposit 
Insurance Act.
    (e) The term association means a savings association within the 
meaning of section 2(4) of the Home Owners' Loan Act of 1933, as 
amended, 12 U.S.C. 1462(4) (``HOLA''), an affiliate service corporation 
within the meaning of section 8(b)(8) of the Federal Deposit Insurance 
Act, as amended, 12 U.S.C. 1818(b)(8) (``FDIA''), a savings and loan 
holding company within the meaning of section 10(a)(1)(D) of the HOLA, 
12 U.S.C. 1467a(a)(1)(D) and a subsidiary of a savings and loan holding 
company (other than a savings association) within the meaning of section 
10(a)(1)(G) of the Home Owners' Loan Act of 1933.
    (f) The term subject individual means a person served with a Notice 
or Order.
    (g) The term petitioner means a subject individual who has filed a 
petition for informal hearing under this part.



Sec. 508.3  Issuance of Notice or Order.

    (a) The Office may issue and serve a Notice upon an officer, 
director, or other person participating in the conduct of the affairs of 
an association, where the individual is charged in any information, 
indictment, or complaint with the commission of or participation in a 
crime involving dishonesty or breach of trust that is punishable by 
imprisonment for a term exceeding one year under State or Federal law, 
if the Office, upon due deliberation, determines that continued service 
or participation by the individual may pose a threat to the interests of 
the association's depositors or may threaten to impair public confidence 
in the association. The Notice shall remain in effect until the 
information, indictment, or complaint is finally disposed of or until 
terminated by the Office.
    (b) The Office may issue and serve an Order upon a subject 
individual against whom a judgment of conviction, or an agreement to 
enter a pretrial diversion or other similar program has been rendered, 
where such judgment is not subject to further appellate review, and the 
Office, upon the deliberation, has determined that continued service or 
participation by the subject individual may pose a threat to the 
interests of the association's depositors or may threaten to impair 
public confidence in the association.



Sec. 508.4  Contents and service of the Notice or Order.

    (a) The Notice or Order shall set forth the basis and facts in 
support of the Office's issuance of such Notice or Order, and shall 
inform the subject individual of his right to a hearing, in accordance 
with this part, for the purpose of determining whether the Notice

[[Page 19]]

or Order should be continued, terminated, or otherwise modified.
    (b) The Secretary shall serve a copy of the Notice or Order upon the 
subject individual and the related association in the manner set forth 
in Sec. 509.11 of this chapter.
    (c) Upon receipt of the Notice or Order, the subject individual 
shall immediately comply with the requirements thereof.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



Sec. 508.5  Petition for hearing.

    (a) To obtain a hearing, the subject individual must file two copies 
of a petition with the Secretary within 30 days of being served with the 
Notice or Order.
    (b) The petition filed under this section shall admit or deny 
specifically each allegation in the Notice or Order, unless the 
petitioner is without knowledge or information, in which case the 
petition shall so state and the statement shall have the effect of a 
denial. Any allegation not denied shall be deemed to be admitted. When a 
petitioner intends in good faith to deny only a part of or to qualify an 
allegation, he shall specify so much of it as is true and shall deny 
only the remainder.
    (c) The petition shall state whether the petitioner is requesting 
termination or modification of the Notice or Order, and shall state with 
particularity how the petitioner intends to show that his continued 
service to or participation in the conduct of the affairs of the 
association would not, or is not likely to, pose a threat to the 
interests of the association's depositors or to impair public confidence 
in the association.



Sec. 508.6  Initiation of hearing.

    (a) Within 10 days of the filing of a petition for hearing, the 
Office shall notify the petitioner of the time and place fixed for 
hearing, and it shall designate one or more Office employees to serve as 
presiding officer.
    (b) The hearing shall be scheduled to be held no later than 30 days 
from the date the petition was filed, unless the time is extended at the 
request of the petitioner.
    (c) A petitioner may appear personally or through counsel, but if 
represented by counsel, said counsel is required to comply with Sec. 
509.6 of this chapter.
    (d) A representative(s) of the Office's Office of Enforcement also 
may attend the hearing and participate therein as a party.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



Sec. 508.7  Conduct of hearings.

    (a) Hearings provided by this section are not subject to the 
adjudicative provisions of the Administrative Procedure Act (5 U.S.C. 
554-557). The presiding officer is, however, authorized to exercise all 
of the powers enumerated in Sec. 509.5 of this chapter.
    (b) Witnesses may be presented, within time limits specified by the 
presiding officer, provided that at least 10 days prior to the hearing 
date, the party presenting the witnesses furnishes the presiding officer 
and the opposing party with a list of such witnesses and a summary of 
the proposed testimony. However, the requirement for furnishing such a 
witness list and summary of testimony shall not apply to the 
presentation of rebuttal witnesses. The presiding officer may ask 
questions of any witness, and each party shall have an opportunity to 
cross-examine any witness presented by an opposing party.
    (c) Upon the request of either the petitioner or a representative of 
the Office of Enforcement, the record shall remain open for a period of 
5 business days following the hearing, during which time the parties may 
make any additional submissions for the record. Thereafter, the record 
shall be closed.
    (d) Following the introduction of all evidence, the petitioner and 
the representative of the Office of Enforcement shall have an 
opportunity for oral argument; however, the parties may jointly waive 
the right to oral argument, and, in lieu thereof, elect to submit 
written argument.
    (e) All oral testimony and oral argument shall be recorded, and 
transcripts made available to the petitioner upon payment of the cost 
thereof. A copy of the transcript shall be sent directly to the 
presiding officer, who shall have

[[Page 20]]

authority to correct the record sua sponte or upon the motion of any 
party.
    (f) The parties may, in writing, jointly waive an oral hearing and 
instead elect a hearing upon a written record in which all evidence and 
argument would be submitted to the presiding officer in documentary form 
and statements of individuals would be made by affidavit.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



Sec. 508.8  Default.

    If the subject individual fails to file a petition for a hearing, or 
fails to appear at a hearing, either in person or by attorney, or fails 
to submit a written argument where oral argument has been waived 
pursuant to Sec. 508.7(d) or (f) of this part, the Notice shall remain 
in effect until the information, indictment, or complaint is finally 
disposed of and the Order shall remain in effect until terminated by the 
Office.



Sec. 508.9  Rules of evidence.

    (a) Formal rules of evidence shall not apply to a hearing, but the 
presiding officer may limit the introduction of irrelevant, immaterial, 
or unduly repetitious evidence.
    (b) All matters officially noticed by the presiding officer shall 
appear on the record.



Sec. 508.10  Burden of persuasion.

    The petitioner has the burden of showing, by a preponderance of the 
evidence, that his or her continued service to or participation in the 
conduct of the affairs of the association does not, or is not likely to, 
pose a threat to the interests of the association's depositors or 
threaten to impair public confidence in the association.



Sec. 508.11  Relevant considerations.

    (a) In determining whether the petitioner has shown that his or her 
continued service to or participation in the conduct of the affairs of 
the association would not, or is not likely to, pose a threat to the 
interests of the association's depositors or threaten to impair public 
confidence in the association, in order to decide whether the Notice or 
Order should be continued, terminated, or otherwise modified, the Office 
will consider:
    (1) The nature and extent of the petitioner's participation in the 
affairs of the association;
    (2) The nature of the offense with which the petitioner has been 
charged;
    (3) The extent of the publicity accorded the indictment and trial; 
and
    (4) Such other relevant factors as may be entered on the record.
    (b) When considering a request for the termination or modification 
of a Notice, the Office will not consider the ultimate guilt or 
innocence of the petitioner with respect to the criminal charge that is 
outstanding.
    (c) When considering a request for the termination or modification 
of an Order which has been issued following a final judgment of 
conviction against a subject individual, the Office will not 
collaterally review such final judgment of conviction.



Sec. 508.12  Proposed findings and conclusions and recommended decision.

    (a) Within 30 days after completion of oral argument or the 
submission of written argument where oral argument has been waived, the 
presiding officer shall file with the Secretary and certify to the 
Office for decision the entire record of the hearing, which shall 
include a recommended decision, the Notice or Order, and all other 
documents filed in connection with the hearing.
    (b) The recommended decision shall contain:
    (1) A statement of the issue(s) presented,
    (2) A statement of findings and conclusions, and the reasons or 
basis therefor, on all material issues of fact, law, or discretion 
presented on the record, and
    (3) An appropriate recommendation as to whether the suspension, 
removal, or prohibition should be continued, modified, or terminated.



Sec. 508.13  Decision of the Office.

    (a) Within 30 days after the recommended decision has been certified 
to the Office, the Office shall issue a final decision.

[[Page 21]]

    (b) The Office's final decision shall contain a statement of the 
basis therefor. The Office may satisfy this requirement where it adopts 
the recommended decision of the presiding officer upon finding that the 
recommended decision satisfies the requirements of Sec. 509.38 of this 
chapter.
    (c) The Secretary shall serve upon the petitioner and the 
representative of the Office of Enforcement a copy of the Office's final 
decision and the related recommended decision.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991; 
59 FR 53570, Oct. 25, 1994]



Sec. 508.14  Miscellaneous.

    The provisions of Sec. Sec. 509.10, 509.11, and 509.12 of this 
chapter shall apply to proceedings under this part.

[54 FR 49444, Nov. 30, 1989, as amended at 56 FR 38306, Aug. 12, 1991]



PART 509_RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY PROCEEDINGS--Table of 

Contents



            Subpart A_Uniform Rules of Practice and Procedure

Sec.
509.1 Scope.
509.2 Rules of construction.
509.3 Definitions.
509.4 Authority of Director.
509.5 Authority of the administrative law judge.
509.6 Appearance and practice in adjudicatory proceedings.
509.7 Good faith certification.
509.8 Conflicts of interest.
509.9 Ex parte communications.
509.10 Filing of papers.
509.11 Service of papers.
509.12 Construction of time limits.
509.13 Change of time limits.
509.14 Witness fees and expenses.
509.15 Opportunity for informal settlement.
509.16 Office's right to conduct examination.
509.17 Collateral attacks on adjudicatory proceeding.
509.18 Commencement of proceeding and contents of notice.
509.19 Answer.
509.20 Amended pleadings.
509.21 Failure to appear.
509.22 Consolidation and severance of actions.
509.23 Motions.
509.24 Scope of document discovery.
509.25 Request for document discovery from parties.
509.26 Document subpoenas to nonparties.
509.27 Deposition of witness unavailable for hearing.
509.28 Interlocutory review.
509.29 Summary disposition.
509.30 Partial summary disposition.
509.31 Scheduling and prehearing conferences.
509.32 Prehearing submissions.
509.33 Public hearings.
509.34 Hearing subpoenas.
509.35 Conduct of hearings.
509.36 Evidence.
509.37 Post-hearing filings.
509.38 Recommended decision and filing of record.
509.39 Exceptions to recommended decision.
509.40 Review by the Director.
509.41 Stays pending judicial review.

                          Subpart B_Local Rules

509.100 Scope.
509.101 Appointment of Office of Financial Institution Adjudication.
509.102 Discovery.
509.103 Civil money penalties.
509.104 Additional procedures.

                         Subpart C_Special Rules

509.200 Scope.
509.201 Definitions.
509.202 Commencement of proceedings and contents of notice.
509.203 Answer, consequences of failure to answer, and consent.
509.204 Hearing Procedure.

          Subpart D_Exemptions under Section 19(e) of the FDIA

509.300 Scope.
509.301 Hearing procedures.

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 1468, 
1817(j), 1818, 1820(k), 1829(e), 3349, 4717; 15 U.S.C. 78(l), 78o-5, 
78u-2; 28 U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a.

    Source: 56 FR 38306, Aug. 12, 1991, unless otherwise noted.



            Subpart A_Uniform Rules of Practice and Procedure



Sec. 509.1  Scope.

    This subpart prescribes Uniform 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 22]]

    (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 Office 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 Office is the appropriate Office;
    (e) Assessment of civil money penalties by the Office against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate Office for any violation of:
    (1) Section 5 of the Home Owners' Loan Act (HOLA) or any regulation 
or order issued thereunder, pursuant to 12 U.S.C. 1464 (d), (s) and (v);
    (2) Section 9 of the HOLA or any regulation or order issued 
thereunder, pursuant to 12 U.S.C. 1467(d);
    (3) Section 10 of the HOLA, pursuant to 12 U.S.C. 1467a (i) and (r);
    (4) Any provisions of the Change in Bank Control Act, any regulation 
or order issued thereunder or certain unsafe or unsound practices or 
breaches of fiduciary duty, pursuant to 12 U.S.C. 1817(j)(16);
    (5) Sections 22(h) and 23 of the Federal Reserve Act, or any 
regulation issued thereunder or certain unsafe or unsound practices or 
breaches of fiduciary duty, pursuant to 12 U.S.C. 1468;
    (6) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (7) Section 1120 of Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (12 U.S.C. 3349), or any order or regulation 
issued thereunder;
    (8) The terms of any final or temporary order issued or enforceable 
pursuant to section 8 of the FDIA or of any written agreement executed 
by the Office, the terms of any conditions imposed in writing by the 
Office 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);
    (9) Any provision of law referenced in section 102 of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (10) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102 of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k)) 
to impose penalties on senior examiners for violation of post-employment 
prohibitions; and
    (h) 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.
    (i) Subpart D of this part governs hearings on denials of 
applications for case-by-case exemptions under 12 CFR part 585, which 
implements section 19(e) of the FDIA.

[56 FR 38306, Aug. 12, 1991, as amended at 56 FR 59866, Nov. 26, 1991; 
61 FR 20353, May 6, 1996; 70 FR 69641, Nov. 17, 2005; 72 FR 25955, May 
8, 2007]



Sec. 509.2  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 23]]



Sec. 509.3  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) Decisional employee means any member of the Office'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 Office or 
the administrative law judge, respectively, in preparing orders, 
recommended decisions, decisions, and other documents under the Uniform 
Rules.
    (d) Director means the Director of the Office of Thrift Supervision 
or his or her designee.
    (e) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the Office in an adjudicatory 
proceeding.
    (f) Final order means an order issued by the Office 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.
    (g) Institution includes 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 whether wholly or partly 
owned (other than a bank) as those terms are defined in section 10(a) of 
the HOLA (12 U.S.C. 1467(a)).
    (h) 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)).
    (i) Local Rules means those rules found in subpart B of this part.
    (j) Office means the Office of Thrift Supervision in the case of any 
savings association or any savings and loan holding company, and 
subsidiary (other than a bank or subsidiary of that bank) of a savings 
and loan holding company, any service corporation of a savings 
association, and any subsidiary of such service corporation, whether 
wholly or partly owned.
    (k) Office of Financial Institution Adjudication (OFIA) means the 
executive body charged with overseeing the administration of 
administrative enforcement proceedings for the Office of the Comptroller 
of the Currency, the Board of Governors of the Federal Reserve Board, 
the Federal Deposit Insurance Corporation, the National Credit Union 
Administration and the Office.
    (l) Party means the Office and any person named as a party in any 
notice.
    (m) 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 (g) of this section.
    (n) Respondent means any party other than the Office.
    (o) Uniform Rules means those rules in subpart A of this part.
    (p) 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.



Sec. 509.4  Authority of Director.

    The Director 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. 509.5  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

[[Page 24]]

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. 509.31 of this subpart;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the 
Director 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 Director 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. 509.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before an Office 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 
Office if such attorney is not currently suspended or debarred from 
practice before the Office.
    (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 Office.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the Director, 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.
    (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 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.7  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

[[Page 25]]

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. 509.8  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. 509.6(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 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.9  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 Office (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Director, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the Director until the date that the Director issues the 
final decision pursuant to Sec. 509.40(c) of this subpart:
    (1) No interested person outside the Office shall make or knowingly 
cause to be made an ex parte communication to the Director, the 
administrative law judge, or a decisional employee; and
    (2) The Director, administrative law judge, or decisional employee 
shall not make or knowingly cause to be made to any interested person 
outside the Office any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, the 
Director 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

[[Page 26]]

the ex parte communication to file responses thereto and to recommend 
any sanctions, in accordance with paragraph (d) of this section, that 
they believe to be appropriate under the circumstances.
    (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 Director 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 Office 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. 509.40 of this subpart, except as witness or 
counsel in public proceedings.

[56 FR 38306, Aug. 12, 1991, as amended at 60 FR 28035, May 30, 1995]



Sec. 509.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec. 
509.25 and 509.26 of this subpart, shall be filed with the OFIA, except 
as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Director 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 Director or the administrative 
law judge. All papers filed by electronic media shall also concurrently 
be filed in accordance with paragraph (c) of this section as to form.
    (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. 509.7 of this subpart.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the Office and of the 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 Director, 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. 509.11  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. 509.10(c) of this 
subpart as to form.

[[Page 27]]

    (c) By the Director or the administrative law judge. (1) All papers 
required to be served by the Director or the administrative law judge 
upon a party who has appeared in the proceeding through a counsel of 
record, 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. 509.6 of this subpart, the Director 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 person'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) By any other method 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 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.12  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 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; or
    (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

[[Page 28]]

this section may be modified by the Director 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 Director or the administrative law judge in the case of filing, or 
by agreement among the parties in the case of service.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.13  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 any notice or order issued in the proceedings. After 
the referral of the case to the Director pursuant to Sec. 509.38 of 
this subpart, the Director may grant extensions of the time limits for 
good cause shown. Extensions may be granted at the motion of a party or 
on the Director's or the administrative law judge's own motion after 
notice and opportunity to respond is afforded all non-moving parties.



Sec. 509.14  Witness fees and expenses.

    Witnesses subpoenaed for testimony or deposition 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 Office is the 
party requesting the subpoena. The Office shall not be required to pay 
any fees to, or expenses of, any witness not subpoenaed by the Office.



Sec. 509.15  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 Office 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.



Sec. 509.16  Office's right to conduct examination.

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



Sec. 509.17  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. 509.18  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 Director.

[[Page 29]]

    (ii) The notice must be served by the Director 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 
Director.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the Office's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the 
Office 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) The answer and/or request for a hearing shall be filed with 
OFIA.



Sec. 509.19  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 Director 
a recommended decision containing the findings and the relief sought in 
the notice. Any final order issued by the Director based upon a 
respondent's failure to answer is deemed to be an order issued upon 
consent.
    (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.

[56 FR 38306, Aug. 12, 1991, as amended at 65 FR 78901, Dec. 18, 2000]



Sec. 509.20  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 Director 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

[[Page 30]]

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 20354, May 6, 1996]



Sec. 509.21  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 Director a recommended decision containing the findings and the 
relief sought in the notice.



Sec. 509.22  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. 509.23  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, but upon the filing of the recommended decision, motions must 
be filed with the Director.
    (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 
Director, 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. 509.29 and 509.30 of this subpart.



Sec. 509.24  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

[[Page 31]]

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 Sec. 509.102 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. 509.25 of 
this subpart.
    (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, except as provided in the 
Local Rules. 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 38306, Aug. 12, 1991, as amended at 61 FR 20354, May 6, 1996]



Sec. 509.25  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, 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 under 12 CFR 502.7 for requests under 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.

[[Page 32]]

    (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. 509.23 
of this subpart to revoke 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. 509.23 of this subpart are 
waived.
    (2) The party who served the request that is the subject of a motion 
to revoke 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. 509.23 of this subpart 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 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 38306, Aug. 12, 1991, as amended at 61 FR 20355, May 6, 1996]



Sec. 509.26  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.

[[Page 33]]

    (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. 509.24(d) of this subpart. 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. 509.25(d) of this 
subpart, 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. 509.27  Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party 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:
    (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

[[Page 34]]

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)(2) 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 comply with, a subpoena issued under this section.



Sec. 509.28  Interlocutory review.

    (a) General rule. The Director may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Director only in accordance with the procedures set forth in this 
section and Sec. 509.23 of this subpart.
    (b) Scope of review. The Director may exercise interlocutory review 
of a ruling of the administrative law judge if the Director 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. 509.23 of this subpart. 
Any party may file a response to a request for interlocutory review in 
accordance with

[[Page 35]]

Sec. 509.23(d) of this subpart. Upon the expiration of the time for 
filing all responses, the administrative law judge shall refer the 
matter to the Director for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Director under this 
section suspends or stays the proceeding unless otherwise ordered by the 
administrative law judge or the Director.



Sec. 509.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the Director 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 summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the Director. 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. 509.30  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. 509.31  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

[[Page 36]]

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 its 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.

[56 FR 38306, Aug. 12, 1991, as amended at 65 FR 78901, Dec. 18, 2000]



Sec. 509.32  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. 509.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Director, in the Director's discretion, determines that holding an 
open hearing would be contrary to 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 
Director 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 Director. The form 
of, and procedure for, these requests and replies are governed by Sec. 
509.23 of this subpart. 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 38306, Aug. 12, 1991, as amended at 61 FR 20355, May 6, 1996]

[[Page 37]]



Sec. 509.34  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 section 
Sec. 509.26(c) of this subpart.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20355, May 6, 1996]



Sec. 509.35  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 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

[[Page 38]]

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 38306, Aug. 12, 1991, as amended at 61 FR 20356, May 6, 1996]



Sec. 509.36  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 APA 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 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 Director 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 the appropriate Office 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 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 Director.
    (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.

[[Page 39]]

    (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. 509.37  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 38306, Aug. 12, 1991, as amended at 61 FR 20356, May 6, 1996]



Sec. 509.38  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. 
509.37(b) of this subpart, the administrative law judge shall file with 
and certify to the Director, 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 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 Director for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the Director 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 20356, May 6, 1996]

[[Page 40]]



Sec. 509.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec. 509.38 of this subpart, a party may file with the Director 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 Director 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. 509.40  Review by the Director.

    (a) Notice of submission to the Director. When the Director 
determines that the record in the proceeding is complete, the Director 
shall serve notice upon the parties that the proceeding has been 
submitted to the Director for final decision.
    (b) Oral argument before the Director. Upon the initiative of the 
Director or on the written request of any party filed with the Director 
within the time for filing exceptions, the Director 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 Director's final decision. Oral 
argument before the Director must be on the record.
    (c) Director's final decision. (1) Decisional employees may advise 
and assist the Director in the consideration and disposition of the 
case. The final decision of the Director will be based upon review of 
the entire record of the proceeding, except that the director may limit 
the issues to be reviewed to those findings and conclusions to which 
opposing arguments or exceptions have been filed by the parties.
    (2) The Director 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 
Director 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 Director shall be served upon each party to 
the proceeding, upon other persons required by statute, and, if directed 
by the Director or required by statute, upon any appropriate state or 
Federal supervisory authority.



Sec. 509.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the Office may not, unless specifically ordered by 
the Director or a reviewing court, operate as a stay of any order issued 
by the Director. The Director 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 the order.

[[Page 41]]



                          Subpart B_Local Rules



Sec. 509.100  Scope.

    The rules and procedures in this subpart B shall apply to those 
proceedings covered by subpart A of this part. In addition, subpart A of 
this part and this subpart shall apply to adjudicatory proceedings for 
which hearings on the record are provided for by the following statutory 
provisions:
    (a) Proceedings under section 10(a)(2)(D) of the HOLA (12 U.S.C. 
1467a(a)(2)(D)) to determine whether any person directly or indirectly 
exercises a controlling influence over the management or policies of a 
savings association or any other company, except to the extent the 
Director exercises his or her discretion to commence a proceeding of the 
kind identified in subpart C of this part;
    (b) Proceedings under section 10(g)(5)(A) of the HOLA (12 U.S.C. 
1467a(g)(5)(A)) to determine whether to terminate certain activities by 
savings and loan holding companies or to terminate ownership or control 
of a non-insured savings and loan holding company subsidiary; and
    (c) Proceedings under section 15(c)(4) of the Securities and 
Exchange Act of 1934 (15 U.S.C. 78o(c)(4)) (Exchange Act) to determine 
whether any association or person subject to the jurisdiction of the 
Office pursuant to section 12(i) of the Exchange Act (15 U.S.C. 78l(i)) 
has failed to comply with the provisions of sections 12, 13, 14(a), 
14(c), 14(d) or 14(f) of the Exchange Act.

[56 FR 38306, Aug. 12, 1991, as amended at 70 FR 10023, Mar. 2, 2005]



Sec. 509.101  Appointment of Office of Financial Institution Adjudication.

    Unless otherwise directed by the Office, all hearings under subpart 
A of this part and this subpart shall be conducted by administrative law 
judges under the direction of the Office of Financial Institution 
Adjudication, 1700 G Street NW., Washington, DC 20552.



Sec. 509.102  Discovery.

    (a) In general. A party may take the deposition of an expert, or of 
a person, including another party, who has direct knowledge of matters 
that are non-privileged, relevant and material to the proceeding and 
where there is a need for the deposition. The deposition of experts 
shall be limited to those experts who are expected to testify at the 
hearing.
    (b) Notice. A party desiring to take a deposition shall give 
reasonable notice in writing to the deponent and to every other party to 
the proceeding. The notice must state the time and place for taking the 
deposition and the name and address of the person to be deposed.
    (c) Time limits. A party may take depositions at any time after the 
commencement of the proceeding, but no later than ten days before the 
scheduled hearing date, except with permission of the administrative law 
judge for good cause shown.
    (d) Conduct of the deposition. The witness must be duly sworn, and 
each party shall have the right to examine the witness with respect to 
all non-privileged, relevant and material matters of which the witness 
has factual, direct and personal knowledge. Objections to questions or 
exhibits shall be in short form, stating the grounds for objection. 
Failure to object to questions or exhibits is not a waiver except where 
the grounds for the objection might have been avoided if the objection 
had been timely presented. The court reporter shall transcribe or 
otherwise record the witness's testimony, as agreed among the parties.
    (e) Protective orders. At any time after notice of a deposition has 
been given, a party may file a motion for the issuance of a protective 
order. Such protective order may prohibit, terminate, or limit the scope 
or manner of the taking of a deposition. The administrative law judge 
shall grant such protective order upon a showing of sufficient grounds, 
including that the deposition:
    (1) Is unreasonable, oppressive, excessive in scope, or unduly 
burdensome;
    (2) Involves privileged, investigative, trial preparation, 
irrelevant or immaterial matters; or
    (3) Is being conducted in bad faith or in such manner as to 
unreasonably annoy, embarrass, or oppress the deponent.

[[Page 42]]

    (f) Fees. Deposition witnesses, including expert witnesses, shall be 
paid the same expenses in the same manner as are paid witnesses in the 
district courts of the United States in proceedings in which the United 
States Government is a party. Expenses in accordance with this paragraph 
shall be paid by the party seeking to take the deposition.
    (g) Deposition subpoenas--(1) Issuance. At the request of a party, 
the administrative law judge shall issue a subpoena requiring the 
attendance of a witness at a deposition. The attendance of a witness may 
be required from any place in any state or territory that is subject to 
the jurisdiction of the United States or as otherwise permitted by law.
    (2) Service. The party requesting the subpoena must serve it on the 
person named therein or upon that person's counsel, by any of the 
methods identified in Sec. 509.11(d) of this part. The party serving 
the subpoena must file proof of service with the administrative law 
judge.
    (3) Motion to quash. A person named in the subpoena or a party may 
file a motion to quash or modify the subpoena. A statement of the 
reasons for the motion must accompany it and a copy of the motion must 
be served on the party that requested the subpoena. The motion must be 
made prior to the time for compliance specified in the subpoena and not 
more than ten days after the date of service of the subpoena, or if the 
subpoena is served within 15 days of the hearing, within five days after 
the date of service.
    (4) Enforcement of deposition subpoena. Enforcement of a deposition 
subpoena shall be in accordance with the procedures of Sec. 509.27(d) 
of this part.

[56 FR 38306, Aug. 12, 1991, as amended at 61 FR 20356, May 6, 1996]



Sec. 509.103  Civil money penalties.

    (a) Assessment. In the event of consent, or if upon the record 
developed at the hearing the Office finds that any of the grounds 
specified in the notice issued pursuant to Sec. 509.18 of this part 
have been established, the Office may serve an order of assessment of 
civil money penalty upon the party concerned. The assessment order shall 
be effective immediately upon service or upon such other date as may be 
specified therein and shall remain effective and enforceable until it is 
stayed, modified, terminated, or set aside by the Office or by a 
reviewing court.
    (b) Payment. (1) Civil penalties assessed pursuant to subpart A of 
this part and this subpart B are payable and to be collected within 60 
days after the issuance of the notice of assessment, unless the Office 
fixes a different time for payment where it determines that the purpose 
of the civil money penalty would be better served thereby; however, if a 
party has made a timely request for a hearing to challenge the 
assessment of the penalty, the party may not be required to pay such 
penalty until the Office has issued a final order of assessment 
following the hearing. In such instances, the penalty shall be paid 
within 60 days of service of such order unless the Office fixes a 
different time for payment. Notwithstanding the foregoing, the Office 
may seek to attach the party's assets or to have a receiver appointed to 
secure payment of the potential civil money penalty or other obligation 
in advance of the hearing in accordance with section 8(i)(4) of the FDIA 
(12 U.S.C. 1818(i)(4)).
    (2) Checks in payment of civil penalties shall be made payable to 
the Treasurer of the United States and sent to the Controller's Division 
of the Office. Upon receipt, the Office shall forward the check to the 
Treasury of the United States.
    (c) Inflation adjustment. Under the Federal Civil Monetary Penalties 
Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), OTS must adjust 
for inflation the civil money penalties in statutes that it administers. 
The following chart displays the adjusted civil money penalties. The 
amounts in this chart apply to violations that occur after October 27, 
2008:

----------------------------------------------------------------------------------------------------------------
              U.S. Code citation                          CMP description                New maximum amount
----------------------------------------------------------------------------------------------------------------
12 U.S.C. 1464(v)(4)..........................  Reports of Condition--1st Tier...  $2,200
12 U.S.C. 1464(v)(5)..........................  Reports of Condition--2nd Tier...  32,500

[[Page 43]]

 
12 U.S.C. 1464(v)(6)..........................  Reports of Condition--3rd Tier...  1,375,000
12 U.S.C. 1467(d).............................  Refusal to Cooperate in Exam.....  7,500
12 U.S.C. 1467a(i)(2).........................  Holding Company Act Violation....  32,500
12 U.S.C. 1467a(i)(3).........................  Holding Company Act Violation....  32,500
12 U.S.C. 1467a(r)(1).........................  Late/Inaccurate Reports--1st Tier  2,200
12 U.S.C. 1467a(r)(2).........................  Late/Inaccurate Reports--2nd Tier  32,500
12 U.S.C. 1467a(r)(3).........................  Late/Inaccurate Reports--3rd Tier  1,375,000
12 U.S.C. 1817(j)(16)(A)......................  Change in Control--1st Tier......  7,500
12 U.S.C. 1817(j)(16)(B)......................  Change in Control--2nd Tier......  37,500
12 U.S.C. 1817(j)(16)(C)......................  Change in Control--3rd Tier......  1,375,000
12 U.S.C. 1818(i)(2)(A).......................  Violation of Law or Unsafe or      7,500
                                                 Unsound Practice--1st Tier.
12 U.S.C. 1818(i)(2)(B).......................  Violation of Law or Unsafe or      37,500
                                                 Unsound Practice--2nd Tier.
12 U.S.C. 1818(i)(2)(C).......................  Violation of Law or Unsafe or      1,375,000
                                                 Unsound Practice--3rd Tier.
12 U.S.C. 1820(k)(6)(A)(ii)...................  Violation of Post Employment       275,000
                                                 Restrictions.
12 U.S.C. 1884................................  Violation of Security Rules......  110
12 U.S.C. 3349(b).............................  Appraisals Violation--1st Tier...  7,500
12 U.S.C. 3349(b).............................  Appraisals Violation--2nd Tier...  37,500
12 U.S.C. 3349(b).............................  Appraisals Violation--3rd Tier...  1,375,000
42 U.S.C. 4012a(f)............................  Flood Insurance..................  \1\ 385
                                                                                   \2\ 135,000
----------------------------------------------------------------------------------------------------------------
\1\ Per day.
\2\ Per year.


[56 FR 38306, Aug. 12, 1991, as amended at 65 FR 61262, Oct. 17, 2000; 
69 FR 64251, Nov. 4, 2004; 73 FR 63626, Oct. 27, 2008]



Sec. 509.104  Additional procedures.

    (a) Replies to exceptions. Replies to written exceptions to the 
administrative law judge's recommended decision, findings, conclusions 
or proposed order pursuant to Sec. 509.39 of this part shall be filed 
within 10 days of the date such written exceptions were required to be 
filed.
    (b) Motions. All motions shall be filed with the administrative law 
judge and an additional copy shall be filed with the Secretary to the 
Office, who receives adjudicatory filings, (``Secretary''); provided, 
however, that once the administrative law judge has certified the record 
to the Director pursuant to Sec. 509.38 of this part, all motions must 
be filed with the Director, to the attention of the Secretary, within 
the 10 day period following the filing of exceptions allowed for the 
filing of replies to exceptions. Responses to such motions filed in a 
timely manner with the Director, other than motions for oral argument 
before the Director, shall be allowed pursuant to the procedures at 
Sec. 509.23(d) of this part. No response is required for the Director 
to make a determination on a motion for oral argument.
    (c) Authority of administrative law judge. In addition to the powers 
listed in Sec. 509.5 of this part, the administrative law judge shall 
have the authority to deny any dispositive motion and shall follow the 
procedures set forth for motions for summary disposition at Sec. 509.29 
of this part and partial summary disposition at Sec. 509.30 of this 
part in making determinations on such motions.
    (d) Notification of submission of proceeding to the Director. Upon 
the expiration of the time for filing any exceptions, any replies to 
such exceptions or any motions and any ruling thereon, and after receipt 
of certified record, the Office shall notify the parties within ten days 
of the submission of the proceeding to the Director for final 
determination.
    (e) Extensions of time for final determination. The Director may, 
sua sponte, extend the time for final determination by signing an order 
of extension of time within the 90 day time period and notifying the 
parties of such extension thereafter.
    (f) Service upon the Office. Service of any document upon the Office 
shall be made by filing with the Secretary, in addition to the 
individuals and/or offices designated by the Office in its Notice issued 
pursuant to Sec. 509.18 of this part, or such other means reasonably 
suited to provide notice of the person

[[Page 44]]

and/or office designated to receive filings.
    (g) Filings with the Director. An additional copy of all materials 
required or permitted to be filed with or referred to the administrative 
law judge pursuant to subpart A and B of this part shall be filed with 
the Secretary. This rule shall not apply to the transcript of testimony 
and exhibits adduced at the hearing or to proposed exhibits submitted in 
advance of the hearing pursuant to an order of the administrative law 
judge under Sec. 509.32 of this part. Materials required or permitted 
to be filed with or referred to the Director pursuant to subparts A and 
B of this part shall be filed with the Director, to the attention of the 
Secretary.
    (h) Presence of cameras and other recording devices. The use of 
cameras and other recording devices, other than those used by the court 
reporter, shall be prohibited and excluded from the proceedings.

[56 FR 38306, Aug. 12, 1991, as amended at 58 FR 4311, Jan. 14, 1993; 61 
FR 20356, May 6, 1996]



                         Subpart C_Special Rules

    Source: 70 FR 10023, Mar. 2, 2005, unless otherwise noted.



Sec. 509.200  Scope.

    The rules and procedures in subpart C of this part and those rules 
and procedures in subparts A and B of this part that are identified in 
subpart C of this part shall apply to any proceedings under section 
10(a)(2)(D) of the HOLA (12 U.S.C. 1467a(a)(2)(D)) to determine for 
purposes of section 10 of the HOLA, other than subsections (c), (d), 
(f), (h)(2), (m), (n), (q) and (s), whether any company that owns at 
least one percent but no more than 10 percent of the outstanding shares 
of a savings association or savings and loan holding company directly or 
indirectly exercises a controlling influence over the management or 
policies of such savings association or savings and loan holding 
company.



Sec. 509.201  Definitions.

    The definitions contained in Sec. 509.3 of this part shall apply to 
this subpart.



Sec. 509.202  Commencement of proceedings and contents of notice.

    (a) Commencement of proceedings. The Director commences a proceeding 
by issuing a notice and having it served on the respondent in the manner 
provided for service by the Director in Sec. 509.11 of this part;
    (b) Contents of notice. The notice must set forth: (1) The legal 
authority for the proceeding and for the Office's jurisdiction over the 
proceeding;
    (2) A statement of the matters of fact or law showing the Office is 
entitled to issue an Order finding, for purposes of section 10 of the 
HOLA, other than subsections (c), (d), (f), (h)(2), (m), (n), (q) and 
(s), the respondent to be directly or indirectly exercising a 
controlling influence over the management or policies of a savings 
association or savings and loan holding company;
    (3) A proposed Order;
    (4) A statement that the respondent must file an answer and, if it 
so desires, request a hearing within 20 days of service of the notice; 
and
    (5) The time and place of the hearing if one is properly requested 
by the respondent.



Sec. 509.203  Answer, consequences of failure to answer, and consent.

    (a) Content of answer. (1) 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 a prayer for relief 
or proposed Order.
    (2) If a respondent does not contest the allegations in a notice, 
the respondent may file an answer that contains only a statement that 
the respondent consents to the entry of the

[[Page 45]]

proposed Order. At any time thereafter, the proposed Order may be issued 
as a final Order.
    (b) Default. Failure of a respondent to file an answer within the 
time provided constitutes a waiver of its right to appear and contest 
the allegations in the notice. If a timely answer is not filed, a 
default Order may be entered. A respondent that believes that there was 
good cause for it to not file an answer within the time allowed may 
request that the Office exercise its discretion to vacate such a default 
Order. A default Order based upon a respondent's failure to answer is 
deemed to be a final Order issued upon consent.



Sec. 509.204  Hearing Procedure.

    (a) (1) The Director shall preside at the hearing and enter the 
final decision of the agency, provided that no party seeks discovery or 
proffers any oral testimony;
    (2) Respondents shall provide two copies of any pleadings and other 
filings to the Office of the Chief Counsel, Business Transactions 
Division. The Office of the Chief Counsel, Business Transactions 
Division shall serve in the manner provided in Sec. 509.11 of this 
part, each respondent separately represented with a copy of any pleading 
or other filing made by the Office.
    (b) If any party seeks discovery or proffers any oral testimony, the 
procedures in subparts A and B of this part shall apply from that time 
until the conclusion of the proceeding.



          Subpart D_Exemptions under Section 19(e) of the FDIA

    Source: 72 FR 25955, May 8, 2007, unless otherwise noted.



Sec. 509.300  Scope.

    The procedures in this subpart D govern hearings on denials of 
applications for case-by-case exemptions under 12 CFR part 585. Part 585 
implements section 19(e) of the FDIA, which prohibits persons who have 
been convicted of certain criminal offenses or who have agreed to enter 
into a pre-trial diversion or similar program in connection with a 
prosecution for such criminal offenses from occupying various positions 
with a savings and loan holding company.



Sec. 509.301  Hearing procedures.

    (a) Hearings. The following procedures apply to hearings under 12 
CFR part 585.
    (1) The hearing shall be held in Washington, DC, or at another 
designated place, before a presiding officer designated by the Director.
    (2) An applicant may elect in writing to have the matter determined 
on the basis of written submissions, rather than an oral hearing.
    (3) The parties to the hearing are OTS Enforcement counsel and the 
applicant.
    (4) 12 CFR 509.2, 509.4, 509.6 through 509.12, and 509.16 apply to 
the hearing.
    (5) Discovery is not permitted.
    (6) A party may introduce relevant and material documents and make 
oral argument at the hearing.
    (7) 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 
before to the hearing. Witnesses must be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party may cross-examine any witness 
presented by the opposing party. OTS will furnish a transcript of the 
proceedings upon an applicant's request and upon the payment of the 
costs of the transcript.
    (8) The presiding officer has 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. If 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 are paid in accordance with 12 CFR 509.14.
    (9) Upon the request of a party, the record will remain open for 
five business days following the hearing for additional submissions to 
the record.

[[Page 46]]

    (10) OTS Enforcement Counsel has the burden of proving a prima facie 
case that a person is prohibited from a position under section 19(e) of 
the FDIA. The applicant has the burden of proof on all other matters.
    (11) The presiding officer must make recommendations to the 
Director, where possible, within 20 days after the last day for the 
parties to submit additions to the record.
    (12) The presiding officer must forward his or her recommendation to 
the Director who shall promptly certify the entire record, including the 
presiding officer's recommendations. The Director's certification will 
close the record.
    (b) Decision. After the certification of the record, the Director 
will notify the parties of his or her decision by issuing an order 
approving or denying the application.
    (1) An approval order will require fidelity bond coverage for the 
position to the same extent as similar positions with the savings and 
loan holding company. The approval order may include such other 
conditions as may be appropriate.
    (2) A denial order will include a summary of the relevant factors 
under 12 CFR 585.120(b).



PART 510_MISCELLANEOUS ORGANIZATIONAL REGULATIONS--Table of Contents



Sec.
510.2 Provisions related to regulations of the Office.
510.4 Service of process.
510.5 Release of unpublished OTS information.

    Authority: 12 U.S.C. 1462a, 1463, 1464; Pub. L. 101-410, 104 Stat. 
890; Pub. L. 104-134, 110 Stat. 1321-358.

    Source: 54 FR 49456, Nov. 30, 1989, unless otherwise noted.



Sec. 510.2  Provisions related to regulations of the Office.

    (a) Amendments. The Office expressly reserves the right to amend 
(including the right to alter or repeal) the regulations set forth in 
this chapter.
    (b) Waiver or relaxation of regulatory provisions with respect to 
disaster or emergency areas. Whenever the President of the United States 
determines that a major disaster or emergency exists, or declares an 
area a major disaster or emergency area, the Office may, to the extent 
not inconsistent with law, by order waive or relax any limitations 
pertaining to the operations of Federal savings associations and savings 
associations in any area or areas affected by such disaster or emergency 
so declared.
    (c) Bar on participation in notice and comment rulemaking by 
suspended or disbarred persons. No person who has been suspended or 
debarred from practice before the Office in accordance with the 
provisions of part 513 of this chapter may submit to the Office, either 
directly or on behalf of an interested party, any written documents or 
petitions otherwise permitted by the Administrative Procedures Act.

[54 FR 49456, Nov. 30, 1989, as amended at 60 FR 66716, Dec. 26, 1995; 
70 FR 76675, Dec. 28, 2005]



Sec. 510.4  Service of process.

    (a) Service of Process. Service of process may be made upon the 
Office by delivering a copy of the summons and complaint to the U.S. 
Attorney for the district in which the action is brought or to an 
assistant U.S. Attorney or clerical employee designated by the U.S. 
Attorney in a writing filed with the clerk of the court, and by sending 
copies of the summons and of the complaint by registered or certified 
mail to the Attorney General of the United States, Washington, DC, and 
to the Secretary of the Office.
    (b) Subpoenas. Any subpoena to obtain information maintained by 
Office shall be duly issued and served upon the Secretary of the Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC, 20552.



Sec. 510.5  Release of unpublished OTS information.

    (a) Scope. (1) This section applies to requests by the public for 
unpublished OTS information, such as requests for records or testimony 
from parties to lawsuits in which the OTS is not a party.
    (2) Unpublished OTS information includes records created or obtained 
in connection with the OTS's performance of its responsibilities, such 
as records

[[Page 47]]

concerning supervision, regulation, and examination of savings 
associations, their holding companies, and affiliates, and records 
compiled in connection with the OTS's enforcement responsibilities. 
Unpublished OTS information also includes information that current and 
former employees, officers, and agents obtained in their official 
capacities. Examples of unpublished information include:
    (i) Information in the memory of a current or former employee, 
officer, or agent of the OTS (or the Federal Home Loan Bank Board, the 
predecessor agency of the OTS), by testimony or informal interview, that 
was acquired in the course of performing official duties or because of 
the employee's, officer's or agent's official status;
    (ii) Reports of examination, supervisory correspondence, internal 
agency memoranda and investigatory files compiled in connection with an 
investigation, whether such records are in the possession of the OTS or 
some other individual or entity; and
    (iii) Unpublished OTS records obtained by or in the possession of 
third parties, including other government agencies.
    (3) This section does not apply to:
    (i) Requests for records or testimony in proceedings in which the 
OTS is a party;
    (ii) Requests for information by other government agencies, except 
when specifically provided;
    (iii) Requests for records that are required to be disclosed under 
the Freedom of Information Act, see 5 U.S.C. 552, and 31 CFR 1.1-1.6; 
and
    (iv) Requests for a Suspicious Activity Report (SAR), or any 
information that would reveal the existence of a SAR.
    (b) Purpose. The purposes of this section are:
    (1) To afford an orderly mechanism for the OTS to expeditiously 
process requests for unpublished OTS information and, where appropriate, 
for the OTS to assert evidentiary privileges in litigation;
    (2) To balance the need for confidentiality of unpublished OTS 
information with the private party's interest in obtaining disclosure of 
that information;
    (3) To ensure that the time of OTS employees is utilized in the most 
efficient manner consistent with the OTS's statutory mission;
    (4) To prevent undue burdens on the OTS;
    (5) To limit the expenditure of the OTS's funds for private 
purposes; and
    (6) To maintain the impartiality of the OTS among private litigants.
    (c) Procedure--(1) Requests for records and testimony in general. A 
request for unpublished OTS information must be in writing, furnish the 
caption of the lawsuit if the request arises in the course of 
litigation, and support the requester's claim that the information 
sought is highly relevant to the purpose for which it is sought. In 
demonstrating that the information is highly relevant, the requester 
must explain in detail how the requested OTS information relates to the 
issues in the case or the matter.
    (i) For requests arising in lawsuits, the submission also must 
include:
    (A) A copy of the complaint or equivalent document in the case and 
any other pleadings necessary to show relevance;
    (B) A description of any prior decisions or pending motions in the 
case that may bear on the asserted relevance of the information being 
sought from the OTS; and
    (C) The names, addresses and phone numbers of counsel to all other 
parties in the case.
    (ii) In all instances, in addition to demonstrating that the 
information sought is highly relevant to the purpose for which it is 
sought, the requester must:
    (A) Demonstrate that the information sought is not available from 
any other source; and
    (B) Demonstrate that the need for the information clearly outweighs 
the need to maintain the confidentiality of the OTS information and the 
burden on the OTS to produce the information.
    (iii) If a request seeks a response in fewer than 30 days, it must 
include an explanation of why the requester was unable to submit the 
request earlier and why expediting the request is required.

[[Page 48]]

    (2) Additional provisions relating to requests for records. In 
addition to the requirements of paragraph (c)(1) of this section, the 
provisions in paragraphs (c)(2)(i) and (c)(2)(ii) of this section apply 
to requests for disclosure of records.
    (i) A request for records must list the categories of records sought 
and describe the specific information sought, including the relevant 
time period.
    (ii) When the OTS believes that another person has a claim of 
privilege regarding the information in the records and the records are 
in the possession or control of that person, such as reports prepared by 
a savings association's attorneys that are shared with the OTS, the OTS 
may respond to the request by authorizing that person to release the 
records pursuant to an appropriate confidentiality order rather than by 
the OTS releasing the records directly to the requesting party. This 
will enable the person possessing or controlling the records to argue 
any issues of privilege to the appropriate court.
    (3) Additional provisions relating to requests for testimony from 
OTS employees. In addition to the requirements of paragraph (c)(1) of 
this section, the provisions in paragraphs (c)(3)(i) through (c)(3)(iv) 
of this section apply to requests that current or former OTS employees 
be authorized to give testimony.
    (i) The request must specifically describe the substance of the 
testimony sought and show a compelling need for the testimony. A showing 
of compelling need should include a demonstration that the requested 
information is not available from any other source, such as the books 
and records of other persons or entities, OTS records that have been or 
might be released, or the testimony of other non-OTS persons, including 
retained experts.
    (ii) OTS employees will not be authorized to provide expert or 
opinion testimony for private parties.
    (iii) The OTS expects litigants to anticipate their need for OTS 
testimony in sufficient time to request and obtain that testimony in 
deposition form. A request for testimony at a trial or hearing may not 
be granted unless the requester shows that properly developed deposition 
testimony could not be used or would not be adequate at the trial or 
hearing.
    (iv) The OTS shall specify the scope of any authorized testimony and 
may take steps to ensure that the scope of testimony taken adheres to 
the scope authorized. Parties to the case who did not join in the 
request and who wish to question the witness beyond the authorized scope 
should request expanded authorization pursuant to this regulation. The 
OTS will attempt to render decisions on such requests in an expedited 
manner.
    (4) Information available to savings associations, holding 
companies, state and Federal agencies and requesters. (i) The regular 
report of examination of a savings association, savings and loan holding 
company, or other affiliate of a savings association is made available 
by the appropriate Regional Office to the entity examined.
    (ii) A subsidiary savings association of a savings and loan holding 
company may reproduce and furnish a copy of its report of examination 
and related supervisory correspondence of the savings association to its 
parent holding company(ies) without prior approval of the OTS. A savings 
and loan holding company may reproduce and furnish a copy of its report 
of examination and related supervisory correspondence to another 
affiliated savings and loan holding company that controls the same 
savings association or its subsidiary savings association(s) without 
prior approval of the OTS. This paragraph does not require such 
disclosure by a parent savings and loan holding company or subsidiary 
savings association.
    (iii) Reports of examination and other information relating to 
state-chartered savings associations and affiliates are made available, 
upon request, by the OTS to the state governmental authority having 
general supervision of such state-chartered savings associations.
    (iv) Reports of examination and other information may be made 
available by the OTS to other agencies of the United States, a state 
agency, or to the Federal Home Loan Banks, for use where necessary in 
the performance of their official duties.

[[Page 49]]

    (v) All reports or other information made available to savings 
associations, holding companies, affiliates, other governmental agencies 
or requesters shall remain the property of the OTS and, except as 
permitted by this section or otherwise by the Director or his delegate, 
no person, company, agency, or authority to whom the information is made 
available, or any officer, director, employee or agent thereof, shall 
disclose any such information except published statistical material that 
would not disclose the identity of any individual or corporation.
    (5) Where to submit requests. In all matters covered by this 
section, notification of the issuance of subpoenas or compulsory process 
and requests for records or testimony covered by this section must be 
sent to the OTS at 1700 G Street NW., Washington, DC 20552, to the 
attention of the Corporate Secretary, and should be labelled ``Request 
for Release of Unpublished Information Under Section 510.5.'' Requesters 
may furnish copies of the request or subpoenas simultaneously to the 
appropriate OTS Regional Office, but the furnishing of such copies does 
not constitute service on the OTS.
    (d) Consideration of requests--(1) In general. The OTS will 
generally process requests in the order in which they are received. The 
OTS will endeavor to respond to requests within 30 days, but this may 
vary depending on the scope and precision of the request. The OTS will 
weigh requests for processing in less than 30 days against the burden to 
the OTS of expedited processing and the unfairness to other parties 
whose pending requests may be delayed.
    (2) Consultation with requester. The OTS may consult with the 
requester to:
    (i) Refine and limit the scope of the request so as to reduce the 
burden and expense on the OTS; or
    (ii) Obtain additional information necessary for the OTS to make an 
informed determination on the request. To the extent necessary to reach 
an informed determination on the request, the OTS may inquire into the 
circumstances of the underlying matter and rely on sources of 
information beyond the requester, including other interested parties.
    (3) Final determinations. Final determinations on requests will be 
made by the Director or his delegate. All such determinations are the 
sole discretion of the Director or his delegate. Requesters will be 
notified in writing of the disposition of the request.
    (4) Denial of requests. (i) The OTS may deny requests for records or 
testimony that seek information that the OTS deems to be:
    (A) Not highly relevant;
    (B) Privileged;
    (C) Available from other sources;
    (D) Information that should not be disclosed for reasons that 
warrant restriction of discovery under the Federal Rules of Civil 
Procedure (28 U.S.C. appendix); and
    (E) Information that should not be disclosed, because such 
disclosure is prohibited by law.
    (ii) The OTS may also deny a records or testimony request when it 
considers production of the information to be overly burdensome or 
contrary to the public interest, or where OTS determines that the need 
for the information does not clearly outweigh the need to maintain the 
confidentiality of the information, or where the requester seeks 
testimony and has not shown a compelling need for the testimony.
    (5) Confidentiality Orders and Agreements. As is set forth in 
paragraph (f) of this section, the OTS may condition release of 
information on the entry by the relevant tribunal of an order 
satisfactory to the OTS or, in a non-litigated matter, the execution of 
a confidentiality agreement that limits access of third parties to the 
unpublished OTS information. It shall be the duty of the requesting 
party to obtain such an order or to execute a confidentiality agreement.
    (e) Parties with access to OTS information; restriction on 
dissemination--(1) Current and former employees. Except as authorized by 
this section or as otherwise authorized by the Director or his delegate, 
no current or former employee, officer or agent of the OTS or a 
predecessor agency shall disclose or permit the disclosure of any 
unpublished information of the OTS to anyone (other than an employee, 
officer or agent of the OTS properly entitled to such information for 
the performance

[[Page 50]]

of their official duties), whether by giving out or furnishing such 
information or a copy thereof or by allowing any person to inspect, 
examine, or copy such information or copy thereof, or otherwise.
    (2) Duty of person served. If any person, whether or not a current 
or former employee, officer or agent of the OTS, has information of the 
OTS that may not be disclosed under the regulations of the OTS or other 
applicable law, and in connection therewith is served with a subpoena, 
order, or other process requiring personal attendance as a witness or 
production of records or information in any proceeding, that person 
shall promptly advise the OTS of such service or request for 
information. Upon such notice the OTS will take appropriate action to 
advise the court or tribunal that issued the process and the attorney 
for the party at whose instance the process was issued, if known, of the 
substance of this section. Such notice to the OTS shall be made by 
contacting the Litigation Division, Office of Chief Counsel, Office of 
Thrift Supervision, 1700 G Street NW., Washington, DC 20552. As provided 
in paragraph (e)(3) of this section, a person so served with process may 
not disclose OTS information without OTS authorization. To obtain OTS 
authorization, a request must be sent to the OTS in Washington, DC, in 
accordance with paragraph (c) of this section.
    (3) Appearance by person served. Except as the OTS has authorized 
disclosure of the relevant information, or except as authorized by law, 
any person who has information of the OTS that may not be disclosed 
under this section and is required to respond to a subpoena or other 
legal process shall attend at the time and place therein mentioned and 
respectfully decline to produce such records or give any testimony with 
respect thereto, basing such refusal on this part. If, notwithstanding, 
the court or other body orders the disclosure of such records or the 
giving of such testimony, the person having such information of the OTS 
shall continue respectfully to decline to produce such information and 
shall promptly advise the Litigation Division of the Chief Counsel's 
Office, Office of Thrift Supervision. Upon such notice the OTS will take 
appropriate action to advise the court or tribunal which issued the 
order, of the substance of this section.
    (4) Non-waiver of privilege. The possession by any entity or 
individual described in paragraph (c)(4) of this section of OTS records 
covered by this section shall not waive any privilege of the OTS or the 
OTS's right to supervise the further dissemination of these records.
    (f) Orders and agreements protecting the confidentiality of 
unpublished OTS information--(1) Records. Unless otherwise permitted by 
the OTS, release of records authorized pursuant to this section will be 
conditioned by the OTS upon entry of an acceptable protective order by 
the court or administrative tribunal presiding in the particular case, 
or, in non-litigated matters, upon execution of an acceptable 
confidentiality agreement. In cases where protective orders have already 
been entered, the OTS reserves the right to condition approval for 
release of information upon the inclusion of additional or amended 
provisions.
    (2) Testimony. The OTS may condition its authorization of deposition 
testimony on an agreement of the parties that the transcript of the 
testimony will be kept under seal, or will be made available only to the 
parties, the court and the jury, except to the extent that the OTS may 
allow use of the transcript in related litigation. The party who 
requested the testimony shall, at its expense, furnish to the OTS a copy 
of the transcript of testimony of the OTS employee or former employee.
    (g) Limitation of burden on the OTS in connection with released 
records--(1) Authentication for use as evidence. The OTS will 
authenticate released records to facilitate their use as evidence. 
Requesters who require authenticated records should request certified 
copies at least 30 days prior to the date they will be needed. The 
request should be sent to the OTS Public Disclosure Branch and shall 
identify the records, giving the office or record depository where they 
are located (if known) and include copies of the records and payment of 
the certification fee.
    (2) Responsibility of litigants to share released records. The party 
who has

[[Page 51]]

sought and obtained OTS records has the responsibility of:
    (i) Notifying other parties to the case of the release and, after 
entry of a protective order, providing copies of the records to the 
other parties who are subject to the protective order; and
    (ii) Retrieving any records from the court's file as soon as the 
records are no longer required by the court and returning them to the 
OTS. Where a party may be involved in related litigation, the OTS may, 
upon a request made to it pursuant to this section, authorize such party 
to transfer the records for use in that related case.
    (h) Fees--(1) Fees for records searches, copying and certifications. 
Requesters shall be charged fees in accordance with Treasury Department 
regulations, 31 CFR 1.7. With certain exceptions, the regulations in 31 
CFR 1.7 provide for recovery of the full direct costs of searching, 
reviewing, certifying and duplicating the records sought. An estimate of 
the statement of charges will be sent to requesters, and fees shall be 
remitted by check payable to the OTS prior to release of the requested 
records. Where it deems appropriate, the OTS may contract with 
commercial copying concerns to copy the records, with the cost billed to 
the requester.
    (2) Witness fees and allowances. (i) Litigants whose requests for 
testimony of current OTS employees are approved shall, upon completion 
of the testimonial appearance, promptly tender a check payable to the 
OTS for witness fees and allowances in accordance with 28 U.S.C. 1821.
    (ii) All litigants whose requests for testimony of former OTS 
employees are approved, shall also promptly tender witness fees and 
allowances to the witness in accordance with 28 U.S.C. 1821.

[54 FR 49456, Nov. 30, 1989, as amended at 60 FR 28031, May 30, 1995; 75 
FR 75586, Dec. 3, 2010]



PART 512_RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL EXAMINATION 

PROCEEDINGS--Table of Contents



Sec.
512.1 Scope of part.
512.2 Definitions.
512.3 Confidentiality of proceedings.
512.4 Transcripts.
512.5 Rights of witnesses.
512.6 Obstruction of the proceedings.
512.7 Subpoenas.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813; 15 U.S.C. 
78 l.

    Source: 54 FR 49457, Nov. 30, 1989, unless otherwise noted.



Sec. 512.1  Scope of part.

    This part prescribes rules of practice and procedure applicable to 
the conduct of investigative proceedings under section 10(g)(2) of the 
Home Owners' Loan Act, as amended, 12 U.S.C. 1467a(g)(2) (``HOLA'') and 
to the conduct of formal examination proceedings with respect to savings 
associations and their affiliates under section 5(d)(1)(B) of the HOLA, 
as amended, 12 U.S.C. 1464(d)(1)(B) or section 7(j)(15) of the Federal 
Deposit Insurance Act, as amended, 12 U.S.C. 1817(j)(15) (``FDIA''), 
section 8(n) of the FDIA, 12 U.S.C. 1818(n), or section 10(c) of the 
FDIA, 12 U.S.C. 1820(c). This part does not apply to adjudicatory 
proceedings as to which hearings are required by statute, the rules for 
which are contained in part 509 of this chapter.



Sec. 512.2  Definitions.

    As used in this part:
    (a) Office means the Office of Thrift Supervision;
    (b) Investigative proceeding means an investigation conducted under 
section 10(g)(2) of the HOLA;
    (c) Formal examination proceeding means the administration of oaths 
and affirmations, taking and preserving of testimony, requiring the 
production of books, papers, correspondence, memoranda, and all other 
records, the issuance of subpoenas, and all related activities in 
connection with examination of savings associations and their affiliates 
conducted pursuant to section 5(d)(1)(B) of the HOLA, section 7(j)(15) 
of the FDIA, section 8(n) of the FDIA or section 10(c) of the FDIA; and
    (d) Designated representative means the person or persons empowered 
by the Office to conduct an investigative proceeding or a formal 
examination proceeding.

[[Page 52]]



Sec. 512.3  Confidentiality of proceedings.

    All formal examination proceedings shall be private and, unless 
otherwise ordered by the Office, all investigative proceedings shall 
also be private. Unless otherwise ordered or permitted by the Office, or 
required by law, and except as provided in Sec. Sec. 512.4 and 512.5, 
the entire record of any investigative proceeding or formal examination 
proceeding, including the resolution of the Office or its delegate(s) 
authorizing the proceeding, the transcript of such proceeding, and all 
documents and information obtained by the designated representative(s) 
during the course of said proceedings shall be confidential.



Sec. 512.4  Transcripts.

    Transcripts or other recordings, if any, of investigative 
proceedings or formal examination proceedings shall be prepared solely 
by an official reporter or by any other person or means authorized by 
the designated representative. A person who has submitted documentary 
evidence or given testimony in an investigative proceeding or formal 
examination proceeding may procure a copy of his own documentary 
evidence or transcript of his own testimony upon payment of the cost 
thereof; provided, that a person seeking a transcript of his own 
testimony must file a written request with the Deputy Chief Counsel for 
Enforcement or the appropriate Regional Counsel for Enforcement stating 
the reason he desires to procure such transcript, and said persons may 
for good cause deny such request. In any event, any witness (or his 
counsel) shall have the right to inspect the transcript of the witness' 
own testimony.

[54 FR 49457, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995]



Sec. 512.5  Rights of witnesses.

    (a) Any person who is compelled or requested to furnish documentary 
evidence or give testimony at an investigative proceeding or formal 
examination proceeding shall have the right to examine, upon request, 
the Office resolution authorizing such proceeding. Copies of such 
resolution shall be furnished, for their retention, to such persons only 
with the written approval of the Deputy Chief Counsel for Enforcement or 
the appropriate Regional Counsel for Enforcement.
    (b) Any witness at an investigative proceeding or formal examination 
proceeding may be accompanied and advised by an attorney personally 
representing that witness.
    (1) Such attorney shall be a member in good standing of the bar of 
the highest court of any state, Commonwealth, possession, territory, or 
the District of Columbia, who has not been suspended or debarred from 
practice by the bar of any such political entity or before the Office in 
accordance with the provisions of part 513 of this chapter and has not 
been excluded from the particular investigative proceeding or formal 
examination proceeding in accordance with paragraph (b)(3) of this 
section.
    (2) Such attorney may advise the witness before, during, and after 
the taking of his testimony and may briefly question the witness, on the 
record, at the conclusion of his testimony, for the sole purpose of 
clarifying any of the answers the witness has given. During the taking 
of the testimony of a witness, such attorney may make summary notes 
solely for his use in representing his client. All witnesses shall be 
sequestered, and, unless permitted in the discretion of the designated 
representative, no witness or accompanying attorney may be permitted to 
be present during the taking of testimony of any other witness called in 
such proceeding. Neither attorney(s) for the association(s) that are the 
subjects of the investigative proceedings or formal examination 
proceedings, nor attorneys for any other interested persons, shall have 
any right to be present during the testimony of any witness not 
personally being represented by such attorney.
    (3) The Office, for good cause, may exclude a particular attorney 
from further participation in any investigation in which the Office has 
found the attorney to have engaged in dilatory, obstructionist, 
egregious, contemptuous or contumacious conduct. The person conducting 
an investigation may report to the Office instances of apparently 
dilatory, obstructionist, egregious, contemptuous or contumacious 
conduct on the part of an attorney.

[[Page 53]]

After due notice to the attorney, the Office may take such action as the 
circumstances warrant based upon a written record evidencing the conduct 
of the attorney in that investigation or such other or additional 
written or oral presentation as the Office may permit or direct.

[54 FR 49457, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995]



Sec. 512.6  Obstruction of the proceedings.

    The designated representative shall report to the Office any 
instances where any witness or counsel has engaged in dilatory, 
obstructionist, or contumacious conduct or has otherwise violated any 
provision of this part during the course of an investigative proceeding 
or formal examination proceeding; and the Office may take such action as 
the circumstances warrant, including the exclusion of counsel from 
further participation in such proceeding.



Sec. 512.7  Subpoenas.

    (a) Service. Service of a subpoena in connection with any 
investigative proceeding or formal examination proceeding shall be 
effected in the following manner:
    (1) Service upon a natural person. Service of a subpoena upon a 
natural person may be effected by handing it to such person; by leaving 
it at his office with the person in charge thereof, or, if there is no 
one in charge, by leaving it in a conspicuous place therein; by leaving 
it at his dwelling place or usual place of abode with some person of 
suitable age and discretion then residing therein; by mailing it to him 
by registered or certified mail or by an express delivery service at his 
last known address; or by any method whereby actual notice is given to 
him.
    (2) Service upon other persons. When the person to be served is not 
a natural person, service of the subpoena may be effected by handing the 
subpoena to a registered agent for service, or to any officer, director, 
or agent in charge of any office of such person; by mailing it to any 
such representative by registered or certified mail or by an express 
delivery service at his last known address; or by any method whereby 
actual notice is given to such person.
    (b) Motions to quash. Any person to whom a subpoena is directed may, 
prior to the time specified therein for compliance, but in no event more 
than 10 days after the date of service of such subpoena, apply to the 
Chief Counsel or his designee to quash or modify such subpoena, 
accompanying such application with a statement of the reasons therefor. 
The Chief Counsel or his designee, as appropriate, may:
    (1) Deny the application;
    (2) Quash or revoke the subpoena;
    (3) Modify the subpoena; or
    (4) Condition the granting of the application on such terms as the 
Chief Counsel or his designee determines to be just, reasonable, and 
proper.
    (c) Attendance of witnesses. Subpoenas issued in connection with an 
investigative proceeding or formal examination proceeding may require 
the attendance and/or testimony of witnesses from any State or territory 
of the United States and the production by such witnesses of documentary 
or other tangible evidence at any designated place where the proceeding 
is being (or is to be) conducted. Foreign nationals are subject to such 
subpoenas if such service is made upon a duly authorized agent located 
in the United States.
    (d) Witness fees and mileage. Witnesses summoned in any proceeding 
under this part shall be paid the same fees and mileage that are paid 
witnesses in the district courts of the United States. Such fees and 
mileage need not be tendered when the subpoena is issued on behalf of 
the Office by any of its designated representatives.

[54 FR 49457, Nov. 30, 1989, as amended at 56 FR 38317, Aug. 12, 1991]



PART 513_PRACTICE BEFORE THE OFFICE--Table of Contents



Sec.
513.1 Scope of part.
513.2 Definitions.
513.3 Who may practice.
513.4 Suspension and debarment.
513.5 Reinstatement.
513.6 Duty to file information concerning adverse judicial or 
          administrative action.
513.7 Proceeding under this part.
513.8 Removal, suspension, or debarment of independent public 
          accountants and accounting firms performing audit services.


[[Page 54]]


    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1813, 1831m, and 15 
U.S.C. 78.

    Source: 54 FR 49459, Nov. 30, 1989, unless otherwise noted.



Sec. 513.1  Scope of part.

    This part prescribes rules with regard to general practice before 
the Office on one's own behalf or in a representative capacity and 
prescribes rules describing the circumstances under which attorneys, 
accountants, appraisers, or other persons may be suspended or debarred, 
either temporarily or permanently, from practicing before the Office. In 
connection with any particular matter, reference also should be made to 
any special requirements of procedure and practice that may be contained 
in the particular statute involved or the rules and forms adopted by the 
Office thereunder, which special requirements are controlling. In 
addition to any suspension hereunder, a person may be excluded from 
further participation under this chapter from a rulemaking hearing in 
accordance with Sec. 510.2, from an adjudicatory proceeding in 
accordance with Sec. 509.6(a)(1), from a removal hearing in accordance 
with Sec. 508.3, or from an investigatory proceeding in accordance with 
Sec. 512.5(b)(2) of this chapter.

[54 FR 49459, Nov. 30, 1989, as amended at 56 FR 38317, Aug. 12, 1991]



Sec. 513.2  Definitions.

    As used in this part:
    (a) Office means the Office;
    (b) The term Secretary means the Secretary and any Assistant or 
Acting Secretary to the Office;
    (c) The term presiding officer includes the Office, his delegatee or 
an administrative law judge appointed under section 3105 or detailed 
pursuant to section 3344 of title 5 of the U.S. Code and, as used in 
this part, the term shall be construed to refer to whichever of the 
above-identified individuals presides at a hearing or other proceeding, 
except as otherwise specified in the text;
    (d) The term attorney means any person who is a member in good 
standing of the bar of the highest court of any State, possession, 
territory, Commonwealth or the District of Columbia; and
    (e) The term practice means transacting any business with the 
Office, including:
    (1) The representation of another person at any adjudicatory, 
investigatory, removal or rulemaking proceeding conducted before the 
Office, a presiding officer or the Office's staff, including those 
proceedings covered in parts 508, 509, 510, and 512 of this chapter;
    (2) The preparation of any statement, opinion, financial statement, 
appraisal report, audit report, or other document or report by any 
attorney, accountant, appraiser or other licensed expert which is filed 
with or submitted to the Office, with such expert's consent or knowledge 
in connection with any application or other filing with the Office;
    (3) A presentation to the Office, a presiding officer or the 
Office's staff at a conference or meeting relating to an association's 
or other person's rights, privileges or liabilities under the laws 
administered by the Office and rules and regulations promulgated 
thereunder;
    (4) Any business correspondence or communication with the Office, a 
presiding officer or the Office's staff; and
    (5) The transaction of any other formal business with the Office on 
behalf of another, in the capacity of an attorney, accountant, appraiser 
or other licensed expert.



Sec. 513.3  Who may practice.

    (a) By non-attorneys. (1) An individual may appear on his own behalf 
(pro se); a member of a partnership may represent the partnership; a 
bona fide and duly authorized officer of a corporation, trust or 
association may represent the corporation, trust or association; and an 
officer or employee of a commission, department or political subdivision 
may represent that commission, department or political subdivision 
before the Office.
    (2) Any accountant, appraiser or other licensed expert may practice 
before the Office in a professional capacity.
    (b) By attorneys. Any association or other person may be represented 
in any proceeding or other matter before the Office by an attorney.

[[Page 55]]

    (c) Any licensed expert or professional transacting business with 
the Office in a representative capacity may be required to show his 
authority to act in such capacity.



Sec. 513.4  Suspension and debarment.

    (a) The Office may censure any person practicing before it or may 
deny, temporarily or permanently, the privilege of any person to 
practice before it if such person is found by the Office, after notice 
of and opportunity for hearing in the matter,
    (1) Not to possess the requisite qualifications to represent others,
    (2) To be lacking in character or professional integrity,
    (3) To have engaged in any dilatory, obstructionist, egregious, 
contemptuous, contumacious or other unethical or improper professional 
conduct before the Office, or
    (4) To have willfully violated, or willfully aided and abetted the 
violation of, any provision of the laws administered by the Office or 
the rules and regulations promulgated thereunder.
    (b) Automatic suspension. (1) Any person who, after being licensed 
as a professional or expert by any competent authority, has been 
convicted of a felony, or of a misdemeanor involving moral turpitude, 
personal dishonesty or breach of trust, shall be suspended forthwith 
from practicing before the Office.
    (2) Any accountant, appraiser or other licensed expert whose license 
to practice has been revoked in any State, possession, territory, 
Commonwealth or the District of Co1umbia, shall be suspended forthwith 
from practice before the Office.
    (3) Any attorney who has been suspended or disbarred by a court of 
the United States or in any State, possession, territory, Commonwealth 
or the District of Columbia, shall be suspended forthwith from 
practicing before the Office.
    (4) A conviction (including a judgment or order on a plea of nolo 
contendere), revocation, suspension or disbarment under paragraphs 
(b)(1), (b)(2) and (b)(3) of this section shall be deemed to have 
occurred when the convicting, revoking, suspending or disbarring agency 
or tribunal enters its judgment or order, regardless of whether an 
appeal is pending or could be taken.
    (5) For purposes of this section, it shall be irrelevant that any 
attorney, accountant, appraiser or other licensed expert who has been 
suspended, disbarred or otherwise disqualified from practice before a 
court or in a jurisdiction continues in professional good standing 
before other courts or in other jurisdictions.
    (c) Temporary suspension. (1) The Office, with due regard to the 
public interest and without preliminary hearing, by order, may 
temporarily suspend any person from appearing or practicing before it 
who, on or after June 20, 1984, by name, has been:
    (i) Permanently enjoined (whether by consent, default or summary 
judgment or after trial) by any court of competent jurisdiction or by 
the Office itself in a final administrative order, by reason of his 
misconduct in any action brought by the Office based upon violations of, 
or aiding and abetting the violation of, the Home Owners, Loan Act of 
1933, as amended, 12 U.S.C. 1461 et seq., the Federal Deposit Insurance 
Act, as amended, 12 U.S.C. 1811 et seq. or any provision of the 
Securities Exchange Act of 1934, as amended, 15 U.S.C. 78a, et seq., 
which is administered by the Office, or of any rule or regulation 
promulgated thereunder; or
    (ii) Found by any court of competent jurisdiction (whether by 
consent, default, or summary judgment, or after trial) in any action 
brought by the Office to which he is a party or found by the Office 
(whether by consent, default, upon summary judgment or after hearing) in 
any administrative proceeding in which the Office is a complainant and 
he is a party, to have willfully committed, caused or aided or abetted a 
violation of any provision of the Home Owners' Loan Act of 1933, as 
amended, 12 U.S.C. 1461 et seq., the Federal Deposit Insurance Act, as 
amended, 12 U.S.C. 1811 et seq. or any provision of the Securities 
Exchange Act of 1934, as amended, 15 U.S.C. 78a, et seq., which is 
administered by the Office, or of any rule or regulation promulgated 
thereunder.
    (2) An order of temporary suspension shall become effective when 
served by certified or registered mail directed to

[[Page 56]]

the last known business or residential address of the person involved. 
No order of temporary suspension shall be entered by the Office pursuant 
to paragraph (c)(1) of this section more than three months after the 
final judgment or order entered in a judicial or administrative 
proceeding described in paragraphs (c)(1)(i) or (c)(1)(ii) of this 
section has become effective and all review or appeal procedures have 
been completed or are no longer available.
    (3) Any person temporarily suspended from appearing and practicing 
before the Office in accordance with paragraph (c)(1) of this section 
may, within 30 days after service upon him of the order of temporary 
suspension, petition the Office to lift such suspension. If no petition 
is received by the Office within those 30 days, the suspension shall 
become permanent.
    (4) Within 30 days after the filing of a petition in accordance with 
paragraph (c)(3) of this section, the Office shall either lift the 
temporary suspension or set the matter down for hearing at a time and 
place to be designated by the Office, or both. After opportunity for 
hearing, the Office may censure the petitioner or may suspend the 
petitioner from appearing or practicing before the Office temporarily or 
permanently. In every case in which the temporary suspension has not 
been lifted, the hearing and any other action taken pursuant to this 
paragraph (c)(4) shall be expedited by the Office in order to ensure the 
petitioner's right to address the allegations against him.
    (5) In any hearing held on a petition filed in accordance with 
paragraph (c)(3) of this section, a showing that the petitioner has been 
enjoined or has been found to have committed, caused or aided or abetted 
violations as described in paragraph (c)(1) of this section, without 
more, may be a basis for suspension or debarment; that showing having 
been made, the burden shall then be on the petitioner to show why he 
should not be censured or be temporarily or permanently suspended or 
debarred. A petitioner will not be permitted to contest any findings 
against him or any admissions made by him in the judicial or 
administrative proceedings upon which the proposed censure, suspension 
or debarment is based. A petitioner who has consented to the entry of a 
permanent injunction or order as described in paragraph (c)(1)(i) of 
this section, without admitting the facts set forth in the complaint, 
shall nevertheless be presumed for all purposes under this section to 
have been enjoined or ordered by reason of the misconduct alleged in the 
complaint.



Sec. 513.5  Reinstatement.

    (a) Any person who is suspended from practicing before the Office 
under paragraph (a) or (c) of Sec. 513.4 of this part may file an 
application for reinstatement at any time. Denial of the privilege of 
practicing before the Office shall continue unless and until the 
applicant has been reinstated by order of the Office for good cause 
shown.
    (b) Any person suspended under paragraph (b) of Sec. 513.4 shall be 
reinstated by the Office, upon appropriate application, if all of the 
grounds for application of the provisions of paragraph (b) of Sec. 
513.4 subsequently are removed by a reversal of the conviction or 
termination of the suspension, disbarment or revocation. An application 
for reinstatement on any other grounds by any person suspended under 
paragraph (b) of Sec. 513.4 may be filed at any time. Such application 
shall state with particularity the relief desired and the grounds 
therefor and shall include supporting evidence, when available. The 
applicant shall be accorded an opportunity for an informal hearing in 
the matter, unless the applicant has waived a hearing in the application 
and, instead, has elected to have the matter determined on the basis of 
written submissions. Such hearing shall utilize the procedures 
established in Sec. 508.3 and paragraph (a) of Sec. 508.7 of this 
chapter. However, such suspension shall continue unless and until the 
applicant has been reinstated by order of the Office for good cause 
shown.

[54 FR 49459, Nov. 30, 1989, as amended at 56 FR 38318, Aug. 12, 1991]



Sec. 513.6  Duty to file information concerning adverse judicial or 

administrative action.

    Any person appearing or practicing before the Office who has been or 
is the subject of a conviction, suspension, debarment, license 
revocation, injunction

[[Page 57]]

or other finding of the kind described in Sec. 513.4 (b) or (c) of this 
part in an action not instituted by the Office shall promptly file a 
copy of the relevant order, judgment or decree with the Secretary to the 
Office together with any related opinion or statement of the agency or 
tribunal involved. Any person who fails to so file a copy of the order, 
judgment or decree within 30 days after the later of June 15, 1984, the 
entry of the order, judgment or decree, or the date such person 
initiates practice before the Office, for that reason alone may be 
disqualified from practicing before the Office until such time as the 
appropriate filing shall be made, but neither the filing of these 
documents nor the failure of a person to file them shall in any way 
impair the operation of any other provision of this part.



Sec. 513.7  Proceeding under this part.

    (a) All hearings required or permitted to be held under paragraphs 
(a) and (c) of Sec. 513.4 of this part shall be held before a presiding 
officer utilizing the procedures established in the rules of practice 
and procedure in adjudicatory proceedings under part 509 of this 
chapter.
    (b) All hearings held under this part shall be closed to the public 
unless the Office on its own motion or upon the request of a party 
otherwise directs.
    (c) Any proceeding brought under any section of this part 513 shall 
not preclude a proceeding under any other section of this part or any 
other part of the Office's regulations.



Sec. 513.8  Removal, suspension, or debarment of independent public 

accountants and accounting firms performing audit services.

    (a) Scope. This subpart, which implements section 36(g)(4) of the 
Federal Deposit Insurance Act (FDIA) (12 U.S.C. 1831m(g)(4)), provides 
rules and procedures for the removal, suspension, or debarment of 
independent public accountants and their accounting firms from 
performing independent audit and attestation services required by 
section 36 of the FDIA (12 U.S.C. 1831m) for insured savings 
associations and savings and loan holding companies.
    (b) Definitions. As used in this section, the following terms have 
the meaning given below unless the context requires otherwise:
    (1) Accounting firm. The term accounting firm means a corporation, 
proprietorship, partnership, or other business firm providing audit 
services.
    (2) Audit services. The term audit services means any service 
required to be performed by an independent public accountant by section 
36 of the FDIA Act and 12 CFR part 363, including attestation services. 
Audit services include any service performed with respect to a savings 
and loan holding company of a savings association that is used to 
satisfy requirements imposed by section 36 or part 363 on that savings 
association.
    (3) Independent public accountant. The term independent public 
accountant means any individual who performs or participates in 
providing audit services.
    (c) Removal, suspension, or debarment of independent public 
accountants. The Office may remove, suspend, or debar an independent 
public accountant from performing audit services for savings 
associations that are subject to section 36 of the FDIA if, after 
service of a notice of intention and opportunity for hearing in the 
matter, the Office finds that the independent public accountant:
    (1) Lacks the requisite qualifications to perform audit services;
    (2) 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 independent 
public 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;
    (3) Has engaged in negligent conduct in the form of: (i) A single 
instance of highly unreasonable conduct that results in a violation of 
applicable professional standards in circumstances in which an 
independent public accountant knows, or should know, that heightened 
scrutiny is warranted; or

[[Page 58]]

    (ii) Repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to perform audit services;
    (4) 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 Office or any officer 
or employee of the Office;
    (5) 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;
    (6) Has been removed, suspended, or debarred from practice before 
any federal or state agency regulating the banking, insurance, or 
securities industries, other than by action listed in paragraph (j) of 
this section, on grounds relevant to the provision of audit services; or
    (7) 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.
    (d) Removal, suspension or debarment of an accounting firm. If the 
Office determines that there is good cause for the removal, suspension, 
or debarment of a member or employee of an accounting firm under 
paragraph (c) of this section, the Office 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 office 
thereof, and the term of any sanction against an accounting firm under 
this section, the Office may consider, for example:
    (1) The gravity, scope, or repetition of the act or failure to act 
that constitutes good cause for the removal, suspension, or debarment;
    (2) 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;
    (3) The selection, training, supervision, and conduct of members or 
employees of the accounting firm involved in the performance of audit 
services;
    (4) 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
    (5) 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.
    (e) Remedies. The remedies provided in this section are in addition 
to any other remedies the Office may have under any other applicable 
provisions of law, rule, or regulation.
    (f) Proceedings to remove, suspend, or debar. (1) The Office may 
initiate a proceeding to remove, suspend, or debar an independent public 
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.
    (2) An independent public accountant or accounting firm named as a 
respondent in the notice issued under paragraph (f)(1) of this section 
may request a hearing on the allegations 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 509).
    (g) Immediate suspension from performing audit services. (1) If the 
Office serves written notice of intention to remove, suspend, or debar 
an independent public accountant or accounting firm from performing 
audit services, the Office may, with due regard for the public interest 
and without preliminary hearing, immediately suspend an independent 
public accountant or accounting firm from performing audit services for 
savings associations, if the Office:
    (i) Has a reasonable basis to believe that the independent public 
accountant or accounting firm engaged in conduct (specified in the 
notice served upon the independent public accountant or accounting firm 
under paragraph (f) of this section) that would constitute

[[Page 59]]

grounds for removal, suspension, or debarment under paragraph (c) or (d) 
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 independent public accountant or accounting firm 
with written notice of the immediate suspension.
    (2) An immediate suspension notice issued under this paragraph will 
become effective upon service. Such suspension will remain in effect 
until the date the Office 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 Office to the independent public 
accountant or accounting firm.
    (h) Petition to stay. (1) Any independent public accountant or 
accounting firm immediately suspended from performing audit services in 
accordance with paragraph (g) of this section may, within 10 calendar 
days after service of the notice of immediate suspension, file a 
petition with the Office for a stay of such suspension. If no petition 
is filed within 10 calendar days, the immediate suspension shall remain 
in effect.
    (2) Upon receipt of a stay petition, the Office will designate a 
presiding officer who shall fix a place and time (not more than 10 
calendar days after receipt of such petition, unless extended at the 
request of the petitioner), at which the immediately suspended party may 
appear, personally or through counsel, to submit written materials and 
oral argument. Any OTS employee engaged in investigative or prosecuting 
functions for the OTS 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 OTS, 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 may also be presented. In hearings held pursuant to this 
paragraph, there will be no discovery and the provisions of Sec. Sec. 
509.6 through 509.12, 509.16, and 509.21 of the Uniform Rules will 
apply.
    (3) Within 30 calendar days after the hearing, the presiding officer 
shall 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.
    (4) The parties may seek review of the presiding officer's decision 
by filing a petition for review with the presiding officer 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 presiding officer must promptly 
certify the entire record to the Director. Within 60 calendar days of 
the presiding officer's certification, the Director shall issue an order 
notifying the affected party whether or not the immediate suspension 
should be continued or reinstated. The order shall state the basis of 
the Director's decision.
    (i) Scope of any order of removal, suspension, or debarment. (1) 
Except as provided in paragraph (i)(2), any independent public 
accountant or accounting firm that has been removed, suspended 
(including an immediate suspension), or debarred from performing audit 
services by the Office may not, while such order is in effect, perform 
audit services for any savings association.
    (2) An order of removal, suspension (including an immediate 
suspension), or debarment may, at the discretion of the Office, be made 
applicable to a limited number of savings associations or savings and 
loan holding companies (limited scope order).
    (j) Automatic removal, suspension, and debarment. (1) An independent 
public accountant or accounting firm may not perform audit services for 
a savings association if the independent public accountant or accounting 
firm:

[[Page 60]]

    (i) 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 Federal Deposit Insurance Corporation, 
or the Office of the Comptroller of the Currency under section 36 of the 
FDIA;
    (ii) 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
    (iii) Is subject to an order of suspension or denial of the 
privilege of appearing or practicing before the Securities and Exchange 
Commission.
    (2) Upon written request, the Office, for good cause shown, may 
grant written permission to an independent public accountant or 
accounting firm to perform audit services for savings associations. The 
request must contain a concise statement of action requested. The Office 
may require the applicant to submit additional information.
    (k) Notice of removal, suspension, or debarment. (1) Upon issuance 
of a final order for removal, suspension, or debarment of an independent 
public accountant or accounting firm from providing audit services, the 
Office shall make the order publicly available and provide notice of the 
order to the other Federal banking agencies.
    (2) An independent public accountant or accounting firm that 
provides audit services to a savings association must provide the Office 
with written notice of:
    (i) Any currently effective order or other action described in 
paragraphs (c)(6) through (c)(7) or paragraphs (j)(1)(ii) through 
(j)(1)(iii) of this section; and
    (ii) 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)).
    (3) 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 independent public accountant or 
accounting firm accepts an engagement to provide audit services, 
whichever date is earlier.
    (l) Application for reinstatement. (1) Unless otherwise ordered by 
the Office, an independent public accountant, accounting firm, or office 
of a firm that was removed, suspended or debarred under this section may 
apply for reinstatement in writing at any time. The request shall 
contain a concise statement of action requested. The Office may require 
the applicant to submit additional information.
    (2) An applicant for reinstatement under paragraph (l)(1) of this 
section may, in the Office's sole discretion, be afforded a hearing. The 
independent public accountant or accounting firm shall bear the burden 
of going forward with an application and the burden of proving the 
grounds supporting the application. The Office may, in its sole 
discretion, direct that any reinstatement proceeding be limited to 
written submissions. The removal, suspension, or debarment shall 
continue until the Office, for good cause shown, has reinstated the 
applicant or until, in the case of a suspension, the suspension period 
has expired. The filing of a petition for reinstatement shall not stay 
the effectiveness of the removal, suspension, or debarment of an 
independent public accountant or accounting firm.

[68 FR 48272, Aug. 13, 2003]



PART 516_APPLICATION PROCESSING PROCEDURES--Table of Contents



Sec.
516.1 What does this part do?
516.5 Do the same procedures apply to all applications under this part?
516.10 How does OTS compute time periods under this part?

               Subpart A_Pre-Filing and Filing Procedures

                          Pre-Filing Procedures

516.15 Must I meet with OTS before I file my application?
516.20 What information must I include in my draft business plan?

[[Page 61]]

                            Filing Procedures

516.25 What type of application must I file?
516.30 What information must I provide with my application?
516.35 May I keep portions of my application confidential?
516.40 Where do I file my application?
516.45 What is the filing date of my application?
516.47 How do I amend or supplement my application?

                   Subpart B_Publication Requirements

516.50 Who must publish a public notice of an application?
516.55 What information must I include in my public notice?
516.60 When must I publish the public notice?
516.70 Where must I publish the public notice?
516.80 What language must I use in my publication?

                      Subpart C_Comment Procedures

516.100 What does this subpart do?
516.110 Who may submit a written comment?
516.120 What information should a comment include?
516.130 Where are comments filed?
516.140 How long is the comment period?

                      Subpart D_Meeting Procedures

516.160 What does this subpart do?
516.170 When will OTS conduct a meeting on an application?
516.180 What procedures govern the conduct of the meeting?
516.185 Will OTS approve or disapprove an application at a meeting?
516.190 Will a meeting affect application processing time frames?

                          Subpart E_OTS Review

                           Expedited Treatment

516.200 If I file a notice under expedited treatment, when may I engage 
          in the proposed activities?

                           Standard Treatment

516.210 What will OTS do after I file my application?
516.220 If OTS requests additional information to complete my 
          application, how will it process my application?
516.230 Will OTS conduct an eligibility examination?
516.240 What may OTS require me to do after my application is deemed 
          complete?
516.250 Will OTS require me to publish a new public notice?
516.260 May OTS suspend processing of my application?
516.270 How long is the OTS review period?
516.280 How will I know if my application has been approved?
516.290 What will happen if OTS does not approve or disapprove my 
          application within two calendar years after the filing date?

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464, 2901 et 
seq.

    Source: 57 FR 14336, Apr. 20, 1992, unless otherwise noted.



Sec. 516.1  What does this part do?

    (a) This part explains OTS procedures for processing applications, 
notices, or filings (applications). Except as provided in paragraph (b) 
of this section, subparts A and E of this part apply whenever an OTS 
regulation requires any person (you) to file an application with OTS. 
Subparts B, C, and D, however, only apply when an OTS regulation 
incorporates the procedures in the subpart or where otherwise required 
by OTS.
    (b) This part does not apply to any of the following:
    (1) An application related to a transaction under section 13(c) or 
(k) of the Federal Deposit Insurance Act, 12 U.S.C. 1823(c) or (k).
    (2) A request for reconsideration, modification, or appeal of a 
final OTS action.
    (3) A request related to litigation, an enforcement proceeding, a 
supervisory directive or supervisory agreement. Such requests include a 
request seeking approval under, modification of, or termination of an 
order issued under part 508 or 509 of this chapter, a supervisory 
agreement, a supervisory directive, a consent merger agreement or a 
document negotiated in settlement of an enforcement matter or other 
litigation, unless an applicable OTS regulation specifically requires an 
application under this part.
    (4) An application filed under an OTS regulation that prescribes 
other application processing procedures and time frames for the approval 
of applications.
    (c) If an OTS regulation for a specific type of application 
prescribes some application processing procedures, or time frames, OTS 
will apply this part to the extent necessary to process the application. 
For example, if an OTS

[[Page 62]]

regulation for a specific type of application does not identify time 
periods for the processing of an application, the time periods in this 
part apply.

[66 FR 13000, Mar. 2, 2001]



Sec. 516.5  Do the same procedures apply to all applications under this part?

    OTS processes applications under this part using two procedures, 
expedited treatment and standard treatment. To determine which treatment 
applies, you may use the following chart:

------------------------------------------------------------------------
                                            Then OTS will  process your
                If * * *                      application under * * *
------------------------------------------------------------------------
(a) The applicable regulation does not    Standard treatment.
 specifically state that expedited
 treatment is available.
(b) You are not a savings association...  Standard treatment.
(c) Your composite rating is 3, 4, or 5.  Standard treatment.
 The composite rating is the composite
 numeric rating that OTS or the other
 federal banking regulator assigned to
 you under the Uniform Financial
 Institutions Rating System \1\ or under
 a comparable rating system. The
 composite rating refers to the rating
 assigned and provided to you, in
 writing, as a result of the most recent
 examination.
(d) Your Community Reinvestment Act       Standard treatment.
 (CRA) rating is Needs to Improve or
 Substantial Noncompliance. The CRA
 rating is the Community Reinvestment
 Act performance rating that OTS or the
 other federal banking regulator
 assigned and provided to you, in
 writing, as a result of the most recent
 compliance examination. See, for
 example, Sec.  563e.28 of this chapter.
(e) Your compliance rating is 3, 4, or    Standard treatment.
 5. The compliance rating is the numeric
 rating that OTS or the other federal
 banking regulator assigned to you under
 OTS compliance rating system, or a
 comparable rating system used by the
 other federal banking regulator. The
 compliance rating refers to the rating
 assigned and provided to you, in
 writing, as a result of the most recent
 compliance examination.
(f) You fail any one of your capital      Standard treatment.
 requirements under part 567 of this
 chapter.
(g) OTS has notified you that you are an  Standard treatment.
 association in troubled condition.
(h) Neither OTS nor any other federal     Standard treatment.
 banking regulator has assigned you a
 composite rating, a CRA rating or a
 compliance rating.
(i) You do not meet any of the criteria   Expedited treatment.
 listed in paragraphs (a) through (h) of
 this section.
------------------------------------------------------------------------
\1\ A savings association may obtain a copy of its composite rating from
  the appropriate Regional Office.


[66 FR 13000, Mar. 2, 2001]



Sec. 516.10  How does OTS compute time periods under this part?

    In computing time periods under this part, OTS does not include the 
day of the act or event that commences the time period. When the last 
day of a time period is a Saturday, Sunday, or Federal holiday, the time 
period runs until the end of the next day that is not a Saturday, 
Sunday, or Federal holiday.

[66 FR 13000, Mar. 2, 2001]



               Subpart A_Pre-Filing and Filing Procedures

    Source: 66 FR 13000, Mar. 2, 2001, unless otherwise noted.

                          Pre-Filing Procedures



Sec. 516.15  Must I meet with OTS before I file my application?

    (a) Chart. To determine whether you must attend a pre-filing meeting 
before you file an application, please consult the following chart:

------------------------------------------------------------------------
             If you file * * *                       Then * * *
------------------------------------------------------------------------
(1) An application for permission to        You must meet with OTS
 organize a de novo federal savings          before filing your
 association.                                application. You must
                                             submit a draft business
                                             plan before this meeting.
(2) An application to convert an existing   You must meet with OTS
 insured depository institution (other       before filing your
 than a state-chartered savings              application. OTS may
 association or a state-chartered savings    require you to submit a
 bank) or a credit union to a federal        draft business plan or
 savings association.                        other relevant information
                                             before this meeting.

[[Page 63]]

 
(3) An application to acquire control of a  OTS may require you to meet
 savings association.                        with OTS before filing your
                                             application and may require
                                             you to submit a draft
                                             business plan or other
                                             relevant information before
                                             this meeting.
------------------------------------------------------------------------

    (b) Contacting the Regional Office. (1) You must contact the 
appropriate Regional Office a reasonable time before you file an 
application described in paragraph (a) of this section. Unless paragraph 
(a) already requires a pre-filing meeting or a draft business plan, the 
Regional Office will determine whether it will require a pre-filing 
meeting, and whether you must submit a business plan or other relevant 
information before the meeting. The Regional Office will also establish 
a schedule for any meeting and the submission of any information.
    (2) All other applicants are encouraged to contact the appropriate 
Regional Office to determine whether a pre-filing meeting or the 
submission of a draft business plan or other relevant information would 
expedite the application review process.



Sec. 516.20  What information must I include in my draft business plan?

    If you must submit a draft business plan under Sec. 516.15, your 
plan must:
    (a) Clearly and completely describe the savings association's 
projected operations and activities;
    (b) Describe the risks associated with the transaction and the 
impact of this transaction on any existing activities and operations of 
the savings association, including financial projections for a minimum 
of three years;
    (c) Identify the majority of the proposed board of directors and the 
key senior executive officers (as defined in Sec. 563.555 of this 
chapter) of the savings association and demonstrate that these 
individuals have the expertise to prudently manage the activities and 
operations described in the savings association's draft business plan; 
and
    (d) Demonstrate how applicable requirements regarding serving the 
credit and lending needs in the market areas served by the savings 
association will be met.

                            Filing Procedures



Sec. 516.25  What type of application must I file?

    (a) Expedited treatment. If you are eligible for expedited treatment 
under Sec. 516.5, you may file your application in the form of a notice 
that includes all information required by the applicable substantive 
regulation. If OTS has designated a form for your notice, you must file 
that form. Your notice is an application for the purposes of all 
statutory and regulatory references to ``applications.''
    (b) Standard treatment. If you are subject to standard treatment 
under Sec. 516.5, you must file your application following all 
applicable substantive regulations and guidelines governing the filing 
of applications. If OTS has a designated form for your application, you 
must file that form.
    (c) Waiver requests. If you want OTS to waive a requirement that you 
provide certain information with the notice or application, you must 
include a written waiver request:
    (1) Describing the requirement to be waived and
    (2) Explaining why the information is not needed to enable OTS to 
evaluate your notice or application under applicable standards.



Sec. 516.30  What information must I provide with my application?

    (a) Required information. You may obtain information about required 
certifications, other regulations and guidelines affecting particular 
notices and applications, appropriate forms, and instructions from any 
OTS Regional Office. You may also obtain forms and instructions on OTS's 
web page at www.ots.treas.gov.
    (b) Captions and exhibits. You must caption the original application 
and required copies with the type of filing, and must include all 
exhibits and other pertinent documents with the original application and 
all required copies. You are not required to include original signatures 
on copies if you include a copy of the signed signature page or the copy 
otherwise indicates that the original was signed.

[[Page 64]]



Sec. 516.35  May I keep portions of my application confidential?

    (a) Confidentiality. OTS makes submissions under this part available 
to the public, but may keep portions of your application confidential 
based on the rules in this section.
    (b) Confidentiality request. (1) You may request OTS to keep 
portions of your application confidential. You must submit your request 
in writing with your application and must explain in detail how your 
request is consistent with the standards under the Freedom of 
Information Act (5 U.S.C. 552) and part 505 of this chapter. For 
example, you should explain how you will be substantially harmed by 
pubic disclosure of the information. You must separately bind and mark 
the portions of the application you consider confidential and the 
portions you consider non-confidential.
    (2) OTS will not treat as confidential the portion of your 
application describing how you plan to meet your Community Reinvestment 
Act (CRA) objectives. OTS will make information in your CRA plan, 
including any information incorporated by reference from other parts of 
your application, available to the public upon request.
    (c) OTS determination on confidentiality. OTS will determine whether 
information that you designate as confidential may be withheld from the 
public under the Freedom of Information Act (5 U.S.C. 552) and part 505 
of this chapter. OTS will advise you before it makes information you 
designate as confidential available to the public.



Sec. 516.40  Where do I file my application?

    (a) Regional Office. (1) You must file the original application and 
the number of copies indicated on the applicable form with the 
applications filing division of the appropriate OTS Regional Office. You 
should address the filings to ``Attn: Applications Filing Room'' at the 
Regional address listed in paragraph (a)(2) of this section. If the form 
does not indicate the number of copies you must file or if OTS has not 
prescribed a form for your application, you must file the original 
application and two copies.
    (2) The addresses of each Regional Office and the states covered by 
each office are:

------------------------------------------------------------------------
     Region             Office address               States served
------------------------------------------------------------------------
Northeast......  Office of Thrift             Connecticut, Delaware,
                  Supervision, Harborside      Maine, Massachusetts, New
                  Financial Center, Plaza      Hampshire, New Jersey,
                  Five, Suite 1600, Jersey     New York, Pennsylvania,
                  City, New Jersey 07311.      Rhode Island, Vermont,
                                               West Virginia.
Southeast......  Office of Thrift             Alabama, District of
                  Supervision, 1475            Columbia, Florida,
                  Peachtree Street, NW.,       Georgia, Kentucky,
                  Atlanta, Georgia 30309       Maryland, North Carolina,
                  (Mail Stop: P.O. Box         Puerto Rico, South
                  105217, Atlanta, Georgia     Carolina, Virginia, the
                  30348-5217).                 Virgin Islands.
Central........  Office of Thrift             Illinois, Indiana, Ohio,
                  Supervision, 1 South         Michigan, Wisconsin.
                  Wacker Drive, Suite 2000,
                  Chicago, Illinois 60606.
Midwest........  Office of Thrift             Arkansas, Iowa, Kansas,
                  Supervision, 225 E. John     Louisiana, Mississippi,
                  Carpenter Freeway, Suite     Missouri Nebraska,
                  500, Irving, Texas 75062-    Oklahoma, Tennessee,
                  2326 (Mail to: P.O. Box      Texas.
                  619027, Dallas/Ft. Worth,
                  Texas 75261-9027.
West...........  Office of Thrift             Alaska, Arizona,
                  Supervision, Pacific         California, Colorado,
                  Plaza, 2001 Junipero Serra   Guam, Hawaii, Idaho,
                  Boulevard, Suite 650, Daly   Montana, Nevada, New
                  City, California.            Mexico, North Dakota,
                                               Northern Mariana Islands,
                                               Oregon, South Dakota,
                                               Utah, Washington,
                                               Wyoming.
------------------------------------------------------------------------

    (b) Additional filings with OTS Headquarters. (1) In addition to 
filing in the Regional Office, if your application involves a 
significant issue of law or policy or if an applicable regulation or 
form directs you to file with OTS Headquarters, you must also file 
copies of your application with the Applications Filing Room at OTS 
headquarters, 1700 G Street, NW., Washington, DC 20552. You must file 
the number of copies indicated on the applicable form. If the form does 
not indicate the number of copies you must file or if OTS has not 
prescribed a form for your application, you must file three copies.
    (2)(i) You may obtain a list of applications involving significant 
issues of law or policy at the OTS website at

[[Page 65]]

www.ots.treas.gov or by contacting a Regional Office.
    (ii) OTS reserves the right to identify significant issues of law or 
policy in a particular application. OTS will advise you, in writing, if 
it makes this determination.

[66 FR 13000, Mar. 2, 2001, as amended at 66 FR 65820, Dec. 21, 2001; 67 
FR 78152, Dec. 23, 2002; 69 FR 76602, Dec. 22, 2004; 73 FR 76939, Dec. 
18, 2008]



Sec. 516.45  What is the filing date of my application?

    (a) Your application's filing date is the date that you complete all 
of the following requirements.
    (1) You attend a pre-filing meeting and submit a draft business plan 
or relevant information, if OTS requires you to do so under Sec. 
516.15.
    (2) You file your application and all required copies with OTS, as 
described under Sec. 516.40.
    (i) If you are required to file with a Regional Office and with OTS 
Headquarters, you have not filed with OTS until you file with both 
offices.
    (ii) You have not filed with a Regional Office or OTS Headquarters 
until you file the application and the required number of copies with 
that office.
    (iii) If you file after the close of business established by a 
Regional Office or OTS Headquarters, you have filed with that office on 
the next business day.
    (3) You pay the applicable fee. You have not paid the fee until you 
submit the fee to the appropriate Regional Office, or OTS waives the 
fee. You may pay by check, money order, cashier's check or wire transfer 
payable to OTS.
    (b) OTS may notify you that it has adjusted your application filing 
date if you fail to meet any applicable publication requirements.
    (c) If, after you properly file your application with the Regional 
Office, OTS determines that a significant issue of law or policy exists 
under Sec. 516.40(b)(2)(ii), the filing date of your application is the 
day you filed with the Regional Office. The 30-day review period under 
Sec. Sec. 516.200 or 516.210 of this part will restart in its entirety 
when the Regional Office forwards the appropriate number of copies of 
your application to OTS Headquarters.



Sec. 516.47  How do I amend or supplement my application?

    To amend or supplement your application, you must file the amendment 
or supplemental information at the appropriate OTS office(s) along with 
the number of copies required under Sec. 516.40. Your amendment or 
supplemental information also must meet the caption and exhibit 
requirements at Sec. 516.30(b).



                   Subpart B_Publication Requirements

    Source: 62 FR 64143, Dec. 4, 1997, unless otherwise noted.



Sec. 516.50  Who must publish a public notice of an application?

    This subpart applies whenever an OTS regulation requires an 
applicant (``you'') to follow the public notice procedures in this 
subpart.



Sec. 516.55  What information must I include in my public notice?

    Your public notice must include the following:
    (a) Your name and address.
    (b) The type of application.
    (c) The name of the depository institution(s) that is the subject 
matter of the application.
    (d) A statement indicating that the public may submit comments to 
the appropriate OTS office(s).
    (e) The address of the appropriate OTS offices where the public may 
submit comments.
    (f) The date that the comment period closes.
    (g) A statement indicating that the nonconfidential portions of the 
application are on file in the Regional Office, and are available for 
public inspection during regular business hours.
    (h) Any other information that OTS requires you to publish. You may 
find the format for various publication notices in the appendix to OTS 
application processing handbook.

[66 FR 13002, Mar. 2, 2001]



Sec. 516.60  When must I publish the public notice?

    You must publish a public notice of the application no earlier than 
seven

[[Page 66]]

days before and no later than the date of filing of the application.



Sec. 516.70  Where must I publish the public notice?

    You must publish the notice in a newspaper having a general 
circulation in the communities indicated in the following chart:

----------------------------------------------------------------------------------------------------------------
                                                                           You must publish in the following
                          If you file . . .                                        communities . . .
----------------------------------------------------------------------------------------------------------------
(a) An application for permission to organize under Sec.  543.2 of   The community in which your home office is
 this chapter, a Bank Merger Act application under 563.22(a) of this   located.
 chapter, an application to convert to is a federal charter under
 Sec.  543.8 or Sec.  552.2-6 of this chapter, or an application
 for a mutual to stock conversion under part 563b of this chapter .
 . .
(b) An application to establish a branch office under Sec.  545.95   The community to be served by the branch
 of this chapter . . .                                                 office.
(c) An application for the change of permanent location of a home or  The community in which the existing office
 branch office under Sec.  545.95 of this chapter . . .               is located and the community to be served
                                                                       by the new office.
(d) A holding company application or a change of control notice       The community in which the home office of
 under part 574 of this chapter . . .                                  the savings association whose stock is to
                                                                       be acquired is located and, if
                                                                       applicable, the community in which the
                                                                       home office of the acquiror's largest
                                                                       subsidiary savings association is
                                                                       located.
----------------------------------------------------------------------------------------------------------------


[69 FR 68246, Nov. 24, 2004]



Sec. 516.80  What language must I use in my publication?

    (a) English. You must publish the notice in a newspaper printed in 
the English language.
    (b) Other than English. If the OTS determines that the primary 
language of a significant number of adult residents of the community is 
a language other than English, the OTS may require that you 
simultaneously publish additional notice(s) in the community in the 
appropriate language(s).



                      Subpart C_Comment Procedures

    Source: 62 FR 64144, Dec. 4, 1997, unless otherwise noted.



Sec. 516.100  What does this subpart do?

    This subpart contains the procedures governing the submission of 
public comments on certain types of applications or notices 
(``applications'') pending before the OTS. It applies whenever a 
regulation incorporates the procedures in this subpart, or where 
otherwise required by the OTS.



Sec. 516.110  Who may submit a written comment?

    Any person may submit a written comment supporting or opposing an 
application.

[62 FR 64144, Dec. 4, 1997, as amended at 66 FR 13003, Mar. 2, 2001]



Sec. 516.120  What information should a comment include?

    (a) A comment should recite relevant facts, including any 
demographic, economic, or financial data, supporting the commenter's 
position. A comment opposing an application should also:
    (1) Address at least one of the reasons why OTS may deny the 
application under the relevant statute or regulation;
    (2) Recite any relevant facts and supporting data addressing these 
reasons; and;
    (3) Address how the approval of the application could harm the 
commenter or any community.
    (b) A commenter must include any request for a meeting under Sec. 
516.170 in its comment. The commenter must describe the nature of the 
issues or facts to be discussed and the reasons why written submissions 
are insufficient to

[[Page 67]]

adequately address these facts or issues.

[66 FR 13003, Mar. 2, 2001, as amended at 69 FR 68247, Nov. 24, 2004]



Sec. 516.130  Where are comments filed?

    A commenter must file with the appropriate OTS Regional Office (See 
table at Sec. 516.40(a)(2)). The commenter must simultaneously send a 
copy of the comment to the applicant.

[66 FR 13003, Mar. 2, 2001]



Sec. 516.140  How long is the comment period?

    (a) General. Except as provided in paragraph (b) of this section, a 
commenter must file a written comment with OTS within 30 calendar days 
after the date of publication of the initial public notice.
    (b) Late-filed comments. OTS may consider late-filed comments if OTS 
determines that the comment will assist in the disposition of the 
application.

[69 FR 68247, Nov. 24, 2004]



                      Subpart D_Meeting Procedures

    Source: 69 FR 68247, Nov. 24, 2004, unless otherwise noted.



Sec. 516.160  What does this subpart do?

    This subpart contains meeting procedures. It applies whenever a 
regulation incorporates the procedures in this subpart, or when 
otherwise required by OTS.



Sec. 516.170  When will OTS conduct a meeting on an application?

    (a) OTS will grant a meeting request or conduct a meeting on its own 
initiative, if it finds that written submissions are insufficient to 
address facts or issues raised in an application, or otherwise 
determines that a meeting will benefit the decision-making process. OTS 
may limit the issues considered at the meeting to issues that OTS 
decides are relevant or material.
    (b) OTS will inform the applicant and all commenters requesting a 
meeting of its decision to grant or deny a meeting request, or of its 
decision to conduct a meeting on its own initiative.
    (c) If OTS decides to conduct a meeting, OTS will invite the 
applicant and any commenters requesting a meeting and raising an issue 
that OTS intends to consider at the meeting. OTS may also invite other 
interested persons to attend. OTS will inform the participants of the 
date, time, location, issues to be considered, and format for the 
meeting a reasonable time before the meeting.



Sec. 516.180  What procedures govern the conduct of the meeting?

    (a) OTS may conduct meetings in any format including, but not 
limited to, a telephone conference, a face-to-face meeting, or a more 
formal meeting.
    (b) 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 OTS Rules of Practice 
and Procedure in Adjudicatory Proceedings (12 CFR part 509) do not apply 
to meetings under this section.



Sec. 516.185  Will OTS approve or disapprove an application at a meeting?

    OTS will not approve or deny an application at a meeting under this 
subpart.



Sec. 516.190  Will a meeting affect application processing time frames?

    If OTS decides to conduct a meeting, it may suspend applicable 
application processing time frames, including the time frames for 
deeming an application complete and the applicable approval time frames 
in subpart E of this part. If OTS suspends applicable application 
processing time frames, the time period will resume when OTS determines 
that a record has been developed that sufficiently supports a 
determination on the issues considered at the meeting.



                          Subpart E_OTS Review

    Source: 66 FR 13003, Mar. 2, 2001, unless otherwise noted.

[[Page 68]]

                           Expedited Treatment



Sec. 516.200  If I file a notice under expedited treatment, when may I engage in the proposed activities?

    If you are eligible for expedited treatment and you have 
appropriately filed your notice with OTS, you may engage in the proposed 
activities upon the expiration of 30 days after the filing date of your 
notice, unless OTS takes one of the following actions before the 
expiration of that time period:
    (a) OTS notifies you in writing that you must file additional 
information supplementing your notice. If you are required to file 
additional information, you may engage in the proposed activities upon 
the expiration of 30 calendar days after the date you file the 
additional information, unless OTS takes one of the actions described in 
paragraphs (b) through (d) of this section before the expiration of that 
time period;
    (b) OTS notifies you in writing that your notice is subject to 
standard treatment under this subpart. OTS will subject your notice to 
standard treatment if it raises a supervisory concern, raises a 
significant issue of law or policy, or requires significant additional 
information;
    (c) OTS notifies you in writing that it is suspending the applicable 
time frames under Sec. 516.190; or
    (d) OTS notifies you that it disapproves your notice.

                           Standard Treatment



Sec. 516.210  What will OTS do after I file my application?

    (a) OTS action. Within 30 calendar days after the filing date of 
your application, OTS will take one of the following actions:

------------------------------------------------------------------------
               If OTS * * *                          Then * * *
------------------------------------------------------------------------
(1) Notifies you, in writing, that your     The applicable review period
 application is complete * * *.              will begin on the date that
                                             OTS deems your application
                                             complete.
(2) Notifies you, in writing, that you      You must submit the required
 must submit addition information to         additional information
 complete your application * * *.            under Sec.  516.220.
(3) Notifies you, in writing, that your     OTS will not process your
 application is materially deficient * * *.  application.
(4) Takes no action * * *.................  Your application is deemed
                                             complete. The applicable
                                             review period will begin on
                                             the day the 30-day time
                                             period expires.
------------------------------------------------------------------------

    (b) Waiver requests. If your application includes a request for 
waiver of an information requirement under Sec. 516.25(b), and OTS has 
not notified you that you must submit additional information under 
paragraph (a)(2) of this section, your request for waiver is granted.



Sec. 516.220  If OTS requests additional information to complete my 

application, how will it process my application?

    (a) You may use the following chart to determine the procedure that 
applies to your submission of additional information under Sec. 
516.210(a)(1):

------------------------------------------------------------------------
   If, within 30 calendar days
 after the date of OTS's request   Then, OTS may * *      And * * *.
for additional information * * *          *.
------------------------------------------------------------------------
(1) You file a response to all    (i) Notify you in   The applicable
 information requests * * *.       writing within 15   review period
                                   days after the      will begin on the
                                   filing date of      date tha t OTS
                                   your response       deems your
                                   that your           application
                                   application is      complete.
                                   complete * * *
                                   applicable to all
                                   response that
                                   your application
                                   is complete * * *.
                                  (ii) Notify you in  You must respond
                                   writing within 15   to the additional
                                   calendar days       information
                                   after the filing    request within
                                   date of your        the time period
                                   response that you   required by OTS.
                                   must submit         OTS will review
                                   additional          your response
                                   information         under the
                                   regarding matters   procedures
                                   derived from or     described in this
                                   prompted by         section.
                                   information
                                   already furnished
                                   or any additional
                                   information
                                   information
                                   necessary to
                                   resolve the
                                   issues presented
                                   in your
                                   application * * *.
                                  (iii) Notify you    OTS will not
                                   in writing within   process your
                                   15 calendar days    application.
                                   after the filing
                                   date of your
                                   response that
                                   your application
                                   is materially
                                   deficient * * *.

[[Page 69]]

 
                                  (iv) Take no        Your application
                                   action within 15    is deemed
                                   calendar days       complete. The
                                   after the filing    applicable review
                                   date of your        period will begin
                                   response * * *.     on the day that
                                                       the 15-day time
                                                       period expires.
(2) You request an extension of   (i) Grant an        You must fully
 time to file additional           extension, in       respond within
 information * * *.                writing,            the extended time
                                   specifying the      period specified
                                   number of days      by OTS. OTS will
                                   for the extension   review your
                                   * * *.              response under
                                                       the procedures
                                                       described under
                                                       this section.
                                  (ii) Notify you in  OTS will not
                                   writing that your   process your
                                   extension request   application
                                   is disapproved *    further. You may
                                   * *.                resubmit the
                                                       application for
                                                       processing as a
                                                       new filing under
                                                       the applicable
                                                       regulation.
(3) You fail to respond           (i) Notify you in   OTS will not
 completely * * *.                 writing that your   process your
                                   application is      application
                                   deemed withdrawn    further. You may
                                   * * *.              resubmit the
                                                       application for
                                                       processing as a
                                                       new filing under
                                                       the applicable
                                                       regulation.
                                  (ii) Notify you,    You must fully
                                   in writing, that    respond within
                                   your response is    the extended time
                                   incomplete and      period specified
                                   extend the          by OTS. OTS will
                                   response period,    review your
                                   specifying the      response under
                                   number of days      the procedures
                                   for the respond     described under
                                   extension * * *.    this section.
------------------------------------------------------------------------

    (b) OTS may extend the 15-day period referenced in paragraph (a)(1) 
of this section by up to 15 calendar days, if OTS requires the 
additional time to review your response. OTS will notify you that it has 
extended the period before the end of the initial 15-day period and will 
briefly explain why the extension is necessary.
    (c) If your response filed under paragraph (a)(1) of this section 
includes a request for a waiver of an informational requirement, your 
request for a waiver is granted if OTS fails to act on it within 15 
calendar days after the filing of your response, unless OTS extends the 
review period under paragraph (b). If OTS extends the review period 
under paragraph (b), your request is granted if OTS fails to act on it 
by the end of the extended review period.

[66 FR 13003, Mar. 2, 2001; 67 FR 3264, Jan. 23, 2002]



Sec. 516.230  Will OTS conduct an eligibility examination?

    (a) Eligibility examination. OTS may notify you at any time before 
it deems your application complete that it will conduct an eligibility 
examination. If OTS decides to conduct an eligibility examination, it 
will not deem your application complete until it concludes the 
examination.
    (b) Additional information. OTS may, as a result of the eligibility 
examination, notify you that you must submit additional information to 
complete your application. If so, you must respond to the additional 
information request within the time period required by OTS. OTS will 
review your response under the procedures described in Sec. 516.220.



Sec. 516.240  What may OTS require me to do after my application is deemed 

complete?

    After your application is deemed complete, but before the end of the 
applicable review period,
    (a) OTS may require you to provide additional information if the 
information is necessary to resolve or clarify the issues presented by 
your application.
    (b) OTS may determine that a major issue of law or a change in 
circumstances arose after you filed your application, and that the issue 
or changed circumstances will substantially effect your application. If 
OTS identifies such an issue or changed circumstances, it may:
    (1) Notify you, in writing, that your application is now incomplete 
and require you to submit additional information to complete the 
application under the procedures described at Sec. 516.220; and
    (2) Require you to publish a new public notice of your application 
under Sec. 516.250.

[[Page 70]]



Sec. 516.250  Will OTS require me to publish a new public notice?

    (a) If your application was subject to a publication requirement, 
OTS may require you to publish a new public notice of your application 
if:
    (1) You submitted a revision to the application, you submitted new 
or additional information, or a major issue of law or a change in 
circumstances arose after the filing of your application; and
    (2) OTS determines that additional comment on these matters is 
appropriate because of the significance of the new information or 
circumstances.
    (b) OTS will notify you in writing if you must publish a new public 
notice of your revised application.
    (c) If you are required to publish a new public notice of your 
revised application, you must notify OTS after you publish the new 
public notice.



Sec. 516.260  May OTS suspend processing of my application?

    (a) Suspension. OTS may, at any time, indefinitely suspend 
processing of your application if:
    (1) OTS, another governmental entity, or a self-regulatory trade or 
professional organization initiates an investigation, examination, or 
administrative proceeding that is relevant to OTS's evaluation of your 
application;
    (2) You request the suspension or there are other extraordinary 
circumstances that have a significant impact on the processing of your 
application.
    (b) Notice. OTS will promptly notify you, in writing, if it suspends 
your application.



Sec. 516.270  How long is the OTS review period?

    (a) General. The applicable OTS review period is 60 calendar days 
after the date that your application is deemed complete, unless an 
applicable OTS regulation specifies a different review period.
    (b) Multiple applications. If you submit more than one application 
in connection with a proposed action or if two or more applicants submit 
related applications, the applicable review period for all applications 
is the review period for the application with the longest review period, 
subject to statutory review periods.
    (c) Extensions. (1) OTS may extend the review period for up to 30 
calendar days beyond the period described in paragraph (a) or (b) of 
this section. OTS must notify you in writing of the extension and the 
duration of the extension. OTS must issue the written extension before 
the end of the review period.
    (2) OTS may also extend the review period as needed until it acts on 
the application, if the application presents a significant issue of law 
or policy that requires additional time to resolve. OTS must notify you 
in writing of the extension and the general reasons for the extension. 
OTS must issue the written extension before the end of the review 
period, including any extension of that period under paragraph (c)(1) of 
this section. This section applies to applications and notices filed 
under Sec. 575.3(b) and part 574 of this chapter.



Sec. 516.280  How will I know if my application has been approved?

    (a) OTS approval or denial. (1) OTS will approve or deny your 
application before the expiration of the applicable review period, 
including any extensions of the review period.
    (2) OTS will promptly notify you in writing of its decision to 
approve or deny your application.
    (b) No OTS action. If OTS fails to act under paragraph (a)(1) of 
this section, your application is approved.



Sec. 516.290  What will happen if OTS does not approve or disapprove my 

application within two calendar years after the filing date?

    (a) Withdrawal. If OTS has not approved or denied your pending 
application within two calendar years after the filing date under Sec. 
516.45, OTS will notify you, in writing, that your application is deemed 
withdrawn unless OTS determines that you are actively pursuing a final 
OTS determination on your application. You are not actively pursuing a 
final OTS determination if you have failed to timely take an action 
required under this part, including filing required additional 
information, or OTS has suspended processing of your application under 
Sec. 516.260 based

[[Page 71]]

on circumstances that are, in whole or in part, within your control and 
you have failed to take reasonable steps to resolve these circumstances.
    (b) Effective date. This section is effective July 1, 2001.



PART 517_CONTRACTING OUTREACH PROGRAMS--Table of Contents



Sec.
517.1 Purpose and scope.
517.2 Definitions.
517.3 Policy.
517.4 Oversight and monitoring.
517.5 Outreach.
517.6 Certification.
517.7 Contract award guidelines.

    Authority: 12 U.S.C. 1833(e); 42 U.S.C. 12101 et seq.

    Source: 58 FR 33324, June 17, 1993, unless otherwise noted.



Sec. 517.1  Purpose and scope.

    The purpose of the OTS Minority-, Women- and Individuals with 
Disabilities-Owned Businesses Outreach Program (Outreach Program) is to 
ensure that firms owned and operated by minorities, women and 
individuals with disabilities are given the opportunity to participate 
to the maximum extent possible in all contracts entered into by the OTS. 
Sections 517.5 through 517.7 of this part apply to all contracting 
activities, with the exception of contracting for legal services, 
engaged in by OTS in any of its capacities, for all OTS functions 
authorized by law. These contracts will typically pertain to services in 
support of OTS's business operations, such as consulting, programming, 
auditing, expert witnesses, customized training, relocation services, 
information systems technology (computer systems, database management, 
software and office automation), or micrographic services; or in support 
of its day-to-day operations, such as facilities management, mail and 
printing services, or procurement of office supplies, furniture and 
office equipment.



Sec. 517.2  Definitions.

    The definitions included in this part are derived from common usage 
of these terms. A term in this part includes all those who are commonly 
understood to be included within that term.
    (a) Minority- and/or women-owned (small and large) businesses and 
entities owned by minorities and women means firms at least fifty-one 
(51) percent owned by individuals who are members of the minority group 
or women and who are citizens of the United States. In the case of 
publicly-owned companies, at least fifty-one (51) percent of each class 
of voting stock must be owned by one or more members of the minority 
group or by one or more women, who are citizens of the United States. In 
the case of partnerships, at least fifty-one (51) percent of the 
partnership interest must be owned by one or more members of the 
minority group or by one or more women, who are citizens of the United 
States. Additionally, the management and daily business operations of 
the firm must be controlled by one or more such individuals.
    (b) Minority means any Black/African-American; Native American 
(American Indians, Eskimos, Aleuts and Native Hawaiians); Hispanic 
American; Asian-Pacific American; or Subcontinent-Asian American.
    (c) Small and large businesses and entities owned by individuals 
with disabilities means firms at least fifty-one (51) percent owned by 
individuals with disabilities who are citizens of the United States. In 
the case of publicly-owned companies, at least fifty-one (51) percent of 
each class of voting stock must be owned by individuals with 
disabilities who are citizens of the United States. In the case of 
partnerships, at least fifty-one (51) percent of the partnership 
interest must be owned by individuals with disabilities who are citizens 
of the United States. Additionally, the management and daily business 
operations must be controlled by one or more such individuals.
    (d) Disability, as used in this part, has the same meaning as the 
term used in section 3 of the Americans With Disabilities Act of 1990, 
Public Law 101-336, 104 Stat. 327 (42 U.S.C. 12101 et seq).



Sec. 517.3  Policy.

    It is the policy of the OTS that minorities, women and individuals 
with

[[Page 72]]

disabilities and entities owned by minorities, women and individuals 
with disabilities are given the opportunity to participate to the 
maximum extent possible in all contracts entered into by the OTS.



Sec. 517.4  Oversight and monitoring.

    The Director of OTS shall appoint an Outreach Program Advocate, who 
shall have primary responsibility for furthering the purposes of the 
Outreach Program.



Sec. 517.5  Outreach.

    (a) The outreach program advocate shall perform outreach activities 
and act as liaison between the OTS and the public on outreach program 
issues.
    (b) Outreach activities include the identification and registration 
of minority-, women-owned (small and large) businesses and entities 
owned by individuals with disabilities who can provide goods and 
services utilized by the OTS. This includes distributing information 
concerning the Outreach Program and providing appropriate registration 
materials for use by vendors and contractors. Identification will 
primarily be accomplished by:
    (1) Obtaining various lists and directories maintained by other 
federal, state and local governmental agencies of Outreach Program 
businesses;
    (2) Participating in conventions, seminars and professional meetings 
oriented towards Outreach Programs;
    (3) Conducting seminars, meetings, workshops and various other 
functions; and
    (4) Monitoring proposed purchases and contracts to assure that OTS 
contracting staff understand and actively promote the Outreach Program.



Sec. 517.6  Certification.

    In order to qualify as an Outreach Program participant, each 
business or contractor must either:
    (a) Self-certify ownership status by filing with the OTS Outreach 
Program Advocate a completed and signed Solicitation Mailing List 
Application, Standard Form 129 (SF-129), as prescribed by the Federal 
Acquisition Regulation (48 CFR part 53);
    (b) Self-certify ownership status by filing with the OTS Outreach 
Program Advocate a completed and signed ABELS Registration/Certification 
Form, as prescribed by the U.S. Department of Commerce's Minority 
Business Development Agency and available from the Outreach Program 
Advocate at the headquarters address of the OTS listed in Sec. 
516.40(b) of this chapter.
    (c) Submit a valid Outreach Program certification received from a 
Federal agency, or a designated state or authorized local agency.

[58 FR 33324, June 17, 1993, as amended at 66 FR 13005, Mar. 2, 2001]



Sec. 517.7  Contract award guidelines.

    Contracts for goods or services shall be awarded in accordance with 
OTS procurement rules and policies (48 CFR chapter 1 and FIRMR, 41 CFR 
chapter 201). The OTS Outreach Program Advocate shall work to facilitate 
the maximum participation of minority-, women-owned (small and large) 
businesses and entities owned by individuals with disabilities in the 
OTS procurement of goods or services.



PART 528_NONDISCRIMINATION REQUIREMENTS--Table of Contents



Sec.
528.1 Definitions.
528.1a Supplementary guidelines.
528.2 Nondiscrimination in lending and other services.
528.2a Nondiscriminatory appraisal and underwriting.
528.3 Nondiscrimination in applications.
528.4 Nondiscriminatory advertising.
528.5 Equal Housing Lender Poster.
528.6 Loan application register.
528.7 Nondiscrimination in employment.
528.8 Complaints.
528.9 Guidelines relating to nondiscrimination in lending.

    Authority: 12 U.S.C. 1464, 2810 et seq., 2901 et seq.; 15 U.S.C. 
1691; 42 U.S.C. 1981, 1982, 3601-3619.

    Source: 55 FR 1388, Jan. 16, 1990, unless otherwise noted.



Sec. 528.1  Definitions.

    As used in this part 528--
    (a) Application. For purposes of this part, an application for a 
loan or other service is as defined in Regulation C, 12 CFR 203.2(b).

[[Page 73]]

    (b) Savings association. The term ``savings association'' means any 
savings association as defined in 12 U.S.C. 1813(b).
    (c) Dwelling. The term ``dwelling'' means a residential structure 
(whether or not it is attached to real property) located in a state of 
the United States of America, the District of Colombia, or the 
Commonwealth of Puerto Rico. The term includes an individual condominium 
unit, cooperative unit, or mobile or manufactured home.

[55 FR 1388, Jan. 16, 1990, as amended at 58 FR 4312, Jan. 14, 1993; 63 
FR 71212, Dec. 24, 1998; 71 FR 19811, Apr. 18, 2006]



Sec. 528.1a  Supplementary guidelines.

    The Office's policy statement found at 12 CFR 528.9 supplements this 
part and should be read together with this part. Refer also to the HUD 
Fair Housing regulations at 24 CFR parts 100 et seq., Federal Reserve 
Regulation B at 12 CFR part 202, and Federal Reserve Regulation C at 12 
CFR part 203.

[63 FR 71212, Dec. 24, 1998]



Sec. 528.2  Nondiscrimination in lending and other services.

    (a) No savings association may deny a loan or other service, or 
discriminate in the purchase of loans or securities or discriminate in 
fixing the amount, interest rate, duration, application procedures, 
collection or enforcement procedures, or other terms or conditions of 
such loan or other service on the basis of the age or location of the 
dwelling, or on the basis of the race, color, religion, sex, handicap, 
familial status (having one or more children under the age of 18), 
marital status, age (provided the person has the capacity to contract) 
or national origin of:
    (1) An applicant or joint applicant;
    (2) Any person associated with an applicant or joint applicant 
regarding such loan or other service, or with the purposes of such loan 
or other service;
    (3) The present or prospective owners, lessees, tenants, or 
occupants of the dwelling(s) for which such loan or other service is to 
be made or given;
    (4) The present or prospective owners, lessees, tenants, or 
occupants of other dwellings in the vicinity of the dwelling(s) for 
which such loan or other service is to be made or given.
    (b) A savings association shall consider without prejudice the 
combined income of joint applicants for a loan or other service.
    (c) No savings association may discriminate against an applicant for 
a loan or other service on any prohibited basis (as defined in 12 CFR 
202.2(z) and 24 CFR part 100).

    Note: See also, Sec. 528.9 (b) and (c).

[55 FR 1388, Jan. 16, 1990, as amended at 63 FR 71212, Dec. 24, 1998]



Sec. 528.2a  Nondiscriminatory appraisal and underwriting.

    (a) Appraisal. No savings association may use or rely upon an 
appraisal of a dwelling which the savings association knows, or 
reasonably should know, is discriminatory on the basis of the age or 
location of the dwelling, or is discriminatory per se or in effect under 
the Fair Housing Act of 1968 or the Equal Credit Opportunity Act.
    (b) Underwriting. Each savings association shall have clearly 
written, non-discriminatory loan underwriting standards, available to 
the public upon request, at each of its offices. Each association shall, 
at least annually, review its standards, and business practices 
implementing them, to ensure equal opportunity in lending

    Note: See also, Sec. 528.9(b), (c)(6), and (c)(7).

[55 FR 1388, Jan. 16, 1990, as amended at 63 FR 71212, Dec. 24, 1998]



Sec. 528.3  Nondiscrimination in applications.

    (a) No savings association may discourage, or refuse to allow, 
receive, or consider, any application, request, or inquiry regarding a 
loan or other service, or discriminate in imposing conditions upon, or 
in processing, any such application, request, or inquiry on the basis of 
the age or location of the dwelling, or on the basis of the race, color, 
religion, sex, handicap, familial status (having one or more children 
under the age of 18), marital status, age (provided the person has the 
capacity to contract), national origin, or other characteristics 
prohibited from consideration in Sec. 528.2(c) of this part,

[[Page 74]]

of the prospective borrower or other person, who:
    (1) Makes application for any such loan or other service;
    (2) Requests forms or papers to be used to make application for any 
such loan or other service; or
    (3) Inquires about the availability of such loan or other service.
    (b) A savings association shall inform each inquirer of his or her 
right to file a written loan application, and to receive a copy of the 
association's underwriting standards.

    Note: See also, Sec. 528.9(a) through (d).

[55 FR 1388, Jan. 16, 1990, as amended at 63 FR 71212, Dec. 24, 1998]



Sec. 528.4  Nondiscriminatory advertising.

    No savings association may directly or indirectly engage in any form 
of advertising that implies or suggests a policy of discrimination or 
exclusion in violation of title VIII of the Civil Rights Acts of 1968, 
the Equal Credit Opportunity Act, or this part 528. Advertisements for 
any loan for the purpose of purchasing, constructing, improving, 
repairing, or maintaining a dwelling or any loan secured by a dwelling 
shall include a facsimile of the following logotype and legend:
[GRAPHIC] [TIFF OMITTED] TC07SE91.000


[55 FR 1388, Jan. 16, 1990, as amended at 69 FR 68247, Nov. 24, 2004]



Sec. 528.5  Equal Housing Lender Poster.

    (a) Each savings association shall post and maintain one or more 
Equal Housing Lender Posters, the text of which is prescribed in 
paragraph (b) of this section, in the lobby of each of its offices in a 
prominent place or places readily apparent to all persons seeking loans. 
The poster shall be at least 11 by 14 inches in size, and the text shall 
be easily legible. It is recommended that savings associations post a 
Spanish language version of the poster in offices serving areas with a 
substantial Spanish-speaking population.
    (b) The text of the Equal Housing Lender Poster shall be as follows:
    [GRAPHIC] [TIFF OMITTED] TC07SE91.001
    
    We Do Business In Accordance With Federal Fair Lending Laws.
    UNDER THE FEDERAL FAIR HOUSING ACT, IT IS ILLEGAL, ON THE BASIS OF 
RACE, COLOR, NATIONAL ORIGIN, RELIGION, SEX, HANDICAP, OR FAMILIAL 
STATUS (HAVING CHILDREN UNDER THE AGE OF 18) TO:
    [ ]Deny a loan for the purpose of purchasing, constructing, 
improving, repairing or maintaining a dwelling or to deny any loan 
secured by a dwelling; or
    [ ]Discriminate in fixing the amount, interest rate, duration, 
application procedures, or other terms or conditions of such a loan or 
in appraising property.
    IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD:
    SEND A COMPLAINT TO:
    Assistant Secretary for Fair Housing and Equal Opportunity, 
Department of Housing and Urban Development, Washington, DC 20410.
    For processing under the Federal Fair Housing Act
    AND TO:
    Director, Consumer Affairs, Office of Thrift Supervision, 
Washington, DC 20552.
    For processing under Office of Thrift Supervision Regulations.

    UNDER THE EQUAL CREDIT OPPORTUNITY ACT, IT IS ILLEGAL TO 
DISCRIMINATE IN ANY CREDIT TRANSACTION:
    [ ]On the basis of race, color, national origin, religion, sex, 
marital status, or age;
    [ ]Because income is from public assistance; or
    [ ]Because a right has been exercised under the Consumer Credit 
Protection Act.

[[Page 75]]

    IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD SEND 
A COMPLAINT TO:
    Director, Consumer Affairs, Office of Thrift Supervision, 
Washington, DC 20552.



Sec. 528.6  Loan application register.

    Savings associations and other lenders required to file Home 
Mortgage Disclosure Act Loan Application Registers with the Office of 
Thrift Supervision in accordance with 12 CFR part 203 must enter the 
reason for denial, using the codes provided in 12 CFR part 203, with 
respect to all loan denials.

[58 FR 4312, Jan. 14, 1993]



Sec. 528.7  Nondiscrimination in employment.

    (a) No savings association shall, because of an individual's race, 
color, religion, sex, or national origin:
    (1) Fail or refuse to hire such individual;
    (2) Discharge such individual;
    (3) Otherwise discriminate against such individual with respect to 
such individual's compensation, promotion, or the terms, conditions, or 
privileges of such individual's employment; or
    (4) Discriminate in admission to, or employment in, any program of 
apprenticeship, training, or retraining, including on-the-job training.
    (b) No savings association shall limit, segregate, or classify its 
employees in any way which would deprive or tend to deprive any 
individual of employment opportunities or otherwise adversely affect 
such individual's status as an employee because of such individual's 
race, color, religion, sex, or national origin.
    (c) No savings association shall discriminate against any employee 
or applicant for employment because such employee or applicant has 
opposed any employment practice made unlawful by Federal, State, or 
local law or regulation or because he has in good faith made a charge of 
such practice or testified, assisted, or participated in any manner in 
an investigation, proceeding, or hearing of such practice by any 
lawfully constituted authority.
    (d) No savings association shall print or publish or cause to be 
printed or published any notice or advertisement relating to employment 
by such savings association indicating any preference, limitation, 
specification, or discrimination based on race, color, religion, sex, or 
national origin.
    (e) This regulation shall not apply in any case in which the Federal 
Equal Employment Opportunities law is made inapplicable by the 
provisions of section 2000e-1 or sections 2000e-2 (e) through (j) of 
title 42, United States Code.
    (f) Any violation of the following laws or regulations by a savings 
association shall be deemed to be a violation of this part 528:
    (1) The Equal Employment Opportunity Act, as amended, 42 U.S.C. 
2000e-2000h-2, and Equal Employment Opportunity Commission (EEOC) 
regulations at 29 CFR part 1600;
    (2) The Age Discrimination in Employment Act, 29 U.S.C. 621-633, and 
EEOC and Department of Labor regulations;
    (3) Department of the Treasury regulations at 31 CFR part 12 and 
Office of Federal Contract Compliance Programs (OFCCP) regulations at 41 
CFR part 60;
    (4) The Veterans Employment and Readjustment Act of 1972, 38 U.S.C. 
2011-2012, and the Vietnam Era Veterans Readjustment Adjustment 
Assistance Act of 1974, 38 U.S.C. 2021-2026;
    (5) The Rehabilitation Act of 1973, 29 U.S.C. 701 et al.; and
    (6) The Immigration and Nationality Act, 8 U.S.C. 1324b, and INS 
regulations at 8 CFR part 274a.



Sec. 528.8  Complaints.

    Complaints regarding discrimination in lending by a savings 
association shall be referred to the Assistant Secretary for Fair 
Housing and Equal Opportunity, U.S. Department of Housing and Urban 
Development, Washington, DC 20410 for processing under the Fair Housing 
Act, and to the Director, Consumer Affairs, Office of Thrift 
Supervision, Washington, DC 20552 for processing under Office 
regulations. Complaints regarding discrimination in employment by a 
savings association should be referred to the Equal Employment 
Opportunity Commission, Washington, DC 20506 and a copy, for information 
only, sent to the Director,

[[Page 76]]

Consumer Affairs, Office of Thrift Supervision, Washington, DC 20552.



Sec. 528.9  Guidelines relating to nondiscrimination in lending.

    (a) General. Fair housing and equal opportunity in home financing is 
a policy of the United States established by Federal statutes and 
Presidential orders and proclamations. In furtherance of the Federal 
civil rights laws and the economical home financing purposes of the 
statutes administered by the Office, the Office has adopted, in part 528 
of this chapter, nondiscrimination regulations that, among other things, 
prohibit arbitrary refusals to consider loan applications on the basis 
of the age or location of a dwelling, and prohibit discrimination based 
on race, color, religion, sex, handicap, familial status (having one or 
more children under the age of 18), marital status, age (provided the 
person has the capacity to contract), or national origin in fixing the 
amount, interest rate, duration, application procedures, collection or 
enforcement procedures, or other terms or conditions of housing related 
loans. Such discrimination is also prohibited in the purchase of loans 
and securities. This section provides supplementary guidelines to aid 
savings associations in developing and implementing nondiscriminatory 
lending policies. Each savings association should reexamine its 
underwriting standards at least annually in order to ensure equal 
opportunity.
    (b) Loan underwriting standards. The basic purpose of the Office's 
nondiscrimination regulations is to require that every applicant be 
given an equal opportunity to obtain a loan. Each loan applicant's 
creditworthiness should be evaluated on an individual basis without 
reference to presumed characteristics of a group. The use of lending 
standards which have no economic basis and which are discriminatory in 
effect is a violation of law even in the absence of an actual intent to 
discriminate. However, a standard which has a discriminatory effect is 
not necessarily improper if its use achieves a genuine business need 
which cannot be achieved by means which are not discriminatory in effect 
or less discriminatory in effect.
    (c) Discriminatory practices--(1) Discrimination on the basis of sex 
or marital status. The Civil Rights Act of 1968 and the National Housing 
Act prohibit discrimination in lending on the basis of sex. The Equal 
Credit Opportunity Act, in addition to this prohibition, forbids 
discrimination on the basis of marital status. Refusing to lend to, 
requiring higher standards of creditworthiness of, or imposing different 
requirements on, members of one sex or individuals of one marital 
status, is discrimination based on sex or marital status. Loan 
underwriting decisions must be based on an applicant's credit history 
and present and reasonably foreseeable economic prospects, rather than 
on the basis of assumptions regarding comparative differences in 
creditworthiness between married and unmarried individuals, or between 
men and women.
    (2) Discrimination on the basis of language. Requiring fluency in 
the English language as a prerequisite for obtaining a loan may be a 
discriminatory practice based on national origin.
    (3) Income of husbands and wives. A practice of discounting all or 
part of either spouse's income where spouses apply jointly is a 
violation of section 527 of the National Housing Act. As with other 
income, when spouses apply jointly for a loan, the determination as to 
whether a spouse's income qualifies for credit purposes should depend 
upon a reasonable evaluation of his or her past, present, and reasonably 
foreseeable economic circumstances. Information relating to child-
bearing intentions of a couple or an individual may not be requested.
    (4) Supplementary income. Lending standards which consider as 
effective only the non-overtime income of the primary wage-earner may 
result in discrimination because they do not take account of variations 
in employment patterns among individuals and families. The Office favors 
loan underwriting which reasonably evaluates the credit worthiness of 
each applicant based on a realistic appraisal of his or her own past, 
present, and foreseeable economic circumstances. The determination as to 
whether primary income or additional income qualifies as

[[Page 77]]

effective for credit purposes should depend upon whether such income may 
reasonably be expected to continue through the early period of the 
mortgage risk. Automatically discounting other income from bonuses, 
overtime, or part-time employment, will cause some applicants to be 
denied financing without a realistic analysis of their credit 
worthiness. Since statistics show that minority group members and low- 
and moderate-income families rely more often on such supplemental 
income, the practice may be racially discriminatory in effect, as well 
as artificially restrictive of opportunities for home financing.
    (5) Applicant's prior history. Loan decisions should be based upon a 
realistic evaluation of all pertinent factors respecting an individual's 
creditworthiness, without giving undue weight to any one factor. The 
savings association should, among other things, take into consideration 
that:
    (i) In some instances, past credit difficulties may have resulted 
from discriminatory practices;
    (ii) A policy favoring applicants who previously owned homes may 
perpetuate prior discrimination;
    (iii) A current, stable earnings record may be the most reliable 
indicator of credit-worthiness, and entitled to more weight than factors 
such as educational level attained;
    (iv) Job or residential changes may indicate upward mobility; and
    (v) Preferring applicants who have done business with the lender can 
perpetuate previous discriminatory policies.
    (6) Income level or racial composition of area. Refusing to lend or 
lending on less favorable terms in particular areas because of their 
racial composition is unlawful. Refusing to lend, or offering less 
favorable terms (such as interest rate, downpayment, or maturity) to 
applicants because of the income level in an area can discriminate 
against minority group persons.
    (7) Age and location factors. Sections 528.2, 528.2a, and 528.3 of 
this chapter prohibit loan denials based upon the age or location of a 
dwelling. These restrictions are intended to prohibit use of unfounded 
or unsubstantiated assumptions regarding the effect upon loan risk of 
the age of a dwelling or the physical or economic characteristics of an 
area. Loan decisions should be based on the present market value of the 
property offered as security (including consideration of specific 
improvements to be made by the borrower) and the likelihood that the 
property will retain an adequate value over the term of the loan. 
Specific factors which may negatively affect its short-range future 
value (up to 3-5 years) should be clearly documented. Factors which in 
some cases may cause the market value of a property to decline are 
recent zoning changes or a significant number of abandoned homes in the 
immediate vicinity of the property. However, not all zoning changes will 
cause a decline in property values, and proximity to abandoned buildings 
may not affect the market value of a property because of rehabilitation 
programs or affirmative lending programs, or because the cause of 
abandonment is unrelated to high risk. Proper underwriting 
considerations include the condition and utility of the improvements, 
and various physical factors such as street conditions, amenities such 
as parks and recreation areas, availability of public utilities and 
municipal services, and exposure to flooding and land faults. However, 
arbitrary decisions based on age or location are prohibited, since many 
older, soundly constructed homes provide housing opportunities which may 
be precluded by an arbitrary lending policy.
    (8) Fair Housing Act (title VIII, Civil Rights Act of 1968, as 
amended). Savings associations, must comply with all regulations 
promulgated by the Department of Housing and Urban Development to 
implement the Fair Housing Act, found at 24 CFR part 100 et seq., except 
that they shall use the Equal Housing Lender logo and poster prescribed 
by Office regulations at 12 CFR 528.4 and 528.5 rather than the Equal 
Housing Opportunity logo and poster required by 24 CFR parts 109 and 
110.
    (d) Marketing practices. Savings associations should review their 
advertising and marketing practices to ensure that their services are 
available without discrimination to the community they serve. 
Discrimination in lending is not limited to loan decisions

[[Page 78]]

and underwriting standards; a savings association does not meet its 
obligations to the community or implement its equal lending 
responsibility if its marketing practices and business relationships 
with developers and real estate brokers improperly restrict its 
clientele to segments of the community. A review of marketing practices 
could begin with an examination of an association's loan portfolio and 
applications to ascertain whether, in view of the demographic 
characteristics and credit demands of the community in which the 
institution is located, it is adequately serving the community on a 
nondiscriminatory basis. The Office will systematically review marketing 
practices where evidence of discrimination in lending is discovered.

[54 FR 49666, Nov. 30, 1989, as amended at 60 FR 66870, Dec. 27, 1995. 
Redesignated at 63 FR 71212, Dec. 24, 1998]



PART 533_DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS--Table of Contents



Sec.
533.1 Purpose and scope of this part.
533.2 Definition of covered agreement.
533.3 CRA communications.
533.4 Fulfillment of the CRA.
533.5 Related agreements considered a single agreement.
533.6 Disclosure of covered agreements.
533.7 Annual reports.
533.8 Release of information under FOIA.
533.9 Compliance provisions.
533.10 Transition provisions.
533.11 Other definitions and rules of construction used in this part.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, and 1831y.

    Source: 66 FR 2106, Jan. 10, 2001, unless otherwise noted.



Sec. 533.1  Purpose and scope of this part.

    (a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental 
entity or person (NGEP), insured depository institution, or affiliate of 
an insured depository institution that enters into a covered agreement 
to--
    (1) Make the covered agreement available to the public and the 
appropriate Federal banking agency; and
    (2) File an annual report with the appropriate Federal banking 
agency concerning the covered agreement.
    (b) Scope of this part. The provisions of this part apply to--
    (1) Savings associations and their subsidiaries;
    (2) Savings and loan holding companies;
    (3) Affiliates of savings associations and savings and loan holding 
companies, other than bank holding companies, banks, and subsidiaries of 
bank holding companies and banks; and
    (4) NGEPs that enter into covered agreements with any company listed 
in paragraphs (b)(1) through (b)(3) of this section.
    (c) Relation to Community Reinvestment Act. This part does not 
affect in any way the Community Reinvestment Act of 1977 (CRA) (12 
U.S.C. 2901 et seq.), OTS's Community Reinvestment rule (12 CFR Part 
563e), or OTS's interpretations or administration of the CRA or 
Community Reinvestment rule.
    (d) Examples. (1) The examples in this part are not exclusive. 
Compliance with an example, to the extent applicable, constitutes 
compliance with this part.
    (2) Examples in a paragraph illustrate only the issue described in 
the paragraph and do not illustrate any other issues that may arise in 
this part.



Sec. 533.2  Definition of covered agreement.

    (a) General definition of covered agreement. A covered agreement is 
any contract, arrangement, or understanding that meets all of the 
following criteria--
    (1) The agreement is in writing.
    (2) The parties to the agreement include--
    (i) One or more insured depository institutions or affiliates of an 
insured depository institution; and
    (ii) One or more NGEPs.
    (3) The agreement provides for the insured depository institution or 
any affiliate to--
    (i) Provide to one or more individuals or entities (whether or not 
parties to the agreement) cash payments, grants, or other consideration 
(except loans)

[[Page 79]]

that have an aggregate value of more than $10,000 in any calendar year; 
or
    (ii) Make to one or more individuals or entities (whether or not 
parties to the agreement) loans that have an aggregate principal amount 
of more than $50,000 in any calendar year.
    (4) The agreement is made pursuant to, or in connection with, the 
fulfillment of the CRA, as defined in Sec. 533.4 of this part.
    (5) The agreement is with a NGEP that has had a CRA communication as 
described in Sec. 533.3 of this part prior to entering into the 
agreement.
    (b) Examples concerning written arrangements or understandings--(1) 
Example 1. A NGEP meets with an insured depository institution and 
states that the institution needs to make more community development 
investments in the NGEP's community. The NGEP and insured depository 
institution do not reach an agreement concerning the community 
development investments the institution should make in the community, 
and the parties do not reach any mutual arrangement or understanding. 
Two weeks later, the institution unilaterally issues a press release 
announcing that it has established a general goal of making $100 million 
of community development grants in low- and moderate-income 
neighborhoods served by the insured depository institution over the next 
5 years. The NGEP is not identified in the press release. The press 
release is not a written arrangement or understanding.
    (2) Example 2. A NGEP meets with an insured depository institution 
and states that the institution needs to offer new loan programs in the 
NGEP's community. The NGEP and the insured depository institution reach 
a mutual arrangement or understanding that the institution will provide 
additional loans in the NGEP's community. The institution tells the NGEP 
that it will issue a press release announcing the program. Later, the 
insured depository institution issues a press release announcing the 
loan program. The press release incorporates the key terms of the 
understanding reached between the NGEP and the insured depository 
institution. The written press release reflects the mutual arrangement 
or understanding of the NGEP and the insured depository institution and 
is, therefore, a written arrangement or understanding.
    (3) Example 3. An NGEP sends a letter to an insured depository 
institution requesting that the institution provide a $15,000 grant to 
the NGEP. The insured depository institution responds in writing and 
agrees to provide the grant in connection with its annual grant program. 
The exchange of letters constitutes a written arrangement or 
understanding.
    (c) Loan agreements that are not covered agreements. A covered 
agreement does not include--
    (1) Any individual loan that is secured by real estate; or
    (2) Any specific contract or commitment for a loan or extension of 
credit to an individual, business, farm, or other entity, or group of 
such individuals or entities, if--
    (i) The funds are loaned at rates that are not substantially below 
market rates; and
    (ii) The loan application or other loan documentation does not 
indicate that the borrower intends or is authorized to use the borrowed 
funds to make a loan or extension of credit to one or more third 
parties.
    (d) Examples concerning loan agreements--(1) Example 1. An insured 
depository institution provides an organization with a $1 million loan 
that is documented in writing and is secured by real estate owned or to-
be-acquired by the organization. The agreement is an individual mortgage 
loan and is exempt from coverage under paragraph (c)(1) of this section, 
regardless of the interest rate on the loan or whether the organization 
intends or is authorized to re-loan the funds to a third party.
    (2) Example 2. An insured depository institution commits to provide 
a $500,000 line of credit to a small business that is documented by a 
written agreement. The loan is made at rates that are within the range 
of rates offered by the institution to similarly situated small 
businesses in the market and the loan documentation does not indicate 
that the small business intends or is authorized to re-lend the

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borrowed funds. The agreement is exempt from coverage under paragraph 
(c)(2) of this section.
    (3) Example 3. An insured depository institution offers small 
business loans that are guaranteed by the Small Business Administration 
(SBA). A small business obtains a $75,000 loan, documented in writing, 
from the institution under the institution's SBA loan program. The loan 
documentation does not indicate that the borrower intends or is 
authorized to re-lend the funds. Although the rate charged on the loan 
is well below that charged by the institution on commercial loans, the 
rate is within the range of rates that the institution would charge a 
similarly situated small business for a similar loan under the SBA loan 
program. Accordingly, the loan is not made at substantially below market 
rates and is exempt from coverage under paragraph (c)(2) of this 
section.
    (4) Example 4. A bank holding company enters into a written 
agreement with a community development organization that provides that 
insured depository institutions owned by the bank holding company will 
make $250 million in small business loans in the community over the next 
5 years. The written agreement is not a specific contract or commitment 
for a loan or an extension of credit and, thus, is not exempt from 
coverage under paragraph (c)(2) of this section. Each small business 
loan made by the insured depository institution pursuant to this general 
commitment would, however, be exempt from coverage if the loan is made 
at rates that are not substantially below market rates and the loan 
documentation does not indicate that the borrower intended or was 
authorized to re-lend the funds.
    (e) Agreements that include exempt loan agreements. If an agreement 
includes a loan, extension of credit or loan commitment that, if 
documented separately, would be exempt under paragraph (c) of this 
section, the exempt loan, extension of credit or loan commitment may be 
excluded for purposes of determining whether the agreement is a covered 
agreement.
    (f) Determining annual value of agreements that lack schedule of 
disbursements. For purposes of paragraph (a)(3) of this section, a 
multi-year agreement that does not include a schedule for the 
disbursement of payments, grants, loans or other consideration by the 
insured depository institution or affiliate, is considered to have a 
value in the first year of the agreement equal to all payments, grants, 
loans and other consideration to be provided at any time under the 
agreement.



Sec. 533.3  CRA communications.

    (a) Definition of CRA communication. A CRA communication is any of 
the following--
    (1) Any written or oral comment or testimony provided to a Federal 
banking agency concerning the adequacy of the performance under the CRA 
of the insured depository institution, any affiliated insured depository 
institution, or any CRA affiliate.
    (2) Any written comment submitted to the insured depository 
institution that discusses the adequacy of the performance under the CRA 
of the institution and must be included in the institution's CRA public 
file.
    (3) Any discussion or other contact with the insured depository 
institution or any affiliate about--
    (i) Providing (or refraining from providing) written or oral 
comments or testimony to any Federal banking agency concerning the 
adequacy of the performance under the CRA of the insured depository 
institution, any affiliated insured depository institution, or any CRA 
affiliate;
    (ii) Providing (or refraining from providing) written comments to 
the insured depository institution that concern the adequacy of the 
institution's performance under the CRA and must be included in the 
institution's CRA public file; or
    (iii) The adequacy of the performance under the CRA of the insured 
depository institution, any affiliated insured depository institution, 
or any CRA affiliate.
    (b) Discussions or contacts that are not CRA communications--(1) 
Timing of contacts with a Federal banking agency. An oral or written 
communication with a Federal banking agency is not a CRA communication 
if it occurred more than 3 years before the parties entered into the 
agreement.

[[Page 81]]

    (2) Timing of contacts with insured depository institutions and 
affiliates. A communication with an insured depository institution or 
affiliate is not a CRA communication if the communication occurred--
    (i) More than 3 years before the parties entered into the agreement, 
in the case of any written communication;
    (ii) More than 3 years before the parties entered into the 
agreement, in the case of any oral communication in which the NGEP 
discusses providing (or refraining from providing) comments or testimony 
to a Federal banking agency or written comments that must be included in 
the institution's CRA public file in connection with a request to, or 
agreement by, the institution or affiliate to take (or refrain from 
taking) any action that is in fulfillment of the CRA; or
    (iii) More than 1 year before the parties entered into the 
agreement, in the case of any other oral communication not described in 
paragraph (b)(2)(ii).
    (3) Knowledge of communication by insured depository institution or 
affiliate. (i) A communication is only a CRA communication under 
paragraph (a) of this section if the insured depository institution or 
its affiliate has knowledge of the communication under paragraph 
(b)(3)(ii) or (b)(3)(iii) of this section.
    (ii) Communication with insured depository institution or affiliate. 
An insured depository institution or affiliate has knowledge of a 
communication by the NGEP to the institution or its affiliate under this 
paragraph only if one of the following representatives of the insured 
depository institution or any affiliate has knowledge of the 
communication--
    (A) An employee who approves, directs, authorizes, or negotiates the 
agreement with the NGEP; or
    (B) An employee designated with responsibility for compliance with 
the CRA or executive officer if the employee or executive officer knows 
that the institution or affiliate is negotiating, intends to negotiate, 
or has been informed by the NGEP that it expects to request that the 
institution or affiliate negotiate an agreement with the NGEP.
    (iii) Other communications. An insured depository institution or 
affiliate is deemed to have knowledge of--
    (A) Any testimony provided to a Federal banking agency at a public 
meeting or hearing;
    (B) Any comment submitted to a Federal banking agency that is 
conveyed in writing by the agency to the insured depository institution 
or affiliate; and
    (C) Any written comment submitted to the insured depository 
institution that must be and is included in the institution's CRA public 
file.
    (4) Communication where NGEP has knowledge. A NGEP has a CRA 
communication with an insured depository institution or affiliate only 
if any of the following individuals has knowledge of the communication--
    (i) A director, employee, or member of the NGEP who approves, 
directs, authorizes, or negotiates the agreement with the insured 
depository institution or affiliate;
    (ii) A person who functions as an executive officer of the NGEP and 
who knows that the NGEP is negotiating or intends to negotiate an 
agreement with the insured depository institution or affiliate; or
    (iii) Where the NGEP is an individual, the NGEP.
    (c) Examples of CRA communications--(1) Examples of actions that are 
CRA communications. The following are examples of CRA communications. 
These examples are not exclusive and assume that the communication 
occurs within the relevant time period as described in paragraph (b)(1) 
or (b)(2) of this section and the appropriate representatives have 
knowledge of the communication as specified in paragraphs (b)(3) and 
(b)(4) of this section.
    (i) Example 1. A NGEP files a written comment with a Federal banking 
agency that states than an insured depository institution successfully 
addresses the credit needs of its community. The written comment is in 
response to a general request from the agency for comments on an 
application of the insured depository institution to open a new branch 
and a copy of the comment is provided to the institution.

[[Page 82]]

    (ii) Example 2. A NGEP meets with an executive officer of an insured 
depository institution and states that the institution must improve its 
CRA performance.
    (iii) Example 3. A NGEP meets with an executive officer of an 
insured depository institution and states that the institution needs to 
make more mortgage loans in low- and moderate-income neighborhoods in 
its community.
    (iv) Example 4. A bank holding company files an application with a 
Federal banking agency to acquire an insured depository institution. Two 
weeks later, the NGEP meets with an executive officer of the bank 
holding company to discuss the adequacy of the performance under the CRA 
of the target insured depository institution. The insured depository 
institution was an affiliate of the bank holding company at the time the 
NGEP met with the target institution. (See Sec. 533.11(a) of this 
part.) Accordingly, the NGEP had a CRA communication with an affiliate 
of the bank holding company.
    (2) Examples of actions that are not CRA communications. The 
following are examples of actions that are not by themselves CRA 
communications. These examples are not exclusive.
    (i) Example 1. A NGEP provides to a Federal banking agency comments 
or testimony concerning an insured depository institution or affiliate 
in response to a direct request by the agency for comments or testimony 
from that NGEP. Direct requests for comments or testimony do not include 
a general invitation by a Federal banking agency for comments or 
testimony from the public in connection with a CRA performance 
evaluation of, or application for a deposit facility (as defined in 
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository 
institution or an application by a company to acquire an insured 
depository institution.
    (ii) Example 2. A NGEP makes a statement concerning an insured 
depository institution or affiliate at a widely attended conference or 
seminar regarding a general topic. A public or private meeting, public 
hearing, or other meeting regarding one or more specific institutions, 
affiliates or transactions involving an application for a deposit 
facility is not considered a widely attended conference or seminar.
    (iii) Example 3. A NGEP, such as a civil rights group, community 
group providing housing and other services in low- and moderate-income 
neighborhoods, veterans organization, community theater group, or youth 
organization, sends a fundraising letter to insured depository 
institutions and to other businesses in its community. The letter 
encourages all businesses in the community to meet their obligation to 
assist in making the local community a better place to live and work by 
supporting the fundraising efforts of the NGEP.
    (iv) Example 4. A NGEP discusses with an insured depository 
institution or affiliate whether particular loans, services, 
investments, community development activities, or other activities are 
generally eligible for consideration by a Federal banking agency under 
the CRA. The NGEP and insured depository institution or affiliate do not 
discuss the adequacy of the CRA performance of the insured depository 
institution or affiliate.
    (v) Example 5. A NGEP engaged in the sale or purchase of loans in 
the secondary market sends a general offering circular to financial 
institutions offering to sell or purchase a portfolio of loans. An 
insured depository institution that receives the offering circular 
discusses with the NGEP the types of loans included in the loan pool, 
whether such loans are generally eligible for consideration under the 
CRA, and which loans are made to borrowers in the institution's local 
community. The NGEP and insured depository institution do not discuss 
the adequacy of the institution's CRA performance.
    (d) Multiparty covered agreements. (1) A NGEP that is a party to a 
covered agreement that involves multiple NGEPs is not required to comply 
with the requirements of this part if--
    (i) The NGEP has not had a CRA communication; and
    (ii) No representative of the NGEP identified in paragraph (b)(4) of 
this section has knowledge at the time of the agreement that another 
NGEP that is a party to the agreement has had a CRA communication.

[[Page 83]]

    (2) An insured depository institution or affiliate that is a party 
to a covered agreement that involves multiple insured depository 
institutions or affiliates is not required to comply with the 
requirements in Sec. Sec. 533.6 and 533.7 if--
    (i) No NGEP that is a party to the agreement has had a CRA 
communication concerning the insured depository institution or any 
affiliate; and
    (ii) No representative of the insured depository institution or any 
affiliate identified in paragraph (b)(3) of this section has knowledge 
at the time of the agreement that an NGEP that is a party to the 
agreement has had a CRA communication concerning any other insured 
depository institution or affiliate that is a party to the agreement.



Sec. 533.4  Fulfillment of the CRA

    (a) List of factors that are in fulfillment of the CRA. Fulfillment 
of the CRA, for purposes of this part, means the following list of 
factors--
    (1) Comments to a Federal banking agency or included in CRA public 
file. Providing or refraining from providing written or oral comments or 
testimony to any Federal banking agency concerning the performance under 
the CRA of an insured depository institution or CRA affiliate that is a 
party to the agreement or an affiliate of a party to the agreement or 
written comments that are required to be included in the CRA public file 
of any such insured depository institution; or
    (2) Activities given favorable CRA consideration. Performing any of 
the following activities if the activity is of the type that is likely 
to receive favorable consideration by a Federal banking agency in 
evaluating the performance under the CRA of the insured depository 
institution that is a party to the agreement or an affiliate of a party 
to the agreement--
    (i) Home-purchase, home-improvement, small business, small farm, 
community development, and consumer lending, as described in Sec. 
563e.22 of this chapter, including loan purchases, loan commitments, and 
letters of credit;
    (ii) Making investments, deposits, or grants, or acquiring 
membership shares, that have as their primary purpose community 
development, as described in Sec. 563e.23 of this chapter;
    (iii) Delivering retail banking services, as described in Sec. 
563.24(d) of this chapter;
    (iv) Providing community development services, as described in Sec. 
563e.24(e) of this chapter;
    (v) In the case of a wholesale or limited-purpose insured depository 
institution, community development lending, including originating and 
purchasing loans and making loan commitments and letters of credit, 
making qualified investments, or providing community development 
services, as described in Sec. 563e.25(c) of this chapter;
    (vi) In the case of a small insured depository institution, any 
lending or other activity described in Sec. 563e.26(a) of this chapter; 
or
    (vii) In the case of an insured depository institution that is 
evaluated on the basis of a strategic plan, any element of the strategic 
plan, as described in Sec. 563e.27(f) of this chapter.
    (b) Agreements relating to activities of CRA affiliates. An insured 
depository institution or affiliate that is a party to a covered 
agreement that concerns any activity described in paragraph (a) of this 
section of a CRA affiliate must, prior to the time the agreement is 
entered into, notify each NGEP that is a party to the agreement that the 
agreement concerns a CRA affiliate.



Sec. 533.5  Related agreements considered a single agreement.

    The following rules must be applied in determining whether an 
agreement is a covered agreement under Sec. 533.2 of this part.
    (a) Agreements entered into by same parties. All written agreements 
to which an insured depository institution or an affiliate of the 
insured depository institution is a party shall be considered to be a 
single agreement if the agreements--
    (1) Are entered into with the same NGEP;
    (2) Were entered into within the same 12-month period; and
    (3) Are each in fulfillment of the CRA.
    (b) Substantively related contracts. All written contracts to which 
an insured depository institution or an affiliate of the insured 
depository institution is a party shall be considered to be a single

[[Page 84]]

agreement, without regard to whether the other parties to the contracts 
are the same or whether each such contract is in fulfillment of the CRA, 
if the contracts were negotiated in a coordinated fashion and a NGEP is 
a party to each contract.



Sec. 533.6  Disclosure of covered agreements.

    (a) Applicability date. This section applies only to covered 
agreements entered into after November 12, 1999.
    (b) Disclosure of covered agreements to the public--(1) Disclosure 
required. Each NGEP and each insured depository institution or affiliate 
that enters into a covered agreement must make a copy of the covered 
agreement available to any individual or entity upon request.
    (2) Nondisclosure of confidential and proprietary information 
permitted. In responding to a request for a covered agreement from any 
individual or entity under paragraph (b)(1) of this section, a NGEP, 
insured depository institution, or affiliate may withhold from public 
disclosure confidential or proprietary information that the party 
believes the relevant supervisory agency could withhold from disclosure 
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
    (3) Information that must be disclosed. Notwithstanding paragraph 
(b)(2) of this section, a party must disclose any of the following 
information that is contained in a covered agreement--
    (i) The names and addresses of the parties to the agreement;
    (ii) The amount of any payments, fees, loans, or other consideration 
to be made or provided by any party to the agreement;
    (iii) Any description of how the funds or other resources provided 
under the agreement are to be used;
    (iv) The term of the agreement (if the agreement establishes a 
term); and
    (v) Any other information that the relevant supervisory agency 
determines is not properly exempt from public disclosure.
    (4) Request for review of withheld information. Any individual or 
entity may request that the relevant supervisory agency review whether 
any information in a covered agreement withheld by a party must be 
disclosed. Any requests for agency review of withheld information must 
be filed, and will be processed in accordance with, the relevant 
supervisory agency's rules concerning the availability of information 
(see part 505 of this chapter and the Department of Treasury's rules (31 
CFR part 1)).
    (5) Duration of obligation. The obligation to disclose a covered 
agreement to the public terminates 12 months after the end of the term 
of the agreement.
    (6) Reasonable copy and mailing fees. Each NGEP and each insured 
depository institution or affiliate may charge an individual or entity 
that requests a copy of a covered agreement a reasonable fee not to 
exceed the cost of copying and mailing the agreement.
    (7) Use of CRA public file by insured depository institution or 
affiliate. An insured depository institution and any affiliate of an 
insured depository institution may fulfill its obligation under this 
paragraph (b) by placing a copy of the covered agreement in the insured 
depository institution's CRA public file if the institution makes the 
agreement available in accordance with the procedures set forth in Sec. 
563e.43 of this chapter.
    (c) Disclosure by NGEPs of covered agreements to the relevant 
supervisory agency. (1) Each NGEP that is a party to a covered agreement 
must provide the following within 30 days of receiving a request from 
the relevant supervisory agency--
    (i) A complete copy of the agreement; and
    (ii) In the event the NGEP proposes the withholding of any 
information contained in the agreement in accordance with paragraph 
(b)(2) of this section, a public version of the agreement that excludes 
such information and an explanation justifying the exclusions. Any 
public version must include the information described in paragraph 
(b)(3) of this section.
    (2) The obligation to provide a covered agreement to the relevant 
supervisory agency terminates 12 months after the end of the term of the 
covered agreement.
    (d) Disclosure by insured depository institution or affiliate of 
covered agreements to the relevant supervisory agency--(1) In general. 
Within 60 days of the end of

[[Page 85]]

each calendar quarter, each insured depository institution and affiliate 
must provide each relevant supervisory agency with--
    (i)(A) A complete copy of each covered agreement entered into by the 
insured depository institution or affiliate during the calendar quarter; 
and
    (B) In the event the institution or affiliate proposes the 
withholding of any information contained in the agreement in accordance 
with paragraph (b)(2) of this section, a public version of the agreement 
that excludes such information (other than any information described in 
paragraph (b)(3) of this section) and an explanation justifying the 
exclusions; or
    (ii) A list of all covered agreements entered into by the insured 
depository institution or affiliate during the calendar quarter that 
contains--
    (A) The name and address of each insured depository institution or 
affiliate that is a party to the agreement;
    (B) The name and address of each NGEP that is a party to the 
agreement;
    (C) The date the agreement was entered into;
    (D) The estimated total value of all payments, fees, loans and other 
consideration to be provided by the institution or any affiliate of the 
institution under the agreement; and
    (E) The date the agreement terminates.
    (2) Prompt filing of covered agreements contained in list required. 
(i) If an insured depository institution or affiliate files a list of 
the covered agreements entered into by the institution or affiliate 
pursuant to paragraph (d)(1)(ii) of this section, the institution or 
affiliate must provide any relevant supervisory agency a complete copy 
and public version of any covered agreement referenced in the list 
within 7 calendar days of receiving a request from the agency for a copy 
of the agreement.
    (ii) The obligation of an insured depository institution or 
affiliate to provide a covered agreement to the relevant supervisory 
agency under this paragraph (d)(2) terminates 36 months after the end of 
the term of the covered agreement.
    (3) Joint filings. In the event that 2 or more insured depository 
institutions or affiliates are parties to a covered agreement, the 
insured depository institution(s) and affiliate(s) may jointly file the 
documents required by this paragraph (d) of this section. Any joint 
filing must identify the insured depository institution(s) and 
affiliate(s) for whom the filings are being made.



Sec. 533.7  Annual reports.

    (a) Applicability date. This section applies only to covered 
agreements entered into on or after May 12, 2000.
    (b) Annual report required. Each NGEP and each insured depository 
institution or affiliate that is a party to a covered agreement must 
file an annual report with each relevant supervisory agency concerning 
the disbursement, receipt, and uses of funds or other resources under 
the covered agreement.
    (c) Duration of reporting requirement--(1) NGEPs. A NGEP must file 
an annual report for a covered agreement for any fiscal year in which 
the NGEP receives or uses funds or other resources under the agreement.
    (2) Insured depository institutions and affiliates. An insured 
depository institution or affiliate must file an annual report for a 
covered agreement for any fiscal year in which the institution or 
affiliate--
    (i) Provides or receives any payments, fees, or loans under the 
covered agreement that must be reported under paragraphs (e)(1)(iii) and 
(e)(1)(iv) of this section; or
    (ii) Has data to report on loans, investments, and services provided 
by a party to the covered agreement under the covered agreement under 
paragraph (e)(1)(vi) of this section.
    (d) Annual reports filed by NGEP--(1) Contents of report. The annual 
report filed by a NGEP under this section must include the following--
    (i) The name and mailing address of the NGEP filing the report;
    (ii) Information sufficient to identify the covered agreement for 
which the annual report is being filed, such as by providing the names 
of the parties to the agreement and the date the agreement was entered 
into or by providing a copy of the agreement;
    (iii) The amount of funds or resources received under the covered 
agreement during the fiscal year; and

[[Page 86]]

    (iv) A detailed, itemized list of how the funds or resources 
received by the NGEP under the covered agreement were used during the 
fiscal year, including the total amount used for--
    (A) Compensation of officers, directors, and employees;
    (B) Administrative expenses;
    (C) Travel expenses;
    (D) Entertainment expenses;
    (E) Payment of consulting and professional fees; and
    (F) Other expenses and uses (specify expense or use).
    (2) More detailed reporting of uses of funds or resources 
permitted--(i) In general. If a NGEP allocated and used funds received 
under a covered agreement for a specific purpose, the NGEP may fulfill 
the requirements of paragraph (d)(1)(iv) of this section with respect to 
such funds by providing--
    (A) A brief description of each specific purpose for which the funds 
or other resources were used; and
    (B) The amount of funds or resources used during the fiscal year for 
each specific purpose.
    (ii) Specific purpose defined. A NGEP allocates and uses funds for a 
specific purpose if the NGEP receives and uses the funds for a purpose 
that is more specific and limited than the categories listed in 
paragraph (d)(1)(iv) of this section.
    (3) Use of other reports. The annual report filed by a NGEP may 
consist of or incorporate a report prepared for any other purpose, such 
as the Internal Revenue Service Return of Organization Exempt From 
Income Tax on Form 990, or any other Internal Revenue Service form, 
state tax form, report to members or shareholders, audited or unaudited 
financial statements, audit report, or other report, so long as the 
annual report filed by the NGEP contains all of the information required 
by this paragraph (d).
    (4) Consolidated reports permitted. A NGEP that is a party to 2 or 
more covered agreements may file with each relevant supervisory agency a 
single consolidated annual report covering all the covered agreements. 
Any consolidated report must contain all the information required by 
this paragraph (d). The information reported under paragraphs (d)(1)(iv) 
and (d)(2) of this section may be reported on an aggregate basis for all 
covered agreements.
    (5) Examples of annual report requirements for NGEPs--(i) Example 1. 
A NGEP receives an unrestricted grant of $15,000 under a covered 
agreement, includes the funds in its general operating budget and uses 
the funds during its fiscal year. The NGEP's annual report for the 
fiscal year must provide the name and mailing address of the NGEP, 
information sufficient to identify the covered agreement, and state that 
the NGEP received $15,000 during the fiscal year. The report must also 
indicate the total expenditures made by the NGEP during the fiscal year 
for compensation, administrative expenses, travel expenses, 
entertainment expenses, consulting and professional fees, and other 
expenses and uses. The NGEP's annual report may provide this information 
by submitting an Internal Revenue Service Form 990 that includes the 
required information. If the Internal Revenue Service Form does not 
include information for all of the required categories listed in this 
part, the NGEP must report the total expenditures in the remaining 
categories either by providing that information directly or by providing 
another form or report that includes the required information.
    (ii) Example 2. An organization receives $15,000 from an insured 
depository institution under a covered agreement and allocates and uses 
the $15,000 during the fiscal year to purchase computer equipment to 
support its functions. The organization's annual report must include the 
name and address of the organization, information sufficient to identify 
the agreement, and a statement that the organization received $15,000 
during the year. In addition, since the organization allocated and used 
the funds for a specific purpose that is more narrow and limited than 
the categories of expenses included in the detailed, itemized list of 
expenses, the organization would have the option of providing either the 
total amount it used during the year for each category of expenses 
included in paragraph (d)(1)(iv) of this section, or a statement that it 
used the $15,000 to purchase computer equipment and a brief description 
of the equipment purchased.

[[Page 87]]

    (iii) Example 3. A community group receives $50,000 from an insured 
depository institution under a covered agreement. During its fiscal 
year, the community group specifically allocates and uses $5,000 of the 
funds to pay for a particular business trip and uses the remaining 
$45,000 for general operating expenses. The group's annual report for 
the fiscal year must include the name and address of the group, 
information sufficient to identify the agreement, and a statement that 
the group received $50,000. Because the group did not allocate and use 
all of the funds for a specific purpose, the group's annual report must 
provide the total amount of funds it used during the year for each 
category of expenses included in paragraph (d)(1)(iv) of this section. 
The group's annual report also could state that it used $5,000 for a 
particular business trip and include a brief description of the trip.
    (iv) Example 4. A community development organization is a party to 
two separate covered agreements with two unaffiliated insured depository 
institutions. Under each agreement, the organization receives $15,000 
during its fiscal year and uses the funds to support its activities 
during that year. If the organization elects to file a consolidated 
annual report, the consolidated report must identify the organization 
and the two covered agreements, state that the organization received 
$15,000 during the fiscal year under each agreement, and provide the 
total amount that the organization used during the year for each 
category of expenses included in paragraph (d)(1)(iv) of this section.
    (e) Annual report filed by insured depository institution or 
affiliate--(1) General. The annual report filed by an insured depository 
institution or affiliate must include the following--
    (i) The name and principal place of business of the insured 
depository institution or affiliate filing the report;
    (ii) Information sufficient to identify the covered agreement for 
which the annual report is being filed, such as by providing the names 
of the parties to the agreement and the date the agreement was entered 
into or by providing a copy of the agreement;
    (iii) The aggregate amount of payments, aggregate amount of fees, 
and aggregate amount of loans provided by the insured depository 
institution or affiliate under the covered agreement to any other party 
to the agreement during the fiscal year;
    (iv) The aggregate amount of payments, aggregate amount of fees, and 
aggregate amount of loans received by the insured depository institution 
or affiliate under the covered agreement from any other party to the 
agreement during the fiscal year;
    (v) A general description of the terms and conditions of any 
payments, fees, or loans reported under paragraphs (e)(1)(iii) and 
(e)(1)(iv) of this section, or, in the event such terms and conditions 
are set forth--
    (A) In the covered agreement, a statement identifying the covered 
agreement and the date the agreement (or a list identifying the 
agreement) was filed with the relevant supervisory agency; or
    (B) In a previous annual report filed by the insured depository 
institution or affiliate, a statement identifying the date the report 
was filed with the relevant supervisory agency; and
    (vi) The aggregate amount and number of loans, aggregate amount and 
number of investments, and aggregate amount of services provided under 
the covered agreement to any individual or entity not a party to the 
agreement--
    (A) By the insured depository institution or affiliate during its 
fiscal year; and
    (B) By any other party to the agreement, unless such information is 
not known to the insured depository institution or affiliate filing the 
report or such information is or will be contained in the annual report 
filed by another party under this section.
    (2) Consolidated reports permitted--(i) Party to multiple 
agreements. An insured depository institution or affiliate that is a 
party to 2 or more covered agreements may file a single consolidated 
annual report with each relevant supervisory agency concerning all the 
covered agreements.
    (ii) Affiliated entities party to the same agreement. An insured 
depository institution and its affiliates that are parties to the same 
covered agreement

[[Page 88]]

may file a single consolidated annual report relating to the agreement 
with each relevant supervisory agency for the covered agreement.
    (iii) Content of report. Any consolidated annual report must contain 
all the information required by this paragraph (e). The amounts and data 
required to be reported under paragraphs (e)(1)(iv) and (e)(1)(vi) of 
this section may be reported on an aggregate basis for all covered 
agreements.
    (f) Time and place of filing--(1) General. Each party must file its 
annual report with each relevant supervisory agency for the covered 
agreement no later than six months following the end of the fiscal year 
covered by the report.
    (2) Alternative method of fulfilling annual reporting requirement 
for a NGEP. (i) A NGEP may fulfill the filing requirements of this 
section by providing the following materials to an insured depository 
institution or affiliate that is a party to the agreement no later than 
six months following the end of the NGEP's fiscal year--
    (A) A copy of the NGEP's annual report required under paragraph (d) 
of this section for the fiscal year; and
    (B) Written instructions that the insured depository institution or 
affiliate promptly forward the annual report to the relevant supervisory 
agency or agencies on behalf of the NGEP.
    (ii) An insured depository institution or affiliate that receives an 
annual report from a NGEP pursuant to paragraph (f)(2)(i) of this 
section must file the report with the relevant supervisory agency or 
agencies on behalf of the NGEP within 30 days.



Sec. 533.8  Release of information under FOIA.

    OTS will make covered agreements and annual reports available to the 
public in accordance with the Freedom of Information Act (5 U.S.C. 552 
et seq.), OTS's rules (part 505 of this chapter), and the Department of 
Treasury's rules (31 CFR part 1). A party to a covered agreement may 
request confidential treatment of proprietary and confidential 
information in a covered agreement or an annual report under those 
procedures.



Sec. 533.9  Compliance provisions.

    (a) Willful failure to comply with disclosure and reporting 
obligations. (1) If OTS determines that a NGEP has willfully failed to 
comply in a material way with Sec. Sec. 533.6 or 533.7 of this part, 
OTS will notify the NGEP in writing of that determination and provide 
the NGEP a period of 90 days (or such longer period as OTS finds to be 
reasonable under the circumstances) to comply.
    (2) If the NGEP does not comply within the time period established 
by OTS, the agreement shall thereafter be unenforceable by that NGEP by 
operation of section 48 of the Federal Deposit Insurance Act (12 U.S.C. 
1831y).
    (3) OTS may assist any insured depository institution or affiliate 
that is a party to a covered agreement that is unenforceable by a NGEP 
by operation of section 48 of the Federal Deposit Insurance Act (12 
U.S.C. 1831y) in identifying a successor to assume the NGEP's 
responsibilities under the agreement.
    (b) Diversion of funds. If a court or other body of competent 
jurisdiction determines that funds or resources received under a covered 
agreement have been diverted contrary to the purposes of the covered 
agreement for an individual's personal financial gain, OTS may take 
either or both of the following actions--
    (1) Order the individual to disgorge the diverted funds or resources 
received under the agreement;
    (2) Prohibit the individual from being a party to any covered 
agreement for a period not to exceed 10 years.
    (c) Notice and opportunity to respond. Before making a determination 
under paragraph (a)(1) of this section, or taking any action under 
paragraph (b) of this section, OTS will provide written notice and an 
opportunity to present information to OTS concerning any relevant facts 
or circumstances relating to the matter.
    (d) Inadvertent or de minimis errors. Inadvertent or de minimis 
errors in annual reports or other documents filed with OTS under 
Sec. Sec. 533.6 or 533.7 of this part will not subject the reporting 
party to any penalty.
    (e) Enforcement of provisions in covered agreements. No provision of 
this part shall be construed as authorizing OTS

[[Page 89]]

to enforce the provisions of any covered agreement.



Sec. 533.10  Transition provisions.

    (a) Disclosure of covered agreements entered into before the 
effective date of this part. The following disclosure requirements apply 
to covered agreements that were entered into after November 12, 1999, 
and that terminated before April 1, 2001.
    (1) Disclosure to the public. Each NGEP and each insured depository 
institution or affiliate that was a party to the agreement must make the 
agreement available to the public under Sec. 533.6 of this part until 
at least April 1, 2002.
    (2) Disclosure to the relevant supervisory agency. (i) Each NGEP 
that was a party to the agreement must make the agreement available to 
the relevant supervisory agency under Sec. 533.6 of this part until at 
least April 1, 2002.
    (ii) Each insured depository institution or affiliate that was a 
party to the agreement must, by June 30, 2001, provide each relevant 
supervisory agency either--
    (A) A copy of the agreement under Sec. 533.6(d)(1)(i) of this part; 
or
    (B) The information described in Sec. 533.6(d)(1)(ii) of this part 
for each agreement.
    (b) Filing of annual reports that relate to fiscal years ending on 
or before December 31, 2000. In the event that a NGEP, insured 
depository institution or affiliate has any information to report under 
Sec. 533.7 of this part for a fiscal that ends on or before December 
31, 2000, and that concerns a covered agreement entered into between May 
12, 2000, and December 31, 2000, the annual report for that fiscal year 
must be provided, no later than June 30, 2001, to--
    (1) Each relevant supervisory agency; or
    (2) In the case of a NGEP, to an insured depository institution or 
affiliate that is a party to the agreement in accordance with Sec. 
533.7(f)(2) of this part.



Sec. 533.11  Other definitions and rules of construction used in this part.

    (a) Affiliate. Affiliate means--
    (1) Any company that controls, is controlled by, or is under common 
control with another company; and
    (2) For the purpose of determining whether an agreement is a covered 
agreement under Sec. 533.2, an affiliate includes any company that 
would be under common control or merged with another company on 
consummation of any transaction pending before a Federal banking agency 
at the time--
    (i) The parties enter into the agreement; and
    (ii) The NGEP that is a party to the agreement makes a CRA 
communication, as described in Sec. 533.3 of this part.
    (b) Control. Control is defined in section 2(a) of the Bank Holding 
Company Act (12 U.S.C. 1841(a)).
    (c) CRA affiliate. A CRA affiliate of an insured depository 
institution is any company that is an affiliate of an insured depository 
institution to the extent, and only to the extent, that the activities 
of the affiliate were considered by the appropriate Federal banking 
agency when evaluating the CRA performance of the institution at its 
most recent CRA examination prior to the agreement. An insured 
depository institution or affiliate also may designate any company as a 
CRA affiliate at any time prior to the time a covered agreement is 
entered into by informing the NGEP that is a party to the agreement of 
such designation.
    (d) CRA public file. CRA public file means the public file 
maintained by an insured depository institution and described in Sec. 
563.43 of this chapter.
    (e) Executive officer. The term executive officer has the same 
meaning as in Sec. 215.2(e)(1) of the Board of Governors of the Federal 
Reserve's Regulation O (12 CFR 215.2(e)(1)). In applying this definition 
under this part, the term savings association shall be used in place of 
the term bank.
    (f) Federal banking agency; appropriate Federal banking agency. The 
terms Federal banking agency and appropriate Federal banking agency have 
the same meanings as in section 3 of the Federal Deposit Insurance Act 
(12 U.S.C. 1813).
    (g) Fiscal year. (1) The fiscal year for a NGEP that does not have a 
fiscal year shall be the calendar year.
    (2) Any NGEP, insured depository institution, or affiliate that has 
a fiscal

[[Page 90]]

year may elect to have the calendar year be its fiscal year for purposes 
of this part.
    (h) Insured depository institution. Insured depository institution 
has the same meaning as in section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813).
    (i) Nongovernmental entity or person or NGEP--(1) General. A 
nongovernmental entity or person or NGEP is any partnership, 
association, trust, joint venture, joint stock company, corporation, 
limited liability corporation, company, firm, society, other 
organization, or individual.
    (2) Exclusions. A nongovernmental entity or person does not 
include--
    (i) The United States government, a state government, a unit of 
local government (including a county, city, town, township, parish, 
village, or other general-purpose subdivision of a state) or an Indian 
tribe or tribal organization established under Federal, state or Indian 
tribal law (including the Department of Hawaiian Home Lands), or a 
department, agency, or instrumentality of any such entity;
    (ii) A federally-chartered public corporation that receives Federal 
funds appropriated specifically for that corporation;
    (iii) An insured depository institution or affiliate of an insured 
depository institution; or
    (iv) An officer, director, employee, or representative (acting in 
his or her capacity as an officer, director, employee, or 
representative) of an entity listed in paragraphs (i)(2)(i), (i)(2)(ii), 
or (i)(2)(iii) of this section.
    (j) Party. The term party with respect to a covered agreement means 
each NGEP and each insured depository institution or affiliate that 
entered into the agreement.
    (k) Relevant supervisory agency. The relevant supervisory agency for 
a covered agreement means the appropriate Federal banking agency for--
    (1) Each insured depository institution (or subsidiary thereof) that 
is a party to the covered agreement;
    (2) Each insured depository institution (or subsidiary thereof) or 
CRA affiliate that makes payments or loans or provides services that are 
subject to the covered agreement; and
    (3) Any company (other than an insured depository institution or 
subsidiary thereof) that is a party to the covered agreement.
    (l) Term of agreement. An agreement that does not have a fixed 
termination date is considered to terminate on the last date on which 
any party to the agreement makes any payment or provides any loan or 
other resources under the agreement, unless the relevant supervisory 
agency for the agreement otherwise notifies each party in writing.



PART 535_UNFAIR OR DECEPTIVE ACTS OR PRACTICES--Table of Contents



                      Subpart A_General Provisions

Sec.
535.1 Authority, purpose, and scope.

                   Subpart B_Consumer Credit Practices

535.11 Definitions.
535.12 Unfair credit contract provisions.
535.13 Unfair or deceptive cosigner practices.
535.14 Unfair late charges.

Appendix to Part 535--Official Staff Commentary

    Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 57a.

    Source: 75 FR 23566, May 4, 2010, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 535.1  Authority, purpose and scope.

    (a) Authority. This part is issued by OTS under section 18(f) of the 
Federal Trade Commission Act, 15 U.S.C. 57a(f) (section 202(a) of the 
Magnuson-Moss Warranty--Federal Trade Commission Improvement Act, Pub. 
L. 93-637) and the Home Owners' Loan Act, 12 U.S.C. 1461 et seq.
    (b) Purpose. The purpose of this part is to prohibit unfair or 
deceptive acts or practices in violation of section 5(a)(1) of the 
Federal Trade Commission Act, 15 U.S.C. 45(a)(1). Subpart B defines and 
contains requirements prescribed for the purpose of preventing specific 
unfair or deceptive acts or practices of savings associations. The 
prohibitions in subpart B do not limit OTS's authority to enforce the 
FTC Act with respect to any other unfair or

[[Page 91]]

deceptive acts or practices. The purpose of this part is also to 
prohibit unsafe and unsound practices and protect consumers under the 
Home Owners' Loan Act, 12 U.S.C. 1461 et seq.
    (c) Scope. This part applies to savings associations and 
subsidiaries owned in whole or in part by a savings association 
(``you'').



                   Subpart B_Consumer Credit Practices



Sec. 535.11  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Consumer means a natural person who seeks or acquires goods, 
services, or money for personal, family, or household purposes, other 
than for the purchase of real property, and who applies for or is 
extended consumer credit.
    (b) Consumer credit means credit extended to a natural person for 
personal, family, or household purposes. It includes consumer loans; 
educational loans; unsecured loans for real property alteration, repair 
or improvement, or for the equipping of real property; overdraft loans; 
and credit cards. It also includes loans secured by liens on real estate 
and chattel liens secured by mobile homes and leases of personal 
property to consumers that may be considered the functional equivalent 
of loans on personal security but only if you rely substantially upon 
other factors, such as the general credit standing of the borrower, 
guaranties, or security other than the real estate or mobile home, as 
the primary security for the loan.
    (c) Earnings means compensation paid or payable to an individual or 
for the individual's account for personal services rendered or to be 
rendered by the individual, whether denominated as wages, salary, 
commission, bonus, or otherwise, including periodic payments pursuant to 
a pension, retirement, or disability program.
    (d) Obligation means an agreement between you and a consumer.
    (e) Person means an individual, corporation, or other business 
organization.



Sec. 535.12  Unfair credit contract provisions.

    It is an unfair act or practice for you, directly or indirectly, to 
enter into a consumer credit obligation that constitutes or contains, or 
to enforce in a consumer credit obligation you purchased, any of the 
following provisions:
    (a) Confession of judgment. A cognovit or confession of judgment 
(for purposes other than executory process in the State of Louisiana), 
warrant of attorney, or other waiver of the right to notice and the 
opportunity to be heard in the event of suit or process thereon.
    (b) Waiver of exemption. An executory waiver or a limitation of 
exemption from attachment, execution, or other process on real or 
personal property held, owned by, or due to the consumer, unless the 
waiver applies solely to property subject to a security interest 
executed in connection with the obligation.
    (c) Assignment of wages. An assignment of wages or other earnings 
unless:
    (1) The assignment by its terms is revocable at the will of the 
debtor;
    (2) The assignment is a payroll deduction plan or preauthorized 
payment plan, commencing at the time of the transaction, in which the 
consumer authorizes a series of wage deductions as a method of making 
each payment; or
    (3) The assignment applies only to wages or other earnings already 
earned at the time of the assignment.
    (d) Security interest in household goods. A nonpossessory security 
interest in household goods other than a purchase-money security 
interest. For purposes of this paragraph, household goods:
    (1) Means clothing, furniture, appliances, linens, china, crockery, 
kitchenware, and personal effects of the consumer and the consumer's 
dependents.
    (2) Does not include:
    (i) Works of art;
    (ii) Electronic entertainment equipment (except one television and 
one radio);
    (iii) Antiques (any item over one hundred years of age, including 
such items that have been repaired or renovated without changing their 
original form or character); or
    (iv) Jewelry (other than wedding rings).

[[Page 92]]



Sec. 535.13  Unfair or deceptive cosigner practices.

    (a) Prohibited deception. It is a deceptive act or practice for you, 
directly or indirectly in connection with the extension of credit to 
consumers, to misrepresent the nature or extent of cosigner liability to 
any person.
    (b) Prohibited unfairness. It is an unfair act or practice for you, 
directly or indirectly in connection with the extension of credit to 
consumers, to obligate a cosigner unless the cosigner is informed, 
before becoming obligated, of the nature of the cosigner's liability.
    (c) Disclosure requirement--(1) Disclosure statement. A clear and 
conspicuous statement must be given in writing to the cosigner before 
becoming obligated. In the case of open-end credit, the disclosure 
statement must be given to the cosigner before the time that the 
cosigner becomes obligated for any fees or transactions on the account. 
The disclosure statement must contain the following statement or one 
that is substantially similar:

                           Notice of Cosigner

    You are being asked to guarantee this debt. Think carefully before 
you do. If the borrower doesn't pay the debt, you will have to. Be sure 
you can afford to pay if you have to, and that you want to accept this 
responsibility.
    You may have to pay up to the full amount of the debt if the 
borrower does not pay. You may also have to pay late fees or collection 
costs, which increase this amount.
    The creditor can collect this debt from you without first trying to 
collect from the borrower. The creditor can use the same collection 
methods against you that can be used against the borrower, such as suing 
you, garnishing your wages, etc. If this debt is ever in default, that 
fact may become a part of your credit record.
    (2) Compliance. Compliance with paragraph (d)(1) of this section 
constitutes compliance with the consumer disclosure requirement in 
paragraph (b) of this section.
    (3) Additional content limitations. If the notice is a separate 
document, nothing other than the following items may appear with the 
notice:
    (i) Your name and address;
    (ii) An identification of the debt to be cosigned (e.g., a loan 
identification number);
    (iii) The date (of the transaction); and
    (iv) The statement, ``This notice is not the contract that makes you 
liable for the debt.''
    (d) Cosigner defined. (1) Cosigner means a natural person who 
assumes liability for the obligation of a consumer without receiving 
goods, services, or money in return for the obligation, or, in the case 
of an open-end credit obligation, without receiving the contractual 
right to obtain extensions of credit under the account.
    (2) Cosigner includes any person whose signature is requested as a 
condition to granting credit to a consumer, or as a condition for 
forbearance on collection of a consumer's obligation that is in default. 
The term does not include a spouse or other person whose signature is 
required on a credit obligation to perfect a security interest pursuant 
to state law.
    (3) A person who meets the definition in this paragraph is a 
cosigner, whether or not the person is designated as such on a credit 
obligation.



Sec. 535.14  Unfair late charges.

    (a) Prohibition. In connection with collecting a debt arising out of 
an extension of credit to a consumer, it is an unfair act or practice 
for you, directly or indirectly, to levy or collect any delinquency 
charge on a payment, when the only delinquency is attributable to late 
fees or ydelinquency charges assessed on earlier installments and the 
payment is otherwise a full payment for the applicable period and is 
paid on its due date or within an applicable grace period.
    (b) Collecting a debt defined--Collecting a debt means, for the 
purposes of this section, any activity, other than the use of judicial 
process, that is intended to bring about or does bring about repayment 
of all or part of money due (or alleged to be due) from a consumer.

[[Page 93]]



          Sec. Appendix to Part 535--Official Staff Commentary

                      Subpart A--General Provisions

              Section 535.1 Authority, Purpose, and Scope.

                               1(c) Scope

    1. Penalties for noncompliance. Administrative enforcement of the 
rule for savings associations may involve actions under section 8 of the 
Federal Deposit Insurance Act (12 U.S.C. 1818), including cease-and-
desist orders requiring that actions be taken to remedy violations and 
civil money penalties.
    2. Application to subsidiaries. The term ``savings association'' as 
used in this Appendix also includes subsidiaries owned in whole or in 
part by a savings association.



PART 536_CONSUMER PROTECTION IN SALES OF INSURANCE--Table of Contents



Sec.
536.10 Purpose and scope.
536.20 Definitions.
536.30 Prohibited practices.
536.40 What you must disclose.
536.50 Where insurance activities may take place.
536.60 Qualification and licensing requirements for insurance sales 
          personnel.

Appendix A to Part 536--Consumer Grievance Process.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, and 1831x.

    Source: 65 FR 75845, Dec. 4, 2000, unless otherwise noted.



Sec. 536.10  Purpose and scope.

    (a) General rule. This part establishes consumer protections in 
connection with retail sales practices, solicitations, advertising, or 
offers of any insurance product or annuity to a consumer by:
    (1) Any savings association; or
    (2) Any other person that is engaged in such activities at an office 
of a savings association or on behalf of a savings association.
    (b) Application to operating subsidiaries. For purposes of Sec. 
559.3(h) of this chapter, an operating subsidiary is subject to this 
part only to the extent that it sells, solicits, advertises, or offers 
insurance products or annuities at an office of a savings association or 
on behalf of a savings association.



Sec. 536.20  Definitions.

    As used in this part:
    Affiliate means a company that controls, is controlled by, or is 
under common control with another company.
    Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined in 
section 2(o)(10) of the Bank Holding Company Act of 1956, as amended (12 
U.S.C. 1841(o)(10)).
    Consumer means an individual who purchases, applies to purchase, or 
is solicited to purchase from a covered person insurance products or 
annuities primarily for personal, family, or household purposes.
    Control of a company has the same meaning as in section 3(w)(5) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, or 
sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    Electronic media includes any means for transmitting messages 
electronically between a covered person and a consumer in a format that 
allows visual text to be displayed on equipment,

[[Page 94]]

for example, a personal computer monitor.
    Office means the premises of a savings association where retail 
deposits are accepted from the public.
    Subsidiary has the same meaning as in section 3(w)(4) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    You means:
    (1) A savings association, as defined in Sec. 561.43 of this 
chapter; or
    (2) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of a savings association, or on behalf of a savings 
association. For purposes of this definition, activities on behalf of a 
savings association include activities where a person, whether at an 
office of the savings association or at another location, sells, 
solicits, advertises, or offers an insurance product or annuity and at 
least one of the following applies:
    (i) The person represents to a consumer that the sale, solicitation, 
advertisement, or offer of any insurance product or annuity is by or on 
behalf of the savings association;
    (ii) The savings association refers a consumer to a seller of 
insurance products and annuities and the savings association has a 
contractual arrangement to receive commissions or fees derived from a 
sale of an insurance product or annuity resulting from that referral; or
    (iii) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the 
savings association.



Sec. 536.30  Prohibited practices.

    (a) Anticoercion and antitying rules. You may not engage in any 
practice that would lead a consumer to believe that an extension of 
credit, in violation of section 5(q) of the Home Owners' Loan Act (12 
U.S.C. 1464(q)), is conditional upon either:
    (1) The purchase of an insurance product or annuity from a savings 
association or any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, a savings association or a subsidiary of a savings association that 
could mislead any person or otherwise cause a reasonable person to reach 
an erroneous belief with respect to:
    (1) The fact that an insurance product or annuity you or any 
subsidiary of a savings association sell or offer for sale is not backed 
by the Federal government or a savings association, or the fact that the 
insurance product or annuity is not insured by the Federal Deposit 
Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a savings association or subsidiary of a savings 
association at which insurance products or annuities are sold or offered 
for sale, the fact that:
    (i) The approval of an extension of credit to a consumer by the 
savings association or subsidiary may not be conditioned on the purchase 
of an insurance product or annuity by the consumer from the savings 
association or a subsidiary of a savings association; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not 
sell or offer for sale, as principal, agent, or broker, any life or 
health insurance product if the status of the applicant or insured as a 
victim of domestic violence or as a provider of services to victims of 
domestic violence is considered as a criterion in any decision with 
regard to insurance underwriting, pricing, renewal, or scope of coverage 
of such product, or with regard to the payment of insurance claims on 
such product, except as required or expressly permitted under State law.

[[Page 95]]



Sec. 536.40  What you must disclose.

    (a) Insurance disclosures. In connection with the initial purchase 
of an insurance product or annuity by a consumer from you, you must 
disclose to the consumer, except to the extent the disclosure would not 
be accurate, that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, a savings association or an affiliate 
of a savings association;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, a savings association, or (if applicable) an affiliate of a 
savings association; and
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value.
    (b) Credit disclosures. In the case of an application for credit in 
connection with which an insurance product or annuity is solicited, 
offered, or sold, you must disclose that a savings association may not 
condition an extension of credit on either:
    (1) The consumer's purchase of an insurance product or annuity from 
the savings association or any of its affiliates; or
    (2) The consumer's agreement not to obtain, or a prohibition on the 
consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (c) Timing and method of disclosures--(1) In general. The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an 
insurance product or annuity to a consumer. The disclosure required by 
paragraph (b) of this section must be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which an insurance product or annuity is solicited, offered, or sold.
    (2) Exception for transactions by mail. If you conduct an insurance 
product or annuity sale by mail, you are not required to make the oral 
disclosures required by paragraph (a) of this section. If you take an 
application for credit by mail, you are not required to make the oral 
disclosure required by paragraph (b) of this section.
    (3) Exception for transactions by telephone. If a sale of an 
insurance product or annuity is conducted by telephone, you may provide 
the written disclosures required by paragraph (a) of this section by 
mail within 3 business days beginning on the first business day after 
the sale, solicitation, or offer, excluding Sundays and the legal public 
holidays specified in 5 U.S.C. 6103(a). If you take an application for 
credit by telephone, you may provide the written disclosure required by 
paragraph (b) of this section by mail, provided you mail it to the 
consumer within three days beginning the first business day after the 
application is taken, excluding Sundays and the legal public holidays 
specified in 5 U.S.C. 6103(a).
    (4) Electronic form of disclosures. (i) Subject to the requirements 
of section 101(c) of the Electronic Signatures in Global and National 
Commerce Act (12 U.S.C. 7001(c)), you may provide the written 
disclosures required by paragraph (a) and (b) of this section through 
electronic media instead of on paper, if the consumer affirmatively 
consents to receiving the disclosures electronically and if the 
disclosures are provided in a format that the consumer may retain or 
obtain later, for example, by printing or storing electronically (such 
as by downloading).
    (ii) You are not required to provide orally any disclosures required 
by paragraphs (a) or (b) of this section that you provide by electronic 
media.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures in visual media, such as television broadcasting, ATM 
screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs (a) 
and (b) of this section:

 NOT A DEPOSIT
 NOT FDIC-INSURED
 NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

[[Page 96]]

 NOT GUARANTEED BY THE SAVINGS ASSOCIATION
 MAY GO DOWN IN VALUE

    (6) Disclosures must be meaningful. (i) You must provide the 
disclosures required by paragraphs (a) and (b) of this section in a 
meaningful form. Examples of the types of methods that could call 
attention to the nature and significance of the information provided 
include:
    (A) A plain-language heading to call attention to the disclosures;
    (B) A typeface and type size that are easy to read;
    (C) Wide margins and ample line spacing;
    (D) Boldface or italics for key words; and
    (E) Distinctive type size, style, and graphic devices, such as 
shading or sidebars, when the disclosures are combined with other 
information.
    (ii) You have not provided the disclosures in a meaningful form if 
you merely state to the consumer that the required disclosures are 
available in printed material, but do not provide the printed material 
when required and do not orally disclose the information to the consumer 
when required.
    (iii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass the 
visual text of the disclosures before purchasing an insurance product or 
annuity.
    (7) Consumer acknowledgment. You must obtain from the consumer, at 
the time a consumer receives the disclosures required under paragraphs 
(a) or (b) of this section, or at the time of the initial purchase by 
the consumer of an insurance product or annuity, a written 
acknowledgment by the consumer that the consumer received the 
disclosures. You may permit a consumer to acknowledge receipt of the 
disclosures electronically or in paper form. If the disclosures required 
under paragraphs (a) or (b) of this section are provided in connection 
with a transaction that is conducted by telephone, you must:
    (i) Obtain an oral acknowledgment of receipt of the disclosures and 
maintain sufficient documentation to show that the acknowledgment was 
given; and
    (ii) Make reasonable efforts to obtain a written acknowledgment from 
the consumer.
    (d) Advertisements and other promotional material for insurance 
products or annuities. The disclosures described in paragraph (a) of 
this section are required in advertisements and promotional material for 
insurance products or annuities unless the advertisements and 
promotional material are of a general nature describing or listing the 
services or products offered by a savings association.



Sec. 536.50  Where insurance activities may take place.

    (a) General rule. A savings association must, to the extent 
practicable:
    (1) Keep the area where the savings association conducts 
transactions involving insurance products or annuities physically 
segregated from areas where retail deposits are routinely accepted from 
the general public;
    (2) Identify the areas where insurance product or annuity sales 
activities occur; and
    (3) Clearly delineate and distinguish those areas from the areas 
where the savings association's retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in an 
area where such transactions are routinely conducted in a savings 
association may refer a consumer who seeks to purchase an insurance 
product or annuity to a qualified person who sells that product only if 
the person making the referral receives no more than a one-time, nominal 
fee of a fixed dollar amount for each referral that does not depend on 
whether the referral results in a transaction.



Sec. 536.60  Qualification and licensing requirements for insurance sales 

personnel.

    A savings association may not permit any person to sell or offer for 
sale any insurance product or annuity in any part of the savings 
association's office or on its behalf, unless the person is at all times 
appropriately qualified and licensed under applicable State insurance 
licensing standards with regard to the specific products being sold or 
recommended.

[[Page 97]]



         Sec. Appendix A to Part 536--Consumer Grievance Process

    Any consumer who believes that any savings association or any other 
person selling, soliciting, advertising, or offering insurance products 
or annuities to the consumer at an office of the savings association or 
on behalf of the savings association has violated the requirements of 
this part should contact the Director, Consumer Programs, Office of 
Thrift Supervision, at the following address: 1700 G Street, NW., 
Washington, DC 20552, or telephone 202-906-6237 or 800-842-6929, or e-
mail consumer.complaint@ots.treas.gov.



PART 541_DEFINITIONS FOR REGULATIONS AFFECTING FEDERAL SAVINGS ASSOCIATIONS--

Table of Contents



Sec.
541.1 When do the definitions in this part apply?
541.2 Act.
541.5 Commercial paper.
541.7 Corporate debt security.
541.8 Debit card.
541.10 Dwelling unit.
541.11 Federal savings association.
541.14 Home.
541.15 Improved nonresidential real estate.
541.16 Improved residential real estate.
541.18 Interim Federal savings association.
541.19 Interim state savings association.
541.20 Loans.
541.21 Nonresidential real estate.
541.22 [Reserved]
541.23 Residential real estate.
541.25 Single-family dwelling.
541.26 Surplus.
541.27 Unimproved real estate.
541.28 Withdrawal value of a savings account.

    Authority: 12 U.S.C. 1462a, 1463, 1464.

    Source: 54 FR 49480, Nov. 30, 1989, unless otherwise noted.



Sec. 541.1  When do the definitions in this part apply?

    The definitions in this part and in 12 CFR part 561 apply throughout 
this chapter, unless another definition is specifically provided.

[67 FR 78152, Dec. 23, 2002]



Sec. 541.2  Act.

    The term Act means the Home Owners' Loan Act of 1933, as amended.



Sec. 541.5  Commercial paper.

    The term commercial paper means any note, draft, or bill of exchange 
which arises out of a current transaction or the proceeds of which have 
been or are to be used for current transactions, and which has a 
maturity at the time of issuance of not exceeding nine months, exclusive 
of days of grace, or any renewal thereof the maturity of which is 
likewise limited.



Sec. 541.7  Corporate debt security.

    The term corporate debt security means a marketable obligation, 
evidencing the indebtedness of any corporation in the form of a bond, 
note and/or debenture which is commonly regarded as a debt security and 
is not predominantly speculative in nature. A security is marketable if 
it may be sold with reasonable promptness at a price which corresponds 
reasonably to its fair value.



Sec. 541.8  Debit card.

    The term debit card means a card that enables an accountholder to 
obtain access to a savings account for the purpose of making withdrawals 
or of transferring funds to a third party by non-transferable order or 
authorization.



Sec. 541.10  Dwelling unit.

    The term dwelling unit means the unified combination of rooms 
designed for residential use by one family, other than a single-family 
dwelling.



Sec. 541.11  Federal savings association.

    The term Federal savings association means a Federal savings 
association or Federal savings bank chartered under section 5(o) of the 
Act.



Sec. 541.14  Home.

    The term home means real estate comprising a single-family 
dwelling(s) or a dwelling unit(s) for four or fewer families in the 
aggregate.



Sec. 541.15  Improved nonresidential real estate.

    The term improved nonresidential real estate means nonresidential 
real estate:
    (a) Containing a permanent structure(s) constituting at least 25 
percent of its value; or
    (b) Containing improvements which make it usable by a business or 
industrial enterprise; or

[[Page 98]]

    (c) Used, or to be used within a reasonable time, for commercial 
farming, excluding hobby and vacation property.



Sec. 541.16  Improved residential real estate.

    The term improved residential real estate means residential real 
estate containing offsite or other improvements sufficient to make the 
property ready for primarily residential construction, and real estate 
in the process of being improved by a building or buildings to be 
constructed or in the process of construction for primarily residential 
use.



Sec. 541.18  Interim Federal savings association.

    The term interim Federal savings association means a Federal savings 
association chartered by the Office under section 5 of the Act to 
facilitate the acquisition of 100 percent of the voting shares of an 
existing Federal stock savings association or other insured stock 
savings association by a newly formed company or an existing savings and 
loan holding company or to facilitate any other transaction the Office 
may approve.



Sec. 541.19  Interim state savings association.

    The term interim state savings association means a savings 
association, other than a Federal savings association, the accounts of 
which are insured by the FDIC to facilitate the acquisition of 100 
percent of the voting shares of an existing Federal stock savings 
association or other insured stock savings association by a newly formed 
company or an existing savings and loan holding company or to facilitate 
any other transaction the Office may approve.



Sec. 541.20  Loans.

    The term loans means obligations and extensions or advances of 
credit; and any reference to a loan or investment includes an interest 
in such a loan or investment.



Sec. 541.21  Nonresidential real estate.

    The terms nonresidential real estate or nonresidential real property 
mean real estate that is not residential real estate, as that term is 
defined in Sec. 541.23 of this part.



Sec. 541.22  [Reserved]



Sec. 541.23  Residential real estate.

    The terms residential real estate or residential real property mean:
    (a) Homes (including a dwelling unit in a multi-family residential 
property such as a condominium or a cooperative);
    (b) Combinations of homes and business property (i.e., a home used 
in part for business);
    (c) Other real estate used for primarily residential purposes other 
than a home (but which may include homes);
    (d) Combinations of such real estate and business property involving 
only minor business use (i.e., where no more than 20 percent of the 
total appraised value of the real estate is attributable to the business 
use);
    (e) Farm residences and combinations of farm residences and 
commercial farm real estate;
    (f) Property to be improved by the construction of such structures; 
or
    (g) Leasehold interests in the above real estate.

[64 FR 46564, Aug. 26, 1999]



Sec. 541.25  Single-family dwelling.

    The term single-family dwelling means a structure designed for 
residential use by one family, or a unit so designed, whose owner owns, 
directly or through a non-profit cooperative housing organization, an 
undivided interest in the underling real estate, including property 
owned in common with others which contributes to the use and enjoyment 
of the structure or unit.

[69 FR 76602, Dec. 22, 2004]



Sec. 541.26  Surplus.

    The term surplus means undistributed earnings held as unallocated 
reserves for general corporate use.



Sec. 541.27  Unimproved real estate.

    The term unimproved real estate means real estate that will be 
improved, as defined in Sec. 541.15 or Sec. 541.16 of this part.

[[Page 99]]



Sec. 541.28  Withdrawal value of a savings account.

    The term withdrawal value of a savings account means the amount 
invested in a savings account plus earnings credited thereto, less 
lawful deductions therefrom.



PART 543_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_INCORPORATION, ORGANIZATION, AND 

CONVERSION--Table of Contents



Sec.
543.1 Corporate title.

                              Organization

543.2 Application for permission to organize.
543.3 ``De novo'' applications for a Federal savings association 
          charter.
543.5 Issuance of charter.
543.6 Completion of organization.
543.7 Limitations on transaction of business.
543.7-1 Federal savings association created in connection with an 
          association in default or in danger of default.

                               Conversion

543.8 Conversion of depository institutions to Federal mutual charter.
543.9 Application for conversion to Federal mutual charter.
543.10 Organization after conversion.
543.11 Organization plan for governance during first years after 
          issuance of Federal mutual savings bank charter.
543.11-1 Grandfathered authority.
543.14 Continuity of existence.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et seq.

    Source: 54 FR 49482, Nov. 30, 1989, unless otherwise noted.



Sec. 543.1  Corporate title.

    (a) General. A Federal savings association shall not adopt a title 
that misrepresents the nature of the institution or the services it 
offers.
    (b) Title change. Prior to changing its corporate title, an 
association must file with the OTS a written notice indicating the 
intended change. The OTS, shall provide to the association a timely 
written acknowledgment stating when the notice was received. If, within 
30 days of receipt of notice, the OTS does not notify the association of 
its objection on the grounds set forth in paragraph (a) of this section, 
the association may change its title by amending its charter in 
accordance with Sec. 544.2(b) or Sec. 552.4 and the amendment 
provisions of its charter, except that an association chartered as a 
Federal Savings and Loan Association may change its title to indicate 
that it is a Federal Savings Bank, and an association chartered as a 
Federal Savings Bank may change its title to indicate that it is a 
Federal Savings and Loan Association.

[54 FR 49482, Nov. 30, 1989, as amended at 57 FR 14338, Apr. 20, 1992; 
58 FR 4312, Jan. 14, 1993; 61 FR 64015, Dec. 3, 1996]

                              Organization



Sec. 543.2  Application for permission to organize.

    (a) General. Recommendations by employees of the OTS regarding 
applications for permission to organize a Federal savings association 
are privileged, confidential, and subject to Sec. 510.5 (b) and (c) of 
this chapter.
    (b)-(c) [Reserved]
    (d) Public notice and inspection. (1) The applicant must publish a 
public notice of the application to organize in accordance with the 
procedures specified in subpart B of part 516 of this chapter.
    (2) Promptly after publication, the applicant(s) shall transmit 
copies of each notice and publisher's affidavit of publication in the 
same manner as the original filing.
    (3) The OTS shall give notice of the application to the State 
official who supervises savings associations in the State in which the 
new association is to be located.
    (4) Any person may inspect the application and all related 
communications at the Regional Office during regular business hours, 
unless such information is exempt from public disclosure.
    (e) Submission of comments. Commenters may submit comments on the 
application in accordance with the procedures specified in subpart C of 
part 516 of this chapter.
    (f) Meetings. OTS may arrange a meeting in accordance with the 
procedures in subpart D of part 516 of this chapter.

[[Page 100]]

    (g) Approval. (1) Factors that will be considered are:
    (i) Whether the applicants are persons of good character and 
responsibility;
    (ii) Whether a necessity exists for such association in the 
community to be served;
    (iii) Whether there is a reasonable probability of the association's 
usefulness and success;
    (iv) Whether the association can be established without undue injury 
to properly conducted existing local thrift and home financing 
institutions;
    (v) Whether the association will perform a role of providing credit 
for housing consistent with safe and sound operation of a Federal 
savings association; and
    (vi) Whether the factors set forth in Sec. 543.3 are met, in the 
case of an application that would result in the formation of a de novo 
association, as defined in Sec. 543.3(a).
    (2) Approvals of applications will be conditioned on the following:
    (i) Receipt by the Office of written confirmation from the Federal 
Deposit Insurance Corporation that the accounts of the Federal savings 
association will be insured by the Federal Deposit Insurance 
Corporation;
    (ii) A minimum amount of capital to be paid into the association's 
accounts prior to commencing business;
    (iii) The submission of a statement that--
    (A) The applicants have complied in all respects with the Act and 
these rules and regulations regarding organization of a Federal savings 
association;
    (B) The applicants have incurred no expense in forming the 
association which is chargeable to it, and no such expense will be 
incurred;
    (C) No funds have been collected on account of the association 
before the Office's approval;
    (D) An organization committee has been created (naming the committee 
and its officers);
    (E) The committee will organize the association and serve as 
temporary officers of the association until officers are elected by the 
association's board of directors under Sec. 543.6 of this part; and
    (F) No funds will be accepted for deposit by the association until 
organization has been completed; and
    (iv) The satisfaction of any other requirement the Director, or his 
or her designee, may impose.
    (h) Alternative procedures for interim Federal savings associations. 
(1) Applications for permission to organize an interim Federal savings 
association are not subject to paragraphs (d), (e), (f) or (g)(2) of 
this section.
    (2) Approval of an application for permission to organize an interim 
Federal savings association shall be conditioned on approval by the 
Office of an application to merge the interim Federal savings 
association and an existing insured stock association or on approval by 
the Office of such other transaction which the interim was chartered to 
facilitate. In evaluating the application, the Director or his or her 
designee will consider the purpose for which the association will be 
organized, the form of any proposed transactions involving the 
organizing association, the effect of the transactions on existing 
associations involved in the transactions, and the factors specified in 
section Sec. 543.2(g)(1) to the extent relevant.

[54 FR 49482, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990; 
57 FR 14338, Apr. 20, 1992; 62 FR 27180, May 19, 1997; 62 FR 64145, Dec. 
4, 1997; 69 FR 68247, Nov. 24, 2004]



Sec. 543.3  ``De novo'' applications for a Federal savings association 

charter.

    (a) Definitions. For purposes of this section, the term ``de novo 
association'' means any Federal savings association chartered by the 
Office, the business of which has not been conducted previously under 
any charter or conducted in the previous three years in substantially 
the same form as is proposed by the de novo association. A ``de novo 
applicant'' means any person or persons who apply to establish a de novo 
association.
    (b) Minimum initial capitalization. (1) A de novo association must 
have at least two million dollars in initial capital stock (stock 
institutions) or initial pledged savings or cash (mutual institutions), 
except as provided in paragraph (b)(2) of this section. The minimum 
initial capitalization is the

[[Page 101]]

amount of proceeds net of all incurred and anticipated securities 
issuance expenses, organization expenses, pre-opening expenses, or any 
expenses paid (or funds advanced) by organizers that are to be 
reimbursed from the proceeds of a securities offering. In securities 
offerings for a de novo association, all securities of a particular 
class in the initial offering shall be sold at the same price.
    (2) On a case by case basis, the Director may, for good cause, 
approve a de novo association that has less than two million dollars in 
initial capital or may require a de novo association to have more than 
two million dollars in initial capital.
    (c) Business and investment plans of de novo associations. (1) To 
assist the Office in making the determinations required under section 
5(e) of the Home Owners' Loan Act, a de novo applicant shall submit a 
business plan describing, for the first three years of operation of the 
de novo association, the major areas of operation, including:
    (i) Lending, leasing and investment activity, including plans for 
meeting Qualified Thrift Lender requirements;
    (ii) Deposit, savings and borrowing activity;
    (iii) Interest-rate risk management;
    (iv) Internal controls and procedures;
    (v) Plans for meeting the credit needs of the proposed de novo 
association's community (including low- and moderate-income 
neighborhoods);
    (vi) Projected statements of condition;
    (vii) Projected statements of operations; and
    (viii) Any other information requested by the Office.
    (2) The business plan shall:
    (i) Provide for the continuation or succession of competent 
management subject to the approval of the Regional Director;
    (ii) Provide that any material change in, or deviation from, the 
business plan must receive the prior approval of the Regional Director;
    (iii) Demonstrate the de novo association's ability to maintain 
required minimum regulatory capital under 12 CFR parts 565 and 567 for 
the duration of the plan.
    (d) Composition of the board of directors. (1) A majority of a de 
novo association's board of directors must be representative of the 
state in which the savings association is located. The Office generally 
will consider a director to be representative of the state if the 
director resides, works or maintains a place of business in the state in 
which the savings association is located. If the association is located 
in a Metropolitan Statistical Area (MSA), Primary Metropolitan 
Statistical Area (PMSA) or Consolidated Metropolitan Statistical Area 
(CMSA) that incorporates portions of more than one state, a director 
will be considered representative of the association's state if he or 
she resides, works or maintains a place of business in the MSA, PMSA or 
CMSA in which the association is located.
    (2) The de novo association's board of directors must be diversified 
and composed of individuals with varied business and professional 
experience. In addition, except in the case of a de novo association 
that is wholly-owned by a holding company, no more than one-third of a 
board of directors may be in closely related businesses. The background 
of each director must reflect a history of responsibility and personal 
integrity, and must show a level of competence and experience sufficient 
to demonstrate that such individual has the ability to direct the 
policies of the association in a safe and sound manner. Where a de novo 
association is owned by a holding company that does not have substantial 
independent economic substance, the foregoing standards will be applied 
to the board of directors of the holding company.
    (e) Management Officials. Proposed stockholders of ten percent or 
more of the stock of a de novo association will be considered management 
officials of the association for the purpose of the Office's evaluation 
of the character and qualifications of the management of the 
association. In connection with the Office's consideration of an 
application for permission to organize and subsequent to issuance of a 
Federal savings association charter to the association by the Office, 
any individual or group of individuals acting in concert under 12 CFR 
part 574, who owns or proposes

[[Page 102]]

to acquire, directly or indirectly, ten percent or more of the stock of 
an association subject to this section, shall submit a Biographical and 
Financial Report, on forms prescribed by the Office, to the Regional 
Director.
    (f) Supervisory transactions. This section does not apply to any 
application for a Federal savings association charter submitted in 
connection with a transfer or an acquisition of the business or accounts 
of a savings association if the Office determines that such transfer or 
acquisition is instituted for supervisory purposes, or in connection 
with applications for Federal charters for interim de novo associations 
chartered for the purpose of facilitating mergers, holding company 
reorganizations, or similar transactions.

[62 FR 27180, May 19, 1997; 62 FR 28983, May 29, 1997]



Sec. 543.5  Issuance of charter.

    Approval by the Office of the organization of a Federal savings 
association or the conversion of an insured association to Federal 
savings association form shall constitute issuance of a charter and 
shall be final, provided that the association complies with the 
procedures set out at Sec. 544.2(a) of this chapter. The charter shall 
conform with the requirements of Sec. 544.1 of this chapter, the 
permissible provisions of Sec. 544.2, or other provisions specifically 
approved by the Office.



Sec. 543.6  Completion of organization.

    (a)(1) Temporary officers. When the Office approves an application 
for permission to organize a Federal savings association, the applicants 
shall constitute the organization committee and elect a chairperson, 
vice-chairperson, and a secretary, who shall act as the temporary 
officers of the association until their successors are duly elected and 
qualified. The temporary officers may effect compliance with any 
conditions prescribed by the Office.
    (2) Organization meeting. Promptly upon receipt of a charter, the 
temporary officers shall call a meeting of the association's capital 
subscribers; notice of such meeting shall be mailed to each subscriber 
at least 5 days before the meeting day. Subscribers who have subscribed 
for a majority of the association's capital, present in person or by 
proxy, shall constitute a quorum. At such meeting, directors of the 
association shall be elected according to the association's charter and 
bylaws, and any other action permitted by such charter and bylaws may be 
taken; any such action shall be considered an acceptance by the 
association of such charter and of such bylaws, which shall be in the 
form provided in parts 544 and 552 of this chapter.
    (b) First meeting of directors. Upon election, the association's 
board of directors shall hold a meeting to elect officers of the 
association as provided by its charter and bylaws and to take any other 
action necessary to permit operation of the association in accordance 
with law, the association's charter and bylaws, and these rules and 
regulations. When such officers have been bonded under Sec. 563.190 of 
this chapter, they shall immediately collect the sums due on 
subscriptions to the association's capital.
    (c) Membership in Federal Home Loan Bank and insurance of accounts. 
When a Federal savings association's charter is issued it must promptly 
qualify as a member of a Federal Home Loan Bank and meet all 
requirements necessary to obtain insurance of its accounts by the 
Federal Deposit Insurance Corporation.
    (d) Failure to complete. Organization of a Federal savings 
association is completed when the organization meeting and the first 
meeting of its directors have been held, permanent officers have been 
bonded, the association holds the cash required to be paid on 
subscriptions to its capital, if required, Federal Home Loan Bank 
membership has been obtained and Federal Deposit Insurance Corporation 
insurance of accounts has been confirmed and any conditions imposed by 
the Office in connection with approval of the application have been met. 
If organization is not so completed within six months after issuance of 
a charter, or within such additional period as the Director or his or 
her designee may for good cause grant, and in the case of an interim 
Federal savings association, if a merger, or other transaction 
facilitated by the existence of an interim association, has not been 
approved, the charter shall become void and all cash

[[Page 103]]

collected on subscriptions shall thereupon be returned.



Sec. 543.7  Limitations on transaction of business.

    No person may organize a Federal savings association, collect money 
from others for such purpose, or represent himself or herself as 
authorized to do so, and no Federal savings association shall transact 
any business prior to completion of its organization, except as provided 
in this part.



Sec. 543.7-1  Federal savings association created in connection with an 

association in default or in danger of default.

    The preceding sections of this part do not apply to a Federal 
savings association which is proposed by the Federal Deposit Insurance 
Corporation or the Resolution Trust Corporation under section 11(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(c)) or section 21A of 
the Federal Home Loan Bank Act (12 U.S.C. 1441A), or is otherwise 
chartered by the Office in connection with an association in default or 
in danger of default. Incorporation and organization of such 
associations are complete when the Director or his or her designee so 
determines.

                               Conversion



Sec. 543.8  Conversion of depository institutions to Federal mutual charter.

    (a) With the approval of the OTS, any depository institution, as 
defined in Sec. 552.13 of this chapter, that is in mutual form, may 
convert into a Federal mutual savings association, provided that:
    (1) The depository institution, upon conversion, will have its 
deposits insured by the Federal Deposit Insurance Corporation;
    (2) The depository institution, in accomplishing the conversion, 
complies with all applicable state and federal statutes and regulations, 
and OTS policies, and obtains all necessary regulatory and member 
approvals; and
    (3) The resulting Federal mutual association conforms, within the 
time prescribed by the OTS, to the requirements of section 5(c) of the 
Home Owners' Loan Act.
    (b) Recommendations regarding applications for issuance of Federal 
charters are privileged, confidential and subject to Sec. 510.5 (b) and 
(c) of this chapter.

[54 FR 49482, Nov. 30, 1989, as amended at 57 FR 14339, Apr. 20, 1992; 
60 FR 66717, Dec. 26, 1995; 62 FR 45309, Aug. 27, 1997]



Sec. 543.9  Application for conversion to Federal mutual charter.

    (a)(1) Filing. Any depository institution that proposes to convert 
to a Federal mutual association as provided in Sec. 543.8 must, after 
approval by its board of directors, file an application on forms 
obtained from OTS. The applicant must submit any financial statements or 
other information OTS may require.
    (2) Procedures. An application for conversion filed under this 
section is subject to the procedures for organization of a federal 
mutual association at Sec. 543.2(d) through (f) of this chapter.
    (b) Plan of conversion. The applicant shall submit with its 
application a plan of conversion specifying the location of the home 
office and any branch offices to be maintained by the Federal savings 
association, and providing for:
    (1) Appropriate reserves and surplus for the Federal savings 
association;
    (2) Satisfaction in full or assumption by the Federal savings 
association of all creditor obligations of the applicant;
    (3) Issuance by the Federal savings association of savings accounts 
to current holders of withdrawable accounts in an amount equalling the 
value of such accounts; and
    (4) If applicable, issuance of additional savings accounts to 
current holders of nonwithdrawable capital stock of the applicant in an 
amount equalling the value of their nonwithdrawable capital stock, 
including the present value of any preference to which such holders are 
entitled.
    (c) Action on application. The OTS will consider such application 
and any information submitted with the application, and may approve the 
application in accordance with section 5(e) of the Home Owners' Loan Act 
and Sec. 543.2(g)(1). Converting depository institutions that have been 
in existence less than three years will be subject to

[[Page 104]]

all approval criteria and other requirements applicable to de novo 
Federal associations. Approval of an application and issuance by the OTS 
of a charter will be subject to:
    (1) Compliance by the applicant with all conditions prescribed in 
the approval;
    (2) Receipt by the applicant of approval of the plan of conversion 
by such vote as may be required by the laws of the applicant's 
jurisdiction to consider such action;
    (3) In the case of a converting association the accounts of which 
are not insured by the Federal Deposit Insurance Corporation, receipt by 
the OTS of written confirmation from the Federal Deposit Insurance 
Corporation that the accounts of the converting association will be 
insured by the Federal Deposit Insurance Corporation; and
    (4) Receipt by the OTS of written confirmation from the appropriate 
Federal Home Loan Bank of approval of the converting institution's 
application for Federal Home Loan Bank membership, if the institution is 
not a member.

[54 FR 49482, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990; 
57 FR 14339, Apr. 20, 1992; 62 FR 45309, Aug. 27, 1997; 66 FR 13005, 
Mar. 2, 2001]



Sec. 543.10  Organization after conversion.

    Except as provided in Sec. 543.11, after a Federal charter is 
issued under Sec. 543.9 the association's members shall, after due 
notice, or upon a valid adjournment of a previous legal meeting, hold a 
meeting to elect directors and take all other action necessary fully to 
effect the conversion and operate the association in accordance with law 
and these rules and regulations. Immediately thereafter the board of 
directors shall meet, elect officers, and transact any other appropriate 
business.



Sec. 543.11  Organization plan for governance during first years after 

issuance of Federal mutual savings bank charter.

    (a) Organizational meeting. Except as provided in paragraph (c)(1) 
of this section, promptly upon receipt of a charter, the officers of a 
Federal mutual savings bank which, immediately prior to conversion, was 
a state chartered mutual savings bank, shall call a meeting of the 
members. Notice for, and conduct of, such meeting shall be in accordance 
with the bank's Federal charter and bylaws. Business to be conducted at 
the organizational meeting shall include the election of trustees (who 
may also be known as a board of directors) and any other matters 
permitted by the charter and bylaws. Any action taken at such meeting 
shall be deemed an acceptance of the charter and bylaws approved by the 
Office pursuant to Sec. 544.1 of this chapter.
    (b) First meeting of trustees. Upon election or appointment, the 
board of trustees shall hold a meeting to elect the officers of the bank 
in accordance with its Federal charter and bylaws, and to take other 
action necessary to permit the operation of the bank in accordance with 
the Home Owners' Loan Act of 1933, as amended, the bank's charter and 
bylaws, these rules and regulations, and orders of the Office.
    (c) Plan for governance of association during first six years after 
issuance of Federal charter. (1)(i) An applicant for a Federal mutual 
savings bank charter may submit a plan which provides that each member 
of its governing board, i.e., board of trustees, managers, or directors, 
may continue to serve, provided that within two years of the issuance of 
a Federal charter at least one-fifth of the members of such board shall 
have been elected by vote, either in person or by proxy, of the bank's 
membership as provided in its Federal charter, that within three years 
of the issuance of its Federal charter at least two-fifths of the 
members of such board shall have been elected by such a membership vote, 
that within four years of the issuance of its Federal charter at least 
three-fifths of the members of such board shall have been elected by 
such a membership vote, that within five years of the issuance of its 
Federal charter at least four-fifths of the members of such board shall 
have been elected by such a membership vote, and that within six years 
of the issuance of its Federal charter all of the members of such board 
shall have been elected by such a membership vote.
    (ii) The plan:

[[Page 105]]

    (A) Shall set forth the names of those persons who are being 
proposed for service on the applicant's governing board after conversion 
to a Federal charter,
    (B) Shall show how trustees not elected by the converted bank's 
membership will be appointed or otherwise selected, and
    (C) Shall provide that no trustees may be appointed or elected to 
terms of more than three years.
    (iii) The plan may provide that
    (A) After receipt of its Federal charter the bank will be organized 
by its existing governing board,
    (B) Within the first two years following receipt of its Federal 
charter, the bank's charter may be amended without a membership vote, 
provided any such amendment is first approved by a two-thirds vote of 
its board of trustees and is thereafter approved by the Office, and
    (C) The bank's first annua1 membership meeting need not take place 
until two years after receipt of its Federal charter.
    (2) Except to the extent that the Office approves a plan under this 
paragraph (c) which is inconsistent with other provisions of this 
section, a Federal mutual savings bank shall in all respects comply with 
those other provisions.

[54 FR 49482, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995]



Sec. 543.11-1  Grandfathered authority.

    (a) A Federal savings bank formerly chartered or designated as a 
mutual savings bank under state law may exercise any authority it was 
authorized to exercise as a mutual savings bank under state law at the 
time of its conversion from a state mutual savings bank to a Federal or 
other state charter. Except to the extent such authority may be 
exercised by Federal savings associations not enjoying grandfathered 
rights hereunder, such authority may be exercised only to the degree 
authorized under state law at the time of such conversion. Unless 
otherwise determined by the Director, an association, in the exercise of 
grandfathered authority, may continue to follow applicable state laws 
and regulations in effect at the time of such conversion.
    (b) A Federal savings association that acquires, or has acquired, a 
Federal savings bank by merger or consolidation may itself exercise any 
grandfathered rights enjoyed by the disappearing institution, whether 
such rights were obtained directly through conversion or through merger 
or consolidation. The extent of the grandfathered rights of a Federal 
savings association that disappeared prior to the effective date of this 
section shall be determined exclusively pursuant to this section.
    (c) This section shall not be construed to prevent the exercise by a 
Federal savings association enjoying grandfathered rights hereunder of 
authority that is available under the applicable state law only upon the 
occurrence of specific preconditions, such as the attainment of a 
particular future date or specified level of regulatory capital, which 
have not occurred at the time of conversion from a state mutual savings 
bank, provided they occur thereafter.
    (d) This section shall not be construed to permit the exercise of 
any particular authority on a more liberal basis than is allowable under 
the most liberal construction of either state or Federal law or 
regulation.



Sec. 543.14  Continuity of existence.

    The corporate existence of an association converting under this part 
shall continue in its successor. Each savings or demand accountholder 
shall receive a savings account or accounts in the converted association 
equal in amount to the value of accounts held in the former association.

[54 FR 49482, Nov. 30, 1989, as amended at 61 FR 64015, Dec. 3, 1996]



PART 544_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_CHARTER AND BYLAWS--Table of 

Contents



                                 Charter

Sec.
544.1 Federal mutual charter.
544.2 Charter amendments.
544.4 Issuance of charter.

                                 Bylaws

544.5 Federal mutual savings association bylaws.

[[Page 106]]

544.6 Effect of subsequent charter or bylaw change.

                              Availability

544.7 In association offices.
544.8 Communication between members of a Federal mutual savings 
          association.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et seq.

    Source: 54 FR 49486, Nov. 30, 1989, unless otherwise noted.

                                 Charter



Sec. 544.1  Federal mutual charter.

    A Federal mutual savings association shall have a charter in the 
following form, which may include any of the additional provisions set 
forth in Sec. 544.2 of this Part, if such provisions are specifically 
requested. A charter for a Federal mutual savings bank shall substitute 
the term ``savings bank'' for ``association.'' The term ``trustee'' may 
be substituted for the term ``director.'' Associations adopting this 
charter with existing borrower members must grandfather those borrower 
members who were members as of the date of issuance of the new charter 
by the Office. Such borrowers shall have one vote for the period of time 
such borrowings are in existence.

                         Federal Mutual Charter

    Section 1. Corporate title. The full corporate title of the Federal 
savings association is ------.
    Section 2. Office. The home office shall be located in ------ [city, 
state].
    Section 3. Duration. The duration of the association is perpetual.
    Section 4. Purpose and powers. The purpose of the association is to 
pursue any or all of the lawful objectives of a Federal mutual savings 
association chartered under section 5 of the Home Owners' Loan Act and 
to exercise all the express, implied, and incidental powers conferred 
thereby and by all acts amendatory thereof and supplemental thereto, 
subject to the Constitution and laws of the United States as they are 
now in effect, or as they may hereafter be amended, and subject to all 
lawful and applicable rules, regulations, and orders of the Office of 
Thrift Supervision (``Office'').
    Section 5. Capital. The association may raise capital by accepting 
payments on savings and demand accounts and by any other means 
authorized by the Office.
    Section 6. Members. All holders of the association's savings, 
demand, or other authorized accounts are members of the association. In 
the consideration of all questions requiring action by the members of 
the association, each holder of an account shall be permitted to cast 
one vote for each $100, or fraction thereof, of the withdrawal value of 
the member's account. No member, however, shall cast more than 1000 
votes. All accounts shall be nonassessable.
    Section 7. Directors. The association shall be under the direction 
of a board of directors. The authorized number of directors shall not be 
fewer than five nor more than fifteen persons, as fixed in the 
association's bylaws, except that the number of directors may be 
decreased to a number less than five or increased to a number greater 
than fifteen with the prior approval of the Director of the Office or 
his or her delegate.
    Section 8. Capital, surplus, and distribution of earnings. The 
association shall maintain for the purpose of meeting losses the amount 
of capital required by section 5 of the Home Owners' Loan Act and by 
regulations of the Office. The association shall distribute net earnings 
on its accounts on such basis and in accordance with such terms and 
conditions as may from time to time be authorized by the Director of the 
Office: Provided, That the association may establish minimum-balance 
requirements for accounts to be eligible for distribution of earnings.
    All holders of accounts of the association shall be entitled to 
equal distribution of assets, pro rata to the value of their accounts, 
in the event of voluntary or involuntary liquidation, dissolution, or 
winding up of the association. Moreover, in any such event, or in any 
other situation in which the priority of such accounts is in 
controversy, all such accounts shall, to the extent of their withdrawal 
value, be debts of the association having the same priority as the 
claims of general creditors of the association not having priority 
(other than any priority arising or resulting from consensual 
subordination) over other general creditors of the association.
    Section 9. Amendment of charter. Adoption of any preapproved charter 
amendment shall be effective after such preapproved amendment has been 
approved by the members at a legal meeting. Any other amendment, 
addition, change, or repeal of this charter must be approved by the 
Office prior to approval by the members at a legal meeting, and shall be 
effective upon filing with the Office in accordance with regulatory 
procedures.

Attest:_________________________________________________________________
 Secretary of the Association

By:_____________________________________________________________________
 President or Chief Executive Officer of the Association

Attest:_________________________________________________________________
 Secretary of the Office of Thrift Supervision

By:_____________________________________________________________________

[[Page 107]]

 Director of the Office of Thrift Supervision

Effective Date:_________________________________________________________

[54 FR 49486, Nov. 30, 1989, as amended at 61 FR 64015, Dec. 3, 1996]



Sec. 544.2  Charter amendments.

    (a) General. In order to adopt a charter amendment, a Federal mutual 
savings association must comply with the following requirements:
    (1) Board of directors approval. The board of directors of the 
association must adopt a resolution proposing the charter amendment that 
states the text of such amendment;
    (2) Form of filing--(i) Application requirement. If the proposed 
charter amendment would: render more difficult or discourage a merger, 
proxy contest, the assumption of control by a mutual account holder of 
the association, or the removal of incumbent management; or involve a 
significant issue of law or policy; then, the association shall file the 
proposed amendment and obtain the prior approval of the OTS.
    (ii) Notice requirement. If the proposed charter amendment does not 
involve a provision that would be covered by paragraph (a)(2)(i) of this 
section and is permissible under all applicable laws, rules and 
regulations, then the association shall submit the proposed amendment to 
the OTS, at least 30 days prior to the effective date of the proposed 
charter amendment.
    (b) Approval. Any charter amendment filed pursuant to paragraph 
(a)(2)(ii) of this section shall automatically be approved 30 days from 
the date of filing of such amendment, provided that the association 
follows the requirements of its charter in adopting such amendment. This 
automatic approval does not apply if, prior to the expiration of such 
30-day period, the OTS notifies the association that such amendment is 
rejected or that such amendment is deemed to be filed under the 
provisions of paragraph (a)(2)(i) of this section. In addition, 
notwithstanding anything in paragraph (a) of this section to the 
contrary, the following charter amendments, including the adoption of 
the Federal mutual charter as set forth in Sec. 544.1 of this part, 
shall be effective and deemed approved at the time of adoption, if 
adopted without change and filed with OTS, within 30 days after 
adoption, provided the association follows the requirements of its 
charter in adopting such amendments:
    (1) Purpose and powers. Add a second paragraph to section 4, as 
follows:

    Section 4. Purpose and powers. * * * The association shall have the 
express power: (i) To act as fiscal agent of the United States when 
designated for that purpose by the Secretary of the Treasury, under such 
regulations as the Secretary may prescribe, to perform all such 
reasonable duties as fiscal agent of the United States as may be 
required, and to act as agent for any other instrumentality of the 
United States when designated for that purpose by any such 
instrumentality; (ii) To sue and be sued, complain and defend in any 
court of law or equity; (iii) To have a corporate seal, affixed by 
imprint, facsimile or otherwise; (iv) To appoint officers and agents as 
its business shall require and allow them suitable compensation; (v) To 
adopt bylaws not inconsistent with the Constitution or laws of the 
United States and rules and regulations adopted thereunder and under 
this Charter; (vi) To raise capital, which shall be unlimited, by 
accepting payments on savings, demand, or other accounts, as are 
authorized by rules and regulations made by the Office, and the holders 
of all such accounts or other accounts as shall, to such extent as may 
be provided by such rules and regulations, be members of the association 
and shall have such voting rights and such other rights as are thereby 
provided; (vii) To issue notes, bonds, debentures, or other obligations, 
or securities, provided by or under any provision of Federal statute as 
from time to time is in effect; (viii) To provide for redemption of 
insured accounts; (ix) To borrow money without limitation and pledge and 
otherwise encumber any of its assets to secure its debts; (x) To lend 
and otherwise invest its funds as authorized by statute and the rules 
and regulations of the Office; (xi) To wind up and dissolve, merge, 
consolidate, convert, or reorganize; (xii) To purchase, hold, and convey 
real estate and personalty consistent with its objects, purposes, and 
powers; (xiii) To mortgage or lease any real estate and personalty and 
take such property by gift, devise, or bequest; and (xiv) To exercise 
all powers conferred by law. In addition to the foregoing powers 
expressly enumerated, this association shall have power to do all things 
reasonably incident to the accomplishment of its express objects and the 
performance of its express powers.

    (2) Title change. A Federal mutual savings association that has 
complied with Sec. 543.1(b) of this chapter may amend its charter by 
substituting a new corporate title in section 1.

[[Page 108]]

    (3) Home office. A Federal mutual savings association may amend its 
charter by substituting a new home office in section 2, if it has 
complied with applicable requirements of Sec. 545.95 of this chapter.
    (4) Maximum number of votes. A Federal mutual savings association 
may amend its charter by substituting ------ votes per member in section 
6. [Fill in a number from 1 to 1000.]
    (c) Reissuance of charter. A Federal mutual savings association that 
has amended its charter may apply to have its charter, including the 
amendments, reissued by the Office. Such request for reissuance should 
be filed with the Corporate Secretary at the Washington Headquarters 
Office at the address listed at Sec. 516.40(b) of this chapter and 
contain signatures required under Sec. 544.1 of this part, together 
with such supporting documents as may be needed to demonstrate that the 
amendments were properly adopted.

[54 FR 49486, Nov. 30, 1989, as amended at 55 FR 13510, Apr. 11, 1990; 
57 FR 14339, Apr. 20, 1992; 61 FR 64016, Dec. 3, 1996; 63 FR 46160, Aug. 
31, 1998; 66 FR 13005, Mar. 2, 2001; 69 FR 68248, Nov. 24, 2004]



Sec. 544.4  Issuance of charter.

    Issuance by the Office of a charter to a Federal mutual savings 
association within the meaning of Sec. 543.5 of this chapter 
constitutes the incorporation of that association by the Office.

                                 Bylaws



Sec. 544.5  Federal mutual savings association bylaws.

    (a) General. A Federal mutual savings association shall operate 
under bylaws that contain provisions that comply with all requirements 
specified by the OTS in this section and that are not otherwise 
inconsistent with the provisions of this section, the association's 
charter, and all other applicable laws, rules, and regulations provided 
that, a bylaw provision inconsistent with the provisions of this section 
may be adopted with the approval of the OTS. Bylaws may be adopted, 
amended or repealed by a majority of the votes cast by the members at a 
legal meeting or a majority of the association's board of directors. The 
bylaws for a Federal mutual savings bank shall substitute the term 
``savings bank'' for ``association''. The term ``trustee'' may be 
substituted for the term ``director''.
    (b) The following requirements are applicable to Federal mutual 
savings associations:
    (1) Annual meetings of members. An association shall provide for and 
conduct an annual meeting of its members for the election of directors 
and at which any other business of the association may be conducted. 
Such meeting shall be held, as designated by its board of directors, at 
a location within the state that constitutes the principal place of 
business of the association, or at any other convenient place the board 
of directors may designate, and at a date and time within 150 days after 
the end of the association's fiscal year. At each annual meeting, the 
officers shall make a full report of the financial condition of the 
association and of its progress for the preceding year and shall outline 
a program for the succeeding year.
    (2) Special meetings of members. Procedures for calling any special 
meeting of the members and for conducting such a meeting shall be set 
forth in the bylaws. The subject matter of such special meeting must be 
established in the notice for such meeting. The board of directors of 
the association or the holders of 10 percent or more of the voting 
capital shall be entitled to call a special meeting. For purposes of 
this section, ``voting capital'' means FDIC-insured deposits as of the 
voting record date.
    (3) Notice of meeting of members. Notice specifying the date, time, 
and place of the annual or any special meeting and adequately describing 
any business to be conducted shall be published for two successive weeks 
immediately prior to the week in which such meeting shall convene in a 
newspaper of general circulation in the city or county in which the 
principal place of business of the association is located, or mailed 
postage prepaid at least 15 days and not more than 45 days prior to the 
date on which such meeting shall convene to each of its members of 
record at the last address appearing on the books of the association. A 
similar notice shall be posted in a conspicuous place in

[[Page 109]]

each of the offices of the association during the 14 days immediately 
preceding the date on which such meeting shall convene. The bylaws may 
permit a member to waive in writing any right to receive personal 
delivery of the notice. When any meeting is adjourned for 30 days or 
more, notice of the adjournment and reconvening of the meeting shall be 
given as in the case of the original meeting.
    (4) Fixing of record date. For the purpose of determining members 
entitled to notice of or to vote at any meeting of members or any 
adjournment thereof, or in order to make a determination of members for 
any other proper purpose, the bylaws shall provide for the fixing of a 
record date and a method for determining from the books of the 
association the members entitled to vote. Such date shall be not more 
than 60 days nor fewer than 10 days prior to the date on which the 
action, requiring such determination of members, is to be taken. The 
same determination shall apply to any adjourned meeting.
    (5) Member quorum. Any number of members present and voting, 
represented in person or by proxy, at a regular or special meeting of 
the members shall constitute a quorum. A majority of all votes cast at 
any meeting of the members shall determine any question, unless 
otherwise required by regulation. At any adjourned meeting, any business 
may be transacted that might have been transacted at the meeting as 
originally called. Members present at a duly constituted meeting may 
continue to transact business until adjournment.
    (6) Voting by proxy. Procedures shall be established for voting at 
any annual or special meeting of the members by proxy pursuant to the 
rules and regulations of the Office, including the placing of such 
proxies on file with the secretary of the association, for verification, 
prior to the convening of such meeting. Proxies may be given 
telephonically or electronically as long as the holder uses a procedure 
for verifying the identity of the member. All proxies with a term 
greater than eleven months or solicited at the expense of the 
association must run to the board of directors as a whole, or to a 
committee appointed by a majority of such board.
    (7) Communications between members. Provisions relating to 
communications between members shall be consistent with Sec. 544.8 of 
this part. No member, however, shall have the right to inspect or copy 
any portion of any books or records of a Federal mutual savings 
association containing:
    (i) A list of depositors in or borrowers from such association;
    (ii) Their addresses;
    (iii) Individual deposit or loan balances or records; or
    (iv) Any data from which such information could be reasonably 
constructed.
    (8) Number of directors, membership. The bylaws shall set forth a 
specific number of directors, not a range. The number of directors shall 
be not fewer than five nor more than fifteen, unless a higher or lower 
number has been authorized by the Director of the Office or his or her 
designee. Each director of the association shall be a member of the 
association. Directors may be elected for periods of one to three years 
and until their successors are elected and qualified, but if a staggered 
board is chosen, provision shall be made for the election of 
approximately one-third or one-half of the board each year, as 
appropriate. State-chartered savings banks converting to Federal savings 
banks may include alternative provisions for the election and term of 
office of directors so long as such provisions are authorized by the 
Office, and provide for compliance with the standard provisions of this 
section no later than six years after the conversion to a Federal 
savings association.
    (9) Meetings of the board. The board of directors shall determine 
the place, frequency, time, procedure for notice, which shall be at 
least 24 hours unless waived by the directors, and waiver of notice for 
all regular and special meetings. The meetings shall be under the 
direction of a chairman, appointed annually by the board; or in the 
absence of the chairman, the meetings shall be under the direction of 
the president. The board also may permit telephonic participation at 
meetings. The bylaws may provide for action to be taken

[[Page 110]]

without a meeting if unanimous written consent is obtained for such 
action. A majority of the authorized directors shall constitute a quorum 
for the transaction of business. The act of a majority of the directors 
present at any meeting at which there is a quorum shall be the act of 
the board.
    (10) Officers, employees. and agents. (i) The bylaws shall contain 
provisions regarding the officers of the association, their functions, 
duties, and powers. The officers of the association shall consist of a 
president, one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom shall be elected annually by the board of 
directors. Such other officers and assistant officers and agents as may 
be deemed necessary may be elected or appointed by the board of 
directors or chosen in such other manner as may be prescribed in the 
bylaws. Any two or more offices may be held by the same person, except 
the offices of president and secretary.
    (ii) All officers and agents of the association, as between 
themselves and the association, shall have such authority and perform 
such duties in the management of the association as may be provided in 
the bylaws, or as may be determined by resolution of the board of 
directors not inconsistent with the bylaws. In the absence of any such 
provision, officers shall have such powers and duties as generally 
pertain to their respective offices. Any officer may be removed by the 
board of directors with or without cause, but such removal, other than 
for cause, shall be without prejudice to the contractual rights, if any, 
of the person so removed.
    (iii) Any indemnification provision must provide that any 
indemnification is subject to applicable Federal law, rules, and 
regulations.
    (11) Vacancies, resignation or removal of directors. Members of the 
association shall elect directors by ballot: Provided, that in the event 
of a vacancy on the board, the board of directors may, by their 
affirmative vote, fill such vacancy, even if the remaining directors 
constitute less than a quorum. A director elected to fill a vacancy 
shall be elected to serve only until the next election of directors by 
the members. The bylaws shall set out the procedure for the resignation 
of a director, which shall be by written notice or by any other 
procedure established in the bylaws. Directors may be removed only for 
cause as defined in Sec. 563.39 of this chapter, by a vote of the 
holders of a majority of the shares then entitled to vote at an election 
of directors.
    (12) Powers of the board. The board of directors shall have the 
power:
    (i) By resolution, to appoint from among its members and remove an 
executive committee and one or more other committees, which committee[s] 
shall have and may exercise all the powers of the board between the 
meetings or the board; but no such committee shall have the authority of 
the board to amend the charter or bylaws, adopt a plan of merger, 
consolidation, dissolution, or provide for the disposition of all or 
substantially all the property and assets of the association. Such 
committee shall not operate to relieve the board, or any member thereof, 
of any responsibility imposed by law;
    (ii) To fix the compensation of directors, officers, and employees; 
and to remove any officer or employee at any time with or without cause;
    (iii) To exercise any and all of the powers of the association not 
expressly reserved by the charter to the members.
    (13) Nominations for directors. The bylaws shall provide that 
nominations for directors may be made at the annual meeting by any 
member and shall be voted upon, except, however, the bylaws may require 
that nominations by a member must be submitted to the secretary and then 
prominently posted in the principal place of business, at least 10 days 
prior to the date of the annual meeting. However, if such provision is 
made for prior submission of nominations by a member, then the bylaws 
must provide for a nominating committee, which, except in the case of a 
nominee substituted as a result of death or other incapacity, must 
submit nominations to the secretary and have such nominations similarly 
posted at least 15 days prior to the date of the annual meeting.
    (14) New business. The bylaws shall provide procedures for the 
introduction of new business at the annual meeting. Those provisions may 
require that such

[[Page 111]]

new business be stated in writing and filed with the secretary prior to 
the annual meeting at least 30 days prior to the date of the annual 
meeting.
    (15) Amendment. Bylaws may include any provision for their amendment 
that would be consistent with applicable law, rules, and regulations and 
adequately addresses its subject and purpose.
    (i) Amendments shall be effective:
    (A) After approval by a majority vote of the authorized board, or by 
a majority of the vote cast by the members of the association at a legal 
meeting; and
    (B) After receipt of any applicable regulatory approval.
    (ii) When an association fails to meet its quorum requirement, 
solely due to vacancies on the board, the bylaws may be amended by an 
affirmative vote of a majority of the sitting board.
    (16) Miscellaneous. The bylaws may also address the subject of age 
limitations for directors or officers as long as they are consistent 
with applicable Federal law, rules or regulations, and any other 
subjects necessary or appropriate for effective operation of the 
association.
    (c) Form of filing--(1) Application requirement. (i) Any bylaw 
amendment shall be submitted to the OTS if it would:
    (A) Render more difficult or discourage a merger, proxy contest, the 
assumption of control by a mutual account holder of the association, or 
the removal of incumbent management;
    (B) Involve a significant issue of law or policy, including 
indemnification, conflicts of interest, and limitations on director or 
officer liability; or
    (C) Be inconsistent with the requirements of this section or with 
applicable laws, rules, regulations, or the association's charter.
    (ii) Applications submitted under paragraph (c)(1)(i) of this 
section are subject to standard treatment processing procedures at part 
516, subparts A and E of this chapter.
    (iii) For purposes of this paragraph (c), bylaw provisions that 
adopt the language of the model or optional bylaws in OTS's Application 
Processing Handbook, if adopted without change, and filed with OTS 
within 30 days after adoption, are effective upon adoption.
    (2) Filing requirement. If the proposed bylaw amendment does not 
involve a provision that would be covered by paragraph (c)(1) or (c)(3) 
of this section, then the association shall submit the amendment to the 
OTS at least 30 days prior to the date the bylaw amendment is to be 
adopted by the association.
    (3) Corporate governance procedures. A Federal mutual association 
may elect to follow the corporate governance procedures of the laws of 
the state where the main office of the institution is located, provided 
that such procedures may be elected only to the extent not inconsistent 
with applicable Federal statutes, regulations, and safety and soundness, 
and such procedures are not of the type described in paragraph (c)(1) of 
this section. If this election is selected, a Federal mutual association 
shall designate in its bylaws the provision or provisions from the body 
of law selected for its corporate governance procedures, and shall file 
a copy of such bylaws, which are effective upon adoption, within 30 days 
after adoption. The submission shall indicate, where not obvious, why 
the bylaw provisions meet the requirements stated in paragraph (c)(1) of 
this section.
    (d) Effectiveness. Any bylaw amendment filed pursuant to paragraph 
(c)(2) of this section shall automatically be effective 30 days from the 
date of filing of such amendment, provided that the association follows 
the requirements of its charter and bylaws in adopting such amendment. 
This automatic effective date does not apply if, prior to the expiration 
of such 30-day period, the OTS notifies the association that such 
amendment is rejected or that such amendment requires an application to 
be filed pursuant to paragraph (c)(1) of this section.

[54 FR 49486, Nov. 30, 1989, as amended at 55 FR 13511, Apr. 11, 1990; 
57 FR 14339, Apr. 20, 1992; 61 FR 64016, Dec. 3, 1996; 62 FR 66262, Dec. 
18, 1997; 66 FR 13006, Mar. 2, 2001; 66 FR 15020, Mar. 15, 2001]



Sec. 544.6  Effect of subsequent charter or bylaw change.

    Notwithstanding any subsequent change to its charter or bylaws, the 
authority of a Federal mutual savings association to engage in any 
transaction

[[Page 112]]

shall be determined only by the association's charter or bylaws then in 
effect.

                              Availability



Sec. 544.7  In association offices.

    A Federal mutual savings association shall make available to its 
members at all times in its offices a true copy of its charter and 
bylaws, including any amendments, and shall deliver such a copy to any 
member on request.



Sec. 544.8  Communication between members of a Federal mutual savings 

association.

    (a) Right of communication with other members. A member of a Federal 
mutual savings association has the right to communicate, as prescribed 
in paragraph (b) of this section, with other members of the Federal 
savings association regarding any matter related to the Federal savings 
association's affairs, except for ``improper'' communications, as 
defined in paragraph (c) of this section. The association may not defeat 
that right by redeeming a savings member's savings account in the 
Federal mutual savings association.
    (b) Member communication procedures. If a member of a Federal mutual 
savings association desires to communicate with other members, the 
following procedures shall be followed:
    (1) The member shall give the Federal mutual savings association a 
written request to communicate;
    (2) If the proposed communication is in connection with a meeting of 
the Federal savings association's members, the request shall be given at 
least thirty days before the annual meeting or 10 days before a special 
meeting;
    (3) The request shall contain--
    (i) The member's full name and address;
    (ii) The nature and extent of the member's interest in the Federal 
savings association at the time the information is given;
    (iii) A copy of the proposed communication; and
    (iv) If the communication is in connection with a meeting of the 
members, the date of the meeting;
    (4) The Federal savings association shall reply to the request 
within either--
    (i) Fourteen days;
    (ii) Ten days, if the communication is in connection with the annual 
meeting; or
    (iii) Three days, if the communication is in connection with a 
special meeting;
    (5) The reply shall provide either--
    (i) The number of the Federal savings association's members and the 
estimated reasonable cost to the Federal savings association of mailing 
to them the proposed communication; or
    (ii) Notification that the Federal savings association has 
determined not to mail the communication because it is ``improper'', as 
defined in paragraph (c) of this section;
    (6) After receiving the amount of the estimated costs of mailing and 
sufficient copies of the communication, the Federal savings association 
shall mail the communication to all members, by a class of mail 
specified by the requesting member, either--
    (i) Within fourteen days;
    (ii) Within seven days, if the communication is in connection with 
the annual meeting;
    (iii) As soon as practicable before the meeting, if the 
communication is in connection with a special meeting; or
    (iv) On a later date specified by the member;
    (7) If the Federal savings association refuses to mail the proposed 
communication, it shall return the requesting member's materials 
together with a written statement of the specific reasons for refusal, 
and shall simultaneously send to the Regional Director two copies each 
of the requesting member's materials, the Federal savings association's 
written statement, and any other relevant material. The materials shall 
be sent within:
    (i) Fourteen days,
    (ii) Ten days if the communication is in connection with the annual 
meeting, or
    (iii) Three days, if the communication is in connection with a 
special meeting,

after the Federal savings association receives the request for 
communication.
    (c) Improper communication. A communication is an ``improper 
communication'' if it contains material which:

[[Page 113]]

    (1) At the time and in the light of the circumstances under which it 
is made:
    (i) Is false or misleading with respect to any material fact; or
    (ii) Omits a material fact necessary to make the statements therein 
not false or misleading, or necessary to correct a statement in an 
earlier communication on the same subject which has become false or 
misleading;
    (2) Relates to a personal claim or a personal grievance, or is 
solicitous of personal gain or business advantage by or on behalf of any 
party;
    (3) Relates to any matter, including a general economic, political, 
racial, religious, social, or similar cause, that is not significantly 
related to the business of the Federal savings association or is not 
within the control of the Federal savings association; or
    (4) Directly or indirectly and without expressed factual foundation:
    (i) Impugns character, integrity, or personal reputation,
    (ii) Makes charges concerning improper, illegal, or immoral conduct, 
or
    (iii) Makes statements impugning the stability and soundness of the 
Federal savings association.

[54 FR 49492, Nov. 30, 1989, as amended at 60 FR 66717, Dec. 26, 1995. 
Redesignated at 61 FR 64018, Dec. 3, 1996.]



PART 545_FEDERAL SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents



Sec.
545.1 General authority.
545.2 Federal preemption.
545.16 Public deposits, depositaries, and fiscal agents.
545.17 Funds transfer services.
545.91 Home office.
545.92 Branch offices.
545.93 Application and notice requirements for branch and home offices.
545.95 What processing procedures apply to my home or branch office 
          application or notice?
545.96 Agency office.
545.101 Fiscal agency.
545.121 Indemnification of directors, officers and employees.

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.

    Source: 54 FR 49492, Nov. 30, 1989, unless otherwise noted.



Sec. 545.1  General authority.

    A Federal savings association may exercise all authority granted it 
by the Home Owners' Loan Act of 1933 (``Act''), 12 U.S.C. 1464, as 
amended, and its charter and bylaws, whether or not implemented 
specifically by Office regulations, subject to the limitations and 
interpretations contained in this part.



Sec. 545.2  Federal preemption.

    The regulations in this part 545 are promulgated pursuant to the 
plenary and exclusive authority of the Office to regulate all aspects of 
the operations of Federal savings associations, as set forth in section 
5(a) of the Act. This exercise of the Office's authority is preemptive 
of any state law purporting to address the subject of the operations of 
a Federal savings association.



Sec. 545.16  Public deposits, depositaries, and fiscal agents.

    (a) Definitions. As used in this section--
    (1) Moneys includes monies and has the meaning it has in applicable 
state law;
    (2) State law includes actions by a governmental body which has a 
charter adopted under the constitution of the state with provisions 
respecting deposits of public money of that body;
    (3) Surety means surety under real and/or personal suretyship, and 
includes guarantor; and
    (4) Terms in paragraph (b) of this section have the meanings they 
have under applicable state law.
    (b) Authority to act as surety for public deposits. (1) A Federal 
savings association that is a deposit association may give bond or 
security for deposit in it of public moneys or investment in it by a 
governmental unit if required to do so by state law, either as an 
alternative condition or otherwise, regardless of the amount required. 
Any bond or security may be given and any substitution or increase 
thereof may be made under this section at any time.
    (2) If state law requires as a condition of such deposit or 
investment that the Federal savings association or its bond or security, 
or any combination thereof, be surety for or with respect to other 
deposits or instruments, whether of that depositor or investor or of any

[[Page 114]]

other(s), and whether in the Federal savings association or in any other 
institution(s) having, when the investments or deposits were made, 
insurance by the Federal Deposit Insurance Corporation, the same shall 
become, or if the state law is self-executing shall be, such surety.
    (c) Depositaries and fiscal agents. Subject to regulation of the 
United States Treasury Department, a Federal savings association may 
serve as a depositary for Federal taxes, as a Treasury tax and loan 
depositary, or as a depositary of public money and fiscal agent of the 
Government or any other instrumentality thereof when designated for that 
purpose by such instrumentality and approved by the Office, and may 
satisfy any requirement in connection therewith, including maintaining 
accounts described in Sec. Sec. 561.33, 561.52, 561.53, and 561.54 of 
this chapter; pledging collateral; and performing the services outlined 
in 31 CFR 202.3(b) or any section that supersedes or amends Sec. 
202.3(b).



Sec. 545.17  Funds transfer services.

    A Federal savings association is authorized to transfer, with or 
without fee, its customers' funds from any account (including a line of 
credit) of the customer at the Federal savings association or at another 
financial intermediary to third parties or other accounts of the 
customer on the customer's order or authorization by any mechanism or 
device, including cashier's checks, conforming with applicable laws and 
established commercial practices.



Sec. 545.91  Home office.

    (a) All operations of a Federal savings association (``you'') are 
subject to direction from the home office.
    (b) You must notify the appropriate OTS Regional Office if the 
permanent address of your home office changes, unless you have submitted 
an application or notice regarding the change under Sec. Sec. 545.93 
and 545.95 of this chapter.

[69 FR 68248, Nov. 24, 2004]



Sec. 545.92  Branch offices.

    (a) Definition. A branch office of a Federal savings association 
(``you'') is any office other than your home office, agency office, 
administrative office, data processing office, or an electronic means or 
facility under part 555 of this chapter.
    (b) Branching. Subject to the application and notice requirements at 
Sec. Sec. 545.93 and 545.95 of this chapter, you may branch in any 
State or States of the United States and its territories unless the 
location would violate:
    (1) Section 5(r) of the HOLA (12 U.S.C. 1464(r));
    (2) Section 10(e)(3) of the HOLA (12 U.S.C. 1467a(e)(3)); or
    (3) Section 13(k)(4) of the FDIA (12 U.S.C. 1823(k)(4)).
    (c) Preemption. This exercise of OTS authority is preemptive of any 
State law purporting to address the subject of branching by a Federal 
savings association.

[69 FR 68248, Nov. 24, 2004]



Sec. 545.93  Application and notice requirements for branch and home offices.

    (a) Application and notice requirements. A Federal savings 
association (``you'') must file an application or notice and receive OTS 
approval or non-objection under Sec. 545.95 before you change the 
permanent location of, or establish a new, home or branch office, except 
as provided in this section.
    (b) Exceptions. You are not required to submit an application or 
notice and receive OTS approval or non-objection under Sec. 545.95 
under the following circumstances:
    (1) Drive-in or pedestrian offices. You may establish a drive-in or 
pedestrian office that is located within 500 feet of a public entrance 
to your existing home or branch office, provided the functions performed 
at the office are limited to functions that are ordinarily performed at 
a teller window.
    (2) Short-distance relocation. You may change the permanent location 
of an existing home or branch office to a site that is within the market 
area and short-distance location area of the existing home or branch 
office. The

[[Page 115]]

short-distance relocation area of an existing office is the area that is 
within:
    (i) A 1000-foot radius of an existing office that is within a 
Principal City in a Metropolitan Statistical Area (MSA) designated by 
the U.S. Department of Commerce;
    (ii) A one-mile radius of an existing office that is within an MSA, 
but is not within a Principal City; or
    (iii) A two-mile radius of an existing office that is not in an MSA.
    (3) Highly-rated Federal savings associations. You may change the 
permanent location of, or establish a new, branch or home office if you 
meet all of the following requirements:
    (i) You are eligible for expedited treatment under Sec. 516.5 of 
this chapter. For the purposes of that section, you must meet the 
capital requirements under part 567 of this chapter before and 
immediately after you change the location of your home or branch office 
or establish a new branch office.
    (ii) You published a notice of your intent to change the location of 
your home or branch office or establish a new branch office. To satisfy 
this publication requirement, you must follow the procedures in subpart 
B of part 516 of this chapter except that:
    (A) Under Sec. 516.55(d) and (e) of this chapter, your public 
notice must state that the public may submit comments to you and to the 
appropriate OTS office(s), and must provide addresses for you and for 
the appropriate OTS office(s) where the public may submit comments;
    (B) Section 516.55(g) of this chapter, which addresses public 
inspections of filings with OTS, does not apply; and
    (C) Under Sec. 516.60 of this chapter, you must publish the public 
notice at least 35 days before you take the proposed action. If you 
publish a public notice more than 12 months before you take the proposed 
action, the publication is invalid.
    (iii) If you intend to change the location of an existing office, 
you posted a notice of your intent in a prominent location in the 
existing office to be relocated. You must post the notice for 30 days 
from the date of publication of the initial public notice described in 
paragraph (b)(3)(ii) of this section.
    (iv)(A) No person files a comment opposing the proposed action 
within 30 days after the date of the publication of the proposed notice, 
or (B) A person files a comment opposing the proposed action and OTS 
determines that the comment raises issues that are not relevant to the 
approval standards in Sec. 545.95(b) of this chapter or that OTS action 
in response to the comment is not required.
    (4) Re-designations of home and branch offices. You may re-designate 
an existing branch office as a home office at the same time that you re-
designate your existing home office as a branch office.
    (c) Section 5(m) of the HOLA. If you are incorporated under the laws 
of, organized in, or do business in the District of Columbia and you 
satisfy the requirements of paragraph (b) of this section, the Director 
of OTS has approved your home or branch office changes under section 
5(m) of the HOLA.
    (d) Maintenance of branch and home office following conversion, 
consolidation, purchase of bulk assets, merger, or purchase from 
receiver. An existing savings association that converts to a federal 
savings association may maintain an existing office and a federal 
savings association may maintain any office acquired through 
consolidation, purchase of bulk assets, merger or purchase from the 
receiver of an association, except to the extent that the approval of 
the conversion, consolidation, merger, or purchase specifies otherwise.
    (e) Prohibition. You may not file an application or notice (or 
utilize any exception described in paragraph (b) of this section) to 
establish a branch office, if you filed an application to merge or 
otherwise surrender your charter and the application has been pending 
for less than six months.

[69 FR 68248, Nov. 24, 2004, as amended at 70 FR 51586, Aug. 31, 2005]



Sec. 545.95  What processing procedures apply to my home or branch office 

application or notice?

    (a) Processing procedures. Applications and notices under Sec. 
545.93 are subject to expedited or standard treatment under the 
application processing procedures at part 516 of this chapter.

[[Page 116]]

    (1) Publication and posting requirements. (i) You must publish a 
public notice of your application or notice in accordance with the 
procedures in subpart B of part 516 of this chapter. Promptly after 
publication, you must transmit copies of the public notice and the 
publisher's affidavit to OTS.
    (ii) If you propose to change the location of an existing office, 
you must also post a notice of the application in a prominent location 
in the office to be relocated. You must post the notice for 30 days from 
the date of publication of the initial public notice.
    (2) Comment procedures. Commenters may submit comments on your 
application or notice in accordance with the procedures in subpart C of 
part 516 of this chapter.
    (3) Meeting procedures. OTS may arrange a meeting in accordance with 
the procedures in subpart D of part 516 of this chapter.
    (4) OTS Review. OTS will process your application or notice in 
accordance with the procedures in subpart E of part 516 of this chapter. 
The applicable review period for applications filed under standard 
treatment is 30 days rather than the time period specified at Sec. 
516.270(a) of this chapter.
    (b) Approval standards. (1) OTS will approve an application (or not 
object to a notice), if your overall policies, condition, and operations 
afford no basis for supervisory objection.
    (i) You should meet or exceed minimum capital requirements under 
part 567 of this chapter and should be at least adequately capitalized 
as described in Sec. 565.4(b)(2) of this chapter, before and 
immediately after the proposed action. If you are undercapitalized as 
described in Sec. 565.4(b)(3), OTS will deny your application (or 
disapprove your notice), unless the proposed action is otherwise 
permitted under section 38(e)(4) of the FDIA.
    (ii) OTS will evaluate your record of helping to meet the credit 
needs of your entire community, including low- and moderate-income 
neighborhoods, under part 563e of this chapter. OTS may:
    (A) Deny your application or disapprove your notice based upon this 
evaluation; or
    (B) Impose a condition to the approval of your application (or non-
objection to your notice) requiring you to improve specific practices 
and/or aspects of your performance under part 563e of this chapter. In 
most cases, a commitment to improve will not be sufficient to overcome a 
seriously deficient record.
    (iii) OTS will review the application or notice under the National 
Environmental Policy Act (42 U.S.C. 3421 et seq.) and the National 
Historic Preservation Act (16 U.S.C. 470).
    (2) In reviewing your application and notice, OTS may consider 
information available from any source, including any comments submitted 
by interested parties or views expressed by interested parties at 
meetings with OTS.
    (3) OTS may approve an amendment to your charter in connection with 
a home office relocation under this section.
    (c) Expiration of OTS approval. (1) You must open or relocate your 
office within twelve months of OTS approval of your application (or the 
date of OTS non-objection to your notice), unless OTS prescribes another 
time period. OTS may extend the time period if it determines that you 
are making a good-faith effort to promptly open or relocate the proposed 
office.
    (2) If you do not open or relocate the proposed office within this 
time period, you must comply with the application and notice 
requirements of this section before you may open or relocate the 
proposed office.

[69 FR 68249, Nov. 24, 2004, as amended at 70 FR 51586, Aug. 31, 2005]



Sec. 545.96  Agency office.

    (a) General. A Federal savings association may establish or maintain 
an agency office to engage in one or more of the following activities: 
(1) Servicing, originating, or approving loans and contracts; (2) 
managing or selling real estate owned by the Federal savings 
association; and (3) conducting fiduciary activities or activities 
ancillary to the association's fiduciary business in compliance with 
subpart A of part 550 of this chapter.
    (b) Additional services. A Federal savings association may request, 
and OTS may approve, any service not listed in

[[Page 117]]

paragraph (a) of this section, except for payment on savings accounts.
    (c) Records. A Federal savings association must maintain records of 
all business it transacts at an agency office. It must maintain these 
records at the agency office, and must transmit copies to a home or 
branch office.

[69 FR 68249, Nov. 24, 2004]



Sec. 545.101  Fiscal agency.

    A Federal savings association designated fiscal agent by the 
Secretary of the Treasury or with Office approval by another 
instrumentality of the United States, shall, as such, perform such 
reasonable duties and exercise only such powers and privileges as the 
Secretary of the Treasury or such instrumentality may prescribe.



Sec. 545.121  Indemnification of directors, officers and employees.

    A Federal savings association shall indemnify its directors, 
officers, and employees in accordance with the following requirements:
    (a) Definitions and rules of construction. (1) Definitions for 
purposes of this section.
    (i) Action. The term ``action'' means any judicial or administrative 
proceeding, or threatened proceeding, whether civil, criminal, or 
otherwise, including any appeal or other proceeding for review;
    (ii) Court. The term ``court'' includes, without limitation, any 
court to which or in which any appeal or any proceeding for review is 
brought.
    (iii) Final judgment. The term ``final judgment'' means a judgment, 
decree, or order which is not appealable or as to which the period for 
appeal has expired with no appeal taken.
    (iv) Settlement. The term ``settlement'' includes entry of a 
judgment by consent or confession or a plea of guilty or nolo 
contendere.
    (2) References in this section to any individual or other person, 
including any association, shall include legal representatives, 
successors, and assigns thereof.
    (b) General. Subject to paragraphs (c) and (g) of this section, a 
savings association shall indemnify any person against whom an action is 
brought or threatened because that person is or was a director, officer, 
or employee of the association, for:
    (1) Any amount for which that person becomes liable under a judgment 
if such action; and
    (2) Reasonable costs and expenses, including reasonable attorney's 
fees, actually paid or incurred by that person in defending or settling 
such action, or in enforcing his or her rights under this section if he 
or she attains a favorable judgment in such enforcement action.
    (c) Requirements. Indemnification shall be made to such period under 
paragraph (b) of this section only if:
    (1) Final judgment on the merits is in his or her favor; or
    (2) In case of:
    (i) Settlement,
    (ii) Final judgment against him or her, or
    (iii) Final judgment in his or her favor, other than on the merits, 
if a majority of the disinterested directors of the savings association 
determine that he or she was acting in good faith within the scope of 
his or her employment or authority as he or she could reasonably have 
perceived it under the circumstances and for a purpose he or she could 
reasonably have believed under the circumstances was in the best 
interests of the savings association or its members.

However, no indemnification shall be made unless the association gives 
the Office at least 60 days' notice of its intention to make such 
indemnification. Such notice shall state the facts on which the action 
arose, the terms of any settlement, and any disposition of the action by 
a court. Such notice, a copy thereof, and a certified copy of the 
resolution containing the required determination by the board of 
directors shall be sent to the Regional Director, who shall promptly 
acknowledge receipt thereof. The notice period shall run from the date 
of such receipt. No such indemnification shall be made if the OTS 
advises the association in writing, within such notice period, of his or 
her objection thereto.
    (d) Insurance. A savings association may obtain insurance to protect 
it and its directors, officers, and employees from potential losses 
arising from claims against any of them for alleged

[[Page 118]]

wrongful acts, or wrongful acts, committed in their capacity as 
directors, officers, or employees. However, no savings association may 
obtain insurance which provides for payment of losses of any person 
incurred as a consequence of his or her willful or criminal misconduct.
    (e) Payment of expenses. If a majority of the directors of a savings 
association concludes that, in connection with an action, any person 
ultimately may become entitled to indemnification under this section, 
the directors may authorize payment of reasonable costs and expenses, 
including reasonable attorneys' fees, arising from the defense or 
settlement of such action. Nothing in this paragraph (e) shall prevent 
the directors of a savings association from imposing such conditions on 
a payment of expenses as they deem warranted and in the interests of the 
savings association. Before making advance payment of expenses under 
this paragraph (e), the savings association shall obtain an agreement 
that the savings association will be repaid if the person on whose 
behalf payment is made is later determined not to be entitled to such 
indemnification.
    (f) Exclusiveness of provisions. No savings association shall 
indemnify any person referred to in paragraph (b) of this section or 
obtain insurance referred to in paragraph (d) of the section other than 
in accordance with this section. However, an association which has a 
bylaw in effect relating to indemnification of its personnel shall be 
governed solely by that bylaw, except that its authority to obtain 
insurance shall be governed by paragraph (d) of this section.
    (g) The indemnification provided for in paragraph (b) of this 
section is subject to and qualified by 12 U.S.C. 1821(k).

[54 FR 49492, Nov. 30, 1989, as amended at 56 FR 59866, Nov. 26, 1991; 
60 FR 66717, Dec. 26, 1995]



PART 546_FEDERAL MUTUAL SAVINGS ASSOCIATIONS_MERGER, DISSOLUTION, 

REORGANIZATION, AND CONVERSION--Table of Contents



Sec.
546.1 Definitions.
546.2 Procedure; effective date.
546.3 Transfer of assets upon merger or consolidation.
546.4 Voluntary dissolution.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et seq.

    Source: 54 FR 49517, Nov. 30, 1989, unless otherwise noted.



Sec. 546.1  Definitions.

    The terms used in Sec. Sec. 546.2 and 546.3 shall have the same 
meaning as set forth in Sec. Sec. 552.13(b) and 563.22(g) of this 
chapter.

[59 FR 44622, Aug. 30, 1994]



Sec. 546.2  Procedure; effective date.

    (a) A Federal mutual savings association may combine with any 
depository institution, provided that:
    (1) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (2) Any resulting Federal savings association meets the requirements 
for Federal Home Loan Bank membership and insurance of accounts;
    (3) Any resulting Federal savings association conforms within the 
time prescribed by the OTS to the requirements of sections 5(c) and 
10(m) of the Home Owners' Loan Act; and
    (4) The resulting institution shall be a mutually held savings 
association, unless:
    (i) The transaction involves a supervisory merger;
    (ii) The transaction is approved under part 563b of this chapter; or
    (iii) The transaction involves a transfer in the context of a mutual 
holding company reorganization under section 10(o) of the Home Owners' 
Loan Act.
    (b) Each Federal mutual savings association, by a two-thirds vote of 
its board of directors, shall approve a plan of combination evidenced by 
a combination agreement. The agreement shall state:
    (1) That the combination shall not be effective unless and until the 
combination receives any necessary approval from the Office pursuant to 
Sec. 563.22 (a) or (c), or in the case of a transaction requiring a 
notice pursuant to Sec. 563.22(c), the notice has been filed, and the 
appropriate period of time has

[[Page 119]]

passed or the OTS has advised the parties that it will not disapprove 
the transaction;
    (2) Which constituent institution is to be the resulting 
institution;
    (3) The name of the resulting institution;
    (4) The location of the home office and any other offices of the 
resulting institution;
    (5) The terms and conditions of the combination and the method of 
effectuation;
    (6) Any charter amendments, or the new charter in the combination;
    (7) The basis upon which the resulting institution's savings 
accounts will be issued;
    (8) If the Federal mutual savings association is the resulting 
institution, the number, names, residence addresses, and terms of 
directors;
    (9) The effect upon and assumption of any liquidation account of a 
disappearing institution by the resulting institution; and
    (10) Such other provisions, agreements, or understandings as relate 
to the combination.
    (c) Prior written notification to, notice to, or prior written 
approval of, the Office pursuant to Sec. 563.22 of this chapter is 
required for every combination. In the case of applications and notices 
pursuant to 563.22 (a) or (c), the Office shall apply the criteria set 
out in Sec. 563.22 of this chapter and shall impose any conditions it 
deems necessary or appropriate to ensure compliance with those criteria 
and the requirements of this chapter.
    (d) Where the resulting institution is a Federal mutual savings 
association, the Office may approve a temporary increase in the number 
of directors of the resulting institution provided that the association 
submits a plan for bringing the board of directors into compliance with 
the requirements of Sec. 544.1 of this chapter within a reasonable 
period of time.
    (e) Notwithstanding any other provision of this part, the Office may 
require that a plan of combination be submitted to the voting members of 
any of the mutual savings associations that are constituent institutions 
at a duly called meeting(s), and that the plan, to be effective, be 
approved by such voting members.
    (f) A conservator or receiver for a Federal mutual savings 
association may combine the association with another insured depository 
institution without submitting the plan to the association's board of 
directors or members for their approval.
    (g) If a plan of combination provides for a resulting Federal mutual 
savings association's name or location to be changed, its charter shall 
be amended accordingly. If the resulting institution is a Federal mutual 
savings association, the effective date of the combination shall be the 
date specified in the approval; if the resulting institution is not a 
Federal savings association, the effective date shall be that prescribed 
under applicable law. Approval of a merger automatically cancels the 
Federal charter of a Federal association that is a disappearing 
institution as of the effective date of merger, and the association 
shall, on that date, surrender its charter to the Office.

[59 FR 44622, Aug. 30, 1994, as amended at 71 FR 19811, Apr. 18, 2006]



Sec. 546.3  Transfer of assets upon merger or consolidation.

    On the effective date of a merger or consolidation in which the 
resulting institution is a Federal association, all assets and property 
of the disappearing institutions shall immediately, without any further 
act, become the property of the resulting institution to the same extent 
as they were the property of the disappearing institutions, and the 
resulting institution shall be a continuation of the entity which 
absorbed the disappearing institutions. All rights and obligations of 
the disappearing institutions shall remain unimpaired, and the resulting 
institution shall, on the effective date of the merger or consolidation, 
succeed to all those rights and obligations, subject to the Home Owners' 
Loan Act and other applicable statutes.

[59 FR 44623, Aug. 30, 1994]

[[Page 120]]



Sec. 546.4  Voluntary dissolution.

    A Federal savings association's board of directors may propose a 
plan for dissolution of the association. The plan may provide for 
either:
    (a) Appointment of the Federal Deposit Insurance Corporation (under 
section 5 of the Act and section 11 of the Federal Deposit Insurance 
Act, as amended or section 21A of the Federal Home Loan Bank Act, as 
amended) as receiver for the purpose of liquidation;
    (b) Transfer of all the association's assets to another association 
or home-financing institutions under Federal or State charter either for 
cash sufficient to pay all obligations of the association and retire all 
outstanding accounts or in exchange for that association's payment of 
all the association's outstanding obligations and issuance of share 
accounts or other evidence of interest to the association's members on a 
pro rata basis; or
    (c) Dissolution in a manner proposed by the directors which they 
consider best for all concerned.

The plan, and a statement of reasons for proposing dissolution and for 
proposing the plan, shall be submitted to the OTS for approval. The OTS 
will approve the plan if the OTS believes dissolution is advisable and 
the plan best for all concerned, but if the OTS considers the plan 
inadvisable, the OTS may either make recommendations to the association 
concerning the plan or disapprove it. When the plan is approved by the 
association's board of directors and by the OTS, it shall be submitted 
to the association's members at a duly called meeting and, when approved 
by a majority of votes cast at that meeting, shall become effective. 
After dissolution in accordance with the plan, a certificate evidencing 
dissolution, supported by such evidence as the OTS may require, shall 
immediately be filed with the OTS. When the OTS receives such evidence 
satisfactory to the OTS, it will terminate the corporate existence of 
the dissolved association and the association's charter shall thereby be 
canceled. A Federal savings association is not required to obtain 
approval under this section where the Federal savings association 
transfers all of its assets and liabilities to a bank in a transaction 
that is subject to Sec. 563.22(b) of this chapter.

[54 FR 49517, Nov. 30, 1989, as amended at 55 FR 13512, Apr. 11, 1990; 
57 FR 14342, Apr. 20, 1992; 59 FR 44623, Aug. 30, 1994; 70 FR 76675, 
Dec. 28, 2005]



PART 550_FIDUCIARY POWERS OF SAVINGS ASSOCIATIONS--Table of Contents



Sec.
550.10 What regulations govern the fiduciary operations of savings 
          associations?
550.20 What are fiduciary powers?
550.30 What fiduciary capacities does this part cover?
550.40 When do I have investment discretion?
550.50 What is a fiduciary account?
550.60 What other definitions apply to this part?

                  Subpart A_Obtaining Fiduciary Powers

550.70 Must I obtain OTS approval or file a notice before I exercise 
          fiduciary powers?
550.80 How do I obtain OTS approval?
550.90 What information must I include in my application?
550.100 What factors may the OTS consider in its review of my 
          application?
550.110 Who will act on my application?
550.120 What action will the OTS take on my application?
550.125 How do I file the notice under Sec. 550.70(c)?

                  Subpart B_Exercising Fiduciary Powers

550.130 How may I conduct multi-state operations?
550.135 How do I determine which State's laws apply to my operations?
550.136 To what extent do State laws apply to my fiduciary operations?
550.140 Must I adopt and follow written policies and procedures in 
          exercising fiduciary powers?

                   Fiduciary Personnel and Facilities

550.150 Who is responsible for the exercise of fiduciary powers?
550.160 What personnel and facilities may I use to perform fiduciary 
          services?
550.170 May my other departments or affiliates use fiduciary personnel 
          and facilities to perform other services?
550.180 May I perform fiduciary services for, or purchase fiduciary 
          services from, another association or entity?
550.190 Must fiduciary officers and employees be bonded?

[[Page 121]]

                      Review of a Fiduciary Account

550.200 Must I review a prospective account before I accept it?
550.210 Must I conduct another review of an account after I accept it?
550.220 Are any other account reviews required?

                      Custody and Control of Assets

550.230 Who must maintain custody or control of assets in a fiduciary 
          account?
550.240 May I hold investments of a fiduciary account off-premises?
550.250 Must I keep fiduciary assets separate from other assets?

                 Investing Funds of a Fiduciary Account

550.260 How may I invest funds of a fiduciary account?

                Funds Awaiting Investment or Distribution

550.290 What must I do with fiduciary funds awaiting investment or 
          distribution?
550.300 Where may I deposit fiduciary funds awaiting investment or 
          distribution?
550.310 What if the FDIC does not insure the deposits?
550.320 What is acceptable collateral for uninsured deposits?

                      Restrictions on Self Dealing

550.330 Are there investments in which I may not invest funds of a 
          fiduciary account?
550.340 May I exercise rights to purchase additional stock or fractional 
          shares of my stock or obligations or the stock or obligations 
          of my affiliates?
550.350 May I lend, sell, or transfer assets of a fiduciary account if I 
          have an interest in the transaction?
550.360 May I make a loan to a fiduciary account that is secured by an 
          interest in the assets in the account?
550.370 May I sell assets or lend money between fiduciary accounts?

                    Compensation, Gifts, and Bequests

550.380 May I earn compensation for acting in a fiduciary capacity?
550.390 May my officer or employee retain compensation for acting as a 
          co-fiduciary?
550.400 May my fiduciary officer or employee accept a gift or bequest?

                       Recordkeeping Requirements

550.410 What records must I keep?
550.420 How long must I keep these records?
550.430 Must I keep fiduciary records separate and distinct from other 
          records?

                           Audit Requirements

550.440 When do I have to audit my fiduciary activities?
550.450 What standards govern the conduct of the audit?
550.460 Who may conduct an audit?
550.470 Who directs the conduct of the audit?
550.480 How do I report the results of the audit?

         Subpart C_Depositing Securities With State Authorities

550.490 When must I deposit securities with State authorities?
550.500 How much must I deposit if I administer fiduciary assets in more 
          than one State?
550.510 What must I do if State authorities refuse my deposit?

               Subpart D_Terminating Fiduciary Activities

                       Receivership or Liquidation

550.520 What happens if I am placed in receivership or voluntary 
          liquidation?

                      Surrender of Fiduciary Powers

550.530 How do I surrender fiduciary powers?
550.540 When will the OTS terminate my fiduciary powers?
550.550 May I recover my deposit from State authorities?

                     Revocation of Fiduciary Powers

550.560 When may the OTS revoke my fiduciary powers?
550.570 What procedures govern the revocation?

               Subpart E_Activities Exempt From This Part

550.580 When may I conduct fiduciary activities without obtaining OTS 
          approval?
550.590 What standards must I observe when acting in exempt fiduciary 
          capacities?
550.600 How may funds be invested when I act in an exempt fiduciary 
          capacity?
550.610 What disclosures must I make when acting in exempt fiduciary 
          capacities?
550.620 May I receive compensation for acting in exempt fiduciary 
          capacities?

    Authority: 12 U.S.C. 1462a, 1463, 1464.

    Source: 62 FR 67703, Dec. 30, 1997, unless otherwise noted.



Sec. 550.10  What regulations govern the fiduciary operations of savings 

associations?

    (a) Federal savings associations. A Federal savings association 
(``you'') must

[[Page 122]]

conduct its fiduciary operations in accordance with 12 U.S.C. 1464(n) 
and this part.
    (b) State-chartered savings associations. (1) A State-chartered 
savings association must conduct its fiduciary operations in accordance 
with applicable State law, and must exercise its fiduciary powers in a 
safe and sound manner. To ensure safe and sound operations, State-
chartered savings associations and their subsidiaries should follow the 
standards for the exercise of fiduciary powers in this part.
    (2) The OTS will monitor the fiduciary operations of State-chartered 
savings associations and their subsidiaries to ensure that those 
operations are conducted in a safe and sound manner. The OTS may object 
to practices that deviate materially from the practices described in 
this part, and may restrict or prohibit activities that threaten the 
safety and soundness of a State-chartered savings association.



Sec. 550.20  What are fiduciary powers?

    Fiduciary powers are the authority that OTS permits you to exercise 
under 12 U.S.C. 1464(n).

[67 FR 76298, Dec. 12, 2002]



Sec. 550.30  What fiduciary capacities does this part cover?

    You are subject to this part if you act in a fiduciary capacity, 
except as described in subpart E of this part. You act in a fiduciary 
capacity when you act in any of the following capacities:
    (a) Trustee.
    (b) Executor.
    (c) Administrator.
    (d) Registrar of stocks and bonds.
    (e) Transfer agent.
    (f) Assignee.
    (g) Receiver.
    (h) Guardian or conservator of the estate of a minor, an incompetent 
person, an absent person, or a person over whose estate a court has 
taken jurisdiction, other than under bankruptcy or insolvency laws.
    (i) A fiduciary in a relationship established under a State law that 
is substantially similar to the Uniform Gifts to Minors Act or the 
Uniform Transfers to Minors Act as published by the American Law 
Institute.
    (j) Investment adviser, if you receive a fee for your investment 
advice.
    (k) Any capacity in which you have investment discretion on behalf 
of another.
    (l) Any other similar capacity that the OTS may authorize under 12 
U.S.C. 1464(n).



Sec. 550.40  When do I have investment discretion?

    (a) General. You have investment discretion when you have, with 
respect to a fiduciary account, the sole or shared authority to 
determine what securities or other assets to purchase or sell on behalf 
of that account. It does not matter whether you have exercised this 
authority.
    (b) Delegations. You retain investment discretion if you delegate 
investment discretion to another. You also have investment discretion if 
you receive delegated authority to exercise investment discretion from 
another.



Sec. 550.50  What is a fiduciary account?

    A fiduciary account is an account that you administer acting in a 
fiduciary capacity.



Sec. 550.60  What other definitions apply to this part?

    Activities ancillary to your fiduciary business include advertising, 
marketing, or soliciting fiduciary business, contacting existing or 
potential customers, answering questions and providing information to 
customers related to their accounts, acting as liaison between you and 
your customer (for example, forwarding requests for distribution, 
changes in investment objectives, forms, or funds received from the 
customer), and inspecting or maintaining custody of fiduciary assets or 
holding title to real property. This list is illustrative and not 
comprehensive. Other activities may also be ``ancillary activities'' for 
purposes of this definition.
    Affiliate has the same meaning as in 12 U.S.C. 221a(b). For purposes 
of this part, substitute the term ``Federal savings association'' for 
the term ``member bank'' whenever it appears in 12 U.S.C. 221a(b).
    Applicable law means the law of a State or other jurisdiction 
governing

[[Page 123]]

your fiduciary relationships, any Federal law governing those 
relationships, the terms of the instrument governing a fiduciary 
relationship, and any court order pertaining to the relationship.
    Fiduciary activities include accepting a fiduciary appointment, 
executing fiduciary-related documents, providing investment advice for a 
fee regarding fiduciary assets, or making discretionary decisions 
regarding investment or distribution of assets.
    Fiduciary officers and employees means the officers and employees of 
a Federal savings association to whom the board of directors or its 
designee has assigned functions involving the exercise of the 
association's fiduciary powers.

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76298, Dec. 12, 2002]



                  Subpart A_Obtaining Fiduciary Powers



Sec. 550.70  Must I obtain OTS approval or file a notice before I exercise 

fiduciary powers?

    You should refer to the following chart to determine if you must 
obtain OTS approval or file a notice with OTS before you exercise 
fiduciary powers. This chart does not apply to activities that are 
exempt under subpart E of this part.

------------------------------------------------------------------------
         If you will conduct . . .                   Then . . .
------------------------------------------------------------------------
(a) Fiduciary activities for the first      You must obtain prior
 time and OTS has not previously approved    approval from OTS under
 an application that you submitted under     Sec. Sec.  550.80 through
 this part.                                  550.120 before you conduct
                                             the activities
(b) Fiduciary activities that are           You must obtain prior
 materially different from the activities    approval from OTS under
 that OTS has previously approved for you,   Sec. Sec.  550.80 through
 including fiduciary activities that OTS     550.120 before you conduct
 has previously approved for you that you    the activities
 have not exercised for at least five
 years.
(c) Fiduciary activities that are not       You must file a written
 materially different from the activities    notice described at Sec.
 that OTS has previously approved for you.   550.125 if you commence the
                                             activities in a new State.
                                             You do not need to file a
                                             written notice if you
                                             commence the activities at
                                             a new location in a State
                                             where you already conduct
                                             these activities.
(d) Activities that are ancillary to your   You do not have to obtain
 fiduciary business.                         prior OTS approval or file
                                             a notice with OTS.
------------------------------------------------------------------------


[67 FR 76298, Dec. 12, 2002; 68 FR 2108, Jan. 15, 2003, as amended at 68 
FR 75109, Dec. 30, 2003]



Sec. 550.80  How do I obtain OTS approval?

    You must file an application under part 516, subparts A and E of 
this chapter.

[66 FR 13006, Mar. 2, 2001]



Sec. 550.90  What information must I include in my application?

    You must describe the fiduciary powers that you or your affiliate 
will exercise. You must also include information necessary to enable the 
OTS to make the determinations described in Sec. 550.100.



Sec. 550.100  What factors may the OTS consider in its review of my 

application?

    The OTS may consider the following factors when reviewing your 
application:
    (a) Your financial condition.
    (b) Your capital and whether that capital is sufficient under the 
circumstances.
    (c) Your overall performance.
    (d) The fiduciary powers you propose to exercise.
    (e) Your proposed supervision of those powers.
    (f) The availability of legal counsel.
    (g) The needs of the community to be served.
    (h) Any other facts or circumstances that the OTS considers proper.



Sec. 550.110  Who will act on my application?

    The Director of OTS may act on any application. The Regional 
Director may act on an application if it does not raise any significant 
issues of law or policy on which the OTS has not taken a formal 
position.



Sec. 550.120  What action will the OTS take on my application?

    The OTS may approve or deny your application. If your application is 
approved, the OTS may impose conditions to ensure that the requirements 
of this part are met.

[[Page 124]]



Sec. 550.125  How do I file the notice under Sec. 550.70(c)?

    (a) If you are required to file a notice under Sec. 550.70(c), 
within ten days after you commence the fiduciary activities in a new 
State, you must file a written notice that identifies each new State in 
which you conduct or will conduct fiduciary activities, describe the 
fiduciary activities that you conduct or will conduct in each new State, 
and provide sufficient information supporting a conclusion that the 
activities are permissible in the State.
    (b) You must file the notice with the appropriate OTS Regional 
Office at the address in Sec. 516.40(a) of this chapter.

[67 FR 76299, Dec. 12, 2002]



                  Subpart B_Exercising Fiduciary Powers



Sec. 550.130  How may I conduct multi-state operations?

    (a) Conducting fiduciary activities in more than one State. You may 
conduct fiduciary activities in any State, subject to the application 
and notice requirements in subpart A of this part.
    (b) Serving customers in more than one State. When you conduct 
fiduciary activities in a State:
    (1) You may market your fiduciary services to, and act as a 
fiduciary for, customers located in any State, may act as a fiduciary 
for relationships that include property located in other States, and may 
act as a testamentary trustee for a testator located in other States.
    (2) You may establish or utilize an office in any State to perform 
activities that are ancillary to your fiduciary business.

[67 FR 76299, Dec. 12, 2002]



Sec. 550.135  How do I determine which State's laws apply to my operations?

    (a) The State laws that apply to you by virtue of 12 U.S.C. 1464(n) 
are the laws of the States in which you conduct fiduciary activities. 
For each individual State, you may conduct fiduciary activities in the 
capacity of trustee, executor, administrator, guardian, or in any other 
fiduciary capacity the State permits for its State banks, trust 
companies, or other corporations that compete with Federal savings 
associations in the State.
    (b) For each fiduciary relationship, the State referred to in 12 
U.S.C. 1464(n) is the State in which you conduct fiduciary activities 
for that relationship.

[67 FR 76299, Dec. 12, 2002]



Sec. 550.136  To what extent do State laws apply to my fiduciary operations?

    (a) Occupation of field. To enhance safety and soundness and to 
enable Federal savings associations to conduct their fiduciary 
activities in accordance with the best practices of thrift institutions 
in the United States (by efficiently delivering fiduciary services to 
the public free from undue regulatory duplication and burden), OTS 
occupies the field of the regulation of the fiduciary activities of 
Federal savings associations. In so doing, OTS intends to give Federal 
savings associations maximum flexibility to exercise their fiduciary 
powers in accordance with a uniform scheme of Federal regulation. 
Accordingly, Federal savings associations may exercise fiduciary powers 
as authorized under Federal law, including this part, without regard to 
State laws that purport to regulate or otherwise affect their fiduciary 
activities, except to the extent provided in 12 U.S.C. 1464(n) (State 
laws regarding scope of fiduciary powers, access to examination reports 
regarding trust activities, deposits of securities, oaths and 
affidavits, and capital) or in paragraph (c) of this section. For 
purposes of this section, ``State law'' includes any State statute, 
regulation, ruling, order, or judicial decision.
    (b) Illustrative examples. Examples of State laws that are preempted 
by the HOLA and this section include those regarding:
    (1) Registration and licensing;
    (2) Recordkeeping;
    (3) Advertising and marketing;
    (4) The ability of a federal savings association conducting 
fiduciary activities to maintain an action or proceeding in State court; 
and
    (5) Fiduciary-related fees.
    (c) State laws that are not preempted. State laws of the following 
types are not preempted to the extent that they

[[Page 125]]

only incidentally affect the fiduciary operations of Federal savings 
associations or are otherwise consistent with the purposes of paragraph 
(a) of this section:
    (1) Contract and commercial law;
    (2) Real property law;
    (3) Tort law;
    (4) Criminal law;
    (5) Probate law; and
    (6) Any other law that OTS, upon review, finds:
    (i) Furthers a vital State interest; and
    (ii) Either has only an incidental effect on fiduciary operations or 
is not otherwise contrary to the purposes expressed in paragraph (a) of 
this section.

[67 FR 76299, Dec. 12, 2002, as amended at 68 FR 53026, Sept. 9, 2003]



Sec. 550.140  Must I adopt and follow written policies and procedures in 

exercising fiduciary powers?

    You must adopt and follow written policies and procedures adequate 
to maintain your fiduciary activities in compliance with applicable law. 
Among other relevant matters, the policies and procedures should 
address, where appropriate, the following areas:
    (a) Your brokerage placement practices.
    (b) Your methods for ensuring that your fiduciary officers and 
employees do not use material inside information in connection with any 
decision or recommendation to purchase or sell any security.
    (c) Your methods for preventing self-dealing and conflicts of 
interest.
    (d) Your selection and retention of legal counsel who is ready and 
available to advise you and your fiduciary officers and employees on 
fiduciary matters.
    (e) Your investment of funds held as fiduciary, including short-term 
investments and the treatment of fiduciary funds awaiting investment or 
distribution.

                   Fiduciary Personnel and Facilities



Sec. 550.150  Who is responsible for the exercise of fiduciary powers?

    The exercise of your fiduciary powers must be managed by or under 
the direction of your board of directors. In discharging its 
responsibilities, the board may assign any function related to the 
exercise of fiduciary powers to any director, officer, employee, or 
committee of directors, officers, or employees.



Sec. 550.160  What personnel and facilities may I use to perform fiduciary 

services?

    You may use your qualified personnel and facilities or an 
affiliate's qualified personnel and facilities to perform services 
related to the exercise of fiduciary powers.



Sec. 550.170  May my other departments or affiliates use fiduciary personnel 

and facilities to perform other services?

    Your other departments or affiliates may use fiduciary officers, 
employees, and facilities to perform services unrelated to the exercise 
of fiduciary powers, to the extent not prohibited by applicable law.



Sec. 550.180  May I perform fiduciary services for, or purchase fiduciary 

services from, another association or entity?

    You may perform services related to the exercise of fiduciary powers 
for another association or other entity under a written agreement. You 
may also purchase services related to the exercise of fiduciary powers 
from another association or other entity under a written agreement.



Sec. 550.190  Must fiduciary officers and employees be bonded?

    You must obtain an adequate bond for all fiduciary officers and 
employees.

                      Review of a Fiduciary Account



Sec. 550.200  Must I review a prospective account before I accept it?

    Before accepting a prospective fiduciary account, you must review it 
to determine whether you can properly administer the account.

[[Page 126]]



Sec. 550.210  Must I conduct another review of an account after I accept it?

    After you accept a fiduciary account for which you have investment 
discretion, you must conduct a prompt review of all assets of the 
account to evaluate whether they are appropriate, individually and 
collectively, for the account.



Sec. 550.220  Are any other account reviews required?

    At least once every calendar year, you must conduct a review of all 
assets of each fiduciary account for which you have investment 
discretion. In this review, you must evaluate whether the assets are 
appropriate, individually and collectively, for the account.

                      Custody and Control of Assets



Sec. 550.230  Who must maintain custody or control of assets in a fiduciary account?

    You must place assets of fiduciary accounts in the joint custody or 
control of not fewer than two fiduciary officers or employees designated 
for that purpose by the board of directors.



Sec. 550.240  May I hold investments of a fiduciary account off-premises?

    You may hold the investments of a fiduciary account off-premises, if 
this practice is consistent with applicable law, and you maintain 
adequate safeguards and controls.



Sec. 550.250  Must I keep fiduciary assets separate from other assets?

    You must keep the assets of fiduciary accounts separate from your 
other assets. You must also keep the assets of each fiduciary account 
separate from all other accounts, or you must identify the investments 
as the property of a particular account, except as provided in 
Sec. Sec. 550.260.

                 Investing Funds of a Fiduciary Account



Sec. 550.260  How may I invest funds of a fiduciary account?

    (a) General. You must invest funds of a fiduciary account in a 
manner consistent with applicable law.
    (b) Collective investment funds. (1) You may invest funds of a 
fiduciary account in a collective investment fund, including a 
collective investment fund that you have established. In establishing 
and administering such funds, you must comply with 12 CFR 9.18.
    (2) If you must file a document with the Comptroller of the Currency 
under 12 CFR 9.18, you must also file that document with the appropriate 
Regional Office at Sec. 516.40(a) of this chapter. The OTS may review 
such documents for compliance with this part and other laws and 
regulations.
    (3) ``Bank'' and ``national bank'' as used in 12 CFR 9.18 shall be 
deemed to include a Federal savings association.

[62 FR 67703, Dec. 30, 1997, as amended at 66 FR 13006, Mar. 2, 2001]

                Funds Awaiting Investment or Distribution



Sec. 550.290  What must I do with fiduciary funds awaiting investment or 

distribution?

    If you have investment discretion or discretion over distributions 
for a fiduciary account which contains funds awaiting investment or 
distribution, you must ensure that those funds do not remain uninvested 
and undistributed any longer than is reasonable for the proper 
management of the account and consistent with applicable law. You also 
must obtain a rate of return for those funds that is consistent with 
applicable law.



Sec. 550.300  Where may I deposit fiduciary funds awaiting investment or 

distribution?

    (a) Self deposits. You may deposit funds of a fiduciary account that 
are awaiting investment or distribution in your other departments, 
unless prohibited by applicable law.
    (b) Affiliate deposits. You may also deposit funds of a fiduciary 
account that are awaiting investment or distribution with an affiliated 
insured depository institution, unless prohibited by applicable law.



Sec. 550.310  What if the FDIC does not insure the deposits?

    If the FDIC does not insure the entire amount of a self deposit, you 
must set

[[Page 127]]

aside collateral as security. If the FDIC does not insure the entire 
amount of an affiliate deposit, you or your affiliate must set aside 
collateral as security. The market value of the collateral must at all 
times equal or exceed the amount of the uninsured fiduciary funds. You 
must place the collateral under the control of appropriate fiduciary 
officers and employees.

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76299, Dec. 12, 2002]



Sec. 550.320  What is acceptable collateral for uninsured deposits?

    Any of the following is acceptable collateral for self deposits or 
affiliate deposits under Sec. 550.310:
    (a) Direct obligations of the United States, or other obligations 
fully guaranteed by the United States as to principal and interest.
    (b) Readily marketable securities of the classes in which State-
chartered corporate fiduciaries are permitted to invest fiduciary funds 
under applicable State law.
    (c) Other readily marketable securities as the OTS may determine.
    (d) Surety bonds, to the extent they provide adequate security, 
unless prohibited by applicable law.
    (e) Any other assets that qualify under applicable State law as 
appropriate security for deposits of fiduciary funds.

                      Restrictions on Self Dealing



Sec. 550.330  Are there investments in which I may not invest funds of a 

fiduciary account?

    You may not invest funds of a fiduciary account for which you have 
investment discretion in the following assets, unless authorized by 
applicable law:
    (a) The stock or obligations of, or assets acquired from, you or any 
of your directors, officers, or employees.
    (b) The stock or obligations of, or assets acquired from, your 
affiliates or any of their directors, officers, or employees.
    (c) The stock or obligations of, or assets acquired from, other 
individuals or organizations if you have an interest in the individual 
or organization that might affect the exercise of your best judgment.



Sec. 550.340  May I exercise rights to purchase additional stock or fractional 

shares of my stock or obligations or the stock or obligations of my 

affiliates?

    If the retention of investments in your stock or obligations or the 
stock or obligations of an affiliate in fiduciary accounts is consistent 
with applicable law, you may do either of the following:
    (a) Exercise rights to purchase additional stock (or securities 
convertible into additional stock) when these rights are offered pro 
rata to stockholders.
    (b) Purchase fractional shares to complement fractional shares 
acquired through the exercise of rights or through the receipt of a 
stock dividend resulting in fractional share holdings.



Sec. 550.350  May I lend, sell, or transfer assets of a fiduciary account if I 

have an interest in the transaction?

    (a) General restriction. Except as provided in paragraph (b) of this 
section, you may not lend, sell, or otherwise transfer assets of a 
fiduciary account for which you have investment discretion to yourself 
or any of your directors, officers, or employees; to your affiliates or 
any of their directors, officers, or employees; or to other individuals 
or organizations with whom you have an interest that might affect the 
exercise of your best judgment.
    (b) Exceptions--(1) Funds for which you have investment discretion. 
You may lend, sell or otherwise transfer assets of a fiduciary account 
for which you have investment discretion to yourself or any of your 
directors, officers, or employees; to your affiliates or any of their 
directors, officers, or employees; or to other individuals or 
organizations with whom you have an interest that might affect the 
exercise of your best judgment, if you meet one of the following 
conditions:
    (i) The transaction is authorized by applicable law.
    (ii) Legal counsel advises you in writing that you have incurred, in 
your fiduciary capacity, a contingent or potential liability. Upon the 
sale or transfer of assets, you must reimburse

[[Page 128]]

the fiduciary account in cash in an amount equal to the greater of book 
or market value of the assets.
    (iii) The transaction is permitted under 12 CFR 9.18(b)(8)(iii) for 
defaulted fixed-income investments.
    (iv) The OTS requires you to do so.
    (2) Funds held as trustee. You may make loans of funds held in trust 
to any of your directors, officers, or employees if the funds are held 
in an employee benefit plan and the loan is made in accordance with the 
exemptions found at section 408 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1108).



Sec. 550.360  May I make a loan to a fiduciary account that is secured by an 

interest in the assets of the account?

    You may make a loan to a fiduciary account that is secured by an 
interest in the assets of the account, if the transaction is fair to the 
account and is not prohibited by applicable law.



Sec. 550.370  May I sell assets or lend money between fiduciary accounts?

    You may sell assets or lend money between fiduciary accounts, if the 
transaction is fair to both accounts and is not prohibited by applicable 
law.

                    Compensation, Gifts, and Bequests



Sec. 550.380  May I earn compensation for acting in a fiduciary capacity?

    If the amount of your compensation for acting in a fiduciary 
capacity is not set or governed by applicable law, you may charge a 
reasonable fee for your services.



Sec. 550.390  May my officer or employee retain compensation for acting as a 

co-fiduciary?

    You may not permit your officers or employees to retain any 
compensation for acting as a co-fiduciary with you in the administration 
of a fiduciary account, except with the specific approval of your board 
of directors.



Sec. 550.400  May my fiduciary officer or employee accept a gift or bequest?

    You may not permit any fiduciary officer or employee to accept a 
bequest or gift of fiduciary assets, unless the bequest or gift is 
directed or made by a relative of the officer or employee or is 
specifically approved by your board of directors.

                       Recordkeeping Requirements



Sec. 550.410  What records must I keep?

    You must keep adequate records for all fiduciary accounts. For 
example, you must keep documents on the establishment and termination of 
each fiduciary account.



Sec. 550.420  How long must I keep these records?

    You must keep fiduciary records for three years after the 
termination of the account or the termination of any litigation relating 
to the account, whichever is later.



Sec. 550.430  Must I keep fiduciary records separate and distinct from other 

records?

    You must keep fiduciary records separate and distinct from your 
other records.

                           Audit Requirements



Sec. 550.440  When do I have to audit my fiduciary activities?

    (a) Annual Audit. If you do not use a continuous audit system 
described in paragraph (b) of this section, then you must arrange for a 
suitable audit of all significant fiduciary activities at least once 
during each calendar year.
    (b) Continuous audit. Instead of an annual audit, you may adopt a 
continuous audit system. Under a continuous audit system, you must 
arrange for a discrete audit of each significant fiduciary activity 
(i.e., on an activity-by-activity basis) at an interval commensurate 
with the nature and risk of that activity. Some fiduciary activities may 
receive audits at intervals greater or less than one year, as 
appropriate.



Sec. 550.450  What standards govern the conduct of the audit?

    Auditors must follow generally accepted standards for attestation 
engagements and other standards established by the OTS. An audit must 
ascertain whether your internal control policies and procedures provide 
reasonable assurance of three things:

[[Page 129]]

    (a) You are administering fiduciary activities in accordance with 
applicable law.
    (b) You are properly safeguarding fiduciary assets.
    (c) You are accurately recording transactions in appropriate 
accounts in a timely manner.



Sec. 550.460  Who may conduct an audit?

    Internal auditors, external auditors, or other qualified persons who 
are responsible only to the board of directors, may conduct an audit.



Sec. 550.470  Who directs the conduct of the audit?

    Your fiduciary audit committee directs the conduct of the audit. 
Your fiduciary audit committee may consist of a committee of your 
directors or an audit committee of an affiliate. There are two 
restrictions on who may serve on the committee:
    (a) Your officers and officers of an affiliate who participate 
significantly in administering your fiduciary activities may not serve 
on the audit committee.
    (b) A majority of the members of the audit committee may not serve 
on any committee to which the board of directors has delegated power to 
manage and control your fiduciary activities.



Sec. 550.480  How do I report the results of the audit?

    (a) Annual audit. If you conduct an annual audit, you must note the 
results of the audit (including significant actions taken as a result of 
the audit) in the minutes of the board of directors.
    (b) Continuous audit. If you adopt a continuous audit system, you 
must note the results of all discrete audits conducted since the last 
audit report (including significant actions taken as a result of the 
audits) in the minutes of the board of directors at least once during 
each calendar year.



         Subpart C_Depositing Securities With State Authorities



Sec. 550.490  When must I deposit securities with State authorities?

    You must deposit securities with a State's authorities or, if 
applicable, a Federal Home Loan Bank under Sec. 550.510, if you meet 
all of the following:
    (a) You are located in the State.
    (b) You act as a private or court-appointed trustee.
    (c) The law of the State requires corporations acting in a fiduciary 
capacity to deposit securities with State authorities for the protection 
of private or court trusts.



Sec. 550.500  How much must I deposit if I administer fiduciary assets in more 

than one State?

    If you administer fiduciary assets in more than one State, you must 
compute the amount of deposit required for each State on the basis of 
fiduciary assets that you administer primarily from offices located in 
that State.



Sec. 550.510  What must I do if State authorities refuse my deposit?

    If State authorities refuse to accept your deposit under Sec. 
550.490, you must deposit the securities with the Federal Home Loan Bank 
of which you are a member. The Federal Home Loan Bank will hold the 
securities for the protection of private or court trusts to the same 
extent as if the securities had been deposited with State authorities.



               Subpart D_Terminating Fiduciary Activities

                       Receivership or Liquidation



Sec. 550.520  What happens if I am placed in receivership or voluntary 

liquidation?

    If the OTS appoints a conservator or receiver for you under part 558 
of this chapter, or if you place yourself in voluntary liquidation, the 
receiver, conservator, or liquidating agent must promptly close or 
transfer all fiduciary accounts to a substitute fiduciary, in accordance 
with OTS instructions and the orders of the court having jurisdiction.

                      Surrender of Fiduciary Powers



Sec. 550.530  How do I surrender fiduciary powers?

    If you want to surrender your fiduciary powers, you must file a 
certified copy of a resolution of your board of directors evidencing 
that intent. You

[[Page 130]]

must file the resolution with the appropriate Regional Office at the 
address listed in Sec. 516.40(a) of this chapter.

[62 FR 66703, Dec. 30, 1997, as amended at 66 FR 13006, Mar. 2, 2001]



Sec. 550.540  When will the OTS terminate my fiduciary powers?

    If, after appropriate investigation, the Regional Director is 
satisfied that you have been discharged from all fiduciary duties, the 
Regional Director will issue a written notice indicating that you are no 
longer authorized to exercise fiduciary powers.



Sec. 550.550  May I recover my deposit from State authorities?

    Upon issuance of the OTS written notice under Sec. 550.540, you may 
recover any securities deposited with State authorities, or a Federal 
Home Loan Bank, under subpart C of this part.

                     Revocation of Fiduciary Powers



Sec. 550.560  When may the OTS revoke my fiduciary powers?

    The OTS may revoke your fiduciary powers if it determines that you 
have done any of the following:
    (a) Exercised those fiduciary powers unlawfully or unsoundly.
    (b) Failed to exercise those fiduciary powers for five consecutive 
years.
    (c) Otherwise failed to follow the requirements of this part.



Sec. 550.570  What procedures govern the revocation?

    The procedures for revocation of fiduciary powers are set forth in 
12 U.S.C. 1464(n)(10). The OTS will conduct the hearing required under 
12 U.S.C. 1464(n)(10)(B) under part 509 of this chapter.



               Subpart E_Activities Exempt From This Part



Sec. 550.580  When may I conduct fiduciary activities without obtaining OTS 

approval?

    Subject to the requirements of this subpart E, you do not need OTS 
approval under subpart B if you conduct fiduciary activities in the 
following fiduciary capacities:
    (a) Trustee of a trust created or organized in the United States and 
forming part of a stock bonus, pension, or profit-sharing plan 
qualifying for specific tax treatment under section 401(d) of the 
Internal Revenue Code of 1954 (26 U.S.C. 401(d)).
    (b) Trustee or custodian of a Individual Retirement Account within 
the meaning of section 408(a) of the Internal Revenue Code of 1954 (26 
U.S.C. 408(a)).

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76299, Dec. 12, 2002]



Sec. 550.590  What standards must I observe when acting in exempt fiduciary 

capacities?

    You must observe principles of sound fiduciary administration, 
including those related to recordkeeping and segregation of assets.



Sec. 550.600  How may funds be invested when I act in an exempt fiduciary 

capacity?

    If you act in an exempt fiduciary capacity under Sec. 550.580, the 
funds of the fiduciary account may be invested only in the following:
    (a) Your accounts, deposits, obligations, or securities.
    (b) Other assets as the customer may direct, provided you do not 
exercise any investment discretion and do not directly or indirectly 
provide any investment advice for the fiduciary account.

[62 FR 67703, Dec. 30, 1997, as amended at 67 FR 76299, Dec. 12, 2002]



Sec. 550.610  What disclosures must I make when acting in exempt fiduciary 

capacities?

    If you act in an exempt fiduciary capacity under Sec. 550.580 and 
fiduciary investments are not limited to accounts or deposits insured by 
the FDIC, you must include the following language in bold type on the 
first page of any contract documents:

    Funds invested pursuant to this agreement are not insured by the 
Federal Deposit Insurance Corporation (``FDIC'') merely because the 
trustee or custodian is a Federal savings association the accounts of 
which are covered by such insurance. Only investments in the accounts of 
a Federal savings association

[[Page 131]]

are insured by the FDIC, subject to its rules and regulations.



Sec. 550.620  May I receive compensation for acting in exempt fiduciary 

capacities?

    You may receive reasonable compensation.



PART 551_RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR SECURITIES 

TRANSACTIONS--Table of Contents



Sec.
551.10 What does this part do?
551.20 Must I comply with this part?
551.30 What requirements apply to all transactions?
551.40 What definitions apply to this part?

                  Subpart A_Recordkeeping Requirements

551.50 What records must I maintain for securities transactions?
551.60 How must I maintain my records?

                 Subpart B_Content and Timing of Notice

551.70 What type of notice must I provide when I effect a securities 
          transaction for a customer?
551.80 How do I provide a registered broker-dealer confirmation?
551.90 How do I provide a written notice?
551.100 What are the alternate notice requirements?
551.110 May I provide a notice electronically?
551.120 May I charge a fee for a notice?

             Subpart C_Settlement of Securities Transactions

551.130 When must I settle a securities transaction?

          Subpart D_Securities Trading Policies and Procedures

551.140 What policies and procedures must I maintain and follow for 
          securities transactions?
551.150 How do my officers and employees file reports of personal 
          securities trading transactions?

    Authority: 12 U.S.C. 1462a, 1463, 1464.

    Source: 67 FR 76299, Dec. 12, 2002, unless otherwise noted.



Sec. 551.10  What does this part do?

    This part establishes recordkeeping and confirmation requirements 
that apply when a savings association (``you'') effects certain 
securities transactions for customers.



Sec. 551.20  Must I comply with this part?

    (a) General. Except as provided under paragraph (b) of this section, 
you must comply with this part when:
    (1) You effect a securities transaction for a customer.
    (2) You effect a transaction in government securities.
    (3) You effect a transaction in municipal securities and are not 
registered as a municipal securities dealer with the SEC.
    (4) You effect a securities transaction as fiduciary. If you are a 
Federal savings association, you also must comply with 12 CFR part 550 
when you effect such a transaction. If you are a State savings 
association, you must comply with applicable law when you effect such a 
transaction.
    (b) Exceptions--(1) Small number of transactions. You are not 
required to comply with Sec. 551.50(b) through (d) (recordkeeping) and 
Sec. 551.140(a) through (c) (policies and procedures), if you effected 
an average of fewer than 500 securities transactions per year for 
customers over the three prior calendar years. You may exclude 
transactions in government securities when you calculate this average.
    (2) Government securities. If you effect fewer than 500 government 
securities brokerage transactions per year, you are not required to 
comply with Sec. 551.50 (recordkeeping) for those transactions. This 
exception does not apply to government securities dealer transactions. 
See 17 CFR 404.4(a).
    (3) Municipal securities. If you are registered with the SEC as a 
``municipal securities dealer,'' as defined in 15 U.S.C. 78c(a)(30) (see 
15 U.S.C. 78o-4), you are not required to comply with this part when you 
conduct municipal securities transactions.
    (4) Foreign branches. You are not required to comply with this part 
when you conduct a transaction at your foreign branch.
    (5) Transactions by registered broker-dealers. You are not required 
to comply with this part for securities transactions effected by a 
registered broker-dealer, if the registered broker-dealer directly 
provides the customer with a

[[Page 132]]

confirmation. These transactions include a transaction effected by your 
employee who also acts as an employee of a registered broker-dealer 
(``dual employee'').



Sec. 551.30  What requirements apply to all transactions?

    You must effect all transactions, including transactions excepted 
under Sec. 551.20, in a safe and sound manner. You must maintain 
effective systems of records and controls regarding your customers' 
securities transactions. These systems must clearly and accurately 
reflect all appropriate information and provide an adequate basis for an 
audit.



Sec. 551.40  What definitions apply to this part?

    Asset-backed security means a security that is primarily serviced by 
the cash flows of a discrete pool of receivables or other financial 
assets, either fixed or revolving, that by their terms convert into cash 
within a finite time period. Asset-backed security includes any rights 
or other assets designed to ensure the servicing or timely distribution 
of proceeds to the security holders.
    Common or collective investment fund means any fund established 
under 12 CFR 550.260(b) or 12 CFR 9.18.
    Completion of the transaction means:
    (1) If the customer purchases a security through or from you, except 
as provided in paragraph (2) of this definition, the time the customer 
pays you any part of the purchase price. If payment is made by a 
bookkeeping entry, the time you make the bookkeeping entry for any part 
of the purchase price.
    (2) If the customer purchases a security through or from you and 
pays for the security before you request payment or notify the customer 
that payment is due, the time you deliver the security to or into the 
account of the customer.
    (3) If the customer sells a security through or to you, except as 
provided in paragraph (4) of this definition, the time the customer 
delivers the security to you. If you have custody of the security at the 
time of sale, the time you transfer the security from the customer's 
account.
    (4) If the customer sells a security through or to you and delivers 
the security to you before you request delivery or notify the customer 
that delivery is due, the time you pay the customer or pay into the 
customer's account.
    Customer means a person or account, including an agency, trust, 
estate, guardianship, or other fiduciary account for which you effect a 
securities transaction. Customer does not include a broker or dealer, or 
you when you: act as a broker or dealer; act as a fiduciary with 
investment discretion over an account; are a trustee that acts as the 
shareholder of record for the purchase or sale of securities; or are the 
issuer of securities that are the subject of the transaction.
    Debt security means any security, such as a bond, debenture, note, 
or any other similar instrument that evidences a liability of the issuer 
(including any security of this type that is convertible into stock or a 
similar security). Debt security also includes a fractional or 
participation interest in these debt securities. Debt security does not 
include securities issued by an investment company registered under the 
Investment Company Act of 1940, 15 U.S.C. 80a-1, et seq.
    Government security means:
    (1) A security that is a direct obligation of, or an obligation that 
is guaranteed as to principal and interest by, the United States;
    (2) A security that is issued or guaranteed by a corporation in 
which the United States has a direct or indirect interest if the 
Secretary of the Treasury has designated the security for exemption as 
necessary or appropriate in the public interest or for the protection of 
investors;
    (3) A security issued or guaranteed as to principal and interest by 
a corporation if a statute specifically designates, by name, the 
corporation's securities as exempt securities within the meaning of the 
laws administered by the SEC; or
    (4) Any put, call, straddle, option, or privilege on a government 
security described in this definition, other than a put, call, straddle, 
option, or privilege:

[[Page 133]]

    (i) That is traded on one or more national securities exchanges; or
    (ii) For which quotations are disseminated through an automated 
quotation system operated by a registered securities association.
    Investment discretion means the same as under 12 CFR 550.40(a).
    Investment company plan means any plan under which:
    (1) A customer purchases securities issued by an open-end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940, making the payments directly to, or made payable to, the 
registered investment company, or the principal underwriter, custodian, 
trustee, or other designated agent of the registered investment company; 
or
    (2) A customer sells securities issued by an open-end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940 under:
    (i) An individual retirement or individual pension plan qualified 
under the Internal Revenue Code; or
    (ii) A contractual or systematic agreement under which the customer 
purchases at the applicable public offering price, or redeems at the 
applicable redemption price, securities in specified amounts (calculated 
in security units or dollars) at specified time intervals, and stating 
the commissions or charges (or the means of calculating them) that the 
customer will pay in connection with the purchase.
    Municipal security means:
    (1) A security that is a direct obligation of, or an obligation 
guaranteed as to principal or interest by, a State or any political 
subdivision, or any agency or instrumentality of a State or any 
political subdivision.
    (2) A security that is a direct obligation of, or an obligation 
guaranteed as to principal or interest by, any municipal corporate 
instrumentality of one or more States; or
    (3) A security that is an industrial development bond, the interest 
on which is excludable from gross income under section 103(a) of the 
Code (26 U.S.C. 103(a)).
    Periodic plan means a written document that authorizes you to act as 
agent to purchase or sell for a customer a specific security or 
securities (other than securities issued by an open end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940). The written document must authorize you to purchase or 
sell in specific amounts (calculated in security units or dollars) or to 
the extent of dividends and funds available, at specific time intervals, 
and must set forth the commission or charges to be paid by the customer 
or the manner of calculating them.
    SEC means the Securities and Exchange Commission.
    Security means any note, stock, treasury stock, bond, debenture, 
certificate of interest or participation in any profit-sharing agreement 
or in any oil, gas, or other mineral royalty or lease, any collateral-
trust certificate, preorganization certificate or subscription, 
transferable share, investment contract, voting-trust certificate, and 
any put, call, straddle, option, or privilege on any security or group 
or index of securities (including any interest therein or based on the 
value thereof), or, in general, any instrument commonly known as a 
``security'; or any certificate of interest or participation in, 
temporary or interim certificate for, receipt for, or warrant or right 
to subscribe to or purchase, any of the foregoing. Security does not 
include currency; any note, draft, bill of exchange, or banker's 
acceptance which has a maturity at the time of issuance of less than 
nine months, exclusive of days of grace, or any renewal thereof, the 
maturity of which is likewise limited; a deposit or share account in a 
Federal or State chartered depository institution; a loan participation; 
a letter of credit or other form of bank indebtedness incurred in the 
ordinary course of business; units of a collective investment fund; 
interests in a variable amount (master) note of a borrower of prime 
credit; U.S. Savings Bonds; or any other instrument OTS determines does 
not constitute a security for purposes of this part.
    Sweep account means any prearranged, automatic transfer or sweep of 
funds above a certain dollar level from a deposit account to purchase a 
security or securities, or any prearranged, automatic redemption or

[[Page 134]]

sale of a security or securities when a deposit account drops below a 
certain level with the proceeds being transferred into a deposit 
account.



                  Subpart A_Recordkeeping Requirements



Sec. 551.50  What records must I maintain for securities transactions?

    If you effect securities transactions for customers, you must 
maintain all of the following records for at least three years:
    (a) Chronological records. You must maintain an itemized daily 
record of each purchase and sale of securities in chronological order, 
including:
    (1) The account or customer name for which you effected each 
transaction;
    (2) The name and amount of the securities;
    (3) The unit and aggregate purchase or sale price;
    (4) The trade date; and
    (5) The name or other designation of the registered broker-dealer or 
other person from whom you purchased the securities or to whom you sold 
the securities.
    (b) Account records. You must maintain account records for each 
customer reflecting:
    (1) Purchases and sales of securities;
    (2) Receipts and deliveries of securities;
    (3) Receipts and disbursements of cash; and
    (4) Other debits and credits pertaining to transactions in 
securities.
    (c) Memorandum (order ticket). You must make and keep current a 
memorandum (order ticket) of each order or any other instruction given 
or received for the purchase or sale of securities (whether executed or 
not), including:
    (1) The account or customer name for which you effected each 
transaction;
    (2) Whether the transaction was a market order, limit order, or 
subject to special instructions;
    (3) The time the trader received the order;
    (4) The time the trader placed the order with the registered broker-
dealer, or if there was no registered broker-dealer, the time the trader 
executed or cancelled the order;
    (5) The price at which the trader executed the order;
    (6) The name of the registered broker-dealer you used.
    (d) Record of registered broker-dealers. You must maintain a record 
of all registered broker-dealers that you selected to effect securities 
transactions and the amount of commissions that you paid or allocated to 
each registered broker-dealer during each calendar year.
    (e) Notices. You must maintain a copy of the written notice required 
under subpart B of this part.



Sec. 551.60  How must I maintain my records?

    (a) You may maintain the records required under Sec. 551.50 in any 
manner, form, or format that you deem appropriate. However, your records 
must clearly and accurately reflect the required information and provide 
an adequate basis for an audit of the information.
    (b) You, or the person that maintains and preserves records on your 
behalf, must:
    (1) Arrange and index the records in a way that permits easy 
location, access, and retrieval of a particular record;
    (2) Separately store, for the time required for preservation of the 
original record, a duplicate copy of the record on any medium allowed by 
this section;
    (3) Provide promptly any of the following that OTS examiners or your 
directors may request:
    (i) A legible, true, and complete copy of the record in the medium 
and format in which it is stored;
    (ii) A legible, true, and complete printout of the record; and
    (iii) Means to access, view, and print the records.
    (4) In the case of records on electronic storage media, you, or the 
person that maintains and preserves records for you, must establish 
procedures:
    (i) To maintain, preserve, and reasonably safeguard the records from 
loss, alteration, or destruction;
    (ii) To limit access to the records to properly authorized 
personnel, your directors, and OTS examiners; and

[[Page 135]]

    (iii) To reasonably ensure that any reproduction of a non-electronic 
original record on electronic storage media is complete, true, and 
legible when retrieved.
    (c) You may contract with third party service providers to maintain 
the records.



                 Subpart B_Content and Timing of Notice



Sec. 551.70  What type of notice must I provide when I effect a securities 

transaction for a customer?

    If you effect a securities transaction for a customer, you must give 
or send the customer the registered broker-dealer confirmation described 
at Sec. 551.80, or the written notice described at Sec. 551.90. For 
certain types of transactions, you may elect to provide the alternate 
notices described in Sec. 551.100.



Sec. 551.80  How do I provide a registered broker-dealer confirmation?

    (a) If you elect to satisfy Sec. 551.70 by providing the customer 
with a registered broker-dealer confirmation, you must provide the 
confirmation by having the registered broker-dealer send the 
confirmation directly to the customer or by sending a copy of the 
registered broker-dealer's confirmation to the customer within one 
business day after you receive it.
    (b) If you have received or will receive remuneration from any 
source, including the customer, in connection with the transaction, you 
must provide a statement of the source and amount of the remuneration in 
addition to the registered broker-dealer confirmation described in 
paragraph (a) of this section.



Sec. 551.90  How do I provide a written notice?

    If you elect to satisfy Sec. 551.70 by providing the customer a 
written notice, you must give or send the written notice at or before 
the completion of the securities transaction. You must include all of 
the following information in a written notice:
    (a) Your name and the customer's name.
    (b) The capacity in which you acted (for example, as agent).
    (c) The date and time of execution of the securities transaction (or 
a statement that you will furnish this information within a reasonable 
time after the customer's written request), and the identity, price, and 
number of shares or units (or principal amount in the case of debt 
securities) of the security the customer purchased or sold.
    (d) The name of the person from whom you purchased or to whom you 
sold the security, or a statement that you will furnish this information 
within a reasonable time after the customer's written request.
    (e) The amount of any remuneration that you have received or will 
receive from the customer in connection with the transaction unless the 
remuneration paid by the customer is determined under a written 
agreement, other than on a transaction basis.
    (f) The source and amount of any other remuneration you have 
received or will receive in connection with the transaction. If, in the 
case of a purchase, you were not participating in a distribution, or in 
the case of a sale, were not participating in a tender offer, the 
written notice may state whether you have or will receive any other 
remuneration and state that you will furnish the source and amount of 
the other remuneration within a reasonable time after the customer's 
written request.
    (g) That you are not a member of the Securities Investor Protection 
Corporation, if that is the case. This does not apply to a transaction 
in shares of a registered open-end investment company or unit investment 
trust if the customer sends funds or securities directly to, or receives 
funds or securities directly from, the registered open-end investment 
company or unit investment trust, its transfer agent, its custodian, or 
a designated broker or dealer who sends the customer either a 
confirmation or the written notice in this section.
    (h) Additional disclosures. You must provide all of the additional 
disclosures described in the following chart for transactions involving 
certain debt securities:

[[Page 136]]



------------------------------------------------------------------------
                                                You must provide the
 If you effect a transaction involving . .      following additional
                     .                       information in your written
                                                    notice . . .
------------------------------------------------------------------------
(1) A debt security subject to redemption   A statement that the issuer
 before maturity.                            may redeem the debt
                                             security in whole or in
                                             part before maturity, that
                                             the redemption could affect
                                             the represented yield, and
                                             that additional redemption
                                             information is available
                                             upon request.
(2) A debt security that you effected       (i) The dollar price at
 exclusively on the basis of a dollar        which you effected the
 price.                                      transaction; and
                                            (ii) The yield to maturity
                                             calculated from the dollar
                                             price. You do not have to
                                             disclose the yield to
                                             maturity if:
                                               (A) The issuer may extend
                                                the maturity date of the
                                                security with a variable
                                                interest rate; or
                                               (B) The security is an
                                                asset-backed security
                                                that represents an
                                                interest in, or is
                                                secured by, a pool of
                                                receivables or other
                                                financial assets that
                                                are subject continuously
                                                to prepayment.
(3) A debt security that you effected on    (i) The yield at which the
 basis of yield.                             transaction, including the
                                             percentage amount and its
                                             characterization (e.g.,
                                             current yield, yield to
                                             maturity, or yield to
                                             call). If you effected the
                                             transaction at yield to
                                             call, you must indicate the
                                             type of call, the call
                                             date, and the call price;
                                            (ii) The dollar price
                                             calculated from that yield;
                                             and
                                            (iii) The yield to maturity
                                             and the represented yield,
                                             if you effected the
                                             transaction on a basis
                                             other than yield to
                                             maturity and the yield to
                                             maturity is lower than the
                                             represented yield. You are
                                             not required to disclose
                                             this information if:
                                               (A) The issuer may extend
                                                the maturity date of the
                                                security with a variable
                                                interest rate; or
                                               (B) The security is an
                                                asset-backed security
                                                that represents an
                                                interest in, or is
                                                secured by, a pool of
                                                receivables or other
                                                financial assets that
                                                are subject continuously
                                                to prepayment.
(4) A debt security that is an asset-       (i) A statement that the
 backed security that represents an          actual yield of the asset-
 interest in, or is secured by, a pool of    backed security may vary
 receivables or other financial assets       according to the rate at
 that are subject continuously to            which the underlying
 prepayment.                                 receivables or other
                                             financial assets are
                                             prepaid; and
                                            (ii) A statement that you
                                             will furnish information
                                             concerning the factors that
                                             affect yield (including at
                                             a minimum estimated yield,
                                             weighted average life, and
                                             the prepayment assumptions
                                             underlying yield) upon the
                                             customer's written request.
(5) A debt security, other than a           A statement that the
 government security.                        security is unrated by a
                                             nationally recognized
                                             statistical rating
                                             organization, if that is
                                             the case.
------------------------------------------------------------------------



Sec. 551.100  What are the alternate notice requirements?

    You may elect to satisfy Sec. 551.70 by providing the alternate 
notices described in the following chart for certain types of 
transactions.

------------------------------------------------------------------------
If you effect a securities transaction . .
                     .                       Then you may elect to . . .
------------------------------------------------------------------------
(a) For or with the account of a customer   Give or send to the customer
 under a periodic plan, sweep account, or    within five business days
 investment company plan.                    after the end of each
                                             quarterly period a written
                                             statement disclosing:
                                            (1) Each purchase and
                                             redemption that you
                                             effected for or with, and
                                             each dividend or
                                             distribution that you
                                             credited to or reinvested
                                             for, the customer's account
                                             during the period;
                                               (2) The date of each
                                                transaction;
                                               (3) The identity, number,
                                                and price of any
                                                securities that the
                                                customer purchased or
                                                redeemed in each
                                                transaction;
                                               (4) The total number of
                                                shares of the securities
                                                in the customer's
                                                account;
                                               (5) Any remuneration that
                                                you received or will
                                                receive in connection
                                                with the transaction;
                                                and
                                               (6) That you will give or
                                                send the registered
                                                broker-dealer
                                                confirmation described
                                                in Sec.  551.80 or the
                                                written notice described
                                                in Sec.  551.90 within
                                                a reasonable time after
                                                the customer's written
                                                request.
(b) For or with the account of a customer   Give or send to the customer
 in shares of an open-ended management       the written statement
 company registered under the Investment     described at paragraph (a)
 Company Act of 1940 that holds itself out   of this section on a
 as a money market fund and attempts to      monthly basis. You may not
 maintain a stable net asset value per       use the alternate notice,
 share.                                      however, if you deduct
                                             sales loads upon the
                                             purchase or redemption of
                                             shares in the money market
                                             fund.
(c) For an account for which you do not     Give or send to the customer
 exercise investment discretion, and for     a written notice at the
 which you and the customer have agreed in   agreed-upon time and with
 writing to an arrangement concerning the    the agreed-upon content,
 time and content of the written notice.     and include a statement
                                             that you will furnish the
                                             registered broker-dealer
                                             confirmation described in
                                             Sec.  551.80 or the
                                             written notice described in
                                             Sec.  551.90 within a
                                             reasonable time after the
                                             customer's written request.
(d) For an account for which you exercise   Give or send the registered
 investment discretion other than in an      broker-dealer confirmation
 agency capacity, excluding common or        described in Sec.  551.80
 collective investment funds.                or the written notice
                                             described in Sec.  551.90
                                             within a reasonable time
                                             after a written request by
                                             the person with the power
                                             to terminate the account
                                             or, if there is no such
                                             person, any person holding
                                             a vested beneficial
                                             interest in the account.

[[Page 137]]

 
(e) For an account in which you exercise    Give or send each customer a
 investment discretion in an agency          written itemized statement
 capacity.                                   specifying the funds and
                                             securities in your custody
                                             or possession and all
                                             debits, credits, and
                                             transactions in the
                                             customer's account. You
                                             must provide this
                                             information to the customer
                                             not less than once every
                                             three months. You must give
                                             or send the registered
                                             broker-dealer confirmation
                                             described in Sec.  551.80
                                             or the written notice
                                             described in Sec.  551.90
                                             within a reasonable time
                                             after a customer's written
                                             request.
(f) For a common or collective investment   (1) Give or send to a
 fund.                                       customer who invests in the
                                             fund a copy of the annual
                                             financial report of the
                                             fund, or
                                            (2) Notify the customer that
                                             a copy of the report is
                                             available and that you will
                                             furnish the report within a
                                             reasonable time after a
                                             written request by a person
                                             to whom a regular periodic
                                             accounting would ordinarily
                                             be rendered with respect to
                                             each participating account.
------------------------------------------------------------------------



Sec. 551.110  May I provide a notice electronically?

    You may provide any written notice required under this subpart B 
electronically. If a customer has a facsimile machine, you may send the 
notice by facsimile transmission. You may use other electronic 
communications if:
    (a) The parties agree to use electronic instead of hard copy 
notices;
    (b) The parties are able to print or download the notice;
    (c) Your electronic communications system cannot automatically 
delete the electronic notice; and
    (d) Both parties are able to receive electronic messages.



Sec. 551.120  May I charge a fee for a notice?

    You may not charge a fee for providing a notice required under this 
subpart B, except that you may charge a reasonable fee for the notices 
provided under Sec. Sec. 551.100(a), (d), and (e).



             Subpart C_Settlement of Securities Transactions



Sec. 551.130  When must I settle a securities transaction?

    (a) You may not effect or enter into a contract for the purchase or 
sale of a security that provides for payment of funds and delivery of 
securities later than the latest of:
    (1) The third business day after the date of the contract. This 
deadline is no later than the fourth business day after the contract for 
contracts involving the sale for cash of securities that are priced 
after 4:30 p.m. Eastern Standard Time on the date the securities are 
priced and are sold by an issuer to an underwriter under a firm 
commitment underwritten offering registered under the Securities Act of 
1933, 15 U.S.C. 77a, et seq., or are sold by you to an initial purchaser 
participating in the offering;
    (2) Such other time as the SEC specifies by rule (see SEC Rule 15c6-
1, 17 CFR 240.15c6-1); or
    (3) Such time as the parties expressly agree at the time of the 
transaction. The parties to a contract are deemed to have expressly 
agreed to an alternate date for payment of funds and delivery of 
securities at the time of the transaction for a contract for the sale 
for cash of securities under a firm commitment offering, if the managing 
underwriter and the issuer have agreed to the date for all securities 
sold under the offering and the parties to the contract have not 
expressly agreed to another date for payment of funds and delivery of 
securities at the time of the transaction.
    (b) The deadlines in paragraph (a) of this section do not apply to 
the purchase or sale of limited partnership interests that are not 
listed on an exchange or for which quotations are not disseminated 
through an automated quotation system of a registered securities 
association.

[[Page 138]]



          Subpart D_Securities Trading Policies and Procedures



Sec. 551.140  What policies and procedures must I maintain and follow for 

securities transactions?

    If you effect securities transactions for customers, you must 
maintain and follow policies and procedures that meet all of the 
following requirements:
    (a) Your policies and procedures must assign responsibility for the 
supervision of all officers or employees who:
    (1) Transmit orders to, or place orders with, registered broker-
dealers;
    (2) Execute transactions in securities for customers; or
    (3) Process orders for notice or settlement purposes, or perform 
other back office functions for securities transactions that you effect 
for customers. Policies and procedures for personnel described in this 
paragraph (a)(3) must provide supervision and reporting lines that are 
separate from supervision and reporting lines for personnel described in 
paragraphs (a)(1) and (2) of this section.
    (b) Your policies and procedures must provide for the fair and 
equitable allocation of securities and prices to accounts when you 
receive orders for the same security at approximately the same time and 
you place the orders for execution either individually or in 
combination.
    (c) Your policies and procedures must provide for securities 
transactions in which you act as agent for the buyer and seller 
(crossing of buy and sell orders) on a fair and equitable basis to the 
parties to the transaction, where permissible under applicable law.
    (d) Your policies and procedures must require your officers and 
employees to file the personal securities trading reports described at 
Sec. 551.150, if the officer or employee:
    (1) Makes investment recommendations or decisions for the accounts 
of customers;
    (2) Participates in the determination of these recommendations or 
decisions; or
    (3) In connection with their duties, obtains information concerning 
which securities you intend to purchase, sell, or recommend for purchase 
or sale.



Sec. 551.150  How do my officers and employees file reports of personal 

securities trading transactions?

    An officer or employee described in Sec. 551.140(d) must report all 
personal transactions in securities made by or on behalf of the officer 
or employee if he or she has a beneficial interest in the security.
    (a) Contents and filing of report. The officer or employee must file 
the report with you no later than 30 calendar daysafter the end of each 
calendar quarter. The report must include the following information:
    (1) The date of each transaction, the title and number of shares, 
the interest rate and maturity date (if applicable), and the principal 
amount of each security involved.
    (2) The nature of each transaction (i.e., purchase, sale, or other 
type of acquisition or disposition).
    (3) The price at which each transaction was effected.
    (4) The name of the broker, dealer, or other intermediary effecting 
the transaction.
    (5) The date the officer or employee submitted the report.
    (b) Report not required for certain transactions. Your officer or 
employee is not required to report a transaction if:
    (1) He or she has no direct or indirect influence or control over 
the account for which the transaction was effected or over the 
securities held in that account;
    (2) The transaction was in shares issued by an open-end investment 
company registered under the Investment Company Act of 1940;
    (3) The transaction was in direct obligations of the government of 
the United States;
    (4) The transaction was in bankers' acceptances, bank certificates 
of deposit, commercial paper or high quality short term debt 
instruments, including repurchase agreements; or
    (5) The officer or employee had an aggregate amount of purchases and 
sales of $10,000 or less during the calendar quarter.

[[Page 139]]

    (c) Alternate report. When you act as an investment adviser to an 
investment company registered under the Investment Company Act of 1940, 
an officer or employee that is an ``access person'' may fulfill his or 
her reporting requirements under this section by filing with you the 
``access person'' personal securities trading report required by SEC 
Rule 17j-1(d), 17 CFR 270.17j-1(d).

[67 FR 76299, Dec. 12, 2002, as amended at 72 FR 30474, June 1, 2007]



PART 552_FEDERAL STOCK ASSOCIATIONS_INCORPORATION, ORGANIZATION, AND 

CONVERSION--Table of Contents



Sec.
552.2-1 Procedure for organization of Federal stock association.
552.2-2 Procedures for organization of interim Federal stock 
          association.
552.2-3 Federal stock association created in connection with an 
          association in default or in danger of default.
552.2-6 Conversion from stock form depository institution to Federal 
          stock association.
552.2-7 Conversion to National banking association or State bank.
552.3 Charters for Federal stock associations.
552.4 Charter amendments.
552.5 Bylaws.
552.6 Shareholders.
552.6-1 Board of directors.
552.6-2 Officers.
552.6-3 Certificates for shares and their transfer.
552.6-4 [Reserved]
552.9 [Reserved]
552.10 Annual reports to stockholders.
552.11 Books and records.
552.12 [Reserved]
552.13 Combinations involving Federal stock associations.
552.14 Dissenter and appraisal rights.
552.15 Supervisory combinations.
552.16 Effect of subsequent charter or bylaw change.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.

    Source: 54 FR 49523, Nov. 30, 1989, unless otherwise noted.



Sec. 552.2-1  Procedure for organization of Federal stock association.

    (a) Application for permission to organize. Applications for 
permission to organize a Federal stock association are subject to this 
section and to Sec. 543.3 of this chapter. Recommendations by employees 
of the OTS regarding applications for permission to organize are 
privileged, confidential, and subject to Sec. 510.5 (b) and (c) of this 
chapter. The processing of an application under this section shall be 
subject to the following procedures:
    (1) Publication. (i) The applicant shall publish a public notice of 
the application to organize in accordance with the procedures specified 
in subpart B of part 516 of this chapter.
    (ii) Promptly after publication of the public notice, the applicant 
shall transmit copies of the public notice and publisher's affidavit of 
publication to the OTS in the same manner as the original filing.
    (iii) Any person may inspect the application and all related 
communications at the Regional Office during regular business hours, 
unless such information is exempt from public disclosure.
    (2) Notification to interested parties. The OTS shall give notice of 
the application to the State official who supervises savings 
associations in the State in which the new association is to be located.
    (3) Submission of comments. Commenters may submit comments on the 
application in accordance with the procedures specified in subpart C of 
part 516 of this chapter.
    (4) Meetings. OTS may arrange a meeting in accordance with the 
procedures in subpart D of part 516 of this chapter.
    (b) Conditions of approval. The OTS will decide all applications for 
permission to organize a Federal stock association.
    (1) Factors that will be considered on all applications for 
permission to organize a Federal stock association are:
    (i) Whether the applicants are persons of good character and 
responsibility;
    (ii) Whether a necessity exists for such association in the 
community to be served;
    (iii) Whether there is a reasonable probability of the association's 
usefulness and success;
    (iv) Whether the association can be established without undue injury 
to

[[Page 140]]

properly conducted existing local thrift and home financing 
institutions; and
    (v) Whether the association will perform a role of providing credit 
for housing consistent with safe and sound operation of a Federal 
savings association.
    (2) [Reserved]
    (3) Approvals of applications will be conditioned on the following:
    (i) Receipt by the Office of written confirmation from the Federal 
Deposit Insurance Corporation that the accounts of the association will 
be insured by the Federal Deposit Insurance Corporation;
    (ii) The sale of a minimum amount of fully-paid capital stock of the 
association prior to commencing business;
    (iii) The submission of a statement that:
    (A) The applicants have incurred no expense in organization which is 
chargeable to the association, and that no such expense will be 
incurred, and
    (B) No funds will be accepted for deposit by the association until 
organization has been completed;
    (iv) Compliance with all applicable laws, rules, and regulations; 
and
    (v) The satisfaction of any other requirement or condition the 
Director or his or her designee may impose.
    (c) Issuance of charter. Upon approval of an application, the Office 
shall issue to the association a charter for a Federal stock savings 
association or for a Federal stock savings bank, as requested by the 
applicants, which shall be in the form provided in this part. Issuance 
of the charter shall be subject to the condition subsequent that the 
organization of the association is completed pursuant to this section.
    (d) Interim board of directors and officers. Upon approval of the 
application and the issuance of the charter, the applicants shall 
constitute the interim board of directors of the association until the 
board of directors of the association are elected by its stockholders at 
the organizational meeting required by paragraph (g) of this section, 
and the interim officers of the association shall be those persons set 
forth in the application for permission to organize.
    (e) Sale of capital stock. Upon the issuance of the charter, the 
association shall proceed to offer and sell its capital stock pursuant 
to the requirements of part 563g of this chapter.
    (f) Bank membership and insurance of accounts. Promptly upon the 
issuance of the charter, a Federal stock association must qualify as a 
member of the appropriate Federal Home Loan Bank and meet all 
requirements necessary to obtain insurance of accounts by the Federal 
Deposit Insurance Corporation.
    (g) Organizational meeting. Promptly upon the completion of the sale 
of its capital stock, the association shall provide notice, pursuant to 
Sec. 552.6(b), of a meeting of its stockholders to elect a board of 
directors. Immediately following such election, the directors shall meet 
to elect the officers of the association and to undertake any other 
action necessary under the charter or bylaws to complete corporate 
organization.
    (h) Completion of organization. Organization of a Federal stock 
association shall be deemed complete for the purposes of this part when:
    (1) The association has obtained Federal Home Loan Bank membership 
and insurance of its accounts from the Federal Deposit Insurance 
Corporation;
    (2) It has completed the sale of and received full payment for its 
capital stock;
    (3) It has complied with all requirements of part 563g of this 
chapter;
    (4) It has held its organizational meeting for the election of 
directors and all directors have been elected;
    (5) Its officers have been elected and bonded; and
    (6) It has met the requirements and conditions imposed by the Office 
in connection with approval of the application.
    (i) Failure of completion. If organization of a Federal stock 
association is not completed within six months after the OTS approves 
the application, or within such additional period as the OTS for good 
cause may grant, the charter shall become null and void and all 
subscriptions to capital stock shall be returned.

[54 FR 49523, Nov. 30, 1989, as amended at 57 FR 14342, Apr. 20, 1992; 
62 FR 27181, May 19, 1997; 62 FR 64146, Dec. 4, 1997; 69 FR 68249, Nov. 
24, 2004]

[[Page 141]]



Sec. 552.2-2  Procedures for organization of interim Federal stock 

association.

    (a) Applications for permission to organize an interim Federal 
savings association are not subject to subparts B, C and D of part 516 
of this chapter or Sec. 552.2-1(b)(3) of this part.
    (b) Approval of an application for permission to organize an interim 
Federal stock association shall be conditioned upon approval by the 
Office of an application to merge the interim Federal stock association, 
or upon approval by the Office of other transaction which the interim 
was chartered to facilitate. Applications for permission to organize an 
interim Federal stock association shall be submitted in the same manner 
as the related filing(s). In evaluating the application, the Office will 
consider the purpose for which the association will be organized, the 
form of any proposed transactions involving the association, the effect 
of the transactions on existing associations involved in the 
transactions, and the factors specified in Sec. 552.1(b)(1) to the 
extent relevant.
    (c) If a merger or other transaction facilitated by the existence of 
the interim Federal stock association has not been approved within six 
months of the approval of the application for permission to organize, 
unless extended by OTS for good cause shown, the charter shall be void 
and all subscriptions for capital stock shall be returned.

[54 FR 49523, Nov. 30, 1989, as amended at 55 FR 13513, Apr. 11, 1990; 
57 FR 14342, Apr. 20, 1992; 62 FR 64146, Dec. 4, 1997]



Sec. 552.2-3  Federal stock association created in connection with an 

association in default or in danger of default.

    Sections 552.2-1 and 552.2-2 of this part do not apply to a Federal 
stock association which is proposed by the Federal Deposit Insurance 
Corporation, or the Resolution Trust Corporation under section 5(p) of 
the Home Owner's Loan Act of 1933, section 11(c) of the Federal Deposit 
Insurance Act, or section 21A of the Federal Home Loan Bank Act, or is 
otherwise chartered by the Office in connection with an association in 
default or in danger of default. Incorporation and organization of such 
associations are complete when and under such conditions as the Director 
or his or her designee so determines.



Sec. 552.2-6  Conversion from stock form depository institution to Federal 

stock association.

    (a) With the approval of the Office, any stock depository 
institution that is, or is eligible to become, a member of a Federal 
Home Loan Bank, may convert to a Federal stock association, provided 
that the depository institution, at the time of the conversion, has 
deposits insured by the Federal Deposit Insurance Corporation, and 
provided further, that the depository institution, in accomplishing the 
conversion, complies with all applicable statutes and regulations, 
including, without limitation, section 5(d) of the Federal Deposit 
Insurance Act. The resulting Federal stock association must conform 
within the time prescribed by the OTS to the requirements of section 
5(c) of the Home Owners' Loan Act. For purposes of this section, the 
term ``depository institution'' shall have the meaning set forth at 12 
CFR 552.13(b). An application for conversion filed under this section is 
subject to the procedures for organization of a federal stock 
organization at Sec. 552.2-1.
    (b) Any and all of the assets and other property (whether real, 
personal, mixed, tangible or intangible, including choses in action, 
rights, and credits) of the former stock form depository institution 
become assets and property of the Federal stock association when the 
conversion occurs. Similarly, any and all of the obligations and debts 
of or claims against the former stock form depository institution become 
obligations and debts of and claims against the Federal stock 
association when the conversion occurs. In effect, the Federal stock 
association is the same as the former stock form depository institution 
with respect to any and all assets, property, claims and debts of or 
claims against the former stock form depository institution.

[59 FR 44623, Aug. 30, 1994, as amended at 66 FR 13006, Mar. 2, 2001; 66 
FR 23154, May 8, 2001]

[[Page 142]]



Sec. 552.2-7  Conversion to National banking association or State bank.

    A Federal stock association may convert to a National banking 
association or a State bank after filing a notification or application, 
as appropriate, with the Office in accordance with the applicable 
provisions of Sec. 563.22(b) of this chapter.

[59 FR 44623, Aug. 30, 1994]



Sec. 552.3  Charters for Federal stock associations.

    The charter of a Federal stock association shall be in the following 
form, except that an association that has converted from the mutual form 
pursuant to part 563b of this chapter shall include in its charter a 
section establishing a liquidation account as required by Sec. 
563b.3(c)(13) of this chapter. A charter for a Federal stock savings 
bank shall substitute the term ``savings bank'' for ``association.'' 
Charters may also include any preapproved optional provision contained 
in Sec. 552.4 of this part.

                          Federal Stock Charter

    Section 1. Corporate title. The full corporate title of the 
association is ------.
    Section 2. Office. The home office shall be located in ------ [city, 
state].
    Section 3. Duration. The duration of the association is perpetual.
    Section 4. Purpose and powers. The purpose of the association is to 
pursue any or all of the lawful objectives of a Federal savings 
association chartered under section 5 of the Home Owners' Loan Act and 
to exercise all of the express, implied, and incidental powers conferred 
thereby and by all acts amendatory thereof and supplemental thereto, 
subject to the Constitution and laws of the United States as they are 
now in effect, or as they may hereafter be amended, and subject to all 
lawful and applicable rules, regulations, and orders of the Office of 
Thrift Supervision (``Office'').
    Section 5. Capital stock. The total number of shares of all classes 
of the capital stock that the association has the authority to issue is 
------, all of which shall be common stock of par [or if no par is 
specified then shares shall have a stated] value of ------ per share. 
The shares may be issued from time to time as authorized by the board of 
directors without the approval of its shareholders, except as otherwise 
provided in this Section 5 or to the extent that such approval is 
required by governing law, rule, or regulation. The consideration for 
the issuance of the shares shall be paid in full before their issuance 
and shall not be less than the par [or stated] value. Neither promissory 
notes nor future services shall constitute payment or part payment for 
the issuance of shares of the association. The consideration for the 
shares shall be cash, tangible or intangible property (to the extent 
direct investment in such property would be permitted to the 
association), labor, or services actually performed for the association, 
or any combination of the foregoing. In the absence of actual fraud in 
the transaction, the value of such property, labor, or services, as 
determined by the board of directors of the association, shall be 
conclusive. Upon payment of such consideration, such shares shall be 
deemed to be fully paid and nonassessable. In the case of a stock 
dividend, that part of the retained earnings of the association that is 
transferred to common stock or paid-in capital accounts upon the 
issuance of shares as a stock dividend shall be deemed to be the 
consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association from 
the mutual to stock form of capitalization, no shares of capital stock 
(including shares issuable upon conversion, exchange, or exercise of 
other securities) shall be issued, directly or indirectly, to officers, 
directors, or controlling persons of the association other than as part 
of a general public offering or as qualifying shares to a director, 
unless the issuance or the plan under which they would be issued has 
been approved by a majority of the total votes eligible to be cast at a 
legal meeting.
    The holders of the common stock shall exclusively possess all voting 
power. Each holder of shares of common stock shall be entitled to one 
vote for each share held by such holder, except as to the cumulation of 
votes for the election of directors, unless the charter provides that 
there shall be no such cumulative voting. Subject to any provision for a 
liquidation account, in the event of any liquidation, dissolution, or 
winding up of the association, the holders of the common stock shall be 
entitled, after payment or provision for payment of all debts and 
liabilities of the association, to receive the remaining assets of the 
association available for distribution, in cash or in kind. Each share 
of common stock shall have the same relative rights as and be identical 
in all respects with all the other shares of common stock.
    Section 6. Preemptive rights. Holders of the capital stock of the 
association shall not be entitled to preemptive rights with respect to 
any shares of the association which may be issued.
    Section 7. Directors. The association shall be under the direction 
of a board of directors. The authorized number of directors, as stated 
in the association's bylaws, shall not be

[[Page 143]]

fewer than five nor more than fifteen except when a greater or lesser 
number is approved by the Director of the Office, or his or her 
delegate.
    Section 8. Amendment of charter. Except as provided in Section 5, no 
amendment, addition, alteration, change or repeal of this charter shall 
be made, unless such is proposed by the board of directors of the 
association, approved by the shareholders by a majority of the votes 
eligible to be cast at a legal meeting, unless a higher vote is 
otherwise required, and approved or preapproved by the Office.
Attest:_________________________________________________________________
 Secretary of the Association

By:_____________________________________________________________________
 President or Chief Executive Officer of the Association

Attest:_________________________________________________________________
 Secretary of the Office of Thrift Supervision

By:_____________________________________________________________________
 Director of the Office of Thrift Supervision

Effective Date:_________________________________________________________

[54 FR 49523, Nov. 30, 1989, as amended at 59 FR 53571, Oct. 25, 1994; 
61 FR 64018, Dec. 3, 1996]



Sec. 552.4  Charter amendments.

    (a) General. In order to adopt a charter amendment, a Federal stock 
association must comply with the following requirements:
    (1) Board of directors approval. The board of directors of the 
association must adopt a resolution proposing the charter amendment that 
states the text of such amendment.
    (2) Form of filing--(i) Application requirement. If the proposed 
charter amendment would render more difficult or discourage a merger, 
tender offer, or proxy contest, the assumption of control by a holder of 
a block of the association's stock, the removal of incumbent management, 
or involve a significant issue of law or policy, the association shall 
file the proposed amendment and shall obtain the prior approval of the 
OTS; and
    (ii) Notice requirement. If the proposed charter amendment does not 
involve a provision that would be covered by paragraph (a)(2)(i) of this 
section and such amendment is permissible under all applicable laws, 
rules or regulations, then the association shall submit the proposed 
amendments to the OTS, at least 30 days prior to the date the proposed 
charter amendment is to be mailed for consideration by the association's 
shareholders.
    (b) Approval. Any charter amendment filed pursuant to paragraph 
(a)(2)(ii) of this section shall automatically be approved 30 days from 
the date of filing of such amendment, provided that the association 
follows the requirements of its charter in adopting such amendment, 
unless prior to the expiration of such 30-day period the OTS notifies 
the association that such amendment is rejected or that such amendment 
is deemed to be filed under the provisions of paragraph (a)(2)(i) of 
this section. In addition, the following charter amendments, including 
the adoption of the Federal stock charter as set forth in Sec. 552.3 of 
this part, shall be approved at the time of adoption, if adopted without 
change and filed with OTS within 30 days after adoption, provided the 
association follows the requirements of its charter in adopting such 
amendments:
    (1) Title change. A Federal stock association that has complied with 
Sec. 543.1(b) of this chapter may amend its charter by substituting a 
new corporate title in section 1.
    (2) Home office. A Federal savings association may amend its charter 
by substituting a new home office in section 2, if it has complied with 
applicable requirements of Sec. 545.95 of this chapter.
    (3) Number of shares of stock and par value. A Federal stock 
association may amend Section 5 of its charter to change the number of 
authorized shares of stock, the number of shares within each class of 
stock, and the par or stated value of such shares.
    (4) Capital stock. A Federal stock association may amend its charter 
by revising Section 5 to read as follows:

    Section 5. Capital stock. The total number of shares of all classes 
of capital stock that the association has the authority to issue is ----
--, of which ------ shall be common stock of par [or if no par value is 
specified the stated] value of ------ per share and of which [list the 
number of each class of preferred and the par or if no par value is 
specified the stated value per share of each such class]. The shares may 
be issued from time to time as authorized by the board of directors 
without further approval of shareholders, except as otherwise provided 
in this Section 5 or to

[[Page 144]]

the extent that such approval is required by governing law, rule, or 
regulation. The consideration for the issuance of the shares shall be 
paid in full before their issuance and shall not be less than the par 
[or stated] value. Neither promissory notes nor future services shall 
constitute payment or part payment for the issuance of shares of the 
association. The consideration for the shares shall be cash, tangible or 
intangible property (to the extent direct investment in such property 
would be permitted), labor, or services actually performed for the 
association, or any combination of the foregoing. In the absence of 
actual fraud in the transaction, the value of such property, labor, or 
services, as determined by the board of directors of the association, 
shall be conclusive. Upon payment of such consideration, such shares 
shall be deemed to be fully paid and nonassessable. In the case of a 
stock dividend, that part of the retained earnings of the association 
that is transferred to common stock or paid-in capital accounts upon the 
issuance of shares as a stock dividend shall be deemed to be the 
consideration for their issuance.
    Except for shares issued in the initial organization of the 
association or in connection with the conversion of the association from 
the mutual to the stock form of capitalization, no shares of capital 
stock (including shares issuable upon conversion, exchange, or exercise 
of other securities) shall be issued, directly or indirectly, to 
officers, directors, or controlling persons of the association other 
than as part of a general public offering or as qualifying shares to a 
director, unless their issuance or the plan under which they would be 
issued has been approved by a majority of the total votes eligible to be 
cast at a legal meeting.
    Nothing contained in this Section 5 (or in any supplementary 
sections hereto) shall entitle the holders of any class of a series of 
capital stock to vote as a separate class or series or to more than one 
vote per share, except as to the cumulation of votes for the election of 
directors, unless the charter otherwise provides that there shall be no 
such cumulative voting: Provided, That this restriction on voting 
separately by class or series shall not apply:
    (i) To any provision which would authorize the holders of preferred 
stock, voting as a class or series, to elect some members of the board 
of directors, less than a majority thereof, in the event of default in 
the payment of dividends on any class or series of preferred stock;
    (ii) To any provision that would require the holders of preferred 
stock, voting as a class or series, to approve the merger or 
consolidation of the association with another corporation or the sale, 
lease, or conveyance (other than by mortgage or pledge) of properties or 
business in exchange for securities of a corporation other than the 
association if the preferred stock is exchanged for securities of such 
other corporation: Provided, That no provision may require such approval 
for transactions undertaken with the assistance or pursuant to the 
direction of the Office or the Federal Deposit Insurance Corporation;
    (iii) To any amendment which would adversely change the specific 
terms of any class or series of capital stock as set forth in this 
Section 5 (or in any supplementary sections hereto), including any 
amendment which would create or enlarge any class or series ranking 
prior thereto in rights and preferences. An amendment which increases 
the number of authorized shares of any class or series of capital stock, 
or substitutes the surviving association in a merger or consolidation 
for the association, shall not be considered to be such an adverse 
change.
    A description of the different classes and series (if any) of the 
association's capital stock and a statement of the designations, and the 
relative rights, preferences, and limitations of the shares of each 
class of and series (if any) of capital stock are as follows:
    A. Common stock. Except as provided in this Section 5 (or in any 
supplementary sections thereto) the holders of the common stock shall 
exclusively possess all voting power. Each holder of shares of the 
common stock shall be entitled to one vote for each share held by each 
holder, except as to the cumulation of votes for the election of 
directors, unless the charter otherwise provides that there shall be no 
such cumulative voting.
    Whenever there shall have been paid, or declared and set aside for 
payment, to the holders of the outstanding shares of any class of stock 
having preference over the common stock as to the payment of dividends, 
the full amount of dividends and of sinking fund, retirement fund, or 
other retirement payments, if any, to which such holders are 
respectively entitled in preference to the common stock, then dividends 
may be paid on the common stock and on any class or series of stock 
entitled to participate therewith as to dividends out of any assets 
legally available for the payment of dividends.
    In the event of any liquidation, dissolution, or winding up of the 
association, the holders of the common stock (and the holders of any 
class or series of stock entitled to participate with the common stock 
in the distribution of assets) shall be entitled to receive, in cash or 
in kind, the assets of the association available for distribution 
remaining after: (i) Payment or provision for payment of the 
association's debts and liabilities; (ii) distributions or provision for 
distributions in settlement of its liquidation account; and (iii) 
distributions or provision for distributions to holders of any class or 
series of stock having preference over the

[[Page 145]]

common stock in the liquidation, dissolution, or winding up of the 
association. Each share of common stock shall have the same relative 
rights as and be identical in all respects with all the other shares of 
common stock.
    B. Preferred stock. The association may provide in supplementary 
sections to its charter for one or more classes of preferred stock, 
which shall be separately identified. The shares of any class may be 
divided into and issued in series, with each series separately 
designated so as to distinguish the shares thereof from the shares of 
all other series and classes. The terms of each series shall be set 
forth in a supplementary section to the charter. All shares of the same 
class shall be identical except as to the following relative rights and 
preferences, as to which there may be variations between different 
series:
    (a) The distinctive serial designation and the number of shares 
constituting such series;
    (b) The dividend rate or the amount of dividends to be paid on the 
shares of such series, whether dividends shall be cumulative and, if so, 
from which date(s), the payment date(s) for dividends, and the 
participating or other special rights, if any, with respect to 
dividends;
    (c) The voting powers, full or limited, if any, of shares of such 
series;
    (d) Whether the shares of such series shall be redeemable and, if 
so, the price(s) at which, and the terms and conditions on which, such 
shares may be redeemed;
    (e) The amount(s) payable upon the shares of such series in the 
event of voluntary or involuntary liquidation, dissolution, or winding 
up of the association;
    (f) Whether the shares of such series shall be entitled to the 
benefit of a sinking or retirement fund to be applied to the purchase or 
redemption of such shares, and if so entitled, the amount of such fund 
and the manner of its application, including the price(s) at which such 
shares may be redeemed or purchased through the application of such 
fund;
    (g) Whether the shares of such series shall be convertible into, or 
exchangeable for, shares of any other class or classes of stock of the 
association and, if so, the conversion price(s) or the rate(s) of 
exchange, and the adjustments thereof, if any, at which such conversion 
or exchange may be made, and any other terms and conditions of such 
conversion or exchange.
    (h) The price or other consideration for which the shares of such 
series shall be issued; and
    (i) Whether the shares of such series which are redeemed or 
converted shall have the status of authorized but unissued shares of 
serial preferred stock and whether such shares may be reissued as shares 
of the same or any other series of serial preferred stock.
    Each share of each series of serial preferred stock shall have the 
same relative rights as and be identical in all respects with all the 
other shares of the same series.
    The board of directors shall have authority to divide, by the 
adoption of supplementary charter sections, any authorized class of 
preferred stock into series, and, within the limitations set forth in 
this section and the remainder of this charter, fix and determine the 
relative rights and preferences of the shares of any series so 
established.
    Prior to the issuance of any preferred shares of a series 
established by a supplementary charter section adopted by the board of 
directors, the association shall file with the Secretary to the Office a 
dated copy of that supplementary section of this charter established and 
designating the series and fixing and determining the relative rights 
and preferences thereof.

    (5) Limitations on subsequent issuances. A Federal stock association 
may amend its charter to require shareholder approval of the issuance or 
reservation of common stock or securities convertible into common stock 
under circumstances which would require shareholder approval under the 
rules of the New York or American Stock Exchange if the shares were then 
listed on the New York or American Stock Exchange.
    (6) Cumulative voting. A Federal stock association may amend its 
charter by substituting the following sentence for the second sentence 
in the third paragraph of Section 5: ``Each holder of shares of common 
stock shall be entitled to one vote for each share held by such holder 
and there shall be no right to cumulate votes in an election of 
directors.''
    (7) [Reserved]
    (8) Anti-takeover provisions following mutual to stock conversion. 
Notwithstanding the law of the state in which the association is 
located, a Federal stock association may amend its charter by 
renumbering existing sections as appropriate and adding a new section 8 
as follows:

    Section 8. Certain Provisions Applicable for Five Years. 
Notwithstanding anything contained in the Association's charter or 
bylaws to the contrary, for a period of [specify number of years up to 
five] years from the date of completion of the conversion of the 
Association from mutual to stock form, the following provisions shall 
apply:

[[Page 146]]

    A. Beneficial Ownership Limitation. No person shall directly or 
indirectly offer to acquire or acquire the beneficial ownership of more 
than 10 percent of any class of an equity security of the association. 
This limitation shall not apply to a transaction in which the 
association forms a holding company without change in the respective 
beneficial ownership interests of its stockholders other than pursuant 
to the exercise of any dissenter and appraisal rights, the purchase of 
shares by underwriters in connection with a public offering, or the 
purchase of shares by a tax-qualified employee stock benefit plan which 
is exempt from the approval requirements under Sec. 574.3(c)(1)(vi) of 
the Office's regulations.
    In the event shares are acquired in violation of this section 8, all 
shares beneficially owned by any person in excess of 10% shall be 
considered ``excess shares'' and shall not be counted as shares entitled 
to vote and shall not be voted by any person or counted as voting shares 
in connection with any matters submitted to the stockholders for a vote.
    For purposes of this section 8, the following definitions apply:
    (1) The term ``person'' includes an individual, a group acting in 
concert, a corporation, a partnership, an association, a joint stock 
company, a trust, an unincorporated organization or similar company, a 
syndicate or any other group formed for the purpose of acquiring, 
holding or disposing of the equity securities of the association.
    (2) The term ``offer'' includes every offer to buy or otherwise 
acquire, solicitation of an offer to sell, tender offer for, or request 
or invitation for tenders of, a security or interest in a security for 
value.
    (3) The term ``acquire'' includes every type of acquisition, whether 
effected by purchase, exchange, operation of law or otherwise.
    (4) The term ``acting in concert'' means (a) knowing participation 
in a joint activity or conscious parallel action towards a common goal 
whether or not pursuant to an express agreement, or (b) a combination or 
pooling of voting or other interests in the securities of an issuer for 
a common purpose pursuant to any contract, understanding, relationship, 
agreement or other arrangements, whether written or otherwise.
    B. Cumulative Voting Limitation. Stockholders shall not be permitted 
to cumulate their votes for election of directors.
    C. Call for Special Meetings. Special meetings of stockholders 
relating to changes in control of the association or amendments to its 
charter shall be called only upon direction of the board of directors.

    (c) Anti-takeover provisions. The Office may grant approval to a 
charter amendment not listed in paragraph (b) of this section regarding 
the acquisition by any person or persons of its equity securities 
provided that the association shall file as part of its application for 
approval an opinion, acceptable to the OTS, of counsel independent from 
the association that the proposed charter provision would be permitted 
to be adopted by a corporation chartered by the state in which the 
principal office of the association is located. Any such provision must 
be consistent with applicable statutes, regulations, and OTS policies. 
Further, any such provision that would have the effect of rendering more 
difficult a change in control of the association and would require for 
any corporate action (other than the removal of directors) the 
affirmative vote of a larger percentage of shareholders than is required 
by this Part, shall not be effective unless adopted by a percentage of 
shareholder vote at least equal to the highest percentage that would be 
required to take any action under such provision.
    (d) Reissuance of charter. A Federal stock association that has 
amended its charter may apply to have its charter, including the 
amendments, reissued by the Office. Such requests for reissuance should 
be filed with the Corporate Secretary at Washington Headquarters Office 
at the address listed in Sec. 516.40(b) of this chapter, and contain 
signatures required under Sec. 552.3 of this part, together with such 
supporting documents as needed to demonstrate that the amendments were 
properly adopted.

[54 FR 49523, Nov. 30, 1989, as amended at 55 FR 13513, Apr. 11, 1990; 
57 FR 14343, Apr. 20, 1992; 59 FR 18476, Apr. 19, 1994; 61 FR 64018, 
Dec. 3, 1996; 62 FR 66262, Dec. 18, 1997; 66 FR 13006, Mar. 2, 2001; 69 
FR 68249, Nov. 24, 2004]



Sec. 552.5  Bylaws.

    (a) General. At its first organizational meeting, the board of 
directors of a Federal stock association shall adopt a set of bylaws for 
the administration and regulation of its affairs. Bylaws may be adopted, 
amended or repealed by either a majority of the votes cast by the 
shareholders at a legal meeting or a majority of the board of directors. 
The bylaws shall contain sufficient provisions to govern the association 
in accordance with the requirements of Sec. Sec. 552.6, 552.6-1, 552.6-
2, and 552.6-3 of

[[Page 147]]

this part and shall not contain any provision that is inconsistent with 
those sections or with applicable laws, rules, regulations or the 
association's charter, except that a bylaw provision inconsistent with 
Sec. Sec. 552.6, 552.6-1, 552.6-3, and 552.6-4 of this part may be 
adopted with the approval of the OTS.
    (b) Form of Filing--(1) Application requirement. (i) Any bylaw 
amendment shall be submitted to the OTS for approval if it would:
    (A) Render more difficult or discourage a merger, tender offer, or 
proxy contest, the assumption of control by a holder of a large block of 
the association's stock, or the removal of incumbent management; or
    (B) Be inconsistent with Sec. Sec. 552.6, 552.6-1, 552.6-2, and 
552.6-3 of this part, with applicable laws, rules, regulations or the 
association's charter or involve a significant issue of law or policy, 
including indemnification, conflicts of interest, and limitations on 
director or officer liability.
    (ii) Applications submitted under paragraph (b)(1)(i) of this 
section are subject to standard treatment processing procedures at part 
516, subparts A and E of this chapter.
    (iii) Bylaw provisions that adopt the language of the model or 
optional bylaws in OTS's Application Processing Handbook, if adopted 
without change, and filed with OTS within 30 days after adoption, are 
effective upon adoption.
    (2) Filing requirement. If the proposed bylaw amendment does not 
involve a provision that would be covered by paragraph (b)(1) or (b)(3) 
of this section and is permissible under all applicable laws, rules, or 
regulations, then the association shall submit the amendment to the OTS 
at least 30 days prior to the date the bylaw amendment is to be adopted 
by the association.
    (3) Corporate governance procedures. A Federal stock association may 
elect to follow the corporate governance procedures of: The laws of the 
state where the main office of the association is located; the laws of 
the state where the association's holding company, if any, is 
incorporated or chartered; Delaware General Corporation law; or The 
Model Business Corporation Act, provided that such procedures may be 
elected to the extent not inconsistent with applicable Federal statutes 
and regulations and safety and soundness, and such procedures are not of 
the type described in paragraph (b)(1) of this section. If this election 
is selected, a Federal stock association shall designate in its bylaws 
the provision or provisions from the body or bodies of law selected for 
its corporate governance procedures, and shall file a copy of such 
bylaws, which are effective upon adoption, within 30 days after 
adoption. The submission shall indicate, where not obvious, why the 
bylaw provisions meet the requirements stated in paragraph (b)(1) of 
this section.
    (c) Effectiveness. Any bylaw amendment filed pursuant to paragraph 
(b)(2) of this section shall automatically be effective 30 days from the 
date of filing of such amendment, provided that the association follows 
the requirements of its charter and bylaws in adopting such amendment, 
unless prior to the expiration of such 30-day period the OTS notifies 
the association that such amendment is rejected or that such amendment 
requires an application to be filed pursuant to paragraph (b)(1) of this 
section.
    (d) Effect of subsequent charter or bylaw change. Notwithstanding 
any subsequent change to its charter or bylaws, the authority of a 
Federal stock association to engage in any transaction shall be 
determined only by the association's charter or bylaws then in effect, 
unless otherwise provided by Federal law or regulation.

[57 FR 14343, Apr. 20, 1992, as amended at 60 FR 66718, Dec. 26, 1995; 
61 FR 64019, Dec. 3, 1996; 66 FR 13006, Mar. 2, 2001; 66 FR 15020, Mar. 
15, 2001]



Sec. 552.6  Shareholders.

    (a) Shareholder meetings. An annual meeting of the shareholders of 
the association for the election of directors and for the transaction of 
any other business of the association shall be held annually within 150 
days after the end of the association's fiscal year. Unless otherwise 
provided in the association's charter, special meetings of the 
shareholders may be called by the board of directors or on the request 
of the holders of 10 percent or more of the shares entitled to vote at 
the meeting, or by such other persons as may be

[[Page 148]]

specified in the bylaws of the association. All annual and special 
meetings of shareholders shall be held at such place as the board of 
directors may determine in the state in which the association has its 
principal place of business, or at any other convenient place the board 
of directors may designate.
    (b) Notice of shareholder meetings. Written notice stating the 
place, day, and hour of the meeting and the purpose or purposes for 
which the meeting is called shall be delivered not fewer than 20 nor 
more than 50 days before the date of the meeting, either personally or 
by mail, by or at the direction of the chairman of the board, the 
president, the secretary, or the directors, or other persons calling the 
meeting, to each shareholder of record entitled to vote at such meeting. 
If mailed, such notice shall be deemed to be delivered when deposited in 
the mail, addressed to the shareholder at the address appearing on the 
stock transfer books or records of the association as of the record date 
prescribed in paragraph (c) of this section, with postage thereon 
prepaid. When any shareholders' meeting, either annual or special, is 
adjourned for 30 days or more, notice of the adjourned meeting shall be 
given as in the case of an original meeting. Notwithstanding anything in 
this section, however, a Federal stock association that is wholly owned 
shall not be subject to the shareholder notice requirement.
    (c) Fixing of record date. For the purpose of determining 
shareholders entitled to notice of or to vote at any meeting of 
shareholders or any adjournment thereof, or shareholders entitled to 
receive payment of any dividend, or in order to make a determination of 
shareholders for any other proper purpose, the board of directors shall 
fix in advance a date as the record date for any such determination of 
shareholders. Such date in any case shall be not more than 60 days and, 
in case of a meeting of shareholders, not less than 10 days prior to the 
date on which the particular action, requiring such determination of 
shareholders, is to be taken. When a determination of shareholders 
entitled to vote at any meeting of shareholders has been made as 
provided in this section, such determination shall apply to any 
adjournment thereof.
    (d) Voting lists. (1) At least 20 days before each meeting of the 
shareholders, the officer or agent having charge of the stock transfer 
books for the shares of the association shall make a complete list of 
the stockholders of record entitled to vote at such meeting, or any 
adjournments thereof, arranged in alphabetical order, with the address 
and the number of shares held by each. This list of shareholders shall 
be kept on file at the home office of the association and shall be 
subject to inspection by any shareholder of record or the stockholder's 
agent during the entire time of the meeting. The original stock transfer 
book shall constitute prima facie evidence of the stockholders entitled 
to examine such list or transfer books or to vote at any meeting of 
stockholders. Notwithstanding anything in this section, however, a 
Federal stock association that is wholly owned shall not be subject to 
the voting list requirements.
    (2) In lieu of making the shareholders list available for inspection 
by any shareholders as provided in paragraph (d)(1) of this section, the 
board of directors may perform such acts as required by paragraphs (a) 
and (b) of Rule 14a-7 of the General Rules and Regulations under the 
Securities and Exchange Act of 1934 (17 CFR 240.14a-7) as may be duly 
requested in writing, with respect to any matter which may be properly 
considered at a meeting of shareholders, by any shareholder who is 
entitled to vote on such matter and who shall defray the reasonable 
expenses to be incurred by the association in performance of the act or 
acts required.
    (e) Shareholder quorum. A majority of the outstanding shares of the 
association entitled to vote, represented in person or by proxy, shall 
constitute a quorum at a meeting of shareholders. The shareholders 
present at a duly organized meeting may continue to transact business 
until adjournment, notwithstanding the withdrawal of enough shareholders 
to leave less than a quorum. If a quorum is present, the affirmative 
vote of the majority of the shares represented at the meeting and 
entitled to vote on the subject matter shall be the act of the 
stockholders,

[[Page 149]]

unless the vote of a greater number of stockholders voting together or 
voting by classes is required by law or the charter. Directors, however, 
are elected by a plurality of the votes cast at an election of 
directors.
    (f) Shareholder voting--(1) Proxies. Unless otherwise provided in 
the association's charter, at all meetings of shareholders, a 
shareholder may vote in person or by proxy executed in writing by the 
shareholder or by a duly authorized attorney in fact. Proxies may be 
given telephonically or electronically as long as the holder uses a 
procedure for verifying the identity of the shareholder. A proxy may 
designate as holder a corporation, partnership or company as defined in 
Part 574 of this chapter, or other person. Proxies solicited on behalf 
of the management shall be voted as directed by the shareholder or, in 
the absence of such direction, as determined by a majority of the board 
of directors. No proxy shall be valid more than eleven months from the 
date of its execution except for a proxy coupled with an interest.
    (2) Shares controlled by association. Neither treasury shares of its 
own stock held by the association nor shares held by another 
corporation, if a majority of the shares entitled to vote for the 
election of directors of such other corporation are held by the 
association, shall be voted at any meeting or counted in determining the 
total number of outstanding shares at any given time for purposes of any 
meeting.
    (g) Nominations and new business submitted by shareholders. 
Nominations for directors and new business submitted by shareholders 
shall be voted upon at the annual meeting if such nominations or new 
business are submitted in writing and delivered to the secretary of the 
association at least five days prior to the date of the annual meeting. 
Ballots bearing the names of all the persons nominated shall be provided 
for use at the annual meeting.
    (h) Informal action by stockholders. If the bylaws of the 
association so provide, any action required to be taken at a meeting of 
the stockholders, or any other action that may be taken at a meeting of 
the stockholders, may be taken without a meeting if consent in writing 
has been given by all the stockholders entitled to vote with respect to 
the subject matter.

[54 FR 49523, Nov. 30, 1989, as amended at 59 FR 18476, Apr. 19, 1994; 
61 FR 64019, Dec. 3, 1996]



Sec. 552.6-1  Board of directors.

    (a) General powers and duties. The business and affairs of the 
association shall be under the direction of its board of directors. The 
board of directors shall annually elect a chairman of the board from 
among its members and shall designate the chairman of the board, when 
present, to preside at its meeting. Directors need not be stockholders 
unless the bylaws so require.
    (b) Number and term. The bylaws shall set forth a specific number of 
directors, not a range. The number of directors shall be not fewer than 
five nor more than fifteen, unless a higher or lower number has been 
authorized by the Director of the Office or his or her delegate. 
Directors shall be elected for a term of one to three years and until 
their successors are elected and qualified. If a staggered board is 
chosen, the directors shall be divided into two or three classes as 
nearly equal in number as possible and one class shall be elected by 
ballot annually. In the case of a converting or newly chartered 
association where all directors shall be elected at the first election 
of directors, if a staggered board is chosen, the terms shall be 
staggered in length from one to three years.
    (c) Regular meetings. A regular meeting of the board of directors 
shall be held immediately after, and at the same place as, the annual 
meeting of shareholders. The board of directors shall determine the 
place, frequency, time and procedure for notice of regular meetings.
    (d) Quorum. A majority of the number of directors shall constitute a 
quorum for the transaction of business at any meeting of the board of 
directors. The act of the majority of the directors present at a meeting 
at which a quorum is present shall be the act of the board of directors, 
unless a greater number is prescribed by regulation of the Office.
    (e) Vacancies. Any vacancy occurring in the board of directors may 
be filled by the affirmative vote of a majority of

[[Page 150]]

the remaining directors although less than a quorum of the board of 
directors. A director elected to fill a vacancy shall be elected to 
serve only until the next election of directors by the shareholders. Any 
directorship to be filled by reason of an increase in the number of 
directors may be filled by election by the board of directors for a term 
of office continuing only until the next election of directors by the 
shareholders.
    (f) Removal or resignation of directors. (1) At a meeting of 
shareholders called expressly for that purpose, any director may be 
removed only for cause, as defined in Sec. 563.39 of this chapter, by a 
vote of the holders of a majority of the shares then entitled to vote at 
an election of directors. Associations may provide for procedures 
regarding resignations in the bylaws.
    (2) If less than the entire board is to be removed, no one of the 
directors may be removed if the votes cast against the removal would be 
sufficient to elect a director if then cumulatively voted at an election 
of the class of directors of which such director is a part.
    (3) Whenever the holders of the shares of any class are entitled to 
elect one or more directors by the provisions of the charter or 
supplemental sections thereto, the provisions of this section shall 
apply, in respect to the removal of a director or directors so elected, 
to the vote of the holders of the outstanding shares of that class and 
not to the vote of the outstanding shares as a whole.
    (g) Executive and other committees. The board of directors, by 
resolution adopted by a majority of the full board, may designate from 
among its members an executive committee and one or more other 
committees each of which, to the extent provided in the resolution or 
bylaws of the association, shall have and may exercise all of the 
authority of the board of directors, except no committee shall have the 
authority of the board of directors with reference to: the declaration 
of dividends; the amendment of the charter or bylaws of the association; 
recommending to the stockholders a plan of merger, consolidation, or 
conversion; the sale, lease, or other disposition of all, or 
substantially all, of the property and assets of the association 
otherwise than in the usual and regular course of its business; a 
voluntary dissolution of the association; a revocation of any of the 
foregoing; or the approval of a transaction in which any member of the 
executive committee, directly or indirectly, has any material beneficial 
interest. The designation of any committee and the delegation of 
authority thereto shall not operate to relieve the board of directors, 
or any director, of any responsibility imposed by law or regulation.
    (h) Notice of special meetings. Written notice of at least 24 hours 
regarding any special meeting of the board of directors or of any 
committee designated thereby shall be given to each director in 
accordance with the bylaws, although such notice may be waived by the 
director. The attendance of a director at a meeting shall constitute a 
waiver of notice of such meeting, except where a director attends a 
meeting for the express purpose of objecting to the transaction of any 
business because the meeting is not lawfully called or convened. Neither 
the business to be transacted at, nor the purpose of, any meeting need 
be specified in the notice or waiver of notice of such meeting. The 
bylaws may provide for telephonic participation at a meeting.
    (i) Action without a meeting. Any action required or permitted to be 
taken by the board of directors at a meeting may be taken without a 
meeting if a consent in writing, setting forth the actions so taken, 
shall be signed by all of the directors.
    (j) Presumption of assent. A director of the association who is 
present at a meeting of the board of directors at which action on any 
association matter is taken shall be presumed to have assented to the 
action taken unless his or her dissent or abstention shall be entered in 
the minutes of the meeting or unless a written dissent to such action 
shall be filed with the person acting as the secretary of the meeting 
before the adjournment thereof or shall be forwarded by registered mail 
to the secretary of the association within five days after the date on 
which a copy of the minutes of the meeting is received. Such right to 
dissent shall not apply to

[[Page 151]]

a director who voted in favor of such action.
    (k) Age limitation on directors. A Federal association may provide a 
bylaw on age limitation for directors. Bylaws on age limitations must 
comply with all Federal laws, rules and regulations.

[54 FR 49523, Nov. 30, 1989, as amended at 58 FR 4312, Jan. 14, 1993; 61 
FR 64020, Dec. 3, 1996; 62 FR 66262, Dec. 18, 1997]



Sec. 552.6-2  Officers.

    (a) Positions. The officers of the association shall be a president, 
one or more vice presidents, a secretary, and a treasurer or 
comptroller, each of whom shall be elected by the board of directors. 
The board of directors may also designate the chairman of the board as 
an officer. The offices of the secretary and treasurer or comptroller 
may be held by the same person and the vice president may also be either 
the secretary or the treasurer or comptroller. The board of directors 
may designate one or more vice presidents as executive vice president or 
senior vice president. The board of directors may also elect or 
authorize the appointment of such other officers as the business of the 
association may require. The officers shall have such authority and 
perform such duties as the board of directors may from time to time 
authorize or determine. In the absence of action by the board of 
directors, the officers shall have such powers and duties as generally 
pertain to their respective offices.
    (b) Removal. Any officer may be removed by the board of directors 
whenever in its judgment the best interests of the association will be 
served thereby; but such removal, other than for cause, shall be without 
prejudice to the contractual rights, if any, of the person so removed. 
Employment contracts shall conform with Sec. 563.39 of this chapter.
    (c) Age limitation on officers. A Federal association may provide a 
bylaw on age limitation for officers. Bylaws on age limitations must 
comply with all Federal laws, rules, and regulations.

[54 FR 49523, Nov. 30, 1989, as amended at 56 FR 59866, Nov. 26, 1991; 
60 FR 66869, Dec. 27, 1995; 61 FR 64020, Dec. 3, 1996]



Sec. 552.6-3  Certificates for shares and their transfer.

    (a) Certificates for shares. Certificates representing shares of 
capital stock of the association shall be in such form as shall be 
determined by the board of directors and approved by the OTS. The 
certificates shall be signed by the chief executive officer or by any 
other officer of the association authorized by the board of directors, 
attested by the secretary or an assistant secretary, and sealed with the 
corporate seal or a facsimile thereof. The signatures of such officers 
upon a certificate may be facsimiles if the certificate is manually 
signed on behalf of a transfer agent or a registrar other than the 
association itself or one of its employees. Each certificate for shares 
of capital stock shall be consecutively numbered or otherwise 
identified. The name and address of the person to whom the shares are 
issued, with the number of shares and date of issue, shall be entered on 
the stock transfer books of the association. All certificates 
surrendered to the association for transfer shall be cancelled and no 
new certificate shall be issued until the former certificate for a like 
number of shares shall have been surrendered and cancelled, except that 
in the case of a lost or destroyed certificate a new certificate may be 
issued upon such terms and indemnity to the association as the board of 
directors may prescribe.
    (b) Transfer of shares. Transfer of shares of capital stock of the 
association shall be made only on its stock transfer books. Authority 
for such transfer shall be given only by the holder of record or by a 
legal representative, who shall furnish proper evidence of such 
authority, or by an attorney authorized by a duly executed power of 
attorney and filed with the association. The transfer shall be made only 
on surrender for cancellation of the certificate for the shares. The 
person in whose name shares of capital stock stand on the books of the 
association shall be deemed by the association to be the owner for all 
purposes.

[54 FR 49523, Nov. 30, 1989, as amended at 55 FR 13514, Apr. 11, 1990; 
57 FR 14343, Apr. 20, 1992]

[[Page 152]]



Sec. 552.6-4  [Reserved]



Sec. 552.9  [Reserved]



Sec. 552.10  Annual reports to stockholders.

    A Federal stock association not wholly-owned by a holding company 
shall, within 130 days after the end of its fiscal year, mail to each of 
its stockholders entitled to vote at its annual meeting an annual report 
containing financial statements that satisfy the requirements of rule 
14a-3 under the Securities Exchange Act of 1934. (17 CFR 240.14a-3). 
Concurrently with such mailing a certification of such mailing signed by 
the chairman of the board, the president or a vice president of the 
association, together with copies of the report, shall be transmitted by 
the association to the OTS.

[57 FR 14343, Apr. 20, 1992, as amended at 62 FR 66262, Dec. 18, 1997]



Sec. 552.11  Books and records.

    (a) Each Federal stock association shall keep correct and complete 
books and records of account; shall keep minutes of the proceedings of 
its stockholders, board of directors, and committees of directors; and 
shall keep at its home office or at the office of its transfer agent or 
registrar, a record of its stockholders, giving the names and addresses 
of all stockholders, and the number, class and series, if any, of the 
shares held by each.
    (b) Any stockholder or group of stockholders of a Federal stock 
association, holding of record the number of voting shares of such 
association specified below, upon making written demand stating a proper 
purpose, shall have the right to examine, in person or by agent or 
attorney, at any reasonable time or times, nonconfidential portions of 
its books and records of account, minutes and record of stockholders and 
to make extracts therefrom. Such right of examination is limited to a 
stockholder or group of stockholders holding of record:
    (1) Voting shares having a cost of not less than $100,000 or 
constituting not less than one percent of the total outstanding voting 
shares, provided in either case such stockholder or group of 
stockholders have held of record such voting shares for a period of at 
least six months before making such written demand, or
    (2) Not less than five percent of the total outstanding voting 
shares.

No stockholder or group of stockholders of a Federal stock association 
shall have any other right under this section or common law to examine 
its books and records of account, minutes and record of stockholders, 
except as provided in its bylaws with respect to inspection of a list of 
stockholders.
    (c) The right to examination authorized by paragraph (b) of this 
section and the right to inspect the list of stockholders provided by a 
Federal stock association's bylaws may be denied to any stockholder or 
group of stockholders upon the refusal of any such stockholder or group 
of stockholders to furnish such association, its transfer agent or 
registrar an affidavit that such examination or inspection is not 
desired for any purpose which is in the interest of a business or object 
other than the business of the association, that such stockholder has 
not within the five years preceding the date of the affidavit sold or 
offered for sale, and does not now intend to sell or offer for sale, any 
list of stockholders of the association or of any other corporation, and 
that such stockholder has not within said five-year period aided or 
abetted any other person in procuring any list of stockholders for 
purposes of selling or offering for sale such list.
    (d) Notwithstanding any provision of this section or common law, no 
stockholder or group of stockholders shall have the right to obtain, 
inspect or copy any portion of any books or records of a Federal stock 
association containing:
    (1) A list of depositors in or borrowers from such association;
    (2) Their addresses;
    (3) Individual deposit or loan balances or records; or
    (4) Any data from which such information could be reasonably 
constructed.

[54 FR 49523, Nov. 30, 1989, as amended at 61 FR 64020, Dec. 3, 1996]

[[Page 153]]



Sec. 552.12  [Reserved]



Sec. 552.13  Combinations involving Federal stock associations.

    (a) Scope and authority. Federal stock associations may enter into 
combinations only in accordance with the provisions of this section, 
section 18(c) of the Federal Deposit Insurance Act, sections 5(d)(3)(A) 
and 10(s) of the Home Owners' Loan Act, and Sec. 563.22 of this part.
    (b) Definitions. The following definitions apply to Sec. Sec. 
552.13 and 552.14 of this part:
    (1) Combination. A merger or consolidation with another depository 
institution, or an acquisition of all or substantially all of the assets 
or assumption of all or substantially all of the liabilities of a 
depository institution by another depository institution. Combine means 
to be a constituent institution in a combination.
    (2) Consolidation. Fusion of two or more depository institutions 
into a newly-created depository institution.
    (3) Constituent institution. Resulting, disappearing, acquiring, or 
transferring depository institution in a combination.
    (4) Depository institution means any commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, a 
cooperative bank, an industrial bank or a credit union, chartered in the 
United States and having its principal office located in the United 
States.
    (5) Disappearing institution. A depository institution whose 
corporate existence does not continue after a combination.
    (6) Merger. Uniting two or more depository institutions by the 
transfer of all property rights and franchises to the resulting 
depository institution, which retains its corporate identity.
    (7) Mutual savings association. Any savings association organized in 
a form not requiring non-withdrawable stock under Federal or State law.
    (8) Resulting institution. The depository institution whose 
corporate existence continues after a combination.
    (9) Savings association has the same meaning as defined in Sec. 
561.43 of this chapter.
    (10) State. Includes the District of Columbia, Commonwealth of 
Puerto Rico, and States, territories, and possessions of the United 
States.
    (11) Stock association. Any savings association organized in a form 
requiring non-withdrawable stock.
    (c) Forms of combination. A Federal stock association may combine 
with any depository institution, provided that:
    (1) The combination is in compliance with, and receives all 
approvals required under, any applicable statutes and regulations;
    (2) Any resulting Federal savings association meets the requirements 
for Federal Home Loan Bank membership and insurance of accounts;
    (3) Any resulting Federal savings association conforms within the 
time prescribed by the OTS to the requirements of sections 5(c) and 
10(m) of the Home Owners' Loan Act; and
    (4) If any constituent savings association is a mutual savings 
association, the resulting institution shall be mutually held, unless:
    (i) The transaction involves a supervisory merger;
    (ii) The transaction is approved under part 563b of this chapter;
    (iii) The transaction involves an interim Federal stock association 
or an interim State stock savings association; or
    (iv) The transaction involves a transfer in the context of a mutual 
holding company reorganization under section 10(o) of the Home Owners' 
Loan Act.
    (d) Combinations. Prior written notification to, notice to, or prior 
written approval of, the Office pursuant to Sec. 563.22 of this chapter 
is required for every combination. In the case of applications and 
notices pursuant to Sec. 563.22 (a) or (c), the Office shall apply the 
criteria set out in Sec. 563.22 of this chapter and shall impose any 
conditions it deems necessary or appropriate to ensure compliance with 
those criteria and the requirements of this chapter.
    (e) Approval of the board of directors. Before filing a notice or 
application for any combination involving a Federal

[[Page 154]]

stock association, the combination shall be approved:
    (1) By a two-thirds vote of the entire board of each constituent 
Federal savings association; and
    (2) As required by other applicable Federal or state law, for other 
constituent institutions.
    (f) Combination agreement. All terms, conditions, agreements or 
understandings, or other provisions with respect to a combination 
involving a Federal savings association shall be set forth fully in a 
written combination agreement. The combination agreement shall state:
    (1) That the combination shall not be effective unless and until:
    (i) The combination receives any necessary approval from the Office 
pursuant to Sec. 563.22 (a) or (c);
    (ii) In the case of a transaction requiring a notification pursuant 
to Sec. 563.22(b), notification has been provided to the OTS; or
    (iii) In the case of a transaction requiring a notice pursuant to 
Sec. 563.22(c), the notice has been filed, and the appropriate period 
of time has passed or the OTS has advised the parties that it will not 
disapprove the transaction;
    (2) Which constituent institution is to be the resulting 
institution;
    (3) The name of the resulting institution;
    (4) The location of the home office and any other offices of the 
resulting institution;
    (5) The terms and conditions of the combination and the method of 
effectuation;
    (6) Any charter amendments, or the new charter in the combination;
    (7) The basis upon which the savings accounts of the resulting 
institution shall be issued;
    (8) If a Federal association is the resulting institution, the 
number, names, residence addresses, and terms of directors;
    (9) The effect upon and assumption of any liquidation account of a 
disappearing institution by the resulting institution; and
    (10) Such other provisions, agreements, or understandings as relate 
to the combination.
    (g) [Reserved]
    (h) Approval by stockholders--(1) General rule. Except as otherwise 
provided in this section, an affirmative vote of two-thirds of the 
outstanding voting stock of any constituent Federal savings association 
shall be required for approval of the combination agreement. If any 
class of shares is entitled to vote as a class pursuant to Sec. 552.4 
of this part, an affirmative vote of a majority of the shares of each 
voting class and two-thirds of the total voting shares shall be 
required. The required vote shall be taken at a meeting of the savings 
association.
    (2) General exception. Stockholders of the resulting Federal stock 
association need not authorize a combination agreement if:
    (i) It does not involve an interim Federal savings association or an 
interim state savings association;
    (ii) The association's charter is not changed;
    (iii) Each share of stock outstanding immediately prior to the 
effective date of the combination is to be an identical outstanding 
share or a treasury share of the resulting Federal stock association 
after such effective date; and
    (iv) Either:
    (A) No shares of voting stock of the resulting Federal stock 
association and no securities convertible into such stock are to be 
issued or delivered under the plan of combination, or
    (B) The authorized unissued shares or the treasury shares of voting 
stock of the resulting Federal stock association to be issued or 
delivered under the plan of combination, plus those initially issuable 
upon conversion of any securities to be issued or delivered under such 
plan, do not exceed 15% of the total shares of voting stock of such 
association outstanding immediately prior to the effective date of the 
combination.
    (3) Exceptions for certain combinations involving an interim 
association. Stockholders of a Federal stock association need not 
authorize by a two-thirds affirmative vote combinations involving an 
interim Federal savings association or interim state savings association 
when the resulting Federal stock association is acquired pursuant to 
Sec. 574.7(a)(2) of this chapter. In those cases, an affirmative vote 
of 50 percent

[[Page 155]]

of the shares of the outstanding voting stock of the Federal stock 
association plus one affirmative vote shall be required. If any class of 
shares is entitled to vote as a class pursuant to Sec. 552.4 of this 
part, an affirmative vote of 50 percent of the shares of each voting 
class plus one affirmative vote shall be required. The required votes 
shall be taken at a meeting of the association.
    (i) Disclosure. The OTS may require, in connection with a 
combination under this section, such disclosure of information as the 
OTS deems necessary or desirable for the protection of investors in any 
of the constituent associations.
    (j) Articles of combination. (1) Following stockholder approval of 
any combination in which a Federal savings association is the resulting 
institution, articles of combination shall be executed in duplicate by 
each constituent institution, by its chief executive officer or 
executive vice president and by its secretary or an assistant secretary, 
and verified by one of the officers of each institution signing such 
articles, and shall set forth:
    (i) The plan of combination;
    (ii) The number of shares outstanding in each depository 
institution; and
    (iii) The number of shares in each depository institution voted for 
and against such plan.
    (2) Both sets of articles of combination shall be filed with the 
Office. If the Office determines that such articles conform to the 
requirements of this section, the Office shall endorse the articles and 
return one set to the resulting institution.
    (k) Effective date. No combination under this section shall be 
effective until receipt of any approvals required by the Office. The 
effective date of a combination in which the resulting institution is a 
Federal stock association shall be the date of consummation of the 
transaction or such other later date specified on the endorsement of the 
articles of combination by the Office. If a disappearing institution 
combining under this section is a Federal stock association, its charter 
shall be deemed to be cancelled as of the effective date of the 
combination and such charter must be surrendered to the Office as soon 
as practicable after the effective date.
    (l) Mergers and consolidations: transfer of assets and liabilities 
to the resulting institution. Upon the effective date of a merger or 
consolidation under this section, if the resulting institution is a 
Federal savings association, all assets and property (real, personal and 
mixed, tangible and intangible, choses in action, rights, and credits) 
then owned by each constituent institution or which would inure to any 
of them, shall, immediately by operation of law and without any 
conveyance, transfer, or further action, become the property of the 
resulting Federal savings association. The resulting Federal savings 
association shall be deemed to be a continuation of the entity of each 
constituent institution, the rights and obligations of which shall 
succeed to such rights and obligations and the duties and liabilities 
connected therewith, subject to the Home Owners' Loan Act and other 
applicable statutes.

[54 FR 49523, Nov. 30, 1989, as amended at 57 FR 14343, Apr. 20, 1992; 
59 FR 44623, Aug. 30, 1994; 71 FR 19811, Apr. 18, 2006]



Sec. 552.14  Dissenter and appraisal rights.

    (a) Right to demand payment of fair or appraised value. Except as 
provided in paragraph (b) of this section, any stockholder of a Federal 
stock association combining in accordance with Sec. 552.13 of this part 
shall have the right to demand payment of the fair or appraised value of 
his stock: Provided, That such stockholder has not voted in favor of the 
combination and complies with the provisions of paragraph (c) of this 
section.
    (b) Exceptions. No stockholder required to accept only qualified 
consideration for his or her stock shall have the right under this 
section to demand payment of the stock's fair or appraised value, if 
such stock was listed on a national securities exchange or quoted on the 
National Association of Securities Dealers' Automated Quotation System 
(``NASDAQ'') on the date of the meeting at which the combination was 
acted upon or stockholder action is not required for a combination made 
pursuant to Sec. 552.13(h)(2) of this part. ``Qualified consideration''

[[Page 156]]

means cash, shares of stock of any association or corporation which at 
the effective date of the combination will be listed on a national 
securities exchange or quoted on NASDAQ, or any combination of such 
shares of stock and cash.
    (c) Procedure--(1) Notice. Each constituent Federal stock 
association shall notify all stockholders entitled to rights under this 
section, not less than twenty days prior to the meeting at which the 
combination agreement is to be submitted for stockholder approval, of 
the right to demand payment of appraised value of shares, and shall 
include in such notice a copy of this section. Such written notice shall 
be mailed to stockholders of record and may be part of management's 
proxy solicitation for such meeting.
    (2) Demand for appraisal and payment. Each stockholder electing to 
make a demand under this section shall deliver to the Federal stock 
association, before voting on the combination, a writing identifying 
himself or herself and stating his or her intention thereby to demand 
appraisal of and payment for his or her shares. Such demand must be in 
addition to and separate from any proxy or vote against the combination 
by the stockholder.
    (3) Notification of effective date and written offer. Within ten 
days after the effective date of the combination, the resulting 
association shall:
    (i) Give written notice by mail to stockholders of constituent 
Federal stock associations who have complied with the provisions of 
paragraph (c)(2) of this section and have not voted in favor of the 
combination, of the effective date of the combination;
    (ii) Make a written offer to each stockholder to pay for dissenting 
shares at a specified price deemed by the resulting association to be 
the fair value thereof; and
    (iii) Inform them that, within sixty days of such date, the 
respective requirements of paragraphs (c)(5) and (c)(6) of this section 
(set out in the notice) must be satisfied.

The notice and offer shall be accompanied by a balance sheet and 
statement of income of the association the shares of which the 
dissenting stockholder holds, for a fiscal year ending not more than 
sixteen months before the date of notice and offer, together with the 
latest available interim financial statements.
    (4) Acceptance of offer. If within sixty days of the effective date 
of the combination the fair value is agreed upon between the resulting 
association and any stockholder who has complied with the provisions of 
paragraph (c)(2) of this section, payment therefor shall be made within 
ninety days of the effective date of the combination.
    (5) Petition to be filed if offer not accepted. If within sixty days 
of the effective date of the combination the resulting association and 
any stockholder who has complied with the provisions of paragraph (c)(2) 
of this section do not agree as to the fair value, then any such 
stockholder may file a petition with the Office, with a copy by 
registered or certified mail to the resulting association, demanding a 
determination of the fair market value of the stock of all such 
stockholders. A stockholder entitled to file a petition under this 
section who fails to file such petition within sixty days of the 
effective date of the combination shall be deemed to have accepted the 
terms offered under the combination.
    (6) Stock certificates to be noted. Within sixty days of the 
effective date of the combination, each stockholder demanding appraisal 
and payment under this section shall submit to the transfer agent his 
certificates of stock for notation thereon that an appraisal and payment 
have been demanded with respect to such stock and that appraisal 
proceedings are pending. Any stockholder who fails to submit his or her 
stock certificates for such notation shall no longer be entitled to 
appraisal rights under this section and shall be deemed to have accepted 
the terms offered under the combination.
    (7) Withdrawal of demand. Notwithstanding the foregoing, at any time 
within sixty days after the effective date of the combination, any 
stockholder shall have the right to withdraw his or her demand for 
appraisal and to accept the terms offered upon the combination.
    (8) Valuation and payment. The Director shall, as he or she may 
elect, either

[[Page 157]]

appoint one or more independent persons or direct appropriate staff of 
the Office to appraise the shares to determine their fair market value, 
as of the effective date of the combination, exclusive of any element of 
value arising from the accomplishment or expectation of the combination. 
Appropriate staff of the Office shall review and provide an opinion on 
appraisals prepared by independent persons as to the suitability of the 
appraisal methodology and the adequacy of the analysis and supportive 
data. The Director after consideration of the appraisal report and the 
advice of the appropriate staff shall, if he or she concurs in the 
valuation of the shares, direct payment by the resulting association of 
the appraised fair market value of the shares, upon surrender of the 
certificates representing such stock. Payment shall be made, together 
with interest from the effective date of the combination, at a rate 
deemed equitable by the Director.
    (9) Costs and expenses. The costs and expenses of any proceeding 
under this section may be apportioned and assessed by the Director as he 
or she may deem equitable against all or some of the parties. In making 
this determination the Director shall consider whether any party has 
acted arbitrarily, vexatiously, or not in good faith in respect to the 
rights provided by this section.
    (10) Voting and distribution. Any stockholder who has demanded 
appraisal rights as provided in paragraph (c)(2) of this section shall 
thereafter neither be entitled to vote such stock for any purpose nor be 
entitled to the payment of dividends or other distributions on the stock 
(except dividends or other distribution payable to, or a vote to be 
taken by stockholders of record at a date which is on or prior to, the 
effective date of the combination): Provided, That if any stockholder 
becomes unentitled to appraisal and payment of appraised value with 
respect to such stock and accepts or is deemed to have accepted the 
terms offered upon the combination, such stockholder shall thereupon be 
entitled to vote and receive the distributions described above.
    (11) Status. Shares of the resulting association into which shares 
of the stockholders demanding appraisal rights would have been converted 
or exchanged, had they assented to the combination, shall have the 
status of authorized and unissued shares of the resulting association.



Sec. 552.15  Supervisory combinations.

    Notwithstanding the foregoing provisions of this part, the Director 
of the Office may waive or deem inapplicable any provision of Sec. 
552.13 or Sec. 552.14 of this part if he or she determines that grounds 
exist, or may imminently exist, for appointment of a conservator or 
receiver for an association under subsection 5(d) of the Home Owners' 
Loan Act.



Sec. 552.16  Effect of subsequent charter or bylaw change.

    Notwithstanding any subsequent change to its charter or bylaws, the 
authority of a Federal stock association to engage in any transaction 
shall be determined only by the association's charter or bylaws then in 
effect.



PART 555_ELECTRONIC OPERATIONS--Table of Contents



Sec.
555.100 What does this part do?

     Subpart A_Authority of Federal Savings Associations To Conduct 
                          Electronic Operations

555.200 How may I use or participate with others to use electronic means 
          and facilities?
555.210 What precautions must I take?

      Subpart B_Requirements Applicable to All Savings Associations

555.300 Must I inform OTS before I use electronic means or facilities?
555.310 How do I notify OTS?

    Authority: 12 U.S.C. 1462a, 1463, 1464.

    Source: 63 FR 65682, Nov. 30, 1998, unless otherwise noted.



Sec. 555.100  What does this part do?

    Subpart A of this part describes how a Federal savings association 
may provide products and services through electronic means and 
facilities. Subpart B of this part contains requirements applicable to 
all savings associations.

[[Page 158]]



     Subpart A_Authority of Federal Savings Associations To Conduct 

                          Electronic Operations



Sec. 555.200  How may I use or participate with others to use electronic means 

and facilities?

    (a) General. A Federal savings association (``you'') may use, or 
participate with others to use, electronic means or facilities to 
perform any function, or provide any product or service, as part of an 
authorized activity. Electronic means or facilities include, but are not 
limited to, automated teller machines, automated loan machines, personal 
computers, the Internet, the World Wide Web, telephones, and other 
similar electronic devices.
    (b) Other. To optimize the use of your resources, you may market and 
sell, or participate with others to market and sell, electronic 
capacities and by-products to third-parties, if you acquired or 
developed these capacities and by-products in good faith as part of 
providing financial services.



Sec. 555.210  What precautions must I take?

    If you use electronic means and facilities under this subpart, your 
management must:
    (a) Identify, assess, and mitigate potential risks and establish 
prudent internal controls; and
    (b) Implement security measures designed to ensure secure 
operations. Such measures must be adequate to:
    (1) Prevent unauthorized access to your records and your customers' 
records;
    (2) Prevent financial fraud through the use of electronic means or 
facilities; and
    (3) Comply with applicable security devices requirements of part 568 
of this chapter.



      Subpart B_Requirements Applicable to All Savings Associations



Sec. 555.300  Must I inform OTS before I use electronic means or facilities?

    (a) General. A savings association (``you'') are not required to 
inform OTS before you use electronic means or facilities, except as 
provided in paragraphs (b) and (c) of this section. However, OTS 
encourages you to consult with your Regional Office before you engage in 
any activities using electronic means or facilities.
    (b) Activities requiring advance notice. You must file a written 
notice as described in Sec. 555.310 before you establish a 
transactional web site. A transactional web site is an Internet site 
that enables users to conduct financial transactions such as accessing 
an account, obtaining an account balance, transferring funds, processing 
bill payments, opening an account, applying for or obtaining a loan, or 
purchasing other authorized products or services.
    (c) Other procedures. If the OTS Regional Office informs you of any 
supervisory or compliance concerns that may affect your use of 
electronic means or facilities, you must follow any procedures it 
imposes in writing.



Sec. 555.310  How do I notify OTS?

    (a) Notice requirement. You must file a written notice with the 
appropriate Regional Office listed at Sec. 516.40(a) of this chapter at 
least 30 days before you establish a transactional website. The notice 
must do three things:
    (1) Describe the transactional web site.
    (2) Indicate the date the transactional web site will become 
operational.
    (3) List a contact familiar with the deployment, operation, and 
security of the transactional web site.
    (b) Transition provision. If you established a transactional web 
site after the date of your last regular onsite OTS safety and soundness 
examination but before January 1, 1999, you must file a notice 
describing your activity by February 1, 1999.

[63 FR 65682, Nov. 30, 1998, as amended at 66 FR 13006, Mar. 2, 2001]



PART 557_DEPOSITS--Table of Contents



                            Subpart A_General

Sec.
557.1 What does this part do?

[[Page 159]]

      Subpart B_Deposit Activities of Federal Savings Associations

557.10 What authorities govern the issuance of deposit accounts by a 
          federal savings association?
557.11 To what extent does Federal law preempt deposit-related State 
          laws?
557.12 What are some examples of preempted state laws affecting 
          deposits?
557.13 What State laws affecting deposits are not preempted?
557.14 What interest rate may I pay on savings accounts?
557.15 Who owns a deposit account?

        Subpart C_Deposit Activities of All Savings Associations

557.20 What records should I maintain on deposit activities?

    Authority: 12 U.S.C. 1462a, 1463, 1464.

    Source: 62 FR 54764, Oct. 22, 1997, unless otherwise noted.



                            Subpart A_General



Sec. 557.1  What does this part do?

    This part applies to the deposit activities of savings associations. 
If you are a federal savings association, subpart B of this part applies 
to your deposit activities. Subpart C of this part applies to the 
deposit activities of all federal and state-chartered savings 
associations.



      Subpart B_Deposit Activities of Federal Savings Associations



Sec. 557.10  What authorities govern the issuance of deposit accounts by a 

federal savings association?

    A federal savings association (``you'') may raise funds through 
accounts and may issue evidence of accounts under section 5(b)(1) of the 
HOLA (12 U.S.C. 1464(b)(1)), your charter, and this part. Additionally, 
12 CFR parts 204 and 230 apply to your deposit activities.



Sec. 557.11  To what extent does Federal law preempt deposit-related State 

laws?

    (a) Under sections 4(a), 5(a), and 5(b) of the HOLA, 12 U.S.C. 
1463(a), 1464(a), and 1464(b), OTS is authorized to promulgate 
regulations that preempt state laws affecting the operations of federal 
savings associations when appropriate to:
    (1) Facilitate the safe and sound operations of federal savings 
associations;
    (2) Enable federal savings associations to operate according to the 
best thrift institutions practices in the United States; or
    (3) Further other purposes of HOLA.
    (b) To further these purposes without undue regulatory duplication 
and burden, OTS hereby occupies the entire field of federal savings 
associations' deposit-related regulations. OTS intends to give federal 
savings associations maximum flexibility to exercise deposit-related 
powers according to a uniform federal scheme of regulation. Federal 
savings associations may exercise deposit-related powers as authorized 
under federal law, including this part, without regard to state laws 
purporting to regulate or otherwise affect deposit activities, except to 
the extent provided in Sec. 557.13. State law includes any statute, 
regulation, ruling, order, or judicial decision.

[62 FR 54764, Oct. 22, 1997, as amended at 63 FR 71212, Dec. 24, 1998; 
64 FR 69184, Dec. 10, 1999; 67 FR 78152, Dec. 23, 2002]



Sec. 557.12  What are some examples of preempted state laws affecting 

deposits?

    The OTS preempts state laws that purport to impose requirements 
governing the following:
    (a) Abandoned and dormant accounts;
    (b) Checking accounts;
    (c) Disclosure requirements;
    (d) Funds availability;
    (e) Savings account orders of withdrawal;
    (f) Service charges and fees;
    (g) State licensing or registration requirements; and
    (h) Special purpose savings services.



Sec. 557.13  What State laws affecting deposits are not preempted?

    (a) The OTS has not preempted the following types of state law, to 
the extent that the law only incidentally affects your deposit-related 
activities or is otherwise consistent with the purposes of Sec. 557.11:
    (1) Contract and commercial law;
    (2) Tort law; and
    (3) Criminal law.

[[Page 160]]

    (b) The OTS will not preempt any other state law if the OTS, upon 
review, finds that the law:
    (1) Furthers a vital state interest; and
    (2) Either only incidentally affects your deposit-related activities 
or is not otherwise contrary to the purposes expressed in Sec. 557.11.



Sec. 557.14  What interest rate may I pay on savings accounts?

    (a) You may pay interest at any rate or anticipated rate of return 
on savings accounts, either in deposit or in share form, as provided in 
your charter and the account's terms.
    (b) You may pay fixed or variable rates. If you pay a variable rate, 
you must base it on a schedule, index, or formula that you specify in 
the account's terms.



Sec. 557.15  Who owns a deposit account?

    You may treat the holder of record as the account owner, even if you 
receive contrary notice, until you transfer the account on your records.



        Subpart C_Deposit Activities of All Savings Associations



Sec. 557.20  What records should I maintain on deposit activities?

    All federal and state chartered savings associations (``you'') 
should establish and maintain deposit documentation practices and 
records that demonstrate that you appropriately administer and monitor 
deposit-related activities. Your records should adequately evidence 
ownership, balances, and all transactions involving each account. You 
may maintain records on deposit activities in any format that is 
consistent with standard business practices.



PART 558_POSSESSION BY CONSERVATORS AND RECEIVERS FOR FEDERAL AND STATE 

SAVINGS ASSOCIATIONS--Table of Contents



Sec.
558.1 Procedure upon taking possession.
558.2 Notice of appointment.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.



Sec. 558.1  Procedure upon taking possession.

    (a) The conservator or receiver for a Federal or state savings 
association shall take possession of the savings association by taking 
possession of the principal office of the Federal or state savings 
association in accordance with the terms of the Director's appointment.
    (b) Upon taking possession, the conservator or receiver shall 
immediately:
    (1) Take possession of the savings association's books, records and 
assets.
    (2) Notify in writing, served personally or by registered mail or 
telegraph, all persons and entities that the conservator or receiver 
knows to be holding or in possession of assets of the savings 
association, that the conservator or receiver has succeeded to all 
rights, titles, powers and privileges of the savings associations.
    (3) File with the Corporate Secretary a statement that possession 
was taken, including the time of the taking, which statement shall be 
conclusive evidence thereof.
    (4) Post a notice on the door of the principal and other offices of 
the savings association in the form prescribed by the Director of the 
OTS.
    (5) By operation of law and without any conveyance or other 
instrument, act or deed, succeed to the rights, titles, powers and 
privileges of the savings association, and to the rights, powers, and 
privileges of its stockholders, members, accountholders, depositors, 
officers, and directors. No stockholder, member, accountholder, 
depositor, officer or director shall thereafter have or exercise any 
right, power, or privilege, or act in connection with any of the savings 
association's assets or property.

[58 FR 4312, Jan. 14, 1993, as amended at 59 FR 53571, Oct. 25, 1994; 73 
FR 18, Jan. 2, 2008]



Sec. 558.2  Notice of appointment.

    (a) When the Director of OTS issues an order for the appointment of 
a conservator or receiver, the Director will designate the persons or 
entities whose employees or agents must, before the conservator or 
receiver takes possession of the savings association:

[[Page 161]]

    (1) Give notice of the appointment to any officer or employee who is 
present in and appears to be in charge at the principal office of the 
savings association as determined by OTS.
    (2) Serve a copy of the order for the appointment upon the savings 
association or upon the conservator by:
    (i) Leaving a certified copy of the order of appointment at the 
principal office of the savings association as determined by OTS; or
    (ii) Handing a certified copy of the order of appointment to the 
previous conservator of the savings association, or to the officer or 
employee of the savings association, or to the previous conservator who 
is present in and appears to be in charge at the principal office of the 
savings association as determined by OTS.
    (3) File with the Secretary of OTS a statement that includes the 
date and time that notice of the appointment was given and service of 
the order of appointment was made.
    (b) If the Director of OTS appoints a conservator or receiver under 
this part, OTS will immediately file a notice of the appointment for 
publication in the Federal Register.

[73 FR 18, Jan. 2, 2008]



PART 559_SUBORDINATE ORGANIZATIONS--Table of Contents



Sec.
559.1 What does this part cover?
559.2 Definitions.

    Subpart A_Regulations Applicable to Federal Savings Associations

559.3 What are the characteristics of, and what requirements apply to, 
          subordinate organizations of Federal savings associations?
559.4 What activities are preapproved for service corporations?
559.5 How much may a savings association invest in service corporations 
          or lower-tier entities?

      Subpart B_Regulations Applicable to All Savings Associations

559.10 How must separate corporate identities be maintained?
559.11 What notices are required to establish or acquire a new 
          subsidiary or engage in new activities through an existing 
          subsidiary?
559.12 How may a subsidiary of a savings association issue securities?
559.13 How may a savings association exercise its salvage power in 
          connection with its service corporation or lower-tier 
          entities?

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1828.

    Source: 61 FR 66571, Dec. 18, 1996, unless otherwise noted.



Sec. 559.1  What does this part cover?

    (a) OTS is issuing this part 559 pursuant to its general rulemaking 
and supervisory authority under the Home Owners' Loan Act, 12 U.S.C. 
1462 et seq., and its specific authority under section 18(m) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1828(m). Subpart A of this part 
559 applies to subordinate organizations of federal savings 
associations. Subpart B of this part applies to subordinate 
organizations of all savings associations. OTS may, at any time, limit a 
savings association's investment in any of these entities, or may limit 
or refuse to permit any activities of any of these entities for 
supervisory, legal, or safety and soundness reasons.
    (b) Notices under this part are applications for purposes of 
statutory and regulatory references to ``applications.'' Any conditions 
that OTS imposes in approving any application are enforceable as a 
condition imposed in writing by the OTS in connection with the granting 
of a request by a savings association within the meaning of 12 U.S.C. 
1818(b) or 1818(i).



Sec. 559.2  Definitions.

    For purposes of this part:
    Control has the same meaning as in part 574 of this chapter.
    GAAP-consolidated subsidiary means an entity in which a savings 
association has a direct or indirect ownership interest and whose assets 
are consolidated with those of the savings association for purposes of 
reporting under Generally Accepted Accounting Principles (GAAP). 
Generally, these are entities in which a savings association has a 
majority ownership interest.
    Lower-tier entity includes any company in which an operating 
subsidiary or a service corporation has a direct or indirect ownership 
interest.

[[Page 162]]

    Operating subsidiary means any entity that satisfies all of the 
requirements for an operating subsidiary set forth in Sec. 559.3 of 
this part and that is designated by the parent savings association as an 
operating subsidiary pursuant to Sec. 559.3 of this part. More than 50% 
of the voting shares of an operating subsidiary must be owned, directly 
or indirectly, by a federal savings association and no other person or 
entity may exercise effective operating control. An operating subsidiary 
may only engage in activities permissible for a federal savings 
association.
    Ownership interest means any equity interest in a business 
organization, including stock, limited or general partnership interests, 
or shares in a limited liability company.
    Service corporation means any entity that satisfies all of the 
requirements for service corporations in 12 U.S.C. 1464(c)(4)(B) and 
Sec. 559.3 of this part and that is designated by the investing savings 
association as a service corporation pursuant to Sec. 559.3 of this 
part. A service corporation must be organized under the laws of the 
state where the federal savings association's home office is located, 
may only be owned by savings associations with home offices in that 
state, and may engage in the activities identified in Sec. Sec. 
559.3(e)(2) and 559.4 of this part.
    Subordinate organization means any corporation, partnership, 
business trust, association, joint venture, pool, syndicate, or other 
similar business organization in which a savings association has a 
direct or indirect ownership interest, unless that ownership interest 
qualifies as a pass-through investment pursuant to Sec. 560.32 of this 
chapter and is so designated by the investing savings association.
    Subsidiary means any subordinate organization directly or indirectly 
controlled by a savings association.



    Subpart A_Regulations Applicable to Federal Savings Associations



Sec. 559.3  What are the characteristics of, and what requirements apply to, 

subordinate organizations of Federal savings associations?

    A federal savings association (``you'') that meets the requirements 
of this section, as detailed in the following chart, may establish, or 
obtain an interest in an operating subsidiary or a service corporation. 
For ease of reference, this section cross-references other regulations 
in this chapter affecting operating subsidiaries and service 
corporations. You should refer to those regulations for the details of 
how they apply. The chart also discusses the regulations that may apply 
to lower-tier entities in which you have an indirect ownership interest 
through your operating subsidiary or service corporation. The chart 
follows:

----------------------------------------------------------------------------------------------------------------
                                        Operating subsidiary                       Service corporation
----------------------------------------------------------------------------------------------------------------
(a) How may a federal        (1) You must file a notice satisfying      (2) You must file a notice satisfying
 savings association          Sec.  559.11. Any finance subsidiary      Sec.  559.11. Depending upon your
 (``you'') establish an       that existed on January 1, 1997 is         condition and the activities in which
 operating subsidiary or a    deemed an operating subsidiary without     the service corporation will engage,
 service corporation?         further action on your part.               Sec.  559.3(e)(2) may require you to
                                                                         file an application.
----------------------------------------------------------------------------------------------------------------
(b) Who may be an owner?     (1) Anyone may have an ownership interest  (2) Only savings associations with home
                              in an operating subsidiary.                offices in the state where you have
                                                                         your home office may have an ownership
                                                                         interest in any service corporation in
                                                                         which you invest.
----------------------------------------------------------------------------------------------------------------
(c) What ownership           (1) You must own, directly or indirectly,  (2) You are not required to have any
 requirements apply?          more than 50% of the voting shares of      particular percentage ownership
                              the operating subsidiary. No one else      interest and need not have control of
                              may exercise effective operating           the service corporation.
                              control.
----------------------------------------------------------------------------------------------------------------
(d) What geographic          (1) An operating subsidiary may be         (2) A service corporation must be
 restrictions apply?          organized in any geographic location.      organized in the state where your home
                                                                         office is located.
----------------------------------------------------------------------------------------------------------------

[[Page 163]]

 
(e) What activities are      (1) After you have notified OTS in         (2)(i) If you are eligible for expedited
 permissible?                 accordance with Sec.  559.11, an          treatment under Sec.  516.5 of this
                              operating subsidiary may engage in any     chapter, and notify OTS as required by
                              activity that you may conduct directly.    Sec.  559.11, your service corporation
                              You may hold another insured depository    may engage in the preapproved
                              institution as an operating subsidiary.    activities listed in Sec.  559.4. You
                                                                         may request OTS approval for your
                                                                         service corporation to engage in any
                                                                         other activity reasonably related to
                                                                         the activities of financial
                                                                         institutions by filing an application
                                                                         in accordance with standard treatment
                                                                         processing procedures at part 516,
                                                                         subparts A and E of this chapter.
                                                                        (ii) If you are subject to standard
                                                                         treatment under Sec.  516.5 of this
                                                                         chapter, and notify OTS as required by
                                                                         Sec.  559.11, your service corporation
                                                                         may engage in any activity that you may
                                                                         conduct directly except taking
                                                                         deposits. You may request OTS approval
                                                                         for your service corporation to engage
                                                                         in any other activity reasonably
                                                                         related to the activities of financial
                                                                         institutions, including the activities
                                                                         set forth in Sec.  559.4(b)-(j), by
                                                                         filing an application in accordance
                                                                         with standard treatment processing
                                                                         procedures at part 516, subparts A and
                                                                         E of this chapter.
----------------------------------------------------------------------------------------------------------------
(f) May the operating        (1)(i) An operating subsidiary may itself  (2) A service corporation may invest in
 subsidiary or service        hold an operating subsidiary. Part 559     all types of lower-tier entities as
 corporation invest in        applies equally to a lower-tier            long as the lower-tier entity is
 lower-tier entities?         operating subsidiary. In applying the      engaged solely in activities that are
                              regulations in this part, the investing    permissible for a service corporation.
                              operating subsidiary should substitute     All of the requirements of this part
                              ``investing operating subsidiary''         apply to such entities except for
                              wherever the part uses ``you'' or          paragraphs (b)(2) and (d)(2) of this
                              ``savings association.''                   section.
 
                             (ii) An operating subsidiary may also
                              invest in other types of lower-tier
                              entities. These entities must comply
                              with all of the requirements of this
                              part 559 that apply to service
                              corporations except for paragraphs
                              (b)(2) and (d)(2) of this section.
----------------------------------------------------------------------------------------------------------------
(g) How much may a federal   (1) There are no limits on the amount you  (2) Section 559.5 limits your aggregate
 savings association          may invest in your operating               investments in service corporations and
 invest?                      subsidiaries, either separately or in      indicates when your investments (both
                              the aggregate.                             debt and equity) in lower-tier entities
                                                                         must be aggregated with your
                                                                         investments in service corporations.
----------------------------------------------------------------------------------------------------------------
(h) Do federal statutes and  (1) Unless otherwise specifically          (2) (i) If the federal statute or
 regulations that apply to    provided by statute, regulation, or OTS    regulation specifically refers to
 the savings association      policy, all federal statutes and           ``service corporation,'' it applies to
 apply?                       regulations apply to operating             all service corporations, even if you
                              subsidiaries in the same manner as they    do not control the service corporation
                              apply to you. You and your operating       or it is not a GAAP-consolidated
                              subsidiary are generally consolidated      subsidiary.
                              and treated as a unit for statutory and   (ii) If the federal statute or
                              regulatory purposes.                       regulation refers to ``subsidiary,'' it
                                                                         applies only to service corporations
                                                                         that you directly or indirectly
                                                                         control.
----------------------------------------------------------------------------------------------------------------
(i) Do the investment        (1) Your assets and those of your          (2) Your service corporation's assets
 limits that apply to         operating subsidiary are aggregated when   are not subject to the same investment
 federal savings              calculating investment limitations.        limitations that apply to you. The
 associations (HOLA section                                              investment activities of your service
 5(c) and part 560 of this                                               corporation are governed by paragraph
 chapter) apply?                                                         (e)(2) of this section and Sec.
                                                                         559.4.
----------------------------------------------------------------------------------------------------------------
(j) How does the capital     (1) Your assets and those of your          (2) The capital treatment of a service
 regulation (part 567 of      operating subsidiary are consolidated      corporation depends upon whether it is
 this chapter) apply?         for all capital purposes.                  an includable subsidiary. That
                                                                         determination is based upon factors set
                                                                         forth in part 567 of this chapter,
                                                                         including your percentage ownership of
                                                                         the service corporation and the
                                                                         activities in which the service
                                                                         corporation engages. Both debt and
                                                                         equity investments in service
                                                                         corporations that are GAAP-consolidated
                                                                         subsidiaries are considered investments
                                                                         in subsidiaries for purposes of the
                                                                         capital regulation, regardless of the
                                                                         authority under which they are made.
----------------------------------------------------------------------------------------------------------------

[[Page 164]]

 
(k) How does the loans-to-   (1) The LTOB regulation does not apply to  (2) The LTOB regulation does not apply
 one-borrower (LTOB)          loans from you to your operating           to loans from you to your service
 regulation (Sec.  560.93    subsidiary or loans from your operating    corporation or from your service
 of this chapter) apply?      subsidiary to you. Other loans made by     corporation to you. However, Sec.
                              your operating subsidiary are aggregated   559.5 imposes restrictions on the
                              with your loans for LTOB purposes.         amount of loans you may make to certain
                                                                         service corporations. Loans made by a
                                                                         service corporation that you control to
                                                                         entities other than you or your
                                                                         subordinate organizations are
                                                                         aggregated with your loans for LTOB
                                                                         purposes.
----------------------------------------------------------------------------------------------------------------
(l) How do the transactions  (1) Section 563.41 of this chapter         (2) Section 563.41 of this chapter
 with affiliates (TWA)        explains how TWA applies. Generally, an    explains how TWA applies. Generally, a
 regulations (Sec.  563.41   operating subsidiary is not an             service corporation is not an
 of this chapter) apply?      affiliate, unless it is a depository       affiliate, unless it is a depository
                              institution; is directly controlled by     institution; is directly controlled by
                              another affiliate of the savings           another affiliate of the savings
                              association or by shareholders that        association or by shareholders that
                              control the savings association; or is     control the savings association; or is
                              an employee stock option plan, trust, or   an employee stock option plan, trust,
                              similar organization that exists for the   or similar organization that exists for
                              benefit of shareholders, partners,         the benefit of shareholders, partners,
                              members, or employees of the savings       members, or employees of the savings
                              association or an affiliate. A non-        association or an affiliate. If a
                              affiliate operating subsidiary is          savings association directly or
                              treated as a part of the savings           indirectly controls a service
                              association and its transactions with      corporation and the service corporation
                              affiliates of the savings association      is not otherwise an affiliate under
                              are aggregated with those of the savings   Sec.  563.41 of this chapter, the
                              association                                service corporation is treated as a
                                                                         part of the savings association and its
                                                                         transactions with affiliates of the
                                                                         savings association are aggregated with
                                                                         those of the savings association.
----------------------------------------------------------------------------------------------------------------
(m) How does the Qualified   (1) Under 12 U.S.C. 1467a(m)(5), you may   (2) Under 12 U.S.C. 1467a(m)(5), you may
 Thrift Lender (QTL) (12      determine whether to consolidate the       determine whether to consolidate the
 U.S.C. 1467a(m)) test        assets of a particular operating           assets of a particular service
 apply?                       subsidiary for purposes of calculating     corporation for purposes of calculating
                              your qualified thrift investments. If      your qualified thrift investments. If a
                              the operating subsidiary's assets are      service corporation's assets are not
                              not consolidated with yours for that       consolidated with yours for that
                              purpose, your investment in the            purpose, your investment in the service
                              operating subsidiary will be considered    corporation will be considered in
                              in calculating your qualified thrift       calculating your qualified thrift
                              investments.                               investments.
----------------------------------------------------------------------------------------------------------------
(n) Does state law apply?    (1) State law applies to operating         (2) State law applies to service
                              subsidiaries only to the extent it         corporations regardless of whether it
                              applies to you.                            applies to you, except where there is a
                                                                         conflict with federal law.
----------------------------------------------------------------------------------------------------------------
(o) May OTS conduct          (1) An operating subsidiary is subject to  (2) A service corporation is subject to
 examinations?                examination by OTS.                        examination by OTS.
----------------------------------------------------------------------------------------------------------------
(p) What must be done to     (1) Before redesignating an operating      (2) Before redesignating a service
 redesignate an operating     subsidiary as a service corporation, you   corporation as an operating subsidiary,
 subsidiary as a service      should consult with the OTS Regional       you should consult with the OTS
 corporation or a service     Director for the Region in which your      Regional Director for the Region in
 corporation as an            home office is located. You must           which your home office is located. You
 operating subsidiary?        maintain adequate internal records,        must maintain adequate internal
                              available for examination by OTS,          records, available for examination by
                              demonstrating that the redesignated        OTS, demonstrating that the
                              service corporation meets all of the       redesignated operating subsidiary meets
                              applicable requirements of this part and   all of the applicable requirements of
                              that your board of directors has           this part and that your board of
                              approved the redesignation.                directors has approved the
                                                                         redesignation.
----------------------------------------------------------------------------------------------------------------
(q) What are the             (1) If an operating subsidiary, or any     (2) If a service corporation, or any
 consequences of failing to   lower-tier entity in which the operating   lower-tier entity in which the service
 comply with the              subsidiary invests pursuant to paragraph   corporation invests pursuant to
 requirements of this part?   (f)(1) of this section fails to meet any   paragraph (f)(2) of this section, fails
                              of the requirements of this section, you   to meet any of the requirements of this
                              must notify OTS. Unless otherwise          section, you must notify OTS. Unless
                              advised by OTS, if the company cannot      otherwise advised by OTS, if the
                              comply within 90 days with all of the      company cannot comply within 90 days
                              requirements for either an operating       with all of the requirements for either
                              subsidiary or a service corporation        an operating subsidiary or a service
                              under this section, or any other           corporation under this section, or any
                              investment authorized by 12 U.S.C.         other investment authorized by 12
                              1464(c) or part 560 of this chapter, you   U.S.C. 1464(c) or part 560 of this
                              must promptly dispose of your              chapter, you must promptly dispose of
                              investment.                                your investment.
----------------------------------------------------------------------------------------------------------------


[[Page 165]]


[61 FR 66571, Dec. 18, 1996, as amended at 62 FR 66262, Dec. 18, 1997; 
63 FR 65683, Nov. 30, 1998; 66 FR 13006, Mar. 2, 2001; 67 FR 77916, Dec. 
20, 2002; 67 FR 78152, Dec. 23, 2002; 68 FR 57796, Oct. 7, 2003]



Sec. 559.4  What activities are preapproved for service corporations?

    This section sets forth the activities that have been preapproved 
for service corporations. Section 559.3(e)(2) of this part sets forth 
the procedures for engaging in a broader scope of activities on a case-
by-case basis. You should read these two sections together to determine 
whether you must file a notice with OTS under Sec. 559.11 of this part, 
or whether you must file an application under part 516 of this chapter 
and receive prior written OTS approval for your service corporation to 
engage in a particular activity. To the extent permitted by Sec. 
559.3(e)(2) of this part, a service corporation may engage in the 
following activities:
    (a) Any activity that all federal savings associations may conduct 
directly, except taking deposits.
    (b) Business and professional services. The following services are 
preapproved for service corporations only when they are limited to 
financial documents or financial clients or are generally finance-
related:
    (1) Accounting or internal audit;
    (2) Advertising, marketing research and other marketing;
    (3) Clerical;
    (4) Consulting;
    (5) Courier;
    (6) Data processing;
    (7) Data storage facilities operation and related services;
    (8) Office supplies, furniture, and equipment purchasing and 
distribution;
    (9) Personnel benefit program development or administration;
    (10) Printing and selling forms that require Magnetic Ink Character 
Recognition (MICR) encoding;
    (11) Relocation of personnel;
    (12) Research studies and surveys;
    (13) Software development and systems integration; and
    (14) Remote service unit operation, leasing, ownership or 
establishment.
    (c) Credit-related activities.
    (1) Abstracting;
    (2) Acquiring and leasing personal property;
    (3) Appraising;
    (4) Collection agency;
    (5) Credit analysis;
    (6) Check or credit card guaranty and verification;
    (7) Escrow agent or trustee (under deeds of trust, including 
executing and deliverance of conveyances, reconveyances and transfers of 
title); and
    (8) Loan inspection.
    (d) Consumer services.
    (1) Financial advice or consulting;
    (2) Foreign currency exchange;
    (3) Home ownership counseling;
    (4) Income tax return preparation;
    (5) Postal services;
    (6) Stored value instrument sales;
    (7) Welfare benefit distribution;
    (8) Check printing and related services; and
    (9) Remote service unit operation, leasing, ownership, or 
establishment.
    (e) Real estate related services.
    (1) Acquiring real estate for prompt development or subdivision, for 
construction of improvements, for resale or leasing to others for such 
construction, or for use as manufactured home sites, in accordance with 
a prudent program of property development;
    (2) Acquiring improved real estate or manufactured homes to be held 
for rental or resale, for remodeling, renovating, or demolishing and 
rebuilding for sale or rental, or to be used for offices and related 
facilities of a stockholder of the service corporation;
    (3) Maintaining and managing real estate; and
    (4) Real estate brokerage for property owned by a savings 
association that owns capital stock of the service corporation, the 
service corporation, or a lower-tier entity in which the service 
corporation invests.
    (f) Securities activities, liquidity management, and coins.
    (1) Execution of transactions in securities on an agency or riskless 
principal basis solely upon the order and for the account of customers 
or the provision of investment advice. The service corporation must 
register with the Securities and Exchange Commission and State 
securities regulators, as

[[Page 166]]

required by applicable Federal and State law and regulations.
    (2) Liquidity management;
    (3) Issuing notes, bonds, debentures, or other obligations or 
securities;
    (4) Purchase or sale of coins issued by the U.S. Treasury.
    (g) Investments. (1) Tax-exempt bonds used to finance residential 
real property for family units;
    (2) Tax-exempt obligations of public housing agencies used to 
finance housing projects with rental assistance subsidies;
    (3) Small business investment companies and new markets venture 
capital companies licensed by the U.S. Small Business Administration;
    (4) Rural business investment companies; and
    (5) Investing in savings accounts of an investing thrift.
    (h) Community development and charitable activities:
    (1) Investments in governmentally insured, guaranteed, subsidized or 
otherwise sponsored programs for housing, small farms, or businesses 
that are local in character;
    (2) Investments designed primarily to promote the public welfare, 
including the welfare of low- and moderate-income communities or 
families (such as providing housing, services, or jobs);
    (3) Investments in low-income housing tax credit and new markets tax 
credit projects and entities authorized by statute (e.g., community 
development financial institutions) to promote community, inner city, 
and community development purposes; and
    (4) Establishing a corporation that is recognized by the Internal 
Revenue Service as organized for charitable purposes under 26 U.S.C. 
501(c)(3) of the Internal Revenue Code and making a reasonable 
contribution to capitalize it, provided that the corporation engages 
exclusively in activities designed to promote the well-being of 
communities in which the owners of the service corporation operate.
    (i) Activities conducted on behalf of a customer on an other than 
``as principal'' basis.
    (j) Activities reasonably incident to those listed in paragraphs (a) 
through (i) of this section if the service corporation engages in those 
activities.

[61 FR 66571, Dec. 18, 1996, as amended by 66 FR 13007, Mar. 2, 2001; 66 
FR 65824, Dec. 21, 2001; 69 FR 68249, Nov. 24, 2004; 70 FR 76675, Dec. 
28, 2005]



Sec. 559.5  How much may a savings association invest in service corporations 

or lower-tier entities?

    The amount that a federal savings association (``you'') may invest 
in a service corporation or any lower-tier entity depends upon several 
factors. These include your total assets, your capital, the purpose of 
the investment, and your ownership interest in the service corporation 
or entity.
    (a) Under section 5(c)(4)(B) of the HOLA, you may invest up to 3% of 
your assets in the capital stock, obligations, and other securities of 
service corporations. Any investment you make under this paragraph that 
would cause your investment, in the aggregate, to exceed 2% of your 
assets must serve primarily community, inner city, or community 
development purposes. You must designate the investments serving those 
purposes, which include:
    (1) Investments in governmentally insured, guaranteed, subsidized or 
otherwise sponsored programs for housing, small farms, or businesses 
that are local in character;
    (2) Investments for the preservation or revitalization of either 
urban or rural communities;
    (3) Investments designed to meet the community development needs of, 
and primarily benefit, low- and moderate-income communities; or
    (4) Other community, inner city, or community development-related 
investments approved by OTS.
    (b) In addition to the amounts you may invest under paragraph (a) of 
this section, and to the extent that you have authority under other 
provisions of section 5(c) of the HOLA and part 560 of this chapter, and 
available capacity within any applicable investment limits, you may make 
loans to any service corporation and any lower-tier entity, subject to 
the following conditions:
    (1) You and your GAAP-consolidated subsidiaries may, in the 
aggregate, make loans of up to 15% of your total capital, as described 
in part 567 of this

[[Page 167]]

chapter to each subordinate organization that does not qualify as a 
GAAP-consolidated subsidiary. All loans made under this paragraph (b)(1) 
may not, in the aggregate, exceed 50% of your total capital, as 
described in part 567 of this chapter.
    (2) The Regional Director may limit the amount of loans to a GAAP-
consolidated subsidiary, or may adjust the limits set forth in paragraph 
(b)(1) of this section where safety and soundness considerations warrant 
such action.
    (c) For purposes of this section, the terms ``loans'' and 
``obligations'' include all loans and other debt instruments (except 
accounts payable incurred in the ordinary course of business and paid 
within 60 days) and all guarantees or take-out commitments of such loans 
or debt instruments.

[61 FR 66571, Dec. 18, 1996, as amended at 72 FR 69438, Dec. 7, 2007]



      Subpart B_Regulations Applicable to All Savings Associations



Sec. 559.10  How must separate corporate identities be maintained?

    (a) Each savings association and subordinate organization thereof 
must be operated in a manner that demonstrates to the public that each 
maintains a separate corporate existence. Each must operate so that:
    (1) Their respective business transactions, accounts, and records 
are not intermingled;
    (2) Each observes the formalities of their separate corporate 
procedures;
    (3) Each is adequately financed as a separate unit in light of 
normal obligations reasonably foreseeable in a business of its size and 
character;
    (4) Each is held out to the public as a separate enterprise; and
    (5) Unless the parent savings association has guaranteed a loan to 
the subordinate organization, all borrowings by the subordinate 
organization indicate that the parent is not liable.
    (b) OTS regulations that apply both to savings associations and 
subordinate organizations shall not be construed as requiring a savings 
association and its subordinate organizations to operate as a single 
entity.



Sec. 559.11  What notices are required to establish or acquire a new 

subsidiary or engage in new activities through an existing subsidiary?

    When required by section 18(m) of the Federal Deposit Insurance Act, 
a savings association (``you'') must file a notice (``Notice'') under 
part 516, subpart A of this chapter at least 30 days before establishing 
or acquiring a subsidiary or engaging in new activities in a subsidiary. 
The Notice must contain all of the information the Federal Deposit 
Insurance Corporation (FDIC) requires under 12 CFR 362.15. Providing OTS 
with a copy of the notice you file with the FDIC will satisfy this 
requirement. If OTS notifies you within 30 days that the Notice presents 
supervisory concerns, or raises significant issues of law or policy, you 
must apply for and receive OTS's prior written approval under the 
standard treatment processing procedures at part 516, subpart A and E of 
this chapter before establishing or acquiring the subsidiary or engaging 
in new activities in the subsidiary.

[61 FR 66571, Dec. 18, 1996, as amended at 64 FR 69185, Dec. 10, 1999; 
66 FR 13007, Mar. 2, 2001]



Sec. 559.12  How may a subsidiary of a savings association issue securities?

    (a) A subsidiary may issue, either directly or through a third party 
intermediary, any securities that its parent savings association 
(``you'') may issue. The subsidiary must not state or imply that the 
securities it issues are covered by federal deposit insurance. A 
subsidiary may not issue any security the payment, maturity, or 
redemption of which may be accelerated upon the condition that you are 
insolvent or have been placed into receivership.
    (b) You must file a notice with OTS in accordance with Sec. 559.11 
of this part at least 30 days before your first issuance of any 
securities through an existing subsidiary or in conjunction with 
establishing or acquiring a new subsidiary. If OTS notifies you within 
30 days that the notice presents supervisory concerns or raises 
significant

[[Page 168]]

issues of law or policy, you must receive OTS's prior written approval 
before issuing securities through your subsidiary.
    (c) For as long as any securities are outstanding, you must maintain 
all records generated through each securities issuance in the ordinary 
course of business, including a copy of any prospectus, offering 
circular, or similar document concerning such issuance, and make such 
records available for examination by OTS. Such records must include, but 
are not limited to:
    (1) The amount of your assets or liabilities (including any 
guarantees you make with respect to the securities issuance) that have 
been transferred or made available to the subsidiary; the percentage 
that such amount represents of the current book value of your assets on 
an unconsolidated basis; and the current book value of all such assets 
of the subsidiary;
    (2) The terms of any guarantee(s) issued by you or any third party;
    (3) A description of the securities the subsidiary issued;
    (4) The net proceeds from the issuance of securities (or the pro 
rata portion of the net proceeds from securities issued through a 
jointly owned subsidiary); the gross proceeds of the securities 
issuance; and the market value of assets collateralizing the securities 
issuance (any assets of the subsidiary, including any guarantees of its 
securities issuance you have made);
    (5) The interest or dividend rates and yields, or the range thereof, 
and the frequency of payments on the subsidiary's securities;
    (6) The minimum denomination of the subsidiary's securities; and
    (7) Where the subsidiary marketed or intends to market the 
securities.

[61 FR 66571, Dec. 18, 1996, as amended at 69 FR 68249, Nov. 24, 2004]



Sec. 559.13  How may a savings association exercise its salvage power in 

connection with a service corporation or lower-tier entities?

    (a) In accordance with this section, a savings association (``you'') 
may exercise your salvage power to make a contribution or a loan 
(including a guarantee of a loan made by any other person) to your 
service corporation or lower-tier entity (``salvage investment'') that 
exceeds the maximum amount otherwise permitted under law or regulation. 
You must notify OTS at least 30 days before making such a salvage 
investment. This notice must demonstrate that:
    (1) The salvage investment protects your interest in the service 
corporation or lower-tier entity;
    (2) The salvage investment is consistent with safety and soundness; 
and
    (3) You considered alternatives to the salvage investment and 
determined that such alternatives would not adequately satisfy 
paragraphs (a)(1) and (a)(2) of this section.
    (b) If OTS notifies you within 30 days that the Notice presents 
supervisory concerns, or raises significant issues of law or policy, you 
must apply for and receive OTS's prior written approval under the 
standard treatment processing procedures at part 516, subparts A and E 
of this chapter before making a salvage investment.
    (c) If your service corporation or lower-tier entity is a GAAP-
consolidated subsidiary, your salvage investment under this section will 
be considered an investment in a subsidiary for purposes of part 567 of 
this chapter.

[61 FR 66571, Dec. 18, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



PART 560_LENDING AND INVESTMENT--Table of Contents



Sec.
560.1 General.
560.2 Applicability of law.
560.3 Definitions.

Subpart A_Lending and Investment Powers for Federal Savings Associations

560.30 General lending and investment powers of Federal savings 
          associations.
560.31 Election regarding categorization of loans or investments and 
          related calculations.
560.32 Pass-through investments.
560.33 Late charges.
560.34 Prepayments.
560.35 Adjustments to home loans.
560.36 De minimis investments.
560.37 Real estate for office and related facilities.
560.40 Commercial paper and corporate debt securities.
560.41 Leasing.

[[Page 169]]

560.42 State and local government obligations.
560.43 Foreign assistance investments.
560.50 Letters of credit and other independent undertakings--authority.
560.60 Suretyship and guaranty.

 Subpart B_Lending and Investment Provisions Applicable to all Savings 
                              Associations

560.93 Lending limitations.
560.100 Real estate lending standards; purpose and scope.
560.101 Real estate lending standards.
560.110 Most favored lender usury preemption.
560.120 Letters of credit and other independent undertakings to pay 
          against documents.
560.121 Investment in State housing corporations.
560.130 Prohibition on loan procurement fees.
560.160 Asset classification.
560.170 Records for lending transactions.
560.172 Re-evaluation of real estate owned.

               Subpart C_Alternative Mortgage Transactions

560.210 Disclosures for variable rate transactions.
560.220 Alternative Mortgage Transaction Parity Act.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1701j-3, 1828, 
3803, 3806; 42 U.S.C. 4106.

    Source: 61 FR 50971, Sept. 30, 1996, unless otherwise noted.



Sec. 560.1  General.

    (a) Authority and scope. This part is being issued by OTS under its 
general rulemaking and supervisory authority under the Home Owners' Loan 
Act (HOLA), 12 U.S.C. 1462 et seq. Subpart A of this part sets forth the 
lending and investment powers of Federal savings associations. Subpart B 
of this part contains safety-and-soundness based lending and investment 
provisions applicable to all savings associations. Subpart C of this 
part addresses alternative mortgages and applies to all savings 
associations.
    (b) General lending standards. Each savings association is expected 
to conduct its lending and investment activities prudently. Each 
association should use lending and investment standards that are 
consistent with safety and soundness, ensure adequate portfolio 
diversification and are appropriate for the size and condition of the 
institution, the nature and scope of its operations, and conditions in 
its lending market. Each association should adequately monitor the 
condition of its portfolio and the adequacy of any collateral securing 
its loans.



Sec. 560.2  Applicability of law.

    (a) Occupation of field. Pursuant to sections 4(a) and 5(a) of the 
HOLA, 12 U.S.C. 1463(a), 1464(a), OTS is authorized to promulgate 
regulations that preempt state laws affecting the operations of federal 
savings associations when deemed appropriate to facilitate the safe and 
sound operation of federal savings associations, to enable federal 
savings associations to conduct their operations in accordance with the 
best practices of thrift institutions in the United States, or to 
further other purposes of the HOLA. To enhance safety and soundness and 
to enable federal savings associations to conduct their operations in 
accordance with best practices (by efficiently delivering low-cost 
credit to the public free from undue regulatory duplication and burden), 
OTS hereby occupies the entire field of lending regulation for federal 
savings associations. OTS intends to give federal savings associations 
maximum flexibility to exercise their lending powers in accordance with 
a uniform federal scheme of regulation. Accordingly, federal savings 
associations may extend credit as authorized under federal law, 
including this part, without regard to state laws purporting to regulate 
or otherwise affect their credit activities, except to the extent 
provided in paragraph (c) of this section or Sec. 560.110 of this part. 
For purposes of this section, ``state law'' includes any state statute, 
regulation, ruling, order or judicial decision.
    (b) Illustrative examples. Except as provided in Sec. 560.110 of 
this part, the types of state laws preempted by paragraph (a) of this 
section include, without limitation, state laws purporting to impose 
requirements regarding:
    (1) Licensing, registration, filings, or reports by creditors;
    (2) The ability of a creditor to require or obtain private mortgage 
insurance, insurance for other collateral, or other credit enhancements;

[[Page 170]]

    (3) Loan-to-value ratios;
    (4) The terms of credit, including amortization of loans and the 
deferral and capitalization of interest and adjustments to the interest 
rate, balance, payments due, or term to maturity of the loan, including 
the circumstances under which a loan may be called due and payable upon 
the passage of time or a specified event external to the loan;
    (5) Loan-related fees, including without limitation, initial 
charges, late charges, prepayment penalties, servicing fees, and 
overlimit fees;
    (6) Escrow accounts, impound accounts, and similar accounts;
    (7) Security property, including leaseholds;
    (8) Access to and use of credit reports;
    (9) Disclosure and advertising, including laws requiring specific 
statements, information, or other content to be included in credit 
application forms, credit solicitations, billing statements, credit 
contracts, or other credit-related documents and laws requiring 
creditors to supply copies of credit reports to borrowers or applicants;
    (10) Processing, origination, servicing, sale or purchase of, or 
investment or participation in, mortgages;
    (11) Disbursements and repayments;
    (12) Usury and interest rate ceilings to the extent provided in 12 
U.S.C. 1735f-7a and part 590 of this chapter and 12 U.S.C. 1463(g) and 
Sec. 560.110 of this part; and
    (13) Due-on-sale clauses to the extent provided in 12 U.S.C. 1701j-3 
and part 591 of this chapter.
    (c) State laws that are not preempted. State laws of the following 
types are not preempted to the extent that they only incidentally affect 
the lending operations of Federal savings associations or are otherwise 
consistent with the purposes of paragraph (a) of this section:
    (1) Contract and commercial law;
    (2) Real property law;
    (3) Homestead laws specified in 12 U.S.C. 1462a(f);
    (4) Tort law;
    (5) Criminal law; and
    (6) Any other law that OTS, upon review, finds:
    (i) Furthers a vital state interest; and
    (ii) Either has only an incidental effect on lending operations or 
is not otherwise contrary to the purposes expressed in paragraph (a) of 
this section.



Sec. 560.3  Definitions.

    For purposes of this part and any determination under 12 U.S.C. 
1467a(m):
    Consumer loans include loans for personal, family, or household 
purposes and loans reasonably incident thereto, and may be made as 
either open-end or closed-end consumer credit (as defined at 12 CFR 
226.2(a) (10) and (20)). Consumer loans do not include credit extended 
in connection with credit card loans, bona fide overdraft loans, and 
other loans that the savings association has designated as made under 
investment or lending authority other than section 5(c)(2)(D) of the 
HOLA.
    Credit card is any card, plate, coupon book, or other single credit 
device that may be used from time to time to obtain credit.
    Credit card account is a credit account established in conjunction 
with the issuance of, or the extension of credit through, a credit card. 
This term includes loans made to consolidate credit card debt, including 
credit card debt held by other lenders, and participation certificates, 
securities and similar instruments secured by credit card receivables.
    Home loans include any loans made on the security of a home 
(including a dwelling unit in a multi-family residential property such 
as a condominium or a cooperative), combinations of homes and business 
property (i.e., a home used in part for business), farm residences, and 
combinations of farm residences and commercial farm real estate.
    Loan commitment includes a loan in process, a letter of credit, or 
any other commitment to extend credit.
    Real estate loan, for purposes of this part, is a loan for which the 
savings association substantially relies upon a security interest in 
real estate given by the borrower as a condition of making the loan. A 
loan is made on the security of real estate if:

[[Page 171]]

    (1) The security property is real estate pursuant to the law of the 
state in which the property is located;
    (2) The security interest of the Federal savings association may be 
enforced as a real estate mortgage or its equivalent pursuant to the law 
of the state in which the property is located;
    (3) The security property is capable of separate appraisal; and
    (4) With regard to a security property that is a leasehold or other 
interest for a period of years, the term of the interest extends, or is 
subject to extension or renewal at the option of the Federal savings 
association for a term of at least five years following the maturity of 
the loan.
    Small business includes a small business concern or entity as 
defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a), and 
implemented by the regulations of the Small Business Administration at 
13 CFR Part 121.
    Small business loans and loans to small businesses include any loan 
to a small business as defined in this section; or a loan that does not 
exceed $2 million (including a group of loans to one borrower) and is 
for commercial, corporate, business, or agricultural purposes.

[61 FR 50971, Sept. 30, 1996, as amended at 61 FR 60184, Nov. 27, 1996; 
62 FR 15825, Apr. 3, 1997; 64 FR 46565, Aug. 26, 1999; 66 FR 65825, Dec. 
21, 2001]



Subpart A_Lending and Investment Powers for Federal Savings Associations



Sec. 560.30  General lending and investment powers of Federal savings 

associations.

    Pursuant to section 5(c) of the Home Owners' Loan Act (``HOLA''), 12 
U.S.C. 1464(c), a Federal savings association may make, invest in, 
purchase, sell, participate in, or otherwise deal in (including 
brokerage or warehousing) all loans and investments allowed under 
section 5(c) of the HOLA including, without limitation, the following 
loans, extensions of credit, and investments, subject to the limitations 
indicated and any such terms, conditions, or limitations as may be 
prescribed from time to time by OTS by policy directive, order, or 
regulation:

                   Lending and Investment Powers Chart
------------------------------------------------------------------------
                                                    Statutory investment
                                                        limitations
           Category                 Statutory        (Endnotes contain
                                authorization \1\  applicable regulatory
                                                        limitations)
------------------------------------------------------------------------
Bankers' bank stock...........  5(c)(4)(E).......  Same terms as
                                                    applicable to
                                                    national banks.
Business development credit     5(c)(4)(A).......  The lesser of .5% of
 corporations.                                      total outstanding
                                                    loans or $250,000.
Commercial loans..............  5(c)(2)(A).......  20% of total assets,
                                                    provided that
                                                    amounts in excess of
                                                    10% of total assets
                                                    may be used only for
                                                    small business
                                                    loans.
Commercial paper and corporate  5(c)(2)(D).......  Up to 35% of total
 debt securities.                                   assets. 2,3
Community development loans     5(c)(3)(A).......  5% of total assets,
 and equity investments.                            provided equity
                                                    investments do not
                                                    exceed 2% of total
                                                    assets. \4\
Construction loans without      5(c)(3)(C).......  In the aggregate, the
 security.                                          greater of total
                                                    capital or 5% of
                                                    total assets.
Consumer loans................  5(c)(2)(D).......  Up to 35% of total
                                                    assets. 2,5
Credit card loans or loans      5(c)(1)(T).......  None. \6\
 made through credit card
 accounts.
Deposits in insured depository  5(c)(1)(G).......  None. \6\
 institutions.
Education loans...............  5(c)(1)(U).......  None. \6\
Federal government and          5(c)(1)(C),        None. \6\
 government-sponsored            5(c)(1)(D),
 enterprise securities and       5(c)(1)(E),
 instruments.                    5(c)(1)(F).
Finance leasing...............  5(c)(1)(B),        Based on purpose and
                                 5(c)(2)(A),        property financed.
                                 5(c)(2)(B),        \7\
                                 5(c)(2)(D).
Foreign assistance investments  5(c)(4)(C).......  1% of total assets.
                                                    \8\
General leasing...............  5(c)(2)(C).......  10% of assets. \7\
Home improvement loans........  5(c)(1)(J).......  None. \6\
Home (residential) loans \9\..  5(c)(1)(B).......  None. 6,10
HUD-insured or guaranteed       5(c)(1)(O).......  None. \6\
 investments.
Insured loans.................  5(c)(1)(I),        None. \6\
                                 5(c)(1)(K).
Liquidity investments.........  5(c)(1)(M).......  None. \6\
Loans secured by deposit        5(c)(1)(A).......  None. 6,11
 accounts.
Loans to financial              5(c)(1)(L).......  None. 6,12
 institutions, brokers, and
 dealers.
Manufactured home loans.......  5(c)(1)(J).......  None. 6,13

[[Page 172]]

 
Mortgage-backed securities....  5(c)(1)(R).......  None. \6\
National Housing Partnership    5(c)(1)(N).......  None. \6\
 Corporation and related
 partnerships and joint
 ventures.
New markets venture capital     5(c)(4)(F).......  5% of total capital.
 companies.
Nonconforming loans...........  5(c)(3)(B).......  5% of total assets.
Nonresidential real property    5(c)(2)(B).......  400% of total
 loans.                                             capital. \14\
Open-end management investment  5(c)(1)(Q).......  None. \6\
 companies \15\.
Rural business investment       7 U.S.C. 2009cc-9  Five percent of total
 companies.                                         capital.
Service corporations..........  5(c)(4)(B).......  3% of total assets,
                                                    as long as any
                                                    amounts in excess of
                                                    2% of total assets
                                                    further community,
                                                    inner city, or
                                                    community
                                                    development
                                                    purposes. \16\
Small business investment       15 U.S.C.          5% of total capital.
 companies.                      682(b)(2).
Small-business-related          5(c)(1)(S).......  None. \6\
 securities.
State and local government      5(c)(1)(H).......  None for general
 obligations.                                       obligations. Per
                                                    issuer limitation of
                                                    10% of capital for
                                                    other obligations.
                                                    \6,17\
State housing corporations....  5(c)(1)(P).......  None. \6,18\
Transaction account loans,      5(c)(1)(A).......  None. \6,19\
 including overdrafts.
------------------------------------------------------------------------

                                Endnotes

    1. All references are to section 5 of the Home Owners' Loan Act (12 
U.S.C. 1464) unless otherwise indicated.
    2. For purposes of determining a Federal savings association's 
percentage of assets limitation, investment in commercial paper and 
corporate debt securities must be aggregated with the Federal savings 
association's investment in consumer loans.
    3. A Federal savings association may invest in commercial paper and 
corporate debt securities, which includes corporate debt securities 
convertible into stock, subject to the provisions of Sec. 560.40 of 
this part. Amounts in excess of 30% of assets, in the aggregate, may be 
invested only in obligations purchased by the association directly from 
the original obligor and for which no finder's or referral fees have 
been paid.
    4. The 2% of assets limitation is a sublimit for investments within 
the overall 5% of assets limitation on community development loans and 
investments. The qualitative standards for such loans and investments 
are set forth in HOLA section 5(c)(3)(A) (formerly 5(c)(3)(B), as 
explained in an opinion of the OTS Chief Counsel dated May 10, 1995 
(available at www.ots.treas.gov)).
    5. Amounts in excess of 30% of assets, in the aggregate, may be 
invested only in loans made by the association directly to the original 
obligor and for which no finder's or referral fees have been paid. A 
Federal savings association may include loans to dealers in consumer 
goods to finance inventory and floor planning in the total investment 
made under this section.
    6. While there is no statutory limit on certain categories of loans 
and investments, including credit card loans, home improvement loans, 
education loans, and deposit account loans, OTS may establish an 
individual limit on such loans or investments if the association's 
concentration in such loans or investments presents a safety and 
soundness concern.
    7. A Federal savings association may engage in leasing activities 
subject to the provisions of Sec. 560.41 of this part.
    8. This 1% of assets limitation applies to the aggregate outstanding 
investments made under the Foreign Assistance Act and in the capital of 
the Inter-American Savings and Loan Bank. Such investments may be made 
subject to the provisions of Sec. 560.43 of this part.
    9. A home (or residential) loan includes loans secured by one-to-
four family dwellings, multi-family residential property, and loans 
secured by a unit or units of a condominium or housing cooperative.
    10. A Federal savings association may make home loans subject to the 
provisions of Sec. Sec. 560.33, 560.34, and 560.35 of this part.
    11. Loans secured by savings accounts and other time deposits may be 
made without limitation, provided the Federal savings association 
obtains a lien on, or a pledge of, such accounts. Such loans may not 
exceed the withdrawable amount of the account.
    12. A Federal savings association may only invest in these loans if 
they are secured by obligations of, or by obligations fully guaranteed 
as to principal and interest by, the United States or any of its 
agencies or instrumentalities, the borrower is a financial institution 
insured by the Federal Deposit Insurance Corporation or is a broker or 
dealer registered with the Securities and Exchange Commission, and the 
market value of the securities for each loan at least equals the amount 
of the loan at the time it is made.

[[Page 173]]

    13. If the wheels and axles of the manufactured home have been 
removed and it is permanently affixed to a foundation, a loan secured by 
a combination of a manufactured home and developed residential lot on 
which it sits may be treated as a home loan.
    14. Without regard to any limitations of this part, a Federal 
savings association may make or invest in the fully insured or 
guaranteed portion of nonresidential real estate loans insured or 
guaranteed by the Economic Development Administration, the Farmers Home 
Administration, or the Small Business Administration. Unguaranteed 
portions of guaranteed loans must be aggregated with uninsured loans 
when determining an association's compliance with the 400% of capital 
limitation for other real estate loans.
    15. This authority is limited to investments in open-end management 
investment companies that are registered with the Securities and 
Exchange Commission under the Investment Company Act of 1940. The 
portfolio of the investment company must be restricted by the company's 
investment policy (changeable only if authorized by shareholder vote) 
solely to investments that a Federal savings association may, without 
limitation as to percentage of assets, invest in, sell, redeem, hold, or 
otherwise deal in. Separate and apart from this authority, a Federal 
savings association may make pass-through investments to the extent 
authorized by Sec. 560.32 of this part.
    16. A Federal savings association may invest in service corporations 
subject to the provisions of part 559 of this chapter.
    17. This category includes obligations issued by any state, 
territory, or possession of the United States or political subdivision 
thereof (including any agency, corporation, or instrumentality of a 
state or political subdivision), subject to Sec. 560.42 of this part.
    18. A Federal savings association may invest in state housing 
corporations subject to the provisions of Sec. 560.121 of this part.
    19. Payments on accounts in excess of the account balance 
(overdrafts) on commercial deposit or transaction accounts shall be 
considered commercial loans for purposes of determining the 
association's percentage of assets limitation.

[66 FR 65825, Dec. 21, 2001, as amended at 68 FR 75109, Dec. 30, 2003; 
70 FR 76675, Dec. 28, 2005]



Sec. 560.31  Election regarding categorization of loans or investments and 

related calculations.

    (a) If a loan or other investment is authorized under more than one 
section of the HOLA, as amended, or this part, a Federal savings 
association may designate under which section the loan or investment has 
been made. Such a loan or investment may be apportioned among 
appropriate categories, and may be moved, in whole or part, from one 
category to another. A loan commitment shall be counted as an investment 
and included in total assets of a Federal savings association for 
purposes of calculating compliance with HOLA section 5(c)'s investment 
limitations only to the extent that funds have been advanced and not 
repaid pursuant to the commitment.
    (b) Loans or portions of loans sold to a third party shall be 
included in the calculation of a percentage-of-assets or percentage-of-
capital investment limitation only to the extent they are sold with 
recourse.
    (c) A Federal savings association may make a loan secured by an 
assignment of loans to the extent that it could, under applicable law 
and regulations, make or purchase the underlying assigned loans.



Sec. 560.32  Pass-through investments.

    (a) A federal savings association (``you'') may make pass-through 
investments. A pass-through investment occurs when you invest in an 
entity (``company'') that engages only in activities that you may 
conduct directly and the investment meets the requirements of this 
section. If an investment is authorized under both this section and some 
other provision of law, you may designate under which authority or 
authorities the investment is made. When making a pass-through 
investment, you must comply with all the statutes and regulations that 
would apply if you were engaging in the activity directly. For example, 
your proportionate share of the company's assets will be aggregated with 
the assets you hold directly in calculating investment limits (e.g., no 
more than 400% of total capital may be invested in nonresidential real 
property loans).
    (b) You may make a pass-through investment without prior notice to 
OTS if all of the following conditions are met:
    (1) You do not invest more than 15% of your total capital in one 
company;
    (2) The book value of your aggregate pass-through investments does 
not exceed 50% of your total capital after making the investment;

[[Page 174]]

    (3) Your investment would not give you direct or indirect control of 
the company;
    (4) Your liability is limited to the amount of your investment; and
    (5) The company falls into one of the following categories:
    (i) A limited partnership;
    (ii) An open-end mutual fund;
    (iii) A closed-end investment trust;
    (iv) A limited liability company; or
    (v) An entity in which you are investing primarily to use the 
company's services (e.g., data processing).
    (c) If you want to make other pass-through investments, you must 
provide OTS with 30 days' advance notice. If within that 30-day period 
OTS notifies you that an investment presents supervisory, legal, or 
safety and soundness concerns, you must apply for and receive OTS prior 
written approval under the standard treatment processing procedures at 
part 516, subparts A and E of this chapter before making the investment. 
Notices under this section are deemed to be applications for purposes of 
statutory and regulatory references to ``applications.'' Any conditions 
that OTS imposes on any pass-through investment shall be enforceable as 
a condition imposed in writing by the OTS in connection with the 
granting of a request by a savings association within the meaning of 12 
U.S.C. 1818(b) or 1818(i).

[61 FR 66578, Dec. 18, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



Sec. 560.33  Late charges.

    A Federal savings association may include in a home loan contract a 
provision authorizing the imposition of a late charge with respect to 
the payment of any delinquent periodic payment. With respect to any loan 
made after July 31, 1976, on the security of a home occupied or to be 
occupied by the borrower, no late charge, regardless of form, shall be 
assessed or collected by a Federal savings association, unless any 
billing, coupon, or notice the Federal savings association may provide 
regarding installment payments due on the loan discloses the date after 
which the charge may be assessed. A Federal savings association may not 
impose a late charge more than one time for late payment of the same 
installment, and any installment payment made by the borrower shall be 
applied to the longest outstanding installment due. A Federal savings 
association shall not assess a late charge as to any payment received by 
it within fifteen days after the due date of such payment. No form of 
such late charge permitted by this paragraph shall be considered as 
interest to the Federal savings association and the Federal savings 
association shall not deduct late charges from the regular periodic 
installment payments on the loan, but must collect them as such from the 
borrower.



Sec. 560.34  Prepayments.

    Any prepayment on a real estate loan must be applied directly to 
reduce the principal balance on the loan unless the loan contract or the 
borrower specifies otherwise. Subject to the terms of the loan contract, 
a Federal savings association may impose a fee for any prepayment of a 
loan.



Sec. 560.35  Adjustments to home loans.

    (a) For any home loan secured by borrower-occupied property, or 
property to be occupied by the borrower, adjustments to the interest 
rate, payment, balance, or term to maturity must comply with the 
limitations of this section and the disclosure and notice requirements 
of Sec. 560.210 of this part.
    (b) Adjustments to the interest rate shall correspond directly to 
the movement of an index satisfying the requirements of paragraph (d) of 
this section. A Federal savings association also may increase the 
interest rate pursuant to a formula or schedule that specifies the 
amount of the increase, the time at which it may be made, and which is 
set forth in the loan contract. A Federal savings association may 
decrease the interest rate at any time.
    (c) Adjustments to the payment and the loan balance that do not 
reflect an interest-rate adjustment may be made if:
    (1) The adjustments reflect a change in an index that may be used 
pursuant to paragraph (d) of this section;
    (2) In the case of a payment adjustment, the adjustment reflects a 
change in the loan balance or is made pursuant

[[Page 175]]

to a formula, or to a schedule specifying the percentage or dollar 
change in the payment as set forth in the loan contract; or
    (3) In the case of an open-end line-of-credit loan, the adjustment 
reflects an advance taken by the borrower under the line-of-credit and 
is permitted by the loan contract.
    (d)(1) Any index used must be readily available and independently 
verifiable. If set forth in the loan contract, an association may use 
any combination of indices, a moving average of index values, or more 
than one index during the term of a loan.
    (2) Except as provided in paragraph (d)(3) of this section, any 
index used must be a national or regional index.
    (3) A Federal savings association may use an index not satisfying 
the requirements of paragraph (d)(2) of this section 30 days after 
filing a notice unless, within that 30-day period, OTS has notified the 
association that the notice presents supervisory concerns or raises 
significant issues of law or policy. If OTS notifies the association of 
such concerns or issues, the Federal savings association may not use 
such an index unless it applies for and receives OTS's prior written 
approval under the standard treatment processing procedures at part 516, 
subparts A and E of this chapter.

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



Sec. 560.36  De minimis investments.

    A Federal savings association may invest in the aggregate up to the 
greater of 1% of its total capital or $250,000 in community development 
investments of the type permitted for a national bank under 12 CFR part 
24.

[66 FR 65826, Dec. 21, 2001]



Sec. 560.37  Real estate for office and related facilities.

    A federal savings association may invest in real estate (improved or 
unimproved) to be used for office and related facilities of the 
association, or for such office and related facilities and for rental or 
sale, if such investment is made and maintained under a prudent program 
of property acquisition to meet the federal savings association's 
present needs or its reasonable future needs for office and related 
facilities. A federal savings association may not make an investment 
that would cause the outstanding book value of all such investments 
(including investments under Sec. 559.4(e)(2) of this chapter) to 
exceed its total capital.

[61 FR 66579, Dec. 18, 1996]



Sec. 560.40  Commercial paper and corporate debt securities.

    Pursuant to HOLA section 5(c)(2)(D), a Federal savings association 
may invest in, sell, or hold commercial paper and corporate debt 
securities subject to the provisions of this section.
    (a) Limitations. (1) Commercial paper must be:
    (i) As of the date of purchase, rated in either one of the two 
highest categories by at least two nationally recognized investment 
ratings services as shown by the most recently published rating made of 
such investments; or
    (ii) If unrated, guaranteed by a company having outstanding paper 
that is rated as provided in paragraph (a)(1)(i) of this section.
    (2) Corporate debt securities must be:
    (i) Securities that may be sold with reasonable promptness at a 
price that corresponds reasonably to their fair value; and
    (ii) Rated in one of the four highest categories as to the portion 
of the security in which the association is investing by a nationally 
recognized investment ratings service at its most recently published 
rating before the date of purchase of the security.
    (3) A Federal savings association's total investment in the 
commercial paper and corporate debt securities of any one issuer, or 
issued by any one person or entity affiliated with such issuer, together 
with other loans, shall not exceed the general lending limitations 
contained in Sec. 560.93(c) of this part.
    (4) Investments in corporate debt securities convertible into stock 
are subject to the following additional limitations:
    (i) The purchase of securities convertible into stock at the option 
of the issuer is prohibited;
    (ii) At the time of purchase, the cost of such securities must be 
written

[[Page 176]]

down to an amount that represents the investment value of the securities 
considered independently of the conversion feature; and
    (iii) Federal savings associations are prohibited from exercising 
the conversion feature.
    (5) A Federal savings association shall maintain information in its 
files adequate to demonstrate that it has exercised prudent judgment in 
making investments under this section.
    (b) Notwithstanding the limitations contained in this section, the 
Office may permit investment in corporate debt securities of another 
savings association in connection with the purchase or sale of a branch 
office or in connection with a supervisory merger or acquisition.
    (c) Underwriting. Before committing to acquire any investment 
security, a Federal savings association must determine whether the 
investment is safe and sound and suitable for the association. The 
Federal savings association must consider, as appropriate, the interest 
rate, credit, liquidity, price, transaction, and other risks associated 
with the investment activity. The Federal savings association must also 
determine that the issuer has adequate resources and the willingness to 
provide for all required payments on its obligations in a timely manner.

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 65826, Dec. 21, 2001]



Sec. 560.41  Leasing.

    (a) Permissible activities. Subject to the limitations of this 
section, a Federal savings association may engage in leasing activities. 
These activities include becoming the legal or beneficial owner of 
tangible personal property or real property for the purpose of leasing 
such property, obtaining an assignment of a lessor's interest in a lease 
of such property, and incurring obligations incidental to its position 
as the legal or beneficial owner and lessor of the leased property.
    (b) Definitions. For the purposes of this section:
    (1) The term net lease means a lease under which the Federal savings 
association will not, directly or indirectly, provide or be obligated to 
provide for:
    (i) The servicing, repair or maintenance of the leased property 
during the lease term;
    (ii) The purchasing of parts and accessories for the leased 
property, except that improvements and additions to the leased property 
may be leased to the lessee upon its request in accordance with the 
full-payout requirements of paragraph (c)(2)(i) of this section;
    (iii) The loan of replacement or substitute property while the 
leased property is being serviced;
    (iv) The purchasing of insurance for the lessee, except where the 
lessee has failed to discharge a contractual obligation to purchase or 
maintain insurance; or
    (v) The renewal of any license, registration, or filing for the 
property unless such action by the Federal savings association is 
necessary to protect its interest as an owner or financier of the 
property.
    (2) The term full-payout lease means a lease transaction in which 
any unguaranteed portion of the estimated residual value relied on by 
the association to yield the return of its full investment in the leased 
property, plus the estimated cost of financing the property over the 
term of the lease, does not exceed 25% of the original cost of the 
property to the lessor. In general, a lease will qualify as a full-
payout lease if the scheduled payments provide at least 75% of the 
principal and interest payments that a lessor would receive if the 
finance lease were structured as a market-rate loan.
    (3) The term realization of investment means that a Federal savings 
association that enters into a lease financing transaction must 
reasonably expect to realize the return of its full investment in the 
leased property, plus the estimated cost of financing the property over 
the term of the lease from:
    (i) Rentals;
    (ii) Estimated tax benefits, if any; and
    (iii) The estimated residual value of the property at the expiration 
of the term of the lease.
    (c) Finance leasing--(1) Investment limits. A Federal savings 
association may exercise its authority under HOLA sections 5(c)(1)(B) 
(residential real estate loans), 5(c)(2)(A) (commercial, business,

[[Page 177]]

corporate or agricultural loans), 5(c)(2)(B) (nonresidential real estate 
loans), and 5(c)(2)(D) (consumer loans) by conducting leasing activities 
that are the functional equivalent of loans made under those HOLA 
sections. These activities are commonly referred to as financing leases. 
Such financing leases are subject to the same investment limits that 
apply to loans made under those sections. For example, a financing lease 
of tangible personal property made to a natural person for personal, 
family or household purposes is subject to all limitations applicable to 
the amount of a Federal savings association's investment in consumer 
loans. A financing lease made for commercial, corporate, business, or 
agricultural purposes is subject to all limitations applicable to the 
amount of a Federal savings association's investment in commercial 
loans. A financing lease of residential or nonresidential real property 
is subject to all limitations applicable to the amount of a Federal 
savings association's investment in these types of real estate loans.
    (2) Functional equivalent of lending. To qualify as the functional 
equivalent of a loan:
    (i) The lease must be a net, full-payout lease representing a non-
cancelable obligation of the lessee, notwithstanding the possible early 
termination of the lease;
    (ii) The portion of the estimated residual value of the property 
relied upon by the lessor to satisfy the requirements of a full-payout 
lease must be reasonable in light of the nature of the leased property 
and all relevant circumstances so that realization of the lessor's full 
investment plus the cost of financing the property depends primarily on 
the creditworthiness of the lessee, and not on the residual market value 
of the leased property; and
    (iii) At the termination of a financing lease, either by expiration 
or default, property acquired must be liquidated or released on a net 
basis as soon as practicable. Any property held in anticipation of re-
leasing must be reevaluated and recorded at the lower of fair market 
value or book value.
    (d) General leasing. Pursuant to section 5(c)(2)(C) of the HOLA, a 
Federal savings association may invest in tangible personal property, 
including vehicles, manufactured homes, machinery, equipment, or 
furniture, for the purpose of leasing that property. In contrast to 
financing leases, lease investments made under this authority need not 
be the functional equivalent of loans.
    (e) Leasing salvage powers. If, in good faith, a Federal savings 
association believes that there has been an unanticipated change in 
conditions that threatens its financial position by significantly 
increasing its exposure to loss, it may:
    (1) As the owner and lessor, take reasonable and appropriate action 
to salvage or protect the value of the property or its interest arising 
under the lease;
    (2) As the assignee of a lessor's interest in a lease, become the 
owner and lessor of the leased property pursuant to its contractual 
right, or take any reasonable and appropriate action to salvage or 
protect the value of the property or its interest arising under the 
lease; or
    (3) Include any provisions in a lease, or make any additional 
agreements, to protect its financial position or investment in the 
circumstances set forth in paragraphs (e)(1) and (e)(2) of this section.



Sec. 560.42  State and local government obligations.

    (a) What limitations apply? Pursuant to HOLA section 5(c)(1)(H), a 
Federal savings association (``you'') may invest in obligations issued 
by any state, territory, possession, or political subdivision thereof 
(``governmental entity''), subject to appropriate underwriting and the 
following conditions:

------------------------------------------------------------------------
                                       Aggregate          Per-issuer
                                      limitation          limitation
------------------------------------------------------------------------
(1) General obligations.........  None..............  None.
(2) Other obligations of a        None..............  10% of total
 governmental entity (e.g.,                            capital.
 revenue bonds) that hold one of
 the four highest investment
 grade ratings by a nationally
 recognized rating agency or
 that are nonrated but of
 investment quality.

[[Page 178]]

 
(3) Obligations of a              As approved by      10% of total
 governmental entity that do not   your Regional       capital.
 qualify under any other           Director
 paragraph but are approved by
 your Regional Director.
------------------------------------------------------------------------

    (b) What is a political subdivision? Political subdivision means a 
county, city, town, or other municipal corporation, a public authority, 
or a publicly-owned entity that is an instrumentality of a state or a 
municipal corporation.
    (c) What is a general obligation of a state or political 
subdivision? A general obligation is an obligation that is guaranteed by 
the full faith and credit of a state or political subdivision that has 
the power to tax. Indirect payments, such as through a special fund, may 
qualify as general obligations if a state or political subdivision with 
taxing authority has unconditionally agreed to provide funds to cover 
payments.
    (d) What is appropriate underwriting for this type of investment? In 
the case of a security rated in one of the four highest investment 
grades by a nationally recognized rating agency, your assessment of the 
obligor's credit quality may be based, in part, on reliable rating 
agency estimates of the obligor's performance. For all other securities, 
you must perform your own detailed analysis of credit quality. In doing 
so, you must consider, as appropriate, the interest rate, credit, 
liquidity, price, transaction, and other risks associated with the 
investment activity and determine that such investment is appropriate 
for your institution. You must also determine that the obligor has 
adequate resources and willingness to provide for all required payments 
on its obligations in a timely manner.

[66 FR 65826, Dec. 21, 2001]



Sec. 560.43  Foreign assistance investments.

    Pursuant to HOLA section 5(c)(4)(C), a Federal savings association 
may make foreign assistance investments in an aggregate amount not to 
exceed one percent of its assets, subject to the following conditions:
    (a) For any investment made under the Foreign Assistance Act, the 
loan agreement shall specify what constitutes an event of default, and 
provide that upon default in payment of principal or interest under such 
agreement, the entire amount of outstanding indebtedness thereunder 
shall become immediately due and payable, at the lender's option. 
Additionally, the contract of guarantee shall cover 100% of any loss of 
investment thereunder, except for any portion of the loan arising out of 
fraud or misrepresentation for which the party seeking payment is 
responsible, and provide that the guarantor shall pay for any such loss 
in U.S. dollars within a specified reasonable time after the date of 
application for payment.
    (b) To make any investments in the share capital and capital reserve 
of the Inter-American Savings and Loan Bank, a Federal savings 
association must be adequately capitalized and have adequate allowances 
for loan and lease losses. The Federal savings association's aggregate 
investment in such capital or capital reserve, including the amount of 
any obligations undertaken to provide said Bank with reserve capital in 
the future (call-able capital), must not, as a result of such 
investment, exceed the lesser of one-quarter of 1% of its assets or 
$100,000.



Sec. 560.50  Letters of credit and other independent undertakings--authority.

    A Federal savings association may issue letters of credit and may 
issue such other independent undertakings as are approved by OTS, 
subject to the restrictions in Sec. 560.120.

[64 FR 46565, Aug. 26, 1999]



Sec. 560.60  Suretyship and guaranty.

    Pursuant to section 5(b)(2) of the HOLA, a Federal savings 
association may enter into a repayable suretyship or guaranty agreement, 
subject to the conditions in this section.
    (a) What is a suretyship or guaranty agreement? Under a suretyship, 
a Federal savings association is bound with

[[Page 179]]

its principal to pay or perform an obligation to a third person. Under a 
guaranty agreement, a Federal savings association agrees to satisfy the 
obligation of the principal only if the principal fails to pay or 
perform.
    (b) What requirements apply to suretyship and guaranty agreements 
under this section? A Federal savings association may enter into a 
suretyship or guaranty agreement under this section, subject to each of 
the following requirements:
    (1) The Federal savings association must limit its obligations under 
the agreement to a fixed dollar amount and a specified duration.
    (2) The Federal savings association's performance under the 
agreement must create an authorized loan or other investment.
    (3) The Federal savings association must treat its obligation under 
the agreement as a loan to the principal for purposes of Sec. Sec. 
560.93 and 563.43 of this chapter.
    (4) The Federal savings association must take and maintain a 
perfected security interest in collateral sufficient to cover its total 
obligation under the agreement.
    (c) What collateral is sufficient? (1) The Federal savings 
association must take and maintain a perfected security interest in real 
estate or marketable securities equal to at least 110 percent of its 
obligation under the agreement, except as provided in paragraph (c)(2) 
of this section.
    (i) If the collateral is real estate, the Federal savings 
association must establish the value by a signed appraisal or evaluation 
in accordance with part 564 of this chapter. In determining the value of 
the collateral, the Federal savings association must factor in the value 
of any existing senior mortgages, liens or other encumbrances on the 
property, except those held by the principal to the suretyship or 
guaranty agreement.
    (ii) If the collateral is marketable securities, the Federal savings 
association must be authorized to invest in that security taken as 
collateral. The Federal savings association must ensure that the value 
of the security is 110 percent of the obligation at all times during the 
term of agreement.
    (2) The Federal savings association may take and maintain a 
perfected security interest in collateral which is at all times equal to 
at least 100 percent of its obligation, if the collateral is:
    (i) Cash;
    (ii) Obligations of the United States or its agencies;
    (iii) Obligations fully guarantied by the United States or its 
agencies as to principal and interest; or
    (iv) Notes, drafts, or bills of exchange or bankers' acceptances 
that are eligible for rediscount or purchase by a Federal Reserve Bank.

[64 FR 46565, Aug. 26, 1999]



 Subpart B_Lending and Investment Provisions Applicable to all Savings 

                              Associations



Sec. 560.93  Lending limitations.

    (a) Scope. This section applies to all loans and extensions of 
credit to third parties made by a savings association and its 
subsidiaries. This section does not apply to loans made by a savings 
association or a GAAP-consolidated subsidiary to subordinate 
organizations or affiliates of the savings association. The terms 
subsidiary, GAAP-consolidated subsidiary, and subordinate organization 
have the same meanings as specified in Sec. 559.2 of this chapter. The 
term affiliate has the same meaning as specified in Sec. 563.41 of this 
chapter.
    (b) Definitions. In applying these lending limitations, savings 
associations shall apply the definitions and interpretations promulgated 
by the Office of the Comptroller of the Currency consistent with 12 
U.S.C. 84. See 12 CFR part 32. In applying these definitions, pursuant 
to 12 U.S.C. 1464, savings associations shall use the terms savings 
association, savings associations, and savings association's in place of 
the terms national bank and bank, banks, and bank's, respectively. For 
purposes of this section:
    (1) The term one borrower has the same meaning as the term person 
set forth at 12 CFR part 32. It also includes, in addition to the 
definition cited therein, a financial institution as defined at Sec. 
561.19 of this chapter.
    (2) The term company means a corporation, partnership, business 
trust,

[[Page 180]]

association, or similar organization and, unless specifically excluded, 
the term company includes a savings association and a bank.
    (3) Contractual commitment to advance funds has the meaning set 
forth in 12 CFR part 32.
    (4) Loans and extensions of credit has the meaning set forth in 12 
CFR part 32, and includes investments in commercial paper and corporate 
debt securities. The Office expressly reserves its authority to deem 
other arrangements that are, in substance, loans and extensions of 
credit to be encompassed by this term.
    (5) The term loans as used in the phrase Loans to one borrower to 
finance the sale of real property acquired in satisfaction of debts 
previously contracted for in good faith does not include an 
association's taking of a purchase money mortgage note from the 
purchaser provided that:
    (i) No new funds are advanced by the association to the borrower; 
and
    (ii) The association is not placed in a more detrimental position as 
a result of the sale.
    (6) [Reserved]
    (7) Readily marketable collateral has the meaning set forth in 12 
CFR part 32.
    (8) Residential housing units has the same meaning as the term 
residential real estate set forth in Sec. 541.23 of this chapter. The 
term to develop includes the various phases necessary to produce housing 
units as an end product, to include: acquisition, development and 
construction; development and construction; construction; 
rehabilitation; or conversion. The term domestic includes units within 
the fifty states, the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, and the Pacific Islands.
    (9) Single family dwelling unit has the meaning set forth in Sec. 
541.25 of this chapter.
    (10) A standby letter of credit has the meaning set forth in 12 CFR 
part 32.
    (11) Unimpaired capital and unimpaired surplus means--
    (i) A savings association's core capital and supplementary capital 
included in its total capital under part 567 of this chapter; plus
    (ii) The balance of a savings association's allowance for loan and 
lease losses not included in supplementary capital under part 567 of 
this chapter; plus
    (iii) The amount of a savings association's loans to, investments 
in, and advances to subsidiaries not included in calculating core 
capital under part 567 of this chapter.
    (c) General limitation. Section 5200 of the Revised Statutes (12 
U.S.C. 84) shall apply to savings associations in the same manner and to 
the same extent as it applies to national banks. This statutory 
provision and lending limit regulations and interpretations promulgated 
by the Office of the Comptroller of the Currency pursuant to a 
rulemaking conducted in accordance with the provisions of the 
Administrative Procedure Act, 5 U.S.C. 553 et seq. (including the 
regulations appearing at 12 CFR part 32) shall apply to savings 
associations in the same manner and to the same extent as these 
provisions apply to national banks:
    (1) The total loans and extensions of credit by a savings 
association to one borrower outstanding at one time and not fully 
secured, as determined in the same manner as determined under 12 U.S.C. 
84(a)(2), by collateral having a market value at least equal to the 
amount of the loan or extension of credit shall not exceed 15 percent of 
the unimpaired capital and unimpaired surplus of the association.
    (2) The total loans and extensions of credit by a savings 
association to one borrower outstanding at one time and fully secured by 
readily marketable collateral having a market value, as determined by 
reliable and continuously available price quotations, at least equal to 
the amount of the funds outstanding shall not exceed 10 per centum of 
the unimpaired capital and unimpaired surplus of the association. This 
limitation shall be separate from and in addition to the limitation 
contained in paragraph (c)(1) of this section.
    (d) Exceptions to the general limitation--(1) $500,000 exception. If 
a savings association's aggregate lending limitation calculated under 
paragraphs (c)(1) and (c)(2) of this section is less than

[[Page 181]]

$500,000, notwithstanding this aggregate limitation in paragraphs (c)(1) 
and (c)(2) of this section, such savings association may have total 
loans and extensions of credit, for any purpose, to one borrower 
outstanding at one time not to exceed $500,000.
    (2) Statutory exceptions. The exceptions to the lending limits set 
forth in 12 U.S.C. 84 and 12 CFR part 32 are applicable to savings 
associations in the same manner and to the extent as they apply to 
national banks.
    (3) Loans to develop domestic residential housing units. Subject to 
paragraph (d)(4) of this section, a savings association may make loans 
to one borrower to develop domestic residential housing units, not to 
exceed the lesser of $30,000,000 or 30 percent of the savings 
association's unimpaired capital and unimpaired surplus, including all 
amounts loaned under the authority of the General Limitation set forth 
under paragraphs (c)(1) and (c)(2) of this section, provided that:
    (i) The final purchase price of each single family dwelling unit the 
development of which is financed under this paragraph (d)(3) does not 
exceed $500,000;
    (ii) The savings association is, and continues to be, in compliance 
with its capital requirements under part 567 of this chapter.
    (iii) OTS permits, subject to conditions it may impose, the savings 
association to use the higher limit set forth under this paragraph 
(d)(3). A savings association that meets the requirements of paragraphs 
(d)(3)(i), (ii), (iv) and (v) of this section and that meets the 
requirements for ``expedited treatment'' under Sec. 516.5 of this 
chapter may use the higher limit set forth under this paragraph (d)(3) 
if the savings association has filed a notice with OTS that it intends 
to use the higher limit at least 30 days prior to the proposed use. A 
savings association that meets the requirements of paragraphs (d)(3)(i), 
(ii), (iv), and (v) of this section and that meets the requirements for 
``standard treatment'' under Sec. 516.5 of this chapter may use the 
higher limit set forth under this paragraph (d)(3) if the savings 
association has filed an application with OTS and OTS has approved the 
use the higher limit;
    (iv) Loans made under this paragraph (d)(3) to all borrowers do not, 
in aggregate, exceed 150 percent of the savings association's unimpaired 
capital and unimpaired surplus; and
    (v) Such loans comply with the applicable loan-to-value requirements 
that apply to Federal savings associations.
    (4) The authority of a savings association to make a loan or 
extension of credit under the exception in paragraph (d)(3) of this 
section ceases immediately upon the association's failure to comply with 
any one of the requirements set forth in paragraph (d)(3) of this 
section or any condition(s) set forth in a Director's order under 
paragraph (d)(3)(iii) of this section.
    (5) Notwithstanding the limit set forth in paragraphs (c)(1) and 
(c)(2) of this section, a savings association may invest up to 10 
percent of unimpaired capital and unimpaired surplus in the obligations 
of one issuer evidenced by:
    (i) Commercial paper rated, as of the date of purchase, as shown by 
the most recently published rating by at least two nationally recognized 
investment rating services in the highest category; or
    (ii) Corporate debt securities that may be sold with reasonable 
promptness at a price that corresponds reasonably to their fair value, 
and that are rated in one of the two highest categories by a nationally 
recognized investment rating service in its most recently published 
ratings before the date of purchase of the security.
    (e) Loans to finance the sale of REO. A savings association's loans 
to one borrower to finance the sale of real property acquired in 
satisfaction of debts previously contracted for in good faith shall not, 
when aggregated with all other loans to such borrower, exceed the 
General Limitation in paragraph (c)(1) of this section.
    (f) Calculating compliance and recordkeeping. (1) The amount of an 
association's unimpaired capital and unimpaired surplus pursuant to 
paragraph (b)(11) of this section shall be calculated as of the 
association's most recent periodic report required to be filed with OTS 
prior to the date of granting or purchasing the loan or otherwise 
creating the obligation to repay funds, unless the association knows, or

[[Page 182]]

has reason to know, based on transactions or events actually completed, 
that such level has changed significantly, upward or downward, 
subsequent to filing of such report.
    (2) If a savings association or subsidiary thereof makes a loan or 
extension of credit to any one borrower, as defined in paragraph (b)(1) 
of this section, in an amount that, when added to the total balances of 
all outstanding loans owed to such association and its subsidiary by 
such borrower, exceeds the greater of $500,000 or 5 percent of 
unimpaired capital and unimpaired surplus, the records of such 
association or its subsidiary with respect to such loan shall include 
documentation showing that such loan was made within the limitations of 
paragraphs (c) and (d) of this section; for the purpose of such 
documentation such association or subsidiary may require, and may accept 
in good faith, a certification by the borrower identifying the persons, 
entities, and interests described in the definition of one borrower in 
paragraph (b)(1) of this section.
    (g) [Reserved]
    (h) More stringent restrictions. The Director may impose more 
stringent restrictions on a savings association's loans to one borrower 
if the Director determines that such restrictions are necessary to 
protect the safety and soundness of the savings association.

                Appendix to Sec. 560.93--Interpretations

 Section 560.93-100 Interrelation of General Limitation With Exception 
         for Loans To Develop Domestic Residential Housing Units

    1. The Sec. 560.93(d)(3) exception for loans to one person to 
develop domestic residential housing units is characterized in the 
regulation as an ``alternative'' limit. This exceptional $30,000,000 or 
30 percent limitation does not operate in addition to the 15 percent 
General Limitation or the 10 percent additional amount an association 
may loan to one borrower secured by readily marketable collateral, but 
serves as the uppermost limitation on a savings association's lending to 
any one person once an association employs this exception. An example 
will illustrate the Office's interpretation of the application of this 
rule:

    Example: Savings Associations A's lending limitation as calculated 
under the 15 percent General Limitation is $800,000. If Association A 
lends Y $800,000 for commercial purposes, Association A cannot lend Y an 
additional $1,600,000, or 30 percent of capital and surplus, to develop 
residential housing units under the paragraph (d)(3) exception. The 
(d)(3) exception operates as the uppermost limitation on all lending to 
one borrower (for associations that may employ this exception) and 
includes any amounts loaned to the same borrower under the General 
Limitation. Association A, therefore, may lend only an additional 
$800,000 to Y, provided the paragraph (d)(3) prerequisites have been 
met. The amount loaned under the authority of the General Limitation 
($800,000), when added to the amount loaned under the exception 
($800,000), yields a sum that does not exceed the 30 percent uppermost 
limitation ($1,600,000).

    2. This result does not change even if the facts are altered to 
assume that some or all of the $800,000 amount of lending permissible 
under the General Limitation's 15 percent basket is not used, or is 
devoted to the development of domestic residential housing units.
    In other words, using the above example, if Association A lends Y 
$400,000 for commercial purposes and $300,000 for residential purposes--
both of which would be permitted under the Association's $800,000 
General Limitation--Association A's remaining permissible lending to Y 
would be: first, an additional $100,000 under the General Limitation, 
and then another $800,000 to develop domestic residential housing units 
if the Association meets the paragraph (d)(3) prerequisites. (The latter 
is $800,000 because in no event may the total lending to Y exceed 30 
percent of unimpaired capital and unimpaired surplus). If Association A 
did not lend Y the remaining $100,000 permissible under the General 
Limitation, its permissible loans to develop domestic residential 
housing units under paragraph (d)(3) would be $900,000 instead of 
$800,000 (the total loans to Y would still equal $1,600,000).
    3. In short, under the paragraph (d)(3) exception, the 30 percent or 
$30,000,000 limit will always operate as the uppermost limitation, 
unless of course the association does not avail itself of the exception 
and merely relies upon its General Limitation.

Section 560.93-101 Interrelationship Between the General Limitation and 
  the 150 Percent Aggregate Limit on Loans to all Borrowers To Develop 
                   Domestic Residential Housing Units

    1. The Office has already received numerous questions regarding the 
allocation of loans between the different lending limit ``baskets,'' 
i.e., the 15 percent General Limitation basket and the 30 percent 
Residential Development basket. In general, the inquiries concern the 
manner in which an association may ``move'' a loan from the General

[[Page 183]]

Limitation basket to the Residential Development basket. The following 
example is intended to provide guidance:

    Example: Association A's General Limitation under section 5(u)(1) is 
$15 million. In January, Association A makes a $10 million loan to 
Borrower to develop domestic residential housing units. At the time the 
loan was made, Association A had not received approval under a Director 
order to avail itself of the residential development exception to 
lending limits. Therefore, the $10 million loan is made under 
Association A's General Limitation.

    2. In June, Association A receives authorization to lend under the 
Residential Development exception. In July, Association A lends $3 
million to Borrower to develop domestic residential housing units. In 
August, Borrower seeks an additional $12 million commercial loan from 
Association A. Association A cannot make the loan to Borrower, however, 
because it already has an outstanding $10 million loan to Borrower that 
counts against Association A's General Limitation of $15 million. Thus, 
Association A may lend only up to an additional $5 million to Borrower 
under the General Limitation.
    3. However, Association A may be able to reallocate the $10 million 
loan it made to Borrower in January to its Residential Development 
basket provided that: (1) Association A has obtained authority under a 
Director's order to avail itself of the additional lending authority for 
residential development and maintains compliance with all prerequisites 
to such lending authority; (2) the original $10 million loan made in 
January constitutes a loan to develop domestic residential housing units 
as defined; and (3) the housing unit(s) constructed with the funds from 
the January loan remain in a stage of ``development'' at the time 
Association A reallocates the loan to the domestic residential housing 
basket. The project must be in a stage of acquisition, development, 
construction, rehabilitation, or conversion in order for the loan to be 
reallocated.
    4. If Association A is able to reallocate the $10 million loan made 
to Borrower in January to its Residential Development basket, it may 
make the $12 million commercial loan requested by Borrower in August. 
Once the January loan is reallocated to the Residential Development 
basket, however, the $10 million loan counts towards Association's 150 
percent aggregate limitation on loans to all borrowers under the 
residential development basket (section 5(u)(2)(A)(ii)(IV)).
    5. If Association A reallocates the January loan to its domestic 
residential housing basket and makes an additional $12 million 
commercial loan to Borrower, Association A's totals under the respective 
limitations would be: $12 million under the General Limitation; and $13 
million under the Residential Development limitation. The full $13 
million residential development loan counts toward Association A's 
aggregate 150 percent limitation.

[61 FR 50976, Sept. 30, 1996, as amended at 61 FR 66579, Dec. 18, 1996; 
62 FR 66262, Dec. 18, 1997; 66 FR 13007, Mar. 2, 2001; 69 FR 76602, Dec. 
22, 2004]



Sec. 560.100  Real estate lending standards; purpose and scope.

    This section, and Sec. 560.101 of this subpart, issued pursuant to 
section 304 of the Federal Deposit Insurance Corporation Improvement Act 
of 1991, 12 U.S.C. 1828(o), prescribe standards for real estate lending 
to be used by savings associations and all their includable 
subsidiaries, as defined in 12 CFR 567.1, over which the savings 
associations exercise control, in adopting internal real estate lending 
policies.

[61 FR 50971, Sept. 30, 1996, as amended at 62 FR 66262, Dec. 18, 1997]



Sec. 560.101  Real estate lending standards.

    (a) Each savings association shall adopt and maintain written 
policies that establish appropriate limits and standards for extensions 
of credit that are secured by liens on or interests in real estate, or 
that are made for the purpose of financing permanent improvements to 
real estate.
    (b)(1) Real estate lending policies adopted pursuant to this section 
must:
    (i) Be consistent with safe and sound banking practices;
    (ii) Be appropriate to the size of the institution and the nature 
and scope of its operations; and
    (iii) Be reviewed and approved by the savings association's board of 
directors at least annually.
    (2) The lending policies must establish:
    (i) Loan portfolio diversification standards;
    (ii) Prudent underwriting standards, including loan-to-value limits, 
that are clear and measurable;
    (iii) Loan administration procedures for the savings association's 
real estate portfolio; and
    (iv) Documentation, approval, and reporting requirements to monitor 
compliance with the savings association's real estate lending policies.

[[Page 184]]

    (c) Each savings association must monitor conditions in the real 
estate market in its lending area to ensure that its real estate lending 
policies continue to be appropriate for current market conditions.
    (d) The real estate lending policies adopted pursuant to this 
section should reflect consideration of the Interagency Guidelines for 
Real Estate Lending Policies established by the Federal bank and thrift 
supervisory agencies.

   Appendix to Sec. 560.101--Interagency Guidelines for Real Estate 
                            Lending Policies

    The agencies' regulations require that each insured depository 
institution adopt and maintain a written policy that establishes 
appropriate limits and standards for all extensions of credit that are 
secured by liens on or interests in real estate or made for the purpose 
of financing the construction of a building or other improvements. \1\ 
These guidelines are intended to assist institutions in the formulation 
and maintenance of a real estate lending policy that is appropriate to 
the size of the institution and the nature and scope of its individual 
operations, as well as satisfies the requirements of the regulation.
---------------------------------------------------------------------------

    \1\ The agencies have adopted a uniform rule on real estate lending. 
See 12 CFR Part 365 (FDIC); 12 CFR Part 208, Subpart C (FRB); 12 CFR 
Part 34, Subpart D (OCC); and 12 CFR 560.100-560.101 (OTS).
---------------------------------------------------------------------------

    Each institution's policies must be comprehensive, and consistent 
with safe and sound lending practices, and must ensure that the 
institution operates within limits and according to standards that are 
reviewed and approved at least annually by the board of directors. Real 
estate lending is an integral part of many institutions' business plans 
and, when undertaken in a prudent manner, will not be subject to 
examiner criticism.

                Loan Portfolio Management Considerations

    The lending policy should contain a general outline of the scope and 
distribution of the institution's credit facilities and the manner in 
which real estate loans are made, serviced, and collected. In 
particular, the institution's policies on real estate lending should:
     Identify the geographic areas in which the 
institution will consider lending.
     Establish a loan portfolio diversification policy 
and set limits for real estate loans by type and geographic market 
(e.g., limits on higher risk loans).
     Identify appropriate terms and conditions by type 
of real estate loan.
     Establish loan origination and approval 
procedures, both generally and by size and type of loan.
     Establish prudent underwriting standards that are 
clear and measurable, including loan-to-value limits, that are 
consistent with these supervisory guidelines.
     Establish review and approval procedures for 
exception loans, including loans with loan-to-value percentages in 
excess of supervisory limits.
     Establish loan administration procedures, 
including documentation, disbursement, collateral inspection, 
collection, and loan review.
     Establish real estate appraisal and evaluation 
programs.
     Require that management monitor the loan 
portfolio and provide timely and adequate reports to the board of 
directors.
    The institution should consider both internal and external factors 
in the formulation of its loan policies and strategic plan. Factors that 
should be considered include:
     The size and financial condition of the 
institution.
     The expertise and size of the lending staff.
     The need to avoid undue concentrations of risk.
     Compliance with all real estate related laws and 
regulations, including the Community Reinvestment Act, anti-
discrimination laws, and for savings associations, the Qualified Thrift 
Lender test.
     Market conditions.
    The institution should monitor conditions in the real estate markets 
in its lending area so that it can react quickly to changes in market 
conditions that are relevant to its lending decisions. Market supply and 
demand factors that should be considered include:
     Demographic indicators, including population and 
employment trends.
     Zoning requirements.
     Current and projected vacancy, construction, and 
absorption rates.
     Current and projected lease terms, rental rates, 
and sales prices, including concessions.
     Current and projected operating expenses for 
different types of projects.
     Economic indicators, including trends and 
diversification of the lending area.
     Valuation trends, including discount and direct 
capitalization rates.

                         Underwriting Standards

    Prudently underwritten real estate loans should reflect all relevant 
credit factors, including:
     The capacity of the borrower, or income from the 
underlying property, to adequately service the debt.

[[Page 185]]

     The value of the mortgaged property.
     The overall creditworthiness of the borrower.
     The level of equity invested in the property.
     Any secondary sources of repayment.
     Any additional collateral or credit enhancements 
(such as guarantees, mortgage insurance or takeout commitments).
    The lending policies should reflect the level of risk that is 
acceptable to the board of directors and provide clear and measurable 
underwriting standards that enable the institution's lending staff to 
evaluate these credit factors. The underwriting standards should 
address:
     The maximum loan amount by type of property.
     Maximum loan maturities by type of property.
     Amortization schedules.
     Pricing structure for different types of real 
estate loans.
     Loan-to-value limits by type of property.
    For development and construction projects, and completed commercial 
properties, the policy should also establish, commensurate with the size 
and type of the project or property:
     Requirements for feasibility studies and 
sensitivity and risk analyses (e.g., sensitivity of income projections 
to changes in economic variables such as interest rates, vacancy rates, 
or operating expenses).
     Minimum requirements for initial investment and 
maintenance of hard equity by the borrower (e.g., cash or unencumbered 
investment in the underlying property).
     Minimum standards for net worth, cash flow, and 
debt service coverage of the borrower or underlying property.
     Standards for the acceptability of and limits on 
non-amortizing loans.
     Standards for the acceptability of and limits on 
the use of interest reserves.
     Pre-leasing and pre-sale requirements for income-
producing property.
     Pre-sale and minimum unit release requirements 
for non-income-producing property loans.
     Limits on partial recourse or nonrecourse loans 
and requirements for guarantor support.
     Requirements for takeout commitments.
     Minimum covenants for loan agreements.

                           Loan Administration

    The institution should also establish loan administration procedures 
for its real estate portfolio that address:
     Documentation, including:
    Type and frequency of financial statements, including requirements 
for verification of information provided by the borrower;
    Type and frequency of collateral evaluations (appraisals and other 
estimates of value).
     Loan closing and disbursement.
     Payment processing.
     Escrow administration.
     Collateral administration.
     Loan payoffs.
     Collections and foreclosure, including:
    Delinquency follow-up procedures;
    Foreclosure timing;
    Extensions and other forms of forbearance;
    Acceptance of deeds in lieu of foreclosure.
     Claims processing (e.g., seeking recovery on a 
defaulted loan covered by a government guaranty or insurance program).
     Servicing and participation agreements.

                    Supervisory Loan-to-Value Limits

    Institutions should establish their own internal loan-to-value 
limits for real estate loans. These internal limits should not exceed 
the following supervisory limits:

------------------------------------------------------------------------
                                                               Loan-to-
                       Loan category                         value limit
                                                               (percent)
------------------------------------------------------------------------
Raw land...................................................           65
Land development...........................................           75
Construction:
    Commercial, multifamily, \1\ and other nonresidential..           80
    1- to 4-family residential.............................           85
Improved property..........................................           85
Owner-occupied 1- to 4-family and home equity..............       (\2\)
------------------------------------------------------------------------
\1\ Multifamily construction includes condominiums and cooperatives.
\2\ A loan-to-value limit has not been established for permanent
  mortgage or home equity loans on owner-occupied, 1- to 4-family
  residential property. However, for any such loan with a loan-to-value
  ratio that equals or exceeds 90 percent at origination, an institution
  should require appropriate credit enhancement in the form of either
  mortgage insurance or readily marketable collateral.

    The supervisory loan-to-value limits should be applied to the 
underlying property that collateralizes the loan. For loans that fund 
multiple phases of the same real estate project (e.g., a loan for both 
land development and construction of an office building), the 
appropriate loan-to-value limit is the limit applicable to the final 
phase of the project funded by the loan; however, loan disbursements 
should not exceed actual development or construction outlays. In 
situations where a loan is fully cross-collateralized by two or more 
properties or is secured by a collateral pool of two or more properties, 
the appropriate maximum loan amount under supervisory loan-to-value 
limits is the sum of the value of each property, less senior liens, 
multiplied by the appropriate loan-to-value limit for each property. To 
ensure that collateral margins remain within the supervisory limits, 
lenders should redetermine conformity whenever collateral substitutions 
are made to the collateral pool.

[[Page 186]]

    In establishing internal loan-to-value limits, each lender is 
expected to carefully consider the institution-specific and market 
factors listed under ``Loan Portfolio Management Considerations,'' as 
well as any other relevant factors, such as the particular subcategory 
or type of loan. For any subcategory of loans that exhibits greater 
credit risk than the overall category, a lender should consider the 
establishment of an internal loan-to-value limit for that subcategory 
that is lower than the limit for the overall category.
    The loan-to-value ratio is only one of several pertinent credit 
factors to be considered when underwriting a real estate loan. Other 
credit factors to be taken into account are highlighted in the 
``Underwriting Standards'' section above. Because of these other 
factors, the establishment of these supervisory limits should not be 
interpreted to mean that loans at these levels will automatically be 
considered sound.

         Loans in Excess of the Supervisory Loan-to-Value Limits

    The agencies recognize that appropriate loan-to-value limits vary 
not only among categories of real estate loans but also among individual 
loans. Therefore, it may be appropriate in individual cases to originate 
or purchase loans with loan-to-value ratios in excess of the supervisory 
loan-to-value limits, based on the support provided by other credit 
factors. Such loans should be identified in the institutions' records, 
and their aggregate amount reported at least quarterly to the 
institution's board of directors. (See additional reporting requirements 
described under ``Exceptions to the General Policy.'') The aggregate 
amount of all loans in excess of the supervisory loan-to-value limits 
should not exceed 100 percent of total capital. \2\ Moreover, within the 
aggregate limit, total loans for all commercial, agricultural, 
multifamily or other non-1-to- 4 family residential properties should 
not exceed 30 percent of total capital. An institution will come under 
increased supervisory scrutiny as the total of such loans approaches 
these levels.
---------------------------------------------------------------------------

    \2\ For the state member banks, the term ``total capital'' means 
``total risk-based capital'' as defined in Appendix A to 12 CFR Part 
208. For insured state non-member banks, ``total capital'' refers to 
that term described in table I of Appendix A to 12 CFR Part 325. For 
national banks, the term ``total capital'' is defined at 12 CFR 3.2(e). 
For savings associations, the term ``total capital'' as described in 
part 567 of this chapter.
---------------------------------------------------------------------------

    In determining the aggregate amount of such loans, institutions 
should: (a) Include all loans secured by the same property if any one of 
those loans exceeds the supervisory loan-to-value limits; and (b) 
include the recourse obligation of any such loan sold with recourse. 
Conversely, a loan should no longer be reported to the directors as part 
of aggregate totals when reduction in principal or senior liens, or 
additional contribution of collateral or equity (e.g., improvements to 
the real property securing the loan), bring the loan-to-value ratio into 
compliance with supervisory limits.

                          Excluded Transactions

    The agencies also recognize that there are a number of lending 
situations in which other factors significantly outweigh the need to 
apply the supervisory loan-to-value limits.
    These include:
     Loans guaranteed or insured by the U.S. 
government or its agencies, provided that the amount of the guaranty or 
insurance is at least equal to the portion of the loan that exceeds the 
supervisory loan-to-value limit.
     Loans backed by the full faith and credit of a 
state government, provided that the amount of the assurance is at least 
equal to the portion of the loan that exceeds the supervisory loan-to-
value limit.
     Loans guaranteed or insured by a state, municipal 
or local government, or an agency thereof, provided that the amount of 
the guaranty or insurance is at least equal to the portion of the loan 
that exceeds the supervisory loan-to-value limit, and provided that the 
lender has determined that the guarantor or insurer has the financial 
capacity and willingness to perform under the terms of the guaranty or 
insurance agreement.
     Loans that are to be sold promptly after 
origination, without recourse, to a financially responsible third party.
     Loans that are renewed, refinanced, or 
restructured without the advancement of new funds or an increase in the 
line of credit (except for reasonable closing costs), or loans that are 
renewed, refinanced, or restructured in connection with a workout 
situation, either with or without the advancement of new funds, where 
consistent with safe and sound banking practices and part of a clearly 
defined and well-documented program to achieve orderly liquidation of 
the debt, reduce risk of loss, or maximize recovery on the loan.
     Loans that facilitate the sale of real estate 
acquired by the lender in the ordinary course of collecting a debt 
previously contracted in good faith.
     Loans for which a lien on or interest in real 
property is taken as additional collateral through an abundance of 
caution by the lender (e.g., the institution takes a blanket lien on all 
or substantially all of the assets of the borrower, and the value of the 
real property is low relative to the aggregate value of all other 
collateral).

[[Page 187]]

     Loans, such as working capital loans, where the 
lender does not rely principally on real estate as security and the 
extension of credit is not used to acquire, develop, or construct 
permanent improvements on real property.
     Loans for the purpose of financing permanent 
improvements to real property, but not secured by the property, if such 
security interest is not required by prudent underwriting practice.

                Exceptions to the General Lending Policy

    Some provision should be made for the consideration of loan requests 
from creditworthy borrowers whose credit needs do not fit within the 
institution's general lending policy. An institution may provide for 
prudently underwritten exceptions to its lending policies, including 
loan-to-value limits, on a loan-by-loan basis. However, any exceptions 
from the supervisory loan-to-value limits should conform to the 
aggregate limits on such loans discussed above.
    The board of directors is responsible for establishing standards for 
the review and approval of exception loans. Each institution should 
establish an appropriate internal process for the review and approval of 
loans that do not conform to its own internal policy standards. The 
approval of any such loan should be supported by a written justification 
that clearly sets forth all of the relevant credit factors that support 
the underwriting decision. The justification and approval documents for 
such loans should be maintained as a part of the permanent loan file. 
Each institution should monitor compliance with its real estate lending 
policy and individually report exception loans of a significant size to 
its board of directors.

    Supervisory Review of Real Estate Lending Policies and Practices

    The real estate lending policies of institutions will be evaluated 
by examiners during the course of their examinations to determine if the 
policies are consistent with safe and sound lending practices, these 
guidelines, and the requirements of the regulation. In evaluating the 
adequacy of the institution's real estate lending policies and 
practices, examiners will take into consideration the following factors:
     The nature and scope of the institution's real 
estate lending activities.
     The size and financial condition of the 
institution.
     The quality of the institution's management and 
internal controls.
     The expertise and size of the lending and loan 
administration staff.
     Market conditions.
    Lending policy exception reports will also be reviewed by examiners 
during the course of their examinations to determine whether the 
institutions' exceptions are adequately documented and appropriate in 
light of all of the relevant credit considerations. An excessive volume 
of exceptions to an institution's real estate lending policy may signal 
a weakening of its underwriting practices, or may suggest a need to 
revise the loan policy.

                               Definitions

    For the purposes of these Guidelines:
    Construction loan means an extension of credit for the purpose of 
erecting or rehabilitating buildings or other structures, including any 
infrastructure necessary for development.
    Extension of credit or loan means:
    (1) The total amount of any loan, line of credit, or other legally 
binding lending commitment with respect to real property; and
    (2) The total amount, based on the amount of consideration paid, of 
any loan, line of credit, or other legally binding lending commitment 
acquired by a lender by purchase, assignment, or otherwise.
    Improved property loan means an extension of credit secured by one 
of the following types of real property:
    (1) Farmland, ranchland or timberland committed to ongoing 
management and agricultural production;
    (2) 1- to 4-family residential property that is not owner-occupied;
    (3) Residential property containing five or more individual dwelling 
units;
    (4) Completed commercial property; or
    (5) Other income-producing property that has been completed and is 
available for occupancy and use, except income-producing owner-occupied 
1- to 4-family residential property.
    Land development loan means an extension of credit for the purpose 
of improving unimproved real property prior to the erection of 
structures. The improvement of unimproved real property may include the 
laying or placement of sewers, water pipes, utility cables, streets, and 
other infrastructure necessary for future development.
    Loan origination means the time of inception of the obligation to 
extend credit (i.e., when the last event or prerequisite, controllable 
by the lender, occurs causing the lender to become legally bound to fund 
an extension of credit).
    Loan-to-value or loan-to-value ratio means the percentage or ratio 
that is derived at the time of loan origination by dividing an extension 
of credit by the total value of the property(ies) securing or being 
improved by the extension of credit plus the amount of any readily 
marketable collateral and other acceptable collateral that secures the 
extension of credit. The total amount of all senior liens on or 
interests in such property(ies) should be included in determining the 
loan-to-value ratio. When mortgage insurance or collateral is used in 
the calculation of the

[[Page 188]]

loan-to-value ratio, and such credit enhancement is later released or 
replaced, the loan-to-value ratio should be recalculated.
    Other acceptable collateral means any collateral in which the lender 
has a perfected security interest, that has a quantifiable value, and is 
accepted by the lender in accordance with safe and sound lending 
practices. Other acceptable collateral should be appropriately 
discounted by the lender consistent with the lender's usual practices 
for making loans secured by such collateral. Other acceptable collateral 
includes, among other items, unconditional irrevocable standby letters 
of credit for the benefit of the lender.
    Owner-occupied, when used in conjunction with the term 1- to 4-
family residential property means that the owner of the underlying real 
property occupies at least one unit of the real property as a principal 
residence of the owner.
    Readily marketable collateral means insured deposits, financial 
instruments, and bullion in which the lender has a perfected interest. 
Financial instruments and bullion must be salable under ordinary 
circumstances with reasonable promptness at a fair market value 
determined by quotations based on actual transactions, on an auction or 
similarly available daily bid and ask price market. Readily marketable 
collateral should be appropriately discounted by the lender consistent 
with the lender's usual practices for making loans secured by such 
collateral.
    Value means an opinion or estimate, set forth in an appraisal or 
evaluation, whichever may be appropriate, of the market value of real 
property, prepared in accordance with the agency's appraisal regulations 
and guidance. For loans to purchase an existing property, the term 
``value'' means the lesser of the actual acquisition cost or the 
estimate of value.
    1- to 4-family residential property means property containing fewer 
than five individual dwelling units, including manufactured homes 
permanently affixed to the underlying property (when deemed to be real 
property under state law).

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 65821, Dec. 21, 2001; 
72 FR 69438, Dec. 7, 2007]



Sec. 560.110  Most favored lender usury preemption.

    (a) Definition. The term ``interest'' as used in 12 U.S.C. 1463(g) 
includes any payment compensating a creditor or prospective creditor for 
an extension of credit, making available of a line of credit, or any 
default or breach by a borrower of a condition upon which credit was 
extended. It includes, among other things, the following fees connected 
with credit extension or availability: numerical periodic rates, late 
fees, not sufficient funds (NSF) fees, overlimit fees, annual fees, cash 
advance fees, and membership fees. It does not ordinarily include 
appraisal fees, premiums and commissions attributable to insurance 
guaranteeing repayment of any extension of credit, finders' fees, fees 
for document preparation or notarization, or fees incurred to obtain 
credit reports.
    (b) Authority. A savings association located in a state may charge 
interest at the maximum rate permitted to any state-chartered or 
licensed lending institution by the law of that state. If state law 
permits different interest charges on specified classes of loans, a 
federal savings association making such loans is subject only to the 
provisions of state law relating to that class of loans that are 
material to the determination of the permitted interest. For example, a 
federal savings association may lawfully charge the highest rate 
permitted to be charged by a state-licensed small loan company, without 
being so licensed, but subject to state law limitations on the size of 
loans made by small loan companies. Except as provided in this 
paragraph, the applicability of state law to Federal savings 
associations shall be determined in accordance with Sec. 560.2 of this 
part. State supervisors determine the degree to which state-chartered 
savings associations must comply with state laws other than those 
imposing restrictions on interest, as defined in paragraph (a) of this 
section.
    (c) Effect on state definitions of interest. The Federal definition 
of the term ``interest'' in paragraph (a) of this section does not 
change how interest is defined by the individual states (nor how the 
state definition of interest is used) solely for purposes of state law. 
For example, if late fees are not ``interest'' under state law where a 
savings association is located but state law permits its most favored 
lender to charge late fees, then a savings association located in that 
state may charge late fees to its intrastate customers. The savings 
association may also charge late fees to its interstate customers 
because the fees are interest under the Federal definition of interest

[[Page 189]]

and an allowable charge under state law where the savings association is 
located. However, the late fees would not be treated as interest for 
purposes of evaluating compliance with state usury limitations because 
state law excludes late fees when calculating the maximum interest that 
lending institutions may charge under those limitations.



Sec. 560.120  Letters of credit and other independent undertakings to pay 

against documents.

    (a) General authority. A savings association may issue and commit to 
issue letters of credit within the scope of applicable laws or rules of 
practice recognized by law. It may also issue other independent 
undertakings within the scope of such laws or rules of practice 
recognized by law, that have been approved by OTS (approved 
undertaking). \1\ Under such letters of credit and approved 
undertakings, the savings association's obligation to honor depends upon 
the presentation of specified documents and not upon nondocumentary 
conditions or resolution of questions of fact or law at issue between 
the account party and the beneficiary. A savings association may also 
confirm or otherwise undertake to honor or purchase specified documents 
upon their presentation under another person's independent undertaking 
within the scope of such laws or rules.
---------------------------------------------------------------------------

    \1\ Samples of laws or rules of practice applicable to letters of 
credit and other independent undertakings include, but are not limited 
to: the applicable version of Article 5 of the Uniform Commercial Code 
(UCC) (1962, as amended 1990) or revised Article 5 of the UCC (as 
amended 1995) (available from West Publishing Co., 1/800/328-4880); the 
Uniform Customs and Practice for Documentary Credits (International 
Chamber of Commerce (ICC) Publication No. 500) (available from ICC 
Publishing, Inc., 212/206-1150; the United Nations Convention on 
Independent Guarantees and Standby Letters of Credit (adopted by the 
U.N. General Assembly in 1995 and signed by the U.S. in 1997) (available 
from the U.N. Commission on International Trade Law, 212/963-5353); and 
the Uniform Rules for Bank-to-Bank Reimbursements Under Documentary 
Credits (ICC Publication No. 525) (available from ICC Publishing, Inc., 
212/206-1150).
---------------------------------------------------------------------------

    (b) Safety and soundness considerations--(1) Terms. As a matter of 
safe and sound banking practice, savings associations that issue letters 
of credit or approved undertakings should not be exposed to undue risk. 
At a minimum, savings associations should consider the following:
    (i) The independent character of the letter of credit or approved 
undertaking should be apparent from its terms (such as terms that 
subject it to laws or rules providing for its independent character);
    (ii) The letter of credit or approved undertaking should be limited 
in amount;
    (iii) The letter of credit or approved undertaking should:
    (A) Be limited in duration; or
    (B) Permit the savings association to terminate the letter of credit 
or approved undertaking, either on a periodic basis (consistent with the 
savings association's ability to make any necessary credit assessments) 
or at will upon either notice or payment to the beneficiary; or
    (C) Entitle the savings association to cash collateral from the 
account party on demand (with a right to accelerate the customer's 
obligations, as appropriate); and
    (iv) The savings association either should be fully collateralized 
or have a post-honor right of reimbursement from its customer or from 
another issuer of a letter of credit or an independent undertaking. 
Alternatively, if the savings association's undertaking is to purchase 
documents of title, securities, or other valuable documents, it should 
obtain a first priority right to realize on the documents if the savings 
association is not otherwise to be reimbursed.
    (2) Additional considerations in special circumstances. Certain 
letters of credit and approved undertakings require particular 
protections against credit, operational, and market risk:
    (i) In the event that the undertaking is to honor by delivery of an 
item of value other than money, the savings association should ensure 
that market fluctuations that affect the value of the item will not 
cause the savings association to assume undue market risk;
    (ii) In the event that the undertaking provides for automatic 
renewal, the

[[Page 190]]

terms for renewal should allow the savings association to make any 
necessary credit assessment prior to renewal;
    (iii) In the event that a savings association issues an undertaking 
for its own account, the underlying transaction for which it is issued 
must be within the savings association's authority and comply with any 
safety and soundness requirements applicable to that transaction.
    (3) Operational expertise. The savings association should possess 
operational expertise that is commensurate with the sophistication of 
its letter of credit or independent undertaking activities.
    (4) Documentation. The savings association must accurately reflect 
its letters of credit or approved undertakings in its records, including 
any acceptance or deferred payment or other absolute obligation arising 
out of its contingent undertaking.

[61 FR 50971, Sept. 30, 1996, as amended at 64 FR 46565, Aug. 26, 1999]



Sec. 560.121  Investment in State housing corporations.

    (a) Any savings association to the extent it has legal authority to 
do so, may make investments in, commitments to invest in, loans to, or 
commitments to lend to any state housing corporation; provided, that 
such obligations or loans are secured directly, or indirectly through a 
fiduciary, by a first lien on improved real estate which is insured 
under the National Housing Act, as amended, and that in the event of 
default, the holder of such obligations or loans has the right directly, 
or indirectly through a fiduciary, to subject to the satisfaction of 
such obligations or loans the real estate described in the first lien, 
or the insurance proceeds.
    (b) Any savings association that is adequately capitalized may, to 
the extent it has legal authority to do so, invest in obligations 
(including loans) of, or issued by, any state housing corporation 
incorporated in the state in which such savings association has its home 
or a branch office; provided (except with respect to loans), that:
    (1) The obligations are rated in one of the four highest grades as 
shown by the most recently published rating made of such obligations by 
a nationally recognized rating service; or
    (2) The obligations, if not rated, are approved by the Office. The 
aggregate outstanding direct investment in obligations under paragraph 
(b) of this section shall not exceed the amount of the savings 
association's total capital.
    (c) Each state housing corporation in which a savings association 
invests under the authority of paragraph (b) of this section shall 
agree, before accepting any such investment (including any loan or loan 
commitment), to make available at any time to the Office such 
information as the Office may consider to be necessary to ensure that 
investments are properly made under this section.



Sec. 560.130  Prohibition on loan procurement fees.

    If you are a director, officer, or other natural person having the 
power to direct the management or policies of a savings association, you 
must not receive, directly or indirectly, any commission, fee, or other 
compensation in connection with the procurement of any loan made by the 
savings association or a subsidiary of the savings association.

[61 FR 60178, Nov. 27, 1996]



Sec. 560.160  Asset classification.

    (a)(1) Each savings association must evaluate and classify its 
assets on a regular basis in a manner consistent with, or reconcilable 
to, the asset classification system used by OTS in its Thrift Activities 
Handbook (Available at the address of Washington Headquarters Office at 
Sec. 516.40(b) of this chapter).
    (2) In connection with the examination of a savings association or 
its affiliates, OTS examiners may identify problem assets and classify 
them, if appropriate. The association must recognize such examiner 
classifications in its subsequent reports to OTS.
    (b) Based on the evaluation and classification of its assets, each 
savings association shall establish adequate valuation allowances or 
charge-offs, as appropriate, consistent with generally accepted 
accounting principles and the

[[Page 191]]

practices of the federal banking agencies.

[61 FR 50971, Sept. 30, 1996, as amended at 66 FR 13007, Mar. 2, 2001]



Sec. 560.170  Records for lending transactions.

    In establishing and maintaining its records pursuant to Sec. 
563.170 of this chapter, each savings association and service 
corporation should establish and maintain loan documentation practices 
that:
    (a) Ensure that the institution can make an informed lending 
decision and can assess risk on an ongoing basis;
    (b) Identify the purpose and all sources of repayment for each loan, 
and assess the ability of the borrower(s) and any guarantor(s) to repay 
the indebtedness in a timely manner;
    (c) Ensure that any claims against a borrower, guarantor, security 
holders, and collateral are legally enforceable;
    (d) Demonstrate appropriate administration and monitoring of its 
loans; and
    (e) Take into account the size and complexity of its loans.



Sec. 560.172  Re-evaluation of real estate owned.

    A savings association shall appraise each parcel of real estate 
owned at the earlier of in-substance foreclosure or at the time of the 
savings association's acquisition of such property, and at such times 
thereafter as dictated by prudent management policy; such appraisals 
shall be consistent with the requirements of part 564 of this chapter. 
The Regional Director or his or her designee may require subsequent 
appraisals if, in his or her discretion, such subsequent appraisal is 
necessary under the particular circumstances. The foregoing requirement 
shall not apply to any parcel of real estate that is sold and reacquired 
less than 12 months subsequent to the most recent appraisal made 
pursuant to this part. A dated, signed copy of each report of appraisal 
made pursuant to any provisions of this part shall be retained in the 
savings association's records.



               Subpart C_Alternative Mortgage Transactions



Sec. 560.210  Disclosures for variable rate transactions.

    A savings association must provide the initial disclosures described 
at 12 CFR 226.19(b) and the adjustment notices described at 12 CFR 
226.20(c) for variable rate transactions, as described in those 
regulations. The OTS administers and enforces those provisions for 
savings associations.

[63 FR 38463, July 17, 1998]



Sec. 560.220  Alternative Mortgage Transaction Parity Act.

    (a) Applicable housing creditors. A housing creditor that is not a 
commercial bank, a credit union, or a federal savings association, may 
make an alternative mortgage transaction as defined at 12 U.S.C. 
3802(1), by following the regulations identified in paragraph (b) of 
this section, notwithstanding any state constitution, law, or 
regulation. See 12 U.S.C. 3803.
    (b) Applicable regulations. OTS identifies Sec. Sec. 560.35 and 
560.210 as appropriate and applicable for state housing creditors. All 
other OTS regulations are not identified, and are inappropriate and 
inapplicable for state housing creditors. State housing creditors 
engaged in credit sales should read the term ``loan'' as ``credit sale'' 
wherever applicable in applying these regulations.

[67 FR 60554, Sept. 26, 2002]



PART 561_DEFINITIONS FOR REGULATIONS AFFECTING ALL SAVINGS ASSOCIATIONS--Table 

of Contents



Sec.
561.1 General.
561.2 Account.
561.3 Accountholder.
561.4 Affiliate.
561.5 Affiliated person.
561.6 Audit period.
561.7-561.8 [Reserved]
561.9 Certificate account.
561.12 Consumer credit.
561.14 Controlling person.
561.15 Corporation.
561.16 Demand accounts.
561.18 Director.
561.19 Financial institution.
561.24 Immediate family.

[[Page 192]]

561.26 Land loan.
561.27 Low-rent housing.
561.28 Money Market Deposit Accounts.
561.29 Negotiable Order of Withdrawal Accounts.
561.30 Nonresidential construction loan.
561.31 Nonwithdrawable account.
561.33 Note account.
561.34 Office.
561.35 Officer.
561.37 Parent company; subsidiary.
561.38 Political subdivision.
561.39 Principal office.
561.40 Public unit.
561.41 [Reserved]
561.42 Savings account.
561.43 Savings association.
561.44 Security.
561.45 Service corporation.
561.49 [Reserved]
561.50 State.
561.51 Subordinated debt security.
561.52 Tax and loan account.
561.53 United States Treasury General Account.
561.54 United States Treasury Time Deposit Open Account.
561.55 With recourse.

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.

    Source: 54 FR 49545, Nov. 30, 1989, unless otherwise noted.



Sec. 561.1  When do the definitions in this part apply?

    The definitions in this part and in 12 CFR part 541 apply throughout 
this chapter, unless another definition is specifically provided.

[67 FR 78152, Dec. 23, 2002]



Sec. 561.2  Account.

    The term account means any savings account, demand account, 
certificate account, tax and loan account, note account, United States 
Treasury general account or United States Treasury time deposit-open 
account, whether in the form of a deposit or a share, held by an 
accountholder in a savings association.



Sec. 561.3  Accountholder.

    The term accountholder means the holder of an account or accounts in 
a savings association insured by the Deposit Insurance Fund. The term 
does not include the holder of any subordinated debt security or any 
mortgage-backed bond issued by the savings association.

[54 FR 49545, Nov. 30, 1989, as amended at 71 FR 19811, Apr. 18, 2006]



Sec. 561.4  Affiliate.

    The term affiliate of a savings association, unless otherwise 
defined, means any corporation, business trust, association, or other 
similar organization:
    (a) Of which a savings association, directly or indirectly, owns or 
controls either a majority of the voting shares or more than 50 
percentum of the number of shares voted for the election of its 
directors, trustees, or other persons exercising similar functions at 
the preceding election, or controls in any manner the election of a 
majority of its directors, trustees, or other persons exercising similar 
functions; or
    (b) Of which control is held, directly or indirectly through stock 
ownership or in any other manner, by the shareholders of a savings 
association who own or control either a majority of the shares of such 
savings association or more than 50 per centum of the number of shares 
voted for the election of directors of such savings association at the 
preceding election, or by trustees for the benefit of the shareholders 
of any such savings association; or
    (c) Of which a majority of its directors, trustees, or other persons 
exercising similar functions are directors of any one savings 
association.



Sec. 561.5  Affiliated person.

    The term affiliated person of a savings association means the 
following:
    (a) A director, officer, or controlling person of such association;
    (b) A spouse of a director, officer, or controlling person of such 
association;
    (c) A member of the immediate family of a director, officer, or 
controlling person of such association, who has the same home as such 
person or who is a director or officer of any subsidiary of such 
association or of any holding company affiliate of such association;
    (d) Any corporation or organization (other than the savings 
association or a corporation or organization through which the savings 
association operates) of which a director, officer or the controlling 
person of such association:

[[Page 193]]

    (1) Is chief executive officer, chief financial officer, or a person 
performing similar functions;
    (2) Is a general partner;
    (3) Is a limited partner who, directly or indirectly either alone or 
with his or her spouse and the members of his or her immediate family 
who are also affiliated persons of the association, owns an interest of 
10 percent or more in the partnership (based on the value of his or her 
contribution) or who, directly or indirectly with other directors, 
officers, and controlling persons of such association and their spouses 
and their immediate family members who are also affiliated persons of 
the association, owns an interest of 25 percent or more in the 
partnership; or
    (4) Directly or indirectly either alone or with his or her spouse 
and the members of his or her immediate family who are also affiliated 
persons of the association, owns or controls 10 percent or more of any 
class of equity securities or owns or controls, with other directors, 
officers, and controlling persons of such association and their spouses 
and their immediate family members who are also affiliated persons of 
the association, 25 percent or more of any class of equity securities; 
and
    (5) Any trust or other estate in which a director, officer, or 
controlling person of such association or the spouse of such person has 
a substantial beneficial interest or as to which such person or his or 
her spouse serves as trustee or in a similar fiduciary capacity.

[59 FR 18476, Apr. 19, 1994]



Sec. 561.6  Audit period.

    The audit period of a savings association means the twelve month 
period (or other period in the case of a change in audit period) covered 
by the annual audit conducted to satisfy Sec. 563.170.



Sec. Sec. 561.7-561.8  [Reserved]



Sec. 561.9  Certificate account.

    The term certificate account means a savings account evidenced by a 
certificate that must be held for a fixed or minimum term.



Sec. 561.12  Consumer credit.

    The term consumer credit means credit extended to a natural person 
for personal, family, or household purposes, including loans secured by 
liens on real estate and chattel liens secured by mobile homes and 
leases of personal property to consumers that may be considered the 
functional equivalent of loans on personal security: Provided, the 
savings association relies substantially upon other factors, such as the 
general credit standing of the borrower, guaranties, or security other 
than the real estate or mobile home, as the primary security for the 
loan. Appropriate evidence to demonstrate justification for such 
reliance should be retained in a savings association's files. Among the 
types of credit included within this term are consumer loans; 
educational loans; unsecured loans for real property alteration, repair 
or improvement, or for the equipping of real property; loans in the 
nature of overdraft protection; and credit extended in connection with 
credit cards.



Sec. 561.14  Controlling person.

    The term controlling person of a savings association means any 
person or entity which, either directly or indirectly, or acting in 
concert with one or more other persons or entities, owns, controls, or 
holds with power to vote, or holds proxies representing, ten percent or 
more of the voting shares or rights of such savings association; or 
controls in any manner the election or appointment of a majority of the 
directors of such savings association. However, a director of a savings 
association will not be deemed to be a controlling person of such 
savings association based upon his or her voting, or acting in concert 
with other directors in voting, proxies:
    (a) Obtained in connection with an annual solicitation of proxies, 
or
    (b) Obtained from savings account holders and borrowers if such 
proxies are voted as directed by a majority vote of the entire board of 
directors of such association, or of a committee of such directors if 
such committee's composition and authority are controlled by a majority 
vote of the entire board and if its authority is revocable by such a 
majority.

[[Page 194]]



Sec. 561.15  Corporation.

    The terms Corporation and FDIC mean the Federal Deposit Insurance 
Corporation.



Sec. 561.16  Demand accounts.

    The term demand accounts means non-interest-bearing demand deposits 
that are subject to check or to withdrawal or transfer on negotiable or 
transferable order to the savings association and that are permitted to 
be issued by statute, regulation, or otherwise and are payable on 
demand.

[54 FR 49545, Nov. 30, 1989, as amended at 58 FR 4313, Jan. 14, 1993; 62 
FR 54765, Oct. 22, 1997; 70 FR 76676, Dec. 28, 2005]



Sec. 561.18  Director.

    (a) The term director means any director, trustee, or other person 
performing similar functions with respect to any organization whether 
incorporated or unincorporated. Such term does not include an advisory 
director, honorary director, director emeritus, or similar person, 
unless the person is otherwise performing functions similar to those of 
a director.
    (b) The term Director means the Director of the Office of Thrift 
Supervision as established in section 3 of the Act.



Sec. 561.19  Financial institution.

    The term financial institution has the same meaning as the term 
depository institution set forth in 12 U.S.C. 1813(c)(1).



Sec. 561.24  Immediate family.

    The term immediate family of any natural person means the following 
(whether by the full or half blood or by adoption):
    (a) Such person's spouse, father, mother, children, brothers, 
sisters, and grandchildren;
    (b) The father, mother, brothers, and sisters of such person's 
spouse; and
    (c) The spouse of a child, brother, or sister of such person.



Sec. 561.26  Land loan.

    The term land loan means a loan:
    (a) Secured by real estate upon which all facilities and 
improvements have been completely installed, as required by local 
regulations and practices, so that it is entirely prepared for the 
erection of structures;
    (b) To finance the purchase of land and the accomplishment of all 
improvements required to convert it to developed building lots; or
    (c) Secured by land upon which there is no structure.



Sec. 561.27  Low-rent housing.

    The term low-rent housing means real estate which is, or which is 
being constructed, remodeled, rehabilitated, modernized, or renovated to 
be, the subject of an annual contributions contract for low-rent housing 
under the provisions of the United States Housing Act of 1937, as 
amended.



Sec. 561.28  Money Market Deposit Accounts.

    (a) Money Market Deposit Accounts (MMDAs) offered by Federal savings 
associations in accordance with 12 U.S.C. 1464(b)(1) and by state-
chartered savings associations in accordance with applicable state law 
are savings accounts on which interest may be paid if issued subject to 
the following limitations:
    (1) The savings association shall reserve the right to require at 
least seven days' notice prior to withdrawal or transfer of any funds in 
the account; and
    (2)(i) The depositor is authorized by the savings association to 
make no more than six transfers per calendar month or statement cycle 
(or similar period) of at least four weeks by means of preauthorized, 
automatic, telephonic, or data transmission agreement, order, or 
instruction to another account of the depositor at the same savings 
association to the savings association itself, or to a third party.
    (ii) Savings associations may permit holders of MMDAs to make 
unlimited transfers for the purpose of repaying loans (except overdraft 
loans on the depositor's demand account) and associated expenses at the 
same savings association (as originator or servicer), to make unlimited 
transfers of funds from this account to another account of the same 
depositor at the same savings association or to make unlimited payments 
directly to the depositor from

[[Page 195]]

the account when such transfers or payments are made by mail, messenger, 
automated teller machine, or in person, or when such payments are made 
by telephone (via check mailed to the depositor).
    (3) In order to ensure that no more than the number of transfers 
specified in paragraph (a)(2)(i) of this section are made, a savings 
association must either:
    (i) Prevent transfers of funds in excess of the limitations; or
    (ii) Adopt procedures to monitor those transfers on an after-the-
fact basis and contact customers who exceed the limits on more than an 
occasional basis. For customers who continue to violate those limits 
after being contacted by the depository savings association the 
depository savings association must either place funds in another 
account that the depositor is eligible to maintain or take away the 
account's transfer and draft capacities.
    (iii) Insured savings association at their option, may use on a 
consistent basis either the date on a check or the date it is paid in 
determining whether the transfer limitations within the specified 
interval are exceeded.
    (b) Federal savings associations may offer MMDAs to any depositor, 
and state-chartered savings associations may offer MMDAs to any 
depositor not inconsistent with applicable state law.

[54 FR 49545, Nov. 30, 1989, as amended at 75 FR 33502, June 14, 2010]



Sec. 561.29  Negotiable Order of Withdrawal Accounts.

    (a) Negotiable Order of Withdrawal (NOW) accounts are savings 
accounts authorized by 12 U.S.C. 1832 on which the savings association 
reserves the right to require at least seven days' notice prior to 
withdrawal or transfer of any funds in the account.
    (b) For purposes of 12 U.S.C. 1832:
    (1) An organization shall be deemed ``operated primarily for 
religious, philanthropic, charitable, educational, or other similar 
purposes and * * * not * * * for profit'' if it is described in sections 
501(c)(3) through (13), 501(c)(19), or 528 of the Internal Revenue Code; 
and
    (2) The funds of a sole proprietorship or unincorporated business 
owned by a husband and wife shall be deemed beneficially owned by ``one 
or more individuals.''



Sec. 561.30  Nonresidential construction loan.

    The term nonresidential construction loan means a loan for 
construction of other than one or more dwelling units.



Sec. 561.31  Nonwithdrawable account.

    The term nonwithdrawable account means an account which by the terms 
of the contract of the accountholder with the savings association or by 
provisions of state law cannot be paid to the accountholder until all 
liabilities, including other classes of share liability of the savings 
association have been fully liquidated and paid upon the winding up of 
the savings association is referred to as a nonwithdrawable account.



Sec. 561.33  Note account.

    The term note account means a note, subject to the right of 
immediate call, evidencing funds held by depositories electing the note 
option under applicable United States Treasury Department regulations. 
Note accounts are not savings accounts or savings deposits.



Sec. 561.34  Office.

    The term Office means the Office as established in section 3 of the 
Act or any official duly authorized to act on its behalf. Where 
appropriate in context, it also refers to the Federal Home Loan Bank 
Board and the Federal Savings and Loan Insurance Corporation as 
predecessor agencies to the Office.



Sec. 561.35  Officer.

    The term Officer means the president, any vice-president (but not an 
assistant vice-president, second vice-president, or other vice president 
having authority similar to an assistant or second vice-president), the 
secretary, the treasurer, the comptroller, and any other person 
performing similar functions with respect to any organization whether 
incorporated or unincorporated. The term officer also includes the 
chairman of the board of directors if the chairman is authorized by the 
charter or by-laws of the organization

[[Page 196]]

to participate in its operating management or if the chairman in fact 
participates in such management.



Sec. 561.37  Parent company; subsidiary.

    The terms parent company and subsidiary have the meanings given to 
them by Sec. Sec. 583.15 and 583.23 of this chapter, respectively.



Sec. 561.38  Political subdivision.

    The term political subdivision includes any subdivision of a public 
unit, any principal department of such public unit:
    (a) The creation of which subdivision or department has been 
expressly authorized by state statute,
    (b) To which some functions of government have been delegated by 
state statute, and
    (c) To which funds have been allocated by statute or ordinance for 
its exclusive use and control. It also includes drainage, irrigation, 
navigation, improvement, levee, sanitary, school or power districts and 
bridge or port authorities and other special districts created by state 
statute or compacts between the states. Excluded from the term are 
subordinate or nonautonomous divisions, agencies or boards within 
principal departments.



Sec. 561.39  Principal office.

    The term principal office means the home office of a savings 
association established as such in conformity with the laws under which 
the savings association is organized.



Sec. 561.40  Public unit.

    The term public unit means the United States, any state of the 
United States, the District of Columbia, any territory of the United 
States, Puerto Rico, the Virgin Islands, any county, any municipality or 
any political subdivision thereof.



Sec. 561.41  [Reserved]



Sec. 561.42  Savings account.

    The term savings account means any withdrawable account, except a 
demand account as defined in Sec. 561.16 of this chapter, a tax and 
loan account, a note account, a United States Treasury general account, 
or a United States Treasury time deposit-open account.

[54 FR 49545, Nov. 30, 1989, as amended at 62 FR 54765, Oct. 22, 1997]



Sec. 561.43  Savings association.

    The term savings association means a savings association as defined 
in section 3 of the Federal Deposit Insurance Act, the deposits of which 
are insured by the Corporation. It includes a Federal savings 
association or Federal savings bank, chartered under section 5 of the 
Act, or a building and loan, savings and loan, or homestead association, 
or a cooperative bank (other than a cooperative bank which is a State 
bank as defined in section 3(a)(2) of the Federal Deposit Insurance Act) 
organized and operating according to the laws of the State in which it 
is chartered or organized, or a corporation (other than a bank as 
defined in section 3(a)(1) of the Federal Deposit Insurance Act) that 
the Board of Directors of the Federal Deposit Insurance Corporation and 
the Director of the Office of Thrift Supervision jointly determine to be 
operating substantially in the same manner as a savings association.



Sec. 561.44  Security.

    The term security means any non-withdrawable account, note, stock, 
treasury stock, bond, debenture, evidence of indebtedness, certificate 
of interest or participation in any profit-sharing agreement, 
collateral-trust certificate, preorganization certificate or 
subscription, transferable share, investment contract, voting-trust 
certificate, or, in general, any interest or instrument commonly known 
as a security, or any certificate of interest or participation in, 
temporary or interim certificate for, receipt for, guarantee of, or 
warrant or right to subscribe to or purchase, any of the foregoing, 
except that a security shall not include an account or deposit insured 
by the Federal Deposit Insurance Corporation.



Sec. 561.45  Service corporation.

    The term service corporation means any corporation, the majority of 
the capital stock of which is owned by one or more savings associations 
and which engages, directly or indirectly, in any activities similar to 
activities which

[[Page 197]]

may be engaged in by a service corporation in which a Federal savings 
association may invest under part 559 of this chapter.

[54 FR 49545, Nov. 30, 1989, as amended at 62 FR 66262, Dec. 18, 1997]



Sec. 561.50  State.

    The term State means a State, the District of Columbia, Guam, Puerto 
Rico, and the Virgin Islands of the United States.



Sec. 561.51  Subordinated debt security.

    The term subordinated debt security means any unsecured note, 
debenture, or other debt security issued by a savings association and 
subordinated on liquidation to all claims having the same priority as 
account holders or any higher priority.



Sec. 561.52  Tax and loan account.

    The term tax and loan account means an account, the balance of which 
is subject to the right of immediate withdrawal, established for receipt 
of payments of Federal taxes and certain United States obligations. Such 
accounts are not savings accounts or savings deposits.



Sec. 561.53  United States Treasury General Account.

    The term United States Treasury General Account means an account 
maintained in the name of the United States Treasury the balance of 
which is subject to the right of immediate withdrawal, except in the 
case of the closure of the member, and in which a zero balance may be 
maintained. Such accounts are not savings accounts or savings deposits.



Sec. 561.54  United States Treasury Time Deposit Open Account.

    The term United States Treasury Time Deposit Open Account means a 
non-interest-bearing account maintained in the name of the United States 
Treasury which may not be withdrawn prior to the expiration of 30 days' 
written notice from the United States Treasury, or such other period of 
notice as the Treasury may require. Such accounts are not savings 
accounts or savings deposits.



Sec. 561.55  With recourse.

    (a) The term with recourse means, in connection with the sale of a 
loan or a participation interest in a loan, an agreement or arrangement 
under which the purchaser is to be entitled to receive from the seller a 
sum of money or thing of value, whether tangible or intangible 
(including any substitution), upon default in payment of any loan 
involved or any part thereof or to withhold or to have withheld from the 
seller a sum of money or anything of value by way of security against 
default. The recourse liability resulting from a sale with recourse 
shall be the total book value of any loan sold with recourse less:
    (1) The amount of any insurance or guarantee against loss in the 
event of default provided by a third party,
    (2) The amount of any loss to be borne by the purchaser in the event 
of default, and
    (3) The amount of any loss resulting from a recourse obligation 
entered on the books and records of the savings association.
    (b) The term with recourse does not include loans or interests 
therein where the agreement of sale provides for the savings association 
directly or indirectly
    (1) To hold or retain a subordinate interest in a specified 
percentage of the loans or interests; or
    (2) To guarantee against loss up to a specified percentage of the 
loans or interests, which specified percentage shall not exceed ten 
percent of the outstanding balance of the loans or interests at the time 
of sale: Provided, That the savings association designates adequate 
reserves for the subordinate interest or guarantee.
    (c) This definition does not apply for purposes of determining the 
capital adequacy requirements under part 567 of this chapter.

[54 FR 49545, Nov. 30, 1989, as amended at 57 FR 33437, July 29, 1992]



PART 562_REGULATORY REPORTING STANDARDS--Table of Contents



Sec.
562.1 Regulatory reporting requirements.
562.2 Regulatory reports.

[[Page 198]]

562.4 Audit of savings associations and savings association holding 
          companies.

    Authority: 12 U.S.C. 1463.

    Source: 57 FR 40090, Sept. 2, 1992, unless otherwise noted.



Sec. 562.1  Regulatory reporting requirements.

    (a) Authority and scope. This part is issued by the Office of Thrift 
Supervision (OTS) pursuant to section 4(b) and 4(c) of the Home Owners' 
Loan Act (HOLA). It applies to all savings associations regulated by the 
OTS.
    (b) Records and reports--general--(1) Records. Each savings 
association and its affiliates shall maintain accurate and complete 
records of all business transactions. Such records shall support and be 
readily reconcilable to any regulatory reports submitted to the OTS and 
financial reports prepared in accordance with GAAP. The records shall be 
maintained in the United States and be readily accessible for 
examination and other supervisory purposes within 5 business days upon 
request by the OTS, at a location acceptable to the OTS.
    (2) Reports. For purposes of examination by and regulatory reports 
to the OTS and compliance with this chapter, all savings associations 
shall use such forms and follow such regulatory reporting requirements 
as the OTS may require by regulation or otherwise.



Sec. 562.2  Regulatory reports.

    (a) Definition and scope. This section applies to all regulatory 
reports, as defined herein. A regulatory report is any report that the 
OTS prepares, or is submitted to, or is used by the OTS, to determine 
compliance with its rules and regulations, and to evaluate the safe and 
sound condition and operation of savings associations. The Report of 
Examination and the Thrift Financial Report (TFR) are examples of 
regulatory reports. Regulatory reports are regulatory documents, not 
accounting documents.
    (b) Regulatory reporting requirements--(1) General. The instructions 
to regulatory reports are referred to as ``regulatory reporting 
requirements.'' Regulatory reporting requirements include, but are not 
limited to, the accounting instructions provided in the TFR, guidance 
contained in OTS regulations, bulletins, and examination handbooks, and 
safe and sound practices. Regulatory reporting requirements are not 
limited to the minimum requirements under generally accepted accounting 
principles (GAAP) because of the special supervisory, regulatory, and 
economic policy needs served by such reports. Regulatory reporting by 
savings associations that purports to comply with GAAP shall incorporate 
the GAAP that best reflects the underlying economic substance of the 
transaction at issue. Regulatory reporting requirements shall, at a 
minimum:
    (i) Incorporate GAAP whenever GAAP is the referenced accounting 
instruction for regulatory reports to the Federal banking agencies;
    (ii) Incorporate safe and sound practices contained in OTS 
regulations, bulletins, examination handbooks and instructions to 
regulatory reports. Such safety and soundness requirements shall be no 
less stringent than those applied by the Comptroller of the Currency for 
national banks; and
    (iii) Incorporate additional safety and soundness requirements more 
stringent than GAAP, as the Director may prescribe.
    (2) Exceptions. Regulatory reporting requirements that are not 
consistent with GAAP, if any, are not required to be reflected in 
audited financial statements, including financial statements contained 
in securities filings submitted to the OTS pursuant to the Securities 
and Exchange Act of 1934 or parts 563b, 563d, or 563g of this chapter.
    (3) Compliance. When the OTS determines that a savings association's 
regulatory reports did not conform to regulatory reporting requirements 
in previous reporting periods, the association shall correct its 
regulatory reports in accordance with the directions of the OTS.



Sec. 562.4  Audit of savings associations and savings association holding 

companies.

    (a) General. The OTS may require, at any time, an independent audit 
of the financial statements of, or the application of procedures agreed 
upon by the OTS to a savings association, savings and loan holding 
company, or affiliate

[[Page 199]]

(as defined by 12 CFR 563.41) by qualified independent public 
accountants when needed for any safety and soundness reason identified 
by the Director.
    (b) Audits required for safety and soundness purposes. The OTS 
requires an independent audit for safety and soundness purposes:
    (1) If a savings association has received a composite rating of 3, 4 
or 5, as defined at Sec. 516.5(c) of this chapter; or
    (2) If, as of the beginning of its fiscal year, a savings and loan 
holding company controls savings association subsidiary(ies) with 
aggregate consolidated assets of $500 million or more.
    (c) Procedures. (1) When the OTS requires an independent audit 
because such an audit is needed for safety and soundness purposes, the 
Director shall determine whether the audit was conducted and filed in a 
manner satisfactory to the OTS.
    (2) The Director may waive the independent audit requirement 
described at paragraph (b)(1) of this section, if the Director 
determines that an audit would not provide further information on safety 
and soundness issues relevant to the examination rating.
    (3) When the OTS requires the application of procedures agreed upon 
by the OTS for safety and soundness purposes, the Director shall 
identify the procedures to be performed. The Director shall also 
determine whether the agreed upon procedures were conducted and filed in 
a manner satisfactory to the OTS.
    (d) Qualifications for independent public accountants. The audit 
shall be conducted by an independent public accountant who:
    (1) Is registered or licensed to practice as a public accountant, 
and is in good standing, under the laws of the state or other political 
subdivision of the United States in which the savings association's or 
holding company's principal office is located;
    (2) Agrees in the engagement letter to provide the OTS with access 
to and copies of any work papers, policies, and procedures relating to 
the services performed;
    (3)(i) Is in compliance with the American Institute of Certified 
Public Accountants' (AICPA) Code of Professional Conduct; and
    (ii) Meets the independence requirements and interpretations of the 
Securities and Exchange Commission and its staff; and
    (4) Has received, or is enrolled in, a peer review program that 
meets guidelines acceptable to the OTS.
    (e) Voluntary audits. When a savings association, savings and loan 
holding company, or affiliate (as defined by 12 CFR 563.41) obtains an 
independent audit voluntarily, it must be performed by an independent 
public accountant who satisfies the requirements of paragraphs (d)(1), 
(d)(2), and (d)(3)(i) of this section.

[59 FR 60304, Nov. 23, 1994, as amended at 62 FR 3780, Jan. 27, 1997; 66 
FR 13007, Mar. 2, 2001; 67 FR 70531, Nov. 25, 2002; 67 FR 77917, 
December 20, 2002]



PART 563_SAVINGS ASSOCIATIONS_OPERATIONS--Table of Contents



                           Subpart A_Accounts

Sec.
563.1 Chartering documents.
563.4 [Reserved]
563.5 Securities: Statement of non-insurance.

                    Subpart B_Operation and Structure

563.22 Merger, consolidation, purchase or sale of assets, or assumption 
          of liabilities.
563.27 Advertising.
563.33 Directors, officers, and employees.
563.36 Tying restriction exception.
563.39 Employment contracts.
563.41 Transactions with affiliates.
563.43 Loans by savings associations to their executive officers, 
          directors and principal shareholders.
563.47 Pension plans.

                   Subpart C_Securities and Borrowings

563.74 Mutual capital certificates.
563.76 Offers and sales of securities at an office of a savings 
          association.
563.80 Borrowing limitations.
563.81 Inclusion of subordinated debt securities and mandatorily 
          redeemable preferred stock as supplementary capital.

     Subpart D_Registration of Residential Mortgage Loan Originators

563.101 Authority, purpose, and scope.
563.102 Definitions.
563.103 Registration of mortgage loan originators.

[[Page 200]]

563.104 Policies and procedures.
563.105 Use of unique identifier.

Appendix A to Subpart D of Part 563--Examples of Mortgage Loan 
          Originator Activities

                     Subpart E_Capital Distributions

563.140 What does this subpart cover?
563.141 What is a capital distribution?
563.142 What other definitions apply to this subpart?
563.143 Must I file with OTS?
563.144 How do I file with the OTS?
563.145 May I combine my notice or application with other notices or 
          applications?
563.146 Will the OTS permit my capital distribution?

                 Subpart F_Financial Management Policies

563.161 Management and financial policies.
563.170 Examinations and audits; appraisals; establishment and 
          maintenance of records.
563.171 Frequency of safety and soundness examination.
563.172 Financial derivatives.
563.176 Interest-rate-risk-management procedures.
563.177 Procedures for monitoring Bank Secrecy Act (BSA) compliance.

                     Subpart G_Reporting and Bonding

563.180 Suspicious Activity Reports and other reports and statements.
563.190 Bonds for directors, officers, employees, and agents; form of 
          and amount of bonds.
563.191 Bonds for agents.
563.200 Conflicts of interest.
563.201 Corporate opportunity.

   Subpart H_Notice of Change of Director or Senior Executive Officer

563.550 What does this subpart do?
563.555 What definitions apply to this subpart?
563.560 Who must give prior notice?
563.565 What procedures govern the filing of my notice?
563.570 What information must I include in my notice?
563.575 What procedures govern OTS review of my notice for completeness?
563.580 What standards and procedures will govern OTS review of the 
          substance of my notice?
563.585 When may a proposed director or senior executive officer begin 
          service?
563.590 When will the OTS waive the prior notice requirement?

    Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468, 
1817, 1820, 1828, 1831o, 3806, 5101 et seq.; 31 U.S.C. 5318; 42 U.S.C. 
4106.

    Source: 54 FR 49552, Nov. 30, 1989, unless otherwise noted.



                           Subpart A_Accounts



Sec. 563.1  Chartering documents.

    (a) Submission for approval. Any de novo savings association prior 
to commencing operations shall file its charter and bylaws with the OTS 
for approval, together with a certification that such charter and bylaws 
are permissible under all applicable laws, rules and regulations.
    (b) Availability of chartering documents. Each savings association 
shall cause a true copy of its charter and bylaws and all amendments 
thereto to be available to accountholders at all times in each office of 
the savings association, and shall upon request deliver to any 
accountholders a copy of such charter and bylaws or amendments thereto.

[57 FR 14344, Apr. 20, 1992]



Sec. 563.4  [Reserved]



Sec. 563.5  Securities: Statement of non-insurance.

    Every security issued by a savings association must include in its 
provisions a clear statement that the security is not insured by the 
Federal Deposit Insurance Corporation.



                    Subpart B_Operation and Structure



Sec. 563.22  Merger, consolidation, purchase or sale of assets, or assumption 

of liabilities.

    (a) No savings association may, without application to and approval 
by the Office:
    (1) Combine with any insured depository institution, if the 
acquiring or resulting institution is to be a savings association; or
    (2) Assume liability to pay any deposit made in, any insured 
depository institution.
    (b)(1) No savings association may, without notifying the Office, as 
provided in paragraph (h)(1) of this section:
    (i) Combine with another insured depository institution where a 
savings

[[Page 201]]

association is not the resulting institution; or
    (ii) In the case of a savings association that meets the conditions 
for expedited treatment under Sec. 516.5 of this chapter, convert, 
directly or indirectly, to a national or state bank.
    (2) A savings association that does not meet the conditions for 
expedited treatment under Sec. 516.5 of this chapter may not, directly 
or indirectly, convert to a national or state bank without prior 
application to and approval of OTS, as provided in paragraph (h)(2)(ii) 
of this section.
    (c) No savings association may make any transfer (excluding 
transfers subject to paragraphs (a) or (b) of this section) without 
notice or application to the Office, as provided in paragraph (h)(2) of 
this section. For purposes of this paragraph, the term ``transfer'' 
means purchases or sales of assets or liabilities in bulk not made in 
the ordinary course of business including, but not limited to, transfers 
of assets or savings account liabilities, purchases of assets, and 
assumptions of deposit accounts or other liabilities, and combinations 
with a depository institution other than an insured depository 
institution.
    (d)(1) In determining whether to confer approval for a transaction 
under paragraphs (a), (b)(2), or (c) of this section, the Office shall 
take into account the following:
    (i) The capital level of any resulting savings association;
    (ii) The financial and managerial resources of the constituent 
institutions;
    (iii) The future prospects of the constituent institutions;
    (iv) The convenience and needs of the communities to be served;
    (v) The conformity of the transaction to applicable law, regulation, 
and supervisory policies;
    (vi) Factors relating to the fairness of and disclosure concerning 
the transaction, including, but not limited to:
    (A) Equitable treatment. The transaction should be equitable to all 
concerned--savings account holders, borrowers, creditors and 
stockholders (if any) of each savings association--giving proper 
recognition of and protection to their respective legal rights and 
interests. The transaction will be closely reviewed for fairness where 
the transaction does not appear to be the result of arms' length 
bargaining or, in the case of a stock savings association, where 
controlling stockholders are receiving different consideration from 
other stockholders. No finder's or similar fee should be paid to any 
officer, director, or controlling person of a savings association which 
is a party to the transaction.
    (B) Full disclosure. The filing should make full disclosure of all 
written or oral agreements or understandings by which any person or 
company will receive, directly or indirectly, any money, property, 
service, release of pledges made, or other thing of value, whether 
tangible or intangible, in connection with the transaction.
    (C) Compensation to officers. Compensation, including deferred 
compensation, to officers, directors and controlling persons of the 
disappearing savings association by the resulting institution or an 
affiliate thereof should not be in excess of a reasonable amount, and 
should be commensurate with their duties and responsibilities. The 
filing should fully justify the compensation to be paid to such persons. 
The transaction will be particularly scrutinized where any of such 
persons is to receive a material increase in compensation above that 
paid by the disappearing savings association prior to the commencement 
of negotiations regarding the proposed transaction. An increase in 
compensation in excess of the greater of 15% or $10,000 gives rise to 
presumptions of unreasonableness and sale of control. In the case of 
such an increase, evidence sufficient to rebut such presumptions should 
be submitted.
    (D) Advisory boards. Advisory board members should be elected for a 
term not exceeding one year. No advisory board fees should be paid to 
salaried officers or employees of the resulting savings association. The 
filing should describe and justify the duties and responsibilities and 
any compensation paid to any advisory board of the resulting savings 
association that consists of officers, directors or controlling persons 
of the disappearing institution, particularly if the disappearing

[[Page 202]]

institution experienced significant supervisory problems prior to the 
transaction. No advisory board fees should exceed the director fees paid 
by the resulting savings association. Advisory board fees that are in 
excess of 115 percent of the director fees paid by the disappearing 
savings association prior to commencement of negotiations regarding the 
transaction give rise to presumptions of unreasonableness and sale of 
control unless sufficient evidence to rebut such presumptions is 
submitted. Rebuttal evidence is not required if:
    (1) The advisory board fees do not exceed the fee that advisory 
board members of the resulting institution receive for each monthly 
meeting attended or $150, whichever is greater; or
    (2) The advisory board fees do not exceed $100 per meeting attended 
for disappearing savings associations with assets greater than 
$10,000,000 or $50 per meeting attended for disappearing savings 
associations with assets of $10,000,000 or less, based on a schedule of 
12 meetings per year.
    (E) The accounting and tax treatment of the transaction; and
    (F) Fees paid and professional services rendered in connection with 
the transaction.
    (2) In conferring approval of a transaction under paragraph (a) of 
this section, the Office also will consider the competitive impact of 
the transaction, including whether:
    (i) The transaction would result in a monopoly, or would be in 
furtherance of any monopoly or conspiracy to monopolize or to attempt to 
monopolize the savings association business in any part of the United 
States; or
    (ii) The effect of the transaction on any section of the country may 
be substantially to lessen competition, or tend to create a monopoly, or 
in any other manner would be in restraint of trade, unless the Office 
finds that the anticompetitive effects of the proposed transaction are 
clearly outweighed in the public interest by the probable effect of the 
transaction in meeting the convenience and needs of the communities to 
be served.
    (3) Applications and notices filed under this section shall be upon 
forms prescribed by the Office.
    (4) Applications filed under paragraph (a) of this section must be 
processed in accordance with the time frames set forth in Sec. Sec. 
516.210 through 516.290 of this chapter, provided that the period for 
review may be extended only if the Office determines that the applicant 
has failed to furnish all requested information or that the information 
submitted is substantially inaccurate, in which case the review period 
may be extended for up to 30 days.
    (e)(1) The following procedures apply to applications described in 
paragraph (a) of this section, unless OTS finds that it must act 
immediately to prevent the probable default of one of the depository 
institutions involved:
    (i) The applicant must publish a public notice of the application in 
accordance with the procedures in subpart B of part 516 of this chapter. 
In addition to the initial publication, the applicant must also publish 
on a weekly basis during the public comment period.
    (ii) Commenters may submit comments on an application in accordance 
with the procedures in subpart C of part 516 of this chapter. The public 
comment period is 30 calendar days after the date of publication of the 
initial public notice. However, if OTS has advised the Attorney General 
that an emergency exists requiring expeditious action, the public 
comment period is 10 calendar days after the date of publication of the 
initial public notice.
    (iii) OTS may arrange a meeting in accordance with the procedures in 
subpart D of part 516 of this chapter.
    (iv) OTS will request the Attorney General, the Office of the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, and the Federal Deposit Insurance Corporation to provide 
reports on the competitive impacts involved in the transaction.
    (v) OTS will immediately notify the Attorney General of the approval 
of the transaction. The applicant may not consummate the transaction 
before the date established under 12 U.S.C. 1828(c)(6).
    (2) For applications described in Sec. 563.22, certain savings 
associations described below must provide affected accountholders with a 
notice of a proposed account transfer and an option of

[[Page 203]]

retaining the account in the transferring savings association. The 
notice must allow affected accountholders at least 30 days to consider 
whether to retain their accounts in the transferring savings 
association. The following savings associations must provide the 
notices:
    (i) A savings association transferring account liabilities to an 
institution the accounts of which are not insured by the Deposit 
Insurance Fund or the National Credit Union Share Insurance Fund; and
    (ii) Any mutual savings association transferring account liabilities 
to a stock form depository institution.
    (f) Automatic approvals by the Office. Applications filed pursuant 
to paragraph (a) of this section shall be deemed to be approved 
automatically by the Office 30 calendar days after the Office sends 
written notice to the applicant that the application is complete, 
unless:
    (1) The acquiring savings association does not meet the criteria for 
expedited treatment under Sec. 516.5 of this chapter;
    (2) The OTS recommends the imposition of non-standard conditions 
prior to approving the application;
    (3) The OTS suspends the applicable processing time frames under 
Sec. 516.190 of this chapter;
    (4) The OTS raises objections to the transaction;
    (5) The resulting savings association would be one of the 3 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 5 or fewer depository institutions, 
the resulting savings association would have 25 percent or more of the 
total deposits held by depository institutions in the relevant 
geographic area, and the share of total deposits would have increased by 
5 percent or more;
    (6) The resulting savings association would be one of the 2 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 6 to 11 depository institutions the 
resulting savings association would have 30 percent or more of the total 
deposits held by depositing institutions in the relevant geographic 
area, and the share of total deposits would have increased by 10 percent 
or more;
    (7) The resulting savings association would be one of the 2 largest 
depository institutions competing in the relevant geographic area where 
before the transaction there were 12 or more depository institutions, 
the resulting savings association would have 35 percent or more of the 
total deposits held by the depository institutions in the relevant 
geographic area, and the share of total deposits would have increased by 
15 percent or more;
    (8) The Herfindahl-Hirschman Index (HHI) in the relevant geographic 
area was more than 1800 before the transaction, and the increase in the 
HHI used by the transaction would be 50 or more;
    (9) In a transaction involving potential competition, the OTS 
determines that the acquiring savings association is one of three or 
fewer potential entrants into the relevant geographic area;
    (10) The acquiring savings association has assets of $1 billion or 
more and proposes to acquire assets of $1 billion or more;
    (11) The savings association that will be the resulting savings 
association in the transaction has a composite Community Reinvestment 
Act rating of less than satisfactory, or is otherwise seriously 
deficient with respect to the Office's nondiscrimination regulations and 
the deficiencies have not been resolved to the satisfaction of the OTS;
    (12) The transaction involves any supervisory or assistance 
agreement with the Office, the Resolution Trust Corporation, or the 
Federal Deposit Insurance Corporation;
    (13) The transaction is part of a conversion under part 563b of this 
chapter;
    (14) The transaction raises a significant issue of law or policy; or
    (15) The transaction is opposed by any constituent institution or 
contested by a competing acquiror.
    (g) Definitions. (1) The terms used in this section shall have the 
same meaning as set forth in Sec. 552.13(b) of this chapter.
    (2) Insured depository institution. Insured depository institution 
has the same meaning as defined in section 3(c)(2) of the Federal 
Deposit Insurance Act.

[[Page 204]]

    (3) With regard to paragraph (f) of this section, the term relevant 
geographic area is used as a substitute for relevant geographic market, 
which means the area within which the competitive effects of a merger or 
other combination may be evaluated. The relevant geographic area shall 
be delineated as a county or similar political subdivision, an area 
smaller than a county, or an aggregation of counties within which the 
merging or combining insured depository institutions compete. In 
addition, the Office may consider commuting patterns, newspaper and 
other advertising activities, or other factors as the Office deems 
relevant.
    (h) Special requirements and procedures for transactions under 
paragraphs (b) and (c) of this section--(1) Certain transactions with no 
surviving savings association. The Office must be notified of any 
transaction under paragraph (b)(1) of this section. Such notification 
must be submitted to the OTS at least 30 days prior to the effective 
date of the transaction, but not later than the date on which an 
application relating to the proposed transaction is filed with the 
primary regulator of the resulting institution; the Office may, upon 
request or on its own initiative, shorten the 30-day prior notification 
requirement. Notifications under this paragraph must demonstrate 
compliance with applicable stockholder or accountholder approval 
requirements. Where the savings association submitting the notification 
maintains a liquidation account established pursuant to part 563b of 
this chapter, the notification must state that the resulting institution 
will assume such liquidation account.
    The notification may be in the form of either a letter describing 
the material features of the transaction or a copy of a filing made with 
another Federal or state regulatory agency seeking approval from that 
agency for the transaction under the Bank Merger Act or other applicable 
statute. If the action contemplated by the notification is not completed 
within one year after the Office's receipt of the notification, a new 
notification must be submitted to the Office.
    (2) Other transfer transactions--(i) Expedited treatment. A notice 
in conformity with Sec. 516.25(a) of this chapter may be submitted to 
OTS under Sec. 516.40 of this chapter for any transaction under 
paragraph (c) of this section, provided all constituent savings 
associations meet the conditions for expedited treatment under Sec. 
516.5 of this chapter. Notices submitted under this paragraph must be 
deemed approved automatically by OTS 30 days after receipt, unless OTS 
advises the applicant in writing prior to the expiration of such period 
that the proposed transaction may not be consummated without OTS's 
approval of an application under paragraphs (h)(2)(ii) or (h)(2)(iii) of 
this section.
    (ii) Standard treatment. An application in conformity with Sec. 
516.25(b) of this chapter and paragraph (d) of this section must be 
submitted to OTS under Sec. 516.40 by each savings association 
participating in a transaction under paragraph (b)(2) or (c) of this 
section, where any constituent savings association does not meet the 
conditions for expedited treatment under Sec. 516.5 of this chapter. 
Applications under this paragraph must be processed in accordance with 
the procedures in part 516, subparts A and E of this chapter.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 13514, Apr. 11, 1990; 
57 FR 14344, Apr. 20, 1992; 59 FR 44624, Aug. 30, 1994; 59 FR 66159, 
Dec. 23, 1994; 62 FR 64146, Dec. 4, 1997; 66 FR 13007, Mar. 2, 2001; 69 
FR 68250, Nov. 24, 2004; 71 FR 19811, Apr. 18, 2006]



Sec. 563.27  Advertising.

    No savings association shall use advertising (which includes print 
or broadcast media, displays or signs, stationery, and all other 
promotional materials), or make any representation which is inaccurate 
in any particular or which in any way misrepresents its services, 
contracts, investments, or financial condition.

[54 FR 49552, Nov. 30, 1989, as amended at 58 FR 4313, Jan. 14, 1993]



Sec. 563.33  Directors, officers, and employees.

    (a) Directors--(1) Requirements. The composition of the board of 
directors of a savings association must be in accordance with the 
following requirements:
    (i) A majority of the directors must not be salaried officers or 
employees of

[[Page 205]]

the savings association or of any subsidiary or (except in the case of a 
savings association having 80% or more of any class of voting shares 
owned by a holding company) any holding company affiliate thereof.
    (ii) Not more than two of the directors may be members of the same 
immediate family.
    (iii) Not more than one director may be an attorney with a 
particular law firm.
    (2) Prospective application. In the case of an association whose 
board of directors does not conform with any requirement set forth in 
paragraph (a)(1) of this section as of October 5, 1983, this paragraph 
(a) shall not prohibit the uninterrupted service, including re-election 
and re-appointment, of any person serving on the board of directors at 
that date.
    (b) [Reserved]

[54 FR 49552, Nov. 30, 1989, as amended at 58 FR 4313, Jan. 14, 1993]



Sec. 563.36  Tying restriction exception.

    (a) Safe harbor for combined-balance discounts. A savings and loan 
holding company or any savings association or any affiliate of either 
may vary the consideration for any product or package of products based 
on a customer's maintaining a combined minimum balance in certain 
products specified by the company varying the consideration (eligible 
products), if:
    (1) That company (if it is a savings association) or a savings 
association affiliate of that company (if it is not a savings 
association) offers deposits, and all such deposits are eligible 
products; and
    (2) Balances in deposits count at least as much as non-deposit 
products toward the minimum balance.
    (b) Limitations on exception. This exception shall terminate upon a 
finding by the OTS that the arrangement is resulting in anti-competitive 
practices. The eligibility of a savings and loan holding company or 
savings association or affiliate of either to operate under this 
exception shall terminate upon a finding by the OTS that its exercise of 
this authority is resulting in anti-competitive practices.

[61 FR 60184, Nov. 27, 1996]



Sec. 563.39  Employment contracts.

    (a) General. A savings association may enter into an employment 
contract with its officers and other employees only in accordance with 
the requirements of this section. All employment contracts shall be in 
writing and shall be approved specifically by an association's board of 
directors. An association shall not enter into an employment contract 
with any of its officers or other employees if such contract would 
constitute an unsafe or unsound practice. The making of such an 
employment contract would be an unsafe or unsound practice if such 
contract could lead to material financial loss or damage to the 
association or could interfere materially with the exercise by the 
members of its board of directors of their duty or discretion provided 
by law, charter, bylaw or regulation as to the employment or termination 
of employment of an officer or employee of the association. This may 
occur, depending upon the circumstances of the case, where an employment 
contract provides for an excessive term.
    (b) Required provisions. Each employment contract shall provide 
that:
    (1) The association's board of directors may terminate the officer 
or employee's employment at any time, but any termination by the 
association's board of directors other than termination for cause, shall 
not prejudice the officer or employee's right to compensation or other 
benefits under the contract. The officer or employee shall have no right 
to receive compensation or other benefits for any period after 
termination for cause. Termination for cause shall include termination 
because of the officer or employee's personal dishonesty, incompetence, 
willful misconduct, breach of fiduciary duty involving personal profit, 
intentional failure to perform stated duties, willful violation of any 
law, rule, or regulation (other than traffic violations or similar 
offenses) or final cease-and-desist order, or material breach of any 
provision of the contract.
    (2) If the officer or employee is suspended and/or temporarily 
prohibited from participating in the conduct of the association's 
affairs by a notice served under section 8 (e)(3) or (g)(1) of

[[Page 206]]

Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)) the 
association's obligations under the contract shall be suspended as of 
the date of service unless stayed by appropriate proceedings. If the 
charges in the notice are dismissed, the association may in its 
discretion (i) pay the officer or employee all or part of the 
compensation withheld while its contract obligations were suspended, and 
(ii) reinstate (in whole or in part) any of its obligations which were 
suspended.
    (3) If the officer or employee is removed and/or permanently 
prohibited from participating in the conduct of the association's 
affairs by an order issued under section 8 (e)(4) or (g)(1) of the 
Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)), all 
obligations of the association under the contract shall terminate as of 
the effective date of the order, but vested rights of the contracting 
parties shall not be affected.
    (4) If the savings association is in default (as defined in section 
3(x)(1) of the Federal Deposit Insurance Act), all obligations under the 
contract shall terminate as of the date of default, but this paragraph 
(b)(4) shall not affect any vested rights of the contracting parties: 
Provided, that this paragraph (b)(4) need not be included in an 
employment contract if prior written approval is secured from the 
Director or his or her designee.
    (5) All obligations under the contract shall be terminated, except 
to the extent determined that continuation of the contract is necessary 
of the continued operation of the association
    (i) By the Director or his or her designee, at the time the Federal 
Deposit Insurance Corporation or Resolution Trust Corporation enters 
into an agreement to provide assistance to or on behalf of the 
association under the authority contained in 13(c) of the Federal 
Deposit Insurance Act; or
    (ii) By the Director or his or her designee, at the time the 
Director or his or her designee approves a supervisory merger to resolve 
problems related to operation of the association or when the association 
is determined by the Director to be in an unsafe or unsound condition.

Any rights of the parties that have already vested, however, shall not 
be affected by such action.



Sec. 563.41  Transactions with affiliates.

    (a) Scope. (1) This section implements section 11(a) of the Home 
Owners' Loan Act (12 U.S.C. 1468(a)). Section 11(a) applies sections 23A 
and 23B of the FRA (12 U.S.C. 371c and 371c1) to every savings 
association in the same manner and to the same extent as if the 
association were a member bank; prohibits certain types of transactions 
with affiliates; and authorizes OTS to impose additional restrictions on 
a savings association's transactions with affiliates.
    (2) For the purposes of this section, ``savings association'' is 
defined at section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
1813), and also includes any savings bank or any cooperative bank that 
is a savings association under 12 U.S.C. 1467a(l). A non-affiliate 
subsidiary of a savings association as described in paragraph (b)(11) of 
this section is treated as part of the savings association.
    (b) Sections 23A and 23B of the FRA/Regulation W. A savings 
association must comply with sections 23A and 23B of the Federal Reserve 
Act and the implementing regulations at 12 CFR part 223 (Regulation W) 
as if it were a member bank, except as described in the following chart. 
In addition, a savings association should read all references to ``the 
Board'' or ``appropriate federal banking agency'' to refer only to 
``OTS,'' except for references at 12 CFR 223.2(a)(9)(iv), 223.3(h), 
223.3(z), 223.14(c)(4), 223.43, and 223.55.

------------------------------------------------------------------------
       Provision of Regulation W                   Application
------------------------------------------------------------------------
(1) 12 CFR 223.1--Authority, purpose,    Does not apply. Section
 and scope.                               563.41(a) addresses these
                                          matters.
(2) 12 CFR 223.2(a)(8)--``Affiliate''    Does not apply. Savings
 includes a financial subsidiary.         association subsidiaries do
                                          not meet the statutory
                                          definition of financial
                                          subsidiary.
(3) 12 CFR 223.2(a)(12)--Determination   Read to include the following
 that ``affiliate'' includes other        statement: ``Affiliate also
 types of companies.                      includes any company that OTS
                                          determines, by order or
                                          regulation, to present a risk
                                          to the safety and soundness of
                                          the savings association.''

[[Page 207]]

 
(4) 12 CFR 223.2(b)(1)(ii)--             Does not apply. Savings
 ``Affiliate'' includes a subsidiary      association subsidiaries do
 that is a financial subsidiary.          not meet the statutory
                                          definition of financial
                                          subsidiary.
(5) 12 CFR 223.3(d)--Definition of       Does not apply. Capital stock
 ``capital stock and surplus.''.          and surplus means ``unimpaired
                                          capital and unimpaired
                                          surplus,'' as defined in 12
                                          CFR 560.93(b)(11).
(6) 12 CFR 223.3(h)(1)--Section 23A      Read to incorporate Sec.
 covered transactions include an          563.41(c)(1), which prohibits
 extension of credit to the affiliate.    loans or extensions of credit
                                          to an affiliate, unless the
                                          affiliate is engaged only in
                                          the activities described at 12
                                          U.S.C. 1467a(c)(2)(F)(i), as
                                          defined in Sec.  584.2-2 of
                                          this chapter.
(7) 12 CFR 223.3(h)(2)--Section 23A      Read to incorporate Sec.
 covered transactions include a           563.41(c)(2), which prohibits
 purchase of or investment in             purchases and investments in
 securities issued by an affiliate.       securities issued by an
                                          affiliate, other than with
                                          respect to shares of a
                                          subsidiary.
(8) 12 CFR 223.3(k)--Definition of       Read to include the following
 ``depository institution.''.             statement: ``For the purposes
                                          of this definition, a non-
                                          affiliate subsidiary of a
                                          savings association is treated
                                          as part of the depository
                                          institution.''
(9) 12 CFR 223.3(p)--Definition of       Does not apply. Savings
 ``financial subsidiary.''.               association subsidiaries do
                                          not meet the statutory
                                          definition of financial
                                          subsidiary.
(10) 12 CFR 223.3(w)--Definition of      Read to include the following
 ``member bank.''.                        statement: ``Member bank also
                                          includes a savings
                                          association. For purposes of
                                          this definition, a non-
                                          affiliate subsidiary of a
                                          savings association is treated
                                          as part of the savings
                                          association.''
(11) 12 CFR 223.3(aa)--Definition of     Does not apply. Other OTS
 ``operating subsidiary.''.               regulations include a
                                          conflicting definition of this
                                          same term. Instead, OTS uses
                                          the phrase ``non-affiliate
                                          subsidiary.'' A non-affiliate
                                          subsidiary is a subsidiary of
                                          a savings association other
                                          than a subsidiary described at
                                          12 CFR 223.2(b)(1)(i), (iii)
                                          through (v).
(12) 12 CFR 223.3(ii)--Definition of     Read to include the following
 ``subsidiary.''.                         statement: ``A subsidiary of a
                                          savings association means a
                                          company that is controlled by
                                          the savings association.''
(13) 12 CFR 223.3(kk)--Definition of     Read to include the following
 ``well capitalized.''.                   statement: ``For a savings and
                                          loan holding company, however,
                                          well-capitalized means that
                                          the holding company
                                          significantly exceeds OTS
                                          expectations for the amount of
                                          capital needed to adequately
                                          support the holding company's
                                          risk profile, as determined by
                                          OTS on a case-by-case basis.''
(14) 12 CFR 223.31--Application of       Read to refer to ``a non-
 section 23A to an acquisition of an      affiliate subsidiary'' instead
 affiliate that becomes an operating      of ``operating subsidiary.''
 subsidiary.
(15) 12 CFR 223.32--Rules that apply to  Does not apply. Savings
 financial subsidiaries of a bank.        association subsidiaries do
                                          not meet the statutory
                                          definition of financial
                                          subsidiary.
(16) 12 CFR 223.42(f)(2)--Exemption for  Read to refer to ``Thrift
 purchasing certain marketable            Financial Report'' instead of
 securities.                              ``Call Report.'' References to
                                          ``state member bank'' are
                                          unchanged.
(17) 12 CFR 223.42(g)(2)--Exemption for  Read to refer to ``Thrift
 purchasing municipal securities.         Financial Report'' instead of
                                          ``Call Report.'' References to
                                          ``state member bank'' are
                                          unchanged.
(18) 12 CFR 223.61--Application of       Does not apply to savings
 sections 23A and 23B to U.S. branches    associations or their
 and agencies of foreign banks.           subsidiaries.
------------------------------------------------------------------------

    (c) Additional prohibitions and restrictions. A savings association 
must comply with the additional prohibitions and restrictions in this 
paragraph. Except as described in paragraph (b) of this section, the 
definitions in 12 CFR part 223 apply to these additional prohibitions 
and restrictions.
    (1) Loans and extensions of credit. (i) A savings association may 
not make a loan or other extension of credit to an affiliate, unless the 
affiliate is solely engaged in the activities described at 12 U.S.C. 
1467a(c)(2)(F)(i), as defined in Sec. 584.2-2 of this chapter. A loan 
or extension of credit to a third party is not prohibited merely because 
proceeds of the transaction are used for the benefit of, or are 
transferred to, an affiliate.
    (ii) If OTS determines that a particular transaction is, in 
substance, a loan or extension of credit to an affiliate that is engaged 
in activities other than those described at 12 U.S.C. 1467a(c)(2)(F)(i), 
as defined in Sec. 584.2-2 of this chapter, or OTS has other 
supervisory concerns concerning the transaction, OTS may inform the 
savings association that the transaction is prohibited under this 
paragraph (c)(1), and require the savings association to divest the 
loan, unwind the transaction, or take other appropriate action.
    (2) Purchases or investments in securities. A savings association 
may not purchase or invest in securities issued by any affiliate other 
than with respect to shares of a subsidiary. For the purposes

[[Page 208]]

of this paragraph (c)(2), subsidiary includes a bank and a savings 
association.
    (3) Recordkeeping. A savings association must make and retain 
records that reflect, in reasonable detail, all transactions between the 
savings association and its affiliates and any other person to the 
extent that the proceeds of a transaction are used for the benefit of, 
or transferred to, an affiliate. At a minimum, these records must:
    (i) Identify the affiliate;
    (ii) Specify the dollar amount of the transaction and demonstrate 
that this amount is within the quantitative limits in 12 CFR 223.11 and 
223.12, or that the transaction is not subject to those limits;
    (iii) Indicate whether the transaction involves a low-quality asset;
    (iv) Identify the type and amount of any collateral involved in the 
transaction and demonstrate that this collateral meets the requirements 
in 12 CFR 223.14 or that the transaction is not subject to those 
requirements;
    (v) Demonstrate that the transaction complies with 12 CFR part 223, 
subpart F or that the transaction is not subject to those requirements;
    (vi) Demonstrate that all loans and extensions of credit to 
affiliates comply with paragraph (c)(1) of this section; and
    (vii) Be readily accessible for examination and supervisory 
purposes.
    (4) Notice requirement. (i) OTS may require a savings association to 
notify the agency before the savings association may engage in a 
transaction with an affiliate or a subsidiary (other than exempt 
transactions under 12 CFR part 223). OTS may impose this requirement if:
    (A) The savings association is in troubled condition as defined at 
Sec. 563.555 of this part;
    (B) The savings association does not meet its regulatory capital 
requirements;
    (C) The savings association commenced de novo operations within the 
past two years;
    (D) OTS approved an application or notice under 12 CFR part 574 
involving the savings association or its holding company within the past 
two years;
    (E) The savings association entered into a consent to merge or a 
supervisory agreement within the past two years; or
    (F) OTS or another banking agency initiated a formal enforcement 
proceeding against the savings association and the proceeding is 
pending.
    (ii) OTS must notify the savings association in writing that it has 
imposed the notice requirement and must identify the circumstance listed 
in paragraph (c)(4)(i) of this section that supports the imposition of 
the notice requirement.
    (iii) If OTS has imposed the notice requirement under this 
paragraph, a savings association must provide a written notice to OTS at 
least 30 days before the savings association may enter into a 
transaction with an affiliate or a subsidiary. The written notice must 
include a full description of the transaction. If OTS does not object 
during the 30-day period, the savings association may proceed with the 
proposed transaction.

[68 FR 57797, Oct. 7, 2003, as amended at 68 FR 75110, Dec. 30, 2003]



Sec. 563.43  Loans by savings associations to their executive officers, 

directors and principal shareholders.

    Pursuant to 12 U.S.C. 1463(a) and 1468, a savings association, its 
subsidiaries and its insiders (as defined) shall be subject to the 
restrictions contained in the Federal Reserve Board's Regulation O (12 
CFR part 215), in the same manner and to the same extent as if the 
association were a bank and a member bank of the Federal Reserve System, 
except that:
    (a) Such provisions shall be administered and enforced by the OTS;
    (b) References to the term ``bank holding company'' shall be deemed 
to refer to ``savings and loan holding company'';
    (c) References to ``report of condition filed under 12 U.S.C. 
1817(a)(3)'' shall be deemed to refer to ``Thrift Financial Report'';
    (d) The term subsidiary includes a savings association that is 
controlled by a company (including for this purpose an insured 
depository institution) that is a savings and loan holding company. A 
company has control over a

[[Page 209]]

saving association if it: directly or indirectly, or acting through one 
or more other persons owns, controls, or has the power to vote 25 
percent or more of any class of voting securities; or would be deemed to 
control the company under Sec. 574.4(a) of this chapter or presumed to 
control the company under Sec. 574.4(b) of this chapter, and in the 
latter case, control has not been rebutted. Notwithstanding any other 
provision of this section, no company shall be deemed to own or control 
another by virtue of its ownership or control of shares in a fiduciary 
capacity. When used to refer to a subsidiary of a savings association, 
the term subsidiary means a ``subsidiary'' that is controlled by the 
savings association within the meaning of 12 CFR part 574 of this 
chapter.
    (e) References to the Reserve Bank or the Comptroller shall be 
deemed to include the Director of OTS; and
    (f) References to the term ``unimpaired capital and unimpaired 
surplus'' shall be deemed to refer to ``unimpaired capital and 
unimpaired surplus'' as defined at Sec. 560.93(b)(11) of this part.

[57 FR 45980, Oct. 6, 1992, as amended at 59 FR 53571, Oct. 25, 1994; 60 
FR 66869, Dec. 27, 1995; 67 FR 77918, Dec. 20, 2002; 68 FR 57798, Oct. 
7, 2003; 69 FR 76602, Dec. 22, 2004; 73 FR 18, Jan. 2, 2008]



Sec. 563.47  Pension plans.

    (a) General. No savings association or service corporation thereof 
shall sponsor an employee pension plan which, because of unreasonable 
costs or any other reason, could lead to material financial loss or 
damage to the sponsor. For purposes of this section, an employee pension 
plan is defined in section 3(2) of the Employee Retirement Income 
Security Act of 1974, as amended. The prospective obligation or 
liability of a plan sponsor to each plan participant shall be stated in 
or determinable from the plan, and, for a defined benefit plan, shall 
also be based upon an actuarial estimate of future experience under the 
plan.
    (b) Funding. Actuarial cost methods permitted under the Employee 
Retirement Income Security Act of 1974 and the Internal Revenue Code of 
1954, as amended, shall be used to determine plan funding.
    (c) Plan amendment. A plan may be amended to provide reasonable 
annual cost-of-living increases to retired participants: Provided, That
    (1) Any such increase shall be for a period and amount determined by 
the sponsor's board of directors, but in no event shall it exceed the 
annual increase in the Consumer Price Index published by the Bureau of 
Labor Statistics; and
    (2) No increase shall be granted unless (i) anticipated charges to 
net income for future periods have first been found by such board of 
directors to be reasonable and are documented by appropriate resolution 
and supporting analysis; and (ii) the increase will not reduce the 
association's regulatory capital below its regulatory capital 
requirement.
    (d) Termination. The plan shall permit the sponsor's board of 
directors and its successors to terminate such plan. Notice of intent to 
terminate shall be filed with the OTS at least 60 days prior to the 
proposed termination date.
    (e) Records. Each savings association or service corporation 
maintaining a plan not subject to recordkeeping and reporting 
requirements of the Employee Retirement Income Security Act of 1974, and 
the Internal Revenue Code of 1954, as amended, shall establish and 
maintain records containing the following:
    (1) Plan description;
    (2) Schedule of participants and beneficiaries;
    (3) Schedule of participants and beneficiaries' rights and 
obligations;
    (4) Plan's financial statements; and
    (5) Except for defined contribution plans, an opinion signed by an 
enrolled actuary (as defined by the Employee Retirement Income Security 
Act of 1974) affirming that actuarial assumptions in the aggregate are 
reasonable, take into account the plan's experience and expectations, 
and represent the actuary's best estimate of the plan's projected 
experiences.

[59 FR 66159, Dec. 23, 1994]

[[Page 210]]



                   Subpart C_Securities and Borrowings



Sec. 563.74  Mutual capital certificates.

    (a) General. No savings association that is in the mutual form shall 
issue mutual capital certificates pursuant to this section or amend the 
terms of such certificates unless it has obtained written approval of 
the Office. No approval shall be granted unless the proposed issuance of 
the mutual capital certificates and the form and manner of filing of the 
application are in accordance with the provisions of this section.
    (b) Eligibility Requirements. The Office will consider and process 
an application for approval of the issuance of mutual capital 
certificates pursuant to this section only if the issuance is authorized 
by applicable law and regulation and is not inconsistent with any 
provision of the applicant's charter, constitution or bylaws.
    (c) Application form; supporting information. An application for 
approval of the issuance of mutual capital certificates pursuant to this 
section shall be in the form prescribed by the Office. Such application 
and instructions may be obtained from the OTS. Information and exhibits 
shall be furnished in support of the application in accordance with such 
instructions, setting forth all of the terms and provisions relating to 
the proposed issue and showing that all of the requirements of this 
section have been or will be met.
    (d) Charter amendment. No application for approval of the issuance 
of mutual capital certificates pursuant to this section may be filed 
unless the amendment to the mutual association's charter, constitution 
or bylaws or other actions conferring such authority shall have been 
approved pursuant to the procedures and requirements set forth in the 
mutual association's charter, constitution or bylaws, or as may 
otherwise be required by applicable law.
    (e) Filing requirements. The application for issuance of mutual 
capital certificates shall be publicly filed with the OTS.
    (f) Supervisory objection. No application or approval of the 
issuance of mutual capital certificates pursuant to this section shall 
be approved if, in the opinion of the Office, the policies, condition, 
or operation of the applicant afford a basis for supervisory objection 
to the application.
    (g) Limitation on offering period. Following the date of the 
approval of the application by the Office, the association shall have an 
offering period of not more than one year in which to complete the sale 
of the mutual capital certificates issued pursuant to this section. The 
Office may in its discretion extend such offering period if a written 
request showing good cause for such extension is filed with it not later 
than 30 days before the expiration of such offering period or any 
extension thereof.
    (h) Reports. Within 30 days after completion of the sale of mutual 
capital certificates issued pursuant to this section, the association 
shall transmit to the OTS a written report stating the total dollar 
amount of securities sold, and the amount of net proceeds received by 
the association, and within 90 days it shall transmit a written report 
stating the number of purchasers.
    (i) Requirements as to mutual capital certificates--(1) Form of 
certificate. Each mutual capital certificate and any governing agreement 
evidencing a mutual capital certificate issued by an association 
pursuant to this section:
    (i) Shall bear on its face, in bold-face type, the following legend: 
``This security is not a savings account or a deposit and it is not 
insured by the United States or any agency or fund of the United 
States''; and
    (ii) Shall clearly state that the certificate is subject to the 
requirements of Sec. 563.74(i)(2).
    (2) Legal requirements. Mutual capital certificates issued pursuant 
to this section shall:
    (i) Be subordinate to all claims against the association having the 
same priority as savings accounts, savings certificates, debt 
obligations or any higher priority;
    (ii) Not be eligible for use as collateral for any loan made by the 
issuing association;
    (iii) Constitute a claim in liquidation not exceeding the face value 
plus accrued dividends of the certificates, on

[[Page 211]]

the general reserves, surplus and undivided profits of the association 
remaining after the payment in full of all savings accounts, savings 
certificates and debt obligations;
    (iv) Be entitled to the payment of dividends, which may be fixed, 
variable, participating, or cumulative, or any combination thereof, only 
if, when and as declared by the association's board of directors out of 
funds legally available for that purpose, provided that no dividend may 
be declared or paid without the approval of the Office if such payment 
would cause the association to fail to meet its regulatory capital 
requirements under part 567 of this chapter, and provided further that 
no dividend may be paid if such payment would constitute a violation of 
12 U.S.C. 1828(b);
    (v) Not be redeemable, except: (A) Where the dollar weighted average 
term of each issue of mutual capital certificates to be redeemed is 
seven years or more and redemption is to be made pursuant to a 
redemption schedule; (B) in the event of a merger, consolidation or 
reorganization approved by the Office; or (C) where the funds for 
redemption are raised by the issuance of mutual capital certificates 
approved pursuant to this section, or in conjunction with the issuance 
of capital stock pursuant to part 563b of this chapter: Provided, that 
mandatory redemption shall not be required; that mutual capital 
certificates shall not be redeemable on the demand or at the option of 
the holder; and that mutual capital certificates shall not receive, 
benefit from, be credited with or otherwise be entitled to or due 
payments in or for redemption if such payments would cause the 
association to fail to meet its regulatory capital requirements under 
part 567 of this chapter; And Provided further, for the purposes of this 
paragraph (i)(2)(v), the ``dollar weighted average term'' of an issue of 
mutual capital certificates shall be the sum of the products calculated 
for each year that the mutual capital certificates in the issue have 
been redeemed or are scheduled to be redeemed. Each product shall be 
calculated by multiplying the number of years of each mutual capital 
certificate of a given term by a fraction, the numerator of which shall 
be the total dollar amount of each mutual capital certificate in the 
issue with the same term and the denominator of which shall be the total 
dollar amount of mutual capital certificates in the entire issue;
    (vi) Not have preemptive rights;
    (vii) Not have voting rights, except that an association may provide 
for voting rights if:
    (A) The savings association fails to pay dividends for a minimum of 
three consecutive dividend periods, and then the holders of the class or 
classes of mutual capital certificates granted such voting rights, and 
voting as a single class, with one vote for each outstanding 
certificate, may elect by a majority vote a maximum of one-third of the 
association's board of directors, the directors so elected to serve 
until the next annual meeting of the association succeeding the payment 
of all current and past dividends;
    (B) Any merger, consolidation, or reorganization (except in a 
supervisory case) is sought to be authorized, where the issuing 
association is not the survivor, provided that the regulatory capital of 
the resulting association available for payment of any class of mutual 
capital certificate on liquidation is less than the regulatory capital 
available for such class prior to the merger, consolidation, or 
reorganization;
    (C) Action is sought to be authorized which would create any class 
of mutual capital certificates having a preference or priority over an 
outstanding class or classes of mutual capital certificates;
    (D) Any action is sought to be authorized which would adversely 
change the specific terms of any class of mutual capital certificates;
    (E) Action is sought to be authorized which would increase the 
number of a class of mutual capital certificates, or the number of a 
class of mutual capital certificates ranking prior to or on parity with 
another class of mutual capital certificates; or
    (F) Action is sought which would authorize the issuance of an 
additional class or classes of mutual capital certificates without the 
association having met specific financial standards;
    (viii) Not constitute an obligation of the association and shall 
confer no

[[Page 212]]

rights which would give rise to any claim of or action for default;
    (ix) Not be convertible into any account, security, or interest, 
except that mutual capital certificates may be surrendered in exchange 
for preferred stock issued in connection with the conversion of the 
issuing savings association to the stock form pursuant to part 563b of 
this chapter, provided that the preferred stock shall have substantially 
the same voting rights, designations, preferences and relative, 
participating optional, or other special rights, and qualifications, 
limitations, and restrictions, as the mutual capital certificates 
exchanged for the preferred stock.
    (x) Provide for charging of losses after the exhaustion of all other 
items in the regulatory capital account.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 13515, Apr. 11, 1990; 
57 FR 14345, Apr. 20, 1992; 59 FR 66159, Dec. 23, 1994; 72 FR 69438, 
Dec. 7, 2007]



Sec. 563.76  Offers and sales of securities at an office of a savings 

association.

    (a) A saving association may not offer or sell debt or equity 
securities issued by the association or an affiliate of the association 
at an office of the association; except that equity securities issued by 
the association or an affiliate in connection with the association's 
conversion from the mutual to stock form of organization in a conversion 
approved pursuant to part 563b of this chapter may be offered and sold 
at the association's offices: Provided, That:
    (1) The Regional Director does not object on supervisory grounds 
that the offer and sale of the securities at the offices of the 
association;
    (2) No commissions, bonuses, or comparable payments are paid to any 
employee of the savings association or its affiliates or to any other 
person in connection with the sale of securities at an office of a 
savings association; except that compensation and commissions consistent 
with industry norms may be paid to securities personnel of registered 
broker-dealers;
    (3) No offers or sales are made by tellers or at the teller counter, 
or by comparable persons at comparable locations;
    (4) Sales activity is conducted in a segregated or separately 
identifiable area of the savings association's offices apart from the 
area accessible to the general public for the purposes of making or 
withdrawing deposits;
    (5) Offers and sales are made only by regular, full-time employees 
of the savings association or by securities personnel who are subject to 
supervision by a registered broker-dealer;
    (6) An acknowledgment, in the form set forth in paragraph (c) of 
this section, is signed by any customer to whom the security is sold in 
the savings association's offices prior to the sale of any such 
securities;
    (7) A legend that the security is not a deposit or account and is 
not federally insured or guaranteed appears conspicuously on the 
security and in all offering documents and advertisements for the 
securities; the legend must state in bold or other prominent type at 
least as large as other textual type in the document that ``This 
security is not a deposit or account and is not federally insured or 
guaranteed''; and
    (8) The savings association will be in compliance with its current 
capital requirements upon completion of the conversion stock offering.
    (b) Securities sales practices, advertisements, and other sales 
literature used in connection with offers and sales of securities by 
savings associations shall be subject to Sec. 563g.10 of this chapter.
    (c) Offers and sales of securities of a savings association or its 
affiliates in any office of the savings association must use a one-page, 
unambiguous, certification in substantially the following form:

                          FORM OF CERTIFICATION

    I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS 
NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY [insert name of savings 
association] OR BY THE FEDERAL GOVERNMENT.
    If anyone asserts that this security is federally insured or 
guaranteed, or is as safe as an insured deposit, I should call the 
Office of Thrift Supervision Regional Director [insert Regional 
Director's name and telephone number with area code].
    I further certify that, before purchasing the [description of 
security being offered] of

[[Page 213]]

[name of issuer, name of savings association and affiliation to issuer 
(if different)], I received an offering circular.
    The offering circular that I received contains disclosure concerning 
the nature of the security being offered and describes the risks 
involved in the investment, including:
    [List briefly the principal risks involved and cross reference 
certain specified pages of the offering circular where a more complete 
description of the risks is made.]

Signature:______________________________________________________________
Date:___________________________________________________________________

    (d) For purposes of this section, an ``office'' of an association 
means any premises used by the association that are identified to the 
public through advertising or signage using the association's name, 
trade name, or logo.

[57 FR 46088, Oct. 7, 1992]



Sec. 563.80  Borrowing limitations.

    (a) General. Except as the Office otherwise may permit by advice in 
writing, a savings association may borrow only in accordance with the 
provisions of this section.
    (b) Amount of borrowing. A savings association may borrow up to the 
amount authorized by the laws under which the savings association 
operates.
    (c) Security. An association may give security for borrowings 
subject to any requirements imposed by the Office or the FDIC regarding 
notice of default on borrowings and any FDIC right of first refusal to 
purchase collateral.
    (d) Required statement for all securities evidencing outside 
borrowings. Each security shall bear on its face, in a prominent place, 
the following legend:

    This security is not a savings account or a deposit and it is not 
insured by the United States or any agency or fund of the United States.

    (e) Filing requirements for outside borrowings with maturities in 
excess of one year. (1) Unless the savings association meets its capital 
requirement under part 567 of this chapter, it shall, at least ten 
business days prior to issuance, file with the Regional Director or his 
or her designee a notice of intent to issue securities evidencing such 
borrowings. Such notice shall contain a summary of the items of the 
security, including:
    (i) Principal amount of the securities;
    (ii) Anticipated interest rate range and price range at which the 
securities are to be sold;
    (iii) Minimum denomination;
    (iv) Stated and average effective maturity;
    (v) Mandatory and optional prepayment provisions;
    (vi) Description, amount, and maintenance of collateral if any;
    (vii) Trustee provisions if any;
    (viii) Events of default and remedies of default;
    (ix) Any provisions which restrict, conditionally or otherwise, the 
operations of the association.
    (2) The OTS shall have 10 business days after receipt of such filing 
to object to the issuance of such securities. The OTS shall object if 
the terms or covenants of the proposed issue place unreasonable burdens 
on, or control over, the operations of the association. If no objection 
is taken, the savings association shall have 120 calendar days within 
which to issue such securities.
    (f) Note accounts. For purposes of this section, note accounts are 
not borrowings.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 7300, Mar. 1, 1990; 55 
FR 13515, Apr. 11, 1990; 57 FR 14345, Apr. 20, 1992; 57 FR 33438, July 
29, 1992]



Sec. 563.81  Inclusion of subordinated debt securities and mandatorily 

redeemable preferred stock as supplementary capital.

    (a) Scope. A savings association must comply with this section in 
order to include subordinated debt securities or mandatorily redeemable 
preferred stock (``covered securities'') in supplementary capital (tier 
2 capital) under part 567 of this chapter. If a savings association does 
not include covered securities in supplementary capital, it is not 
required to comply with this section.
    (b) Application and notice procedures. (1) A savings association 
must file an application or notice under 12 CFR part 516, subpart A 
seeking OTS approval of, or non-objection to, the inclusion of covered 
securities in supplementary capital. The savings association may file 
its application or notice before or after it issues covered securities, 
but may not include covered securities in

[[Page 214]]

supplementary capital until OTS approves the application or does not 
object to the notice.
    (2) A savings association must also comply with the securities 
offering rules at 12 CFR part 563g by filing an offering circular for a 
proposed issuance of covered securities, unless the offering qualifies 
for an exemption under that part.
    (c) Securities requirements. To be included in supplementary 
capital, covered securities must meet the following requirements:
    (1) Form. (i) Each certificate evidencing a covered security must:
    (A) Bear the following legend on its face, in bold type: ``This 
security is not a savings account or deposit and it is not insured by 
the United States or any agency or fund of the United States;''
    (B) State that the security is subordinated on liquidation, as to 
principal, interest, and premium, to all claims against the savings 
association that have the same priority as savings accounts or a higher 
priority;
    (C) State that the security is not secured by the savings 
association's assets or the assets of any affiliate of the savings 
association, as defined in 12 CFR 583.2;
    (D) State that the security is not eligible collateral for a loan by 
the savings association;
    (E) State the prohibition on the payment of dividends or interest at 
12 U.S.C. 1828(b) and, in the case of subordinated debt securities, 
state the prohibition on the payment of principal and interest at 12 
U.S.C. 1831o(h);
    (F) For subordinated debt securities, state or refer to a document 
stating the terms under which the savings association may prepay the 
obligation; and
    (G) State or refer to a document stating that the savings 
association must obtain OTS approval before the voluntarily prepayment 
of principal on subordinated debt securities, the acceleration of 
payment of principal on subordinated debt securities, or the voluntarily 
redemption of mandatorily redeemable preferred stock (other than 
scheduled redemptions), if the savings association is undercapitalized, 
significantly undercapitalized, or critically undercapitalized as 
described in Sec. 565.4(b) of this chapter, fails to meet the 
regulatory capital requirements at 12 CFR part 567, or would fail to 
meet any of these standards following the payment.
    (ii) A savings association must include such additional statements 
as OTS may prescribe for certificates, purchase agreements, indentures, 
and other related documents. OTS will prescribe the text of these 
additional statements in its Application Processing Handbook.
    (2) Maturity requirements. Covered securities must have an original 
weighted average maturity or original weighted average period to 
required redemption of at least five years.
    (3) Mandatory prepayment. Subordinated debt securities and related 
documents may not provide events of default or contain other provisions 
that could result in a mandatory prepayment of principal, other than 
events of default that:
    (i) Arise from the savings association's failure to make timely 
payment of interest or principal;
    (ii) Arise from its failure to comply with reasonable financial, 
operating, and maintenance covenants of a type that are customarily 
included in indentures for publicly offered debt securities; or
    (iii) Relate to bankruptcy, insolvency, receivership, or similar 
events.
    (4) Indenture. (i) Except as provided in paragraph (c)(4)(ii) of 
this section, a savings association must use an indenture for 
subordinated debt securities. If the aggregate amount of subordinated 
debt securities publicly offered (excluding sales in a non-public 
offering as defined in 12 CFR 563g.4) and sold in any consecutive 12-
month or 36-month period exceeds $5,000,000 or $10,000,000 respectively 
(or such lesser amount that the Securities and Exchange Commission shall 
establish by rule or regulation under 15 U.S.C. 77ddd), the indenture 
must provide for the appointment of a trustee other than the savings 
association or an affiliate of the savings association (as defined at 12 
CFR 583.2) and for collective enforcement of the security holders' 
rights and remedies.
    (ii) A savings association is not required to use an indenture if 
the subordinated debt securities are sold only to

[[Page 215]]

accredited investors, as that term is defined in 15 U.S.C. 77d(6). A 
savings association must have an indenture that meets the requirements 
of paragraph (c)(4)(i) of this section in place before any debt 
securities for which an exemption from the indenture requirement is 
claimed, are transferred any non-accredited investor. If a savings 
association relies on this exemption from the indenture requirement, it 
must place a legend on the debt securities indicating that an indenture 
must be in place before the debt securities are transferred to any non-
accredited investor.
    (d) OTS review. (1) OTS will review notices and applications under 
12 CFR part 516, subpart E.
    (2) In reviewing notices and applications under this section, OTS 
will consider whether:
    (i) The issuance of the covered securities is authorized under 
applicable laws and regulations and is consistent with the savings 
association's charter and bylaws.
    (ii) The savings association is at least adequately capitalized 
under Sec. 565.4(b) of this chapter and meets the regulatory capital 
requirements at part 567 of this chapter.
    (iii) The savings association is or will be able to service the 
covered securities.
    (iv) The covered securities are consistent with the requirements of 
this section.
    (v) The covered securities and related transactions sufficiently 
transfer risk from the Deposit Insurance Fund.
    (vi) OTS has no objection to the issuance based on the savings 
association's overall policies, condition, and operations.
    (3) OTS approval or non-objection is conditioned upon no material 
changes to the information disclosed in the application or notice 
submitted to OTS. OTS may impose such additional requirements or 
conditions as it may deem necessary to protect purchasers, the savings 
association, OTS, or the Deposit Insurance Fund.
    (e) Amendments. If a savings association amends the covered 
securities or related documents following the completion of OTS review, 
it must obtain OTS approval or non-objection under this section before 
it may include the amended securities in supplementary capital.
    (f) Sale of covered securities. The savings association must 
complete the sale of covered securities within one year after OTS 
approval or non-objection under this section. A savings association may 
request an extension of the offering period by filing a written request 
with OTS. The savings association must demonstrate good cause for the 
extension and file the request at least 30 days before the expiration of 
the offering period or any extension of the offering period.
    (g) Reports. A savings association must file the following 
information with OTS within 30 days after the savings association 
completes the sale of covered securities includable as supplementary 
capital. If the savings association filed its application or notice 
following the completion of the sale, it must submit this information 
with its application or notice:
    (1) A written report indicating the number of purchasers, the total 
dollar amount of securities sold, the net proceeds received by the 
savings association from the issuance, and the amount of covered 
securities, net of all expenses, to be included as supplementary 
capital;
    (2) Three copies of an executed form of the securities and a copy of 
any related documents governing the issuance or administration of the 
securities; and
    (3) A certification by the appropriate executive officer indicating 
that the savings association complied with all applicable laws and 
regulations in connection with the offering, issuance, and sale of the 
securities.

[72 FR 1927, Jan. 17, 2007, as amended at 72 FR 69438, Dec. 7, 2007]



     Subpart D_Registration of Residential Mortgage Loan Originators

    Source: 75 FR 44696, July 28, 2010, unless otherwise noted.

[[Page 216]]



Sec. 563.101  Authority, purpose, and scope.

    (a) Authority. This subpart is issued pursuant to the Secure and 
Fair Enforcement for Mortgage Licensing Act of 2008, title V of the 
Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-
289, 122 Stat. 2654, 12 U.S.C. 5101 et seq.).
    (b) Purpose. This subpart implements the S.A.F.E. Act's Federal 
registration requirement for mortgage loan originators. The S.A.F.E. Act 
provides that the objectives of this registration include aggregating 
and improving the flow of information to and between regulators; 
providing increased accountability and tracking of mortgage loan 
originators; enhancing consumer protections; supporting anti-fraud 
measures; and providing consumers with easily accessible information at 
no charge regarding the employment history of, and publicly adjudicated 
disciplinary and enforcement actions against, mortgage loan originators.
    (c) Scope--(1) In general. This subpart applies to savings 
associations, their operating subsidiaries (collectively referred to in 
this subpart as savings associations), and their employees who act as 
mortgage loan originators.
    (2) De minimis exception. (i) This subpart and the requirements of 
12 U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any 
employee of a savings association who has never been registered or 
licensed through the Registry as a mortgage loan originator if during 
the past 12 months the employee acted as a mortgage loan originator for 
5 or fewer residential mortgage loans.
    (ii) Prior to engaging in mortgage loan origination activity that 
exceeds the exception limit in paragraph (c)(2)(i) of this section, a 
savings association employee must register with the Registry pursuant to 
this subpart.
    (iii) Evasion. Savings associations are prohibited from engaging in 
any act or practice to evade the limits of the de minimis exception set 
forth in paragraph (c)(2)(i) of this section.



Sec. 563.102  Definitions.

    For purposes of this subpart D, the following definitions apply:
    (a) Annual renewal period means November 1 through December 31 of 
each year.
    (b)(1) Mortgage loan originator \1\ means an individual who:
---------------------------------------------------------------------------

    \1\ Appendix A of this subpart provides examples of activities that 
would, and would not, cause an employee to fall within this definition 
of mortgage loan originator.
---------------------------------------------------------------------------

    (i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain.
    (2) The term mortgage loan originator does not include:
    (i) An individual who performs purely administrative or clerical 
tasks on behalf of an individual who is described in paragraph (b)(1) of 
this section;
    (ii) An individual who only performs real estate brokerage 
activities (as defined in 12 U.S.C. 5102(3)(D)) and is licensed or 
registered as a real estate broker in accordance with applicable State 
law, unless the individual is compensated by a lender, a mortgage 
broker, or other mortgage loan originator or by any agent of such 
lender, mortgage broker, or other mortgage loan originator, and meets 
the definition of mortgage loan originator in paragraph (b)(1) of this 
section; or
    (iii) An individual or entity solely involved in extensions of 
credit related to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D).
    (3) Administrative or clerical tasks means the receipt, collection, 
and distribution of information common for the processing or 
underwriting of a loan in the residential mortgage industry and 
communication with a consumer to obtain information necessary for the 
processing or underwriting of a residential mortgage loan.
    (c) Nationwide Mortgage Licensing System and Registry or Registry 
means the system developed and maintained by the Conference of State 
Bank Supervisors and the American Association of Residential Mortgage 
Regulators for the State licensing and registration of State-licensed 
mortgage loan originators and the registration of mortgage loan 
originators pursuant to 12 U.S.C. 5107.
    (d) Registered mortgage loan originator or registrant means any 
individual who:

[[Page 217]]

    (1) Meets the definition of mortgage loan originator and is an 
employee of a savings association; and
    (2) Is registered pursuant to this subpart with, and maintains a 
unique identifier through, the Registry.
    (e) Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(v) of the Truth in Lending Act, 15 U.S.C. 
1602(v)) or residential real estate upon which is constructed or 
intended to be constructed a dwelling, and includes refinancings, 
reverse mortgages, home equity lines of credit and other first and 
additional lien loans that meet the qualifications listed in this 
definition.
    (f) Unique identifier means a number or other identifier that:
    (1) Permanently identifies a registered mortgage loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry, the Federal banking agencies, and the 
Farm Credit Administration to facilitate:
    (i) Electronic tracking of mortgage loan originators; and
    (ii) Uniform identification of, and public access to, the employment 
history of and the publicly adjudicated disciplinary and enforcement 
actions against mortgage loan originators; and
    (3) Must not be used for purposes other than those set forth under 
the S.A.F.E. Act.



Sec. 563.103  Registration of mortgage loan originators.

    (a) Registration requirement--(1) Employee registration. Each 
employee of a savings association who acts as a mortgage loan originator 
must register with the Registry, obtain a unique identifier, and 
maintain this registration in accordance with the requirements of this 
subpart. Any such employee who is not in compliance with the 
registration and unique identifier requirements set forth in this 
subpart is in violation of the S.A.F.E. Act and this subpart.
    (2) Savings association requirement--(i) In general. A savings 
association that employs one or more individuals who act as a 
residential mortgage loan originator must require each such employee to 
register with the Registry, maintain this registration, and obtain a 
unique identifier in accordance with the requirements of this subpart.
    (ii) Prohibition. A savings association must not permit an employee 
of the association who is subject to the registration requirements of 
this subpart to act as a mortgage loan originator for the association 
unless such employee is registered with the Registry pursuant to this 
subpart.
    (3) Implementation period for initial registration. An employee of a 
savings association who is a mortgage loan originator must complete an 
initial registration with the Registry pursuant to this subpart within 
180 days from the date that the OTS provides in a public notice that the 
Registry is accepting registrations.
    (4) Employees previously registered or licensed through the 
Registry--(i) In general. If an employee of a savings association was 
registered or licensed through, and obtained a unique identifier from, 
the Registry and has maintained this registration or license before the 
employee of the association becomes subject to this subpart at this 
association, then the registration requirements of the S.A.F.E. Act and 
this subpart are deemed to be met, provided that:
    (A) The employment information in paragraphs (d)(1)(i)(C) and 
(d)(1)(ii) of this section is updated and the requirements of paragraph 
(d)(2) of this section are met;
    (B) New fingerprints of the employee are submitted to the Registry 
for a background check, as required by paragraph (d)(1)(ix) of this 
section, unless the employee has fingerprints on file with the Registry 
that are less than 3 years old;
    (C) The savings association information required in paragraphs 
(e)(1)(i) (to the extent the association has not previously met these 
requirements) and (e)(2)(i) of this section is submitted to the 
Registry; and
    (D) The registration is maintained pursuant to paragraphs (b) and 
(e)(1)(ii) of this section, as of the date that the employee becomes 
subject to this subpart.

[[Page 218]]

    (ii) Rule for certain acquisitions, mergers, or reorganizations. 
When registered or licensed mortgage loan originators become savings 
association employees as a result of an acquisition, merger, or 
reorganization, only the requirements of paragraphs (a)(4)(i)(A), (C), 
and (D) of this section must be met, and these requirements must be met 
within 60 days from the effective date of the acquisition, merger, or 
reorganization.
    (b) Maintaining registration. (1) A mortgage loan originator who is 
registered with the Registry pursuant to paragraph (a) of this section 
must:
    (i) Except as provided in paragraph (b)(3) of this section, renew 
the registration during the annual renewal period, confirming the 
responses set forth in paragraphs (d)(1)(i) through (viii) of this 
section remain accurate and complete, and updating this information, as 
appropriate; and
    (ii) Update the registration within 30 days of any of the following 
events:
    (A) A change in the name of the registrant;
    (B) The registrant ceases to be an employee of the savings 
association; or
    (C) The information required under paragraphs (d)(1)(iii) through 
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
    (2) A registered mortgage loan originator must maintain his or her 
registration, unless the individual is no longer engaged in the activity 
of a mortgage loan originator.
    (3) The annual registration renewal requirement set forth in 
paragraph (b)(1) of this section does not apply to a registered mortgage 
loan originator who has completed his or her registration with the 
Registry pursuant to paragraph (a)(1) of this section less than 6 months 
prior to the end of the annual renewal period.
    (c) Effective dates--(1) Registration. A registration pursuant to 
paragraph (a)(1) of this section is effective on the date the Registry 
transmits notification to the registrant that the registrant is 
registered.
    (2) Renewals or updates. A renewal or update pursuant to paragraph 
(b) of this section is effective on the date the Registry transmits 
notification to the registrant that the registration has been renewed or 
updated.
    (d) Required employee information--(1) In general. For purposes of 
the registration required by this section, a savings association must 
require each employee who is a mortgage loan originator to submit to the 
Registry, or must submit on behalf of the employee, the following 
categories of information, to the extent this information is collected 
by the Registry:
    (i) Identifying information, including the employee's:
    (A) Name and any other names used;
    (B) Home address and contact information;
    (C) Principal business location address and business contact 
information;
    (D) Social security number;
    (E) Gender; and
    (F) Date and place of birth;
    (ii) Financial services-related employment history for the 10 years 
prior to the date of registration or renewal, including the date the 
employee became an employee of the savings association;
    (iii) Convictions of any criminal offense involving dishonesty, 
breach of trust, or money laundering against the employee or 
organizations controlled by the employee, or agreements to enter into a 
pretrial diversion or similar program in connection with the prosecution 
for such offense(s);
    (iv) Civil judicial actions against the employee in connection with 
financial services-related activities, dismissals with settlements, or 
judicial findings that the employee violated financial services-related 
statutes or regulations, except for actions dismissed without a 
settlement agreement;
    (v) Actions or orders by a State or Federal regulatory agency or 
foreign financial regulatory authority that:
    (A) Found the employee to have made a false statement or omission or 
been dishonest, unfair or unethical; to have been involved in a 
violation of a financial services-related regulation or statute; or to 
have been a cause of a financial services-related business having its 
authorization to do business denied, suspended, revoked, or restricted;
    (B) Are entered against the employee in connection with a financial 
services-related activity;

[[Page 219]]

    (C) Denied, suspended, or revoked the employee's registration or 
license to engage in a financial services-related activity; disciplined 
the employee or otherwise by order prevented the employee from 
associating with a financial services-related business or restricted the 
employee's activities; or
    (D) Barred the employee from association with an entity or its 
officers regulated by the agency or authority or from engaging in a 
financial services-related business;
    (vi) Final orders issued by a State or Federal regulatory agency or 
foreign financial regulatory authority based on violations of any law or 
regulation that prohibits fraudulent, manipulative, or deceptive 
conduct;
    (vii) Revocation or suspension of the employee's authorization to 
act as an attorney, accountant, or State or Federal contractor;
    (viii) Customer-initiated financial services-related arbitration or 
civil action against the employee that required action, including 
settlements, or which resulted in a judgment; and
    (ix) Fingerprints of the employee, in digital form if practicable, 
and any appropriate identifying information for submission to the 
Federal Bureau of Investigation and any governmental agency or entity 
authorized to receive such information in connection with a State and 
national criminal history background check; however, fingerprints 
provided to the Registry that are less than 3 years old may be used to 
satisfy this requirement.
    (2) Employee authorizations and attestation. An employee registering 
as a mortgage loan originator or renewing or updating his or her 
registration under this subpart, and not the employing savings 
association or other employees of the savings association, must:
    (i) Authorize the Registry and the employing institution to obtain 
information related to sanctions or findings in any administrative, 
civil, or criminal action, to which the employee is a party, made by any 
governmental jurisdiction;
    (ii) Attest to the correctness of all information required by 
paragraph (d) of this section, whether submitted by the employee or on 
behalf of the employee by the employing savings association; and
    (iii) Authorize the Registry to make available to the public 
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii) 
through (viii) of this section.
    (3) Submission of information. A savings association may identify 
one or more employees of the association who may submit the information 
required by paragraph (d)(1) of this section to the Registry on behalf 
of the association's employees provided that this individual, and any 
employee delegated such authority, does not act as a mortgage loan 
originator, consistent with paragraph (e)(1)(i)(F) of this section. In 
addition, a savings association may submit to the Registry some or all 
of the information required by paragraphs (d)(1) and (e)(2) of this 
section for multiple employees in bulk through batch processing in a 
format to be specified by the Registry, to the extent such batch 
processing is made available by the Registry.
    (e) Required savings association information. A savings association 
must submit the following categories of information to the Registry:
    (1) Savings association record. (i) In connection with the 
registration of one or more mortgage loan originators:
    (A) Name, main office address, and business contact information;
    (B) Internal Revenue Service Employer Tax Identification Number 
(EIN);
    (C) Research Statistics Supervision and Discount (RSSD) number, as 
issued by the Board of Governors of the Federal Reserve System;
    (D) Identification of its primary Federal regulator;
    (E) Name(s) and contact information of the individual(s) with 
authority to act as the savings association's primary point of contact 
for the Registry;
    (F) Name(s) and contact information of the individual(s) with 
authority to enter the information required by paragraphs (d)(1) and (e) 
of this section to the Registry and who may delegate this authority to 
other individuals. For the purpose of providing information required by 
paragraph (e) of this section, this individual and their delegates must 
not act as mortgage loan

[[Page 220]]

originators unless the savings association has 10 or fewer full time or 
equivalent employees and is not a subsidiary; and
    (G) If a subsidiary of a savings association, indication that it is 
a subsidiary and the RSSD number of the parent association.
    (ii) Attestation. The individual(s) identified in paragraphs 
(e)(1)(i)(E) and (F) of this section must comply with Registry protocols 
to verify their identity and must attest that they have the authority to 
enter data on behalf of the savings association, that the information 
provided to the Registry pursuant to this paragraph (e) is correct, and 
that the savings association will keep the information required by this 
paragraph (e) current and will file accurate supplementary information 
on a timely basis.
    (iii) A savings association must update the information required by 
this paragraph (e) of this section within 30 days of the date that this 
information becomes inaccurate.
    (iv) A savings association must renew the information required by 
paragraph (e) of this section on an annual basis.
    (2) Employee information. In connection with the registration of 
each employee who acts as a mortgage loan originator:
    (i) After the information required by paragraph (d) of this section 
has been submitted to the Registry, confirmation that it employs the 
registrant; and
    (ii) Within 30 days of the date the registrant ceases to be an 
employee of the savings association, notification that it no longer 
employs the registrant and the date the registrant ceased being an 
employee.



Sec. 563.104  Policies and procedures.

    A savings association that employs one or more mortgage loan 
originators must adopt and follow written policies and procedures 
designed to assure compliance with this subpart. These policies and 
procedures must be appropriate to the nature, size, complexity, and 
scope of the mortgage lending activities of the savings association, and 
apply only to those employees acting within the scope of their 
employment at the association. At a minimum, these policies and 
procedures must:
    (a) Establish a process for identifying which employees of the 
savings association are required to be registered mortgage loan 
originators;
    (b) Require that all employees of the savings association who are 
mortgage loan originators be informed of the registration requirements 
of the S.A.F.E. Act and this subpart and be instructed on how to comply 
with such requirements and procedures;
    (c) Establish procedures to comply with the unique identifier 
requirements in Sec. 563.105;
    (d) Establish reasonable procedures for confirming the adequacy and 
accuracy of employee registrations, including updates and renewals, by 
comparisons with its own records;
    (e) Establish reasonable procedures and tracking systems for 
monitoring compliance with registration and renewal requirements and 
procedures;
    (f) Provide for independent testing for compliance with this subpart 
to be conducted at least annually by savings association personnel or by 
an outside party;
    (g) Provide for appropriate action in the case of any employee who 
fails to comply with the registration requirements of the S.A.F.E. Act, 
this subpart, or the savings association's related policies and 
procedures, including prohibiting such employees from acting as mortgage 
loan originators or other appropriate disciplinary actions;
    (h) Establish a process for reviewing employee criminal history 
background reports received pursuant to this subpart, taking appropriate 
action consistent with applicable Federal law, including section 19 of 
the Federal Deposit Insurance Act (12 U.S.C. 1829) and implementing 
regulations with respect to these reports, and maintaining records of 
these reports and actions taken with respect to applicable employees; 
and
    (i) Establish procedures designed to ensure that any third party 
with which the savings association has arrangements related to mortgage 
loan origination has policies and procedures to

[[Page 221]]

comply with the S.A.F.E. Act, including appropriate licensing and/or 
registration of individuals acting as mortgage loan originators.



Sec. 563.105  Use of unique identifier.

    (a) The savings association shall make the unique identifier(s) of 
its registered mortgage loan originator(s) available to consumers in a 
manner and method practicable to the institution.
    (b) A registered mortgage loan originator shall provide his or her 
unique identifier to a consumer:
    (1) Upon request;
    (2) Before acting as a mortgage loan originator; and
    (3) Through the originator's initial written communication with a 
consumer, if any, whether on paper or electronically.



  Sec. Appendix A to Subpart D of Part 563--Examples of Mortgage Loan 

                          Originator Activities

    This Appendix provides examples to aid in the understanding of 
activities that would cause an employee of a savings association to fall 
within or outside the definition of mortgage loan originator. The 
examples in this Appendix are not all inclusive. They illustrate only 
the issue described and do not illustrate any other issues that may 
arise under this subpart. For purposes of the examples below, the term 
``loan'' refers to a residential mortgage loan.
    (a) Taking a loan application. The following examples illustrate 
when an employee takes, or does not take, a loan application.
    (1) Taking an application includes: receiving information provided 
in connection with a request for a loan to be used to determine whether 
the consumer qualifies for a loan, even if the employee:
    (i) Has received the consumer's information indirectly in order to 
make an offer or negotiate a loan;
    (ii) Is not responsible for verifying information;
    (iii) Is inputting information into an online application or other 
automated system on behalf of the consumer; or
    (iv) Is not engaged in approval of the loan, including determining 
whether the consumer qualifies for the loan.
    (2) Taking an application does not include any of the following 
activities performed solely or in combination:
    (i) Contacting a consumer to verify the information in the loan 
application by obtaining documentation, such as tax returns or payroll 
receipts;
    (ii) Receiving a loan application through the mail and forwarding 
it, without review, to loan approval personnel;
    (iii) Assisting a consumer who is filling out an application by 
clarifying what type of information is necessary for the application or 
otherwise explaining the qualifications or criteria necessary to obtain 
a loan product;
    (iv) Describing the steps that a consumer would need to take to 
provide information to be used to determine whether the consumer 
qualifies for a loan or otherwise explaining the loan application 
process;
    (v) In response to an inquiry regarding a prequalified offer that a 
consumer has received from a savings association, collecting only basic 
identifying information about the consumer and forwarding the consumer 
to a mortgage loan originator; or
    (vi) Receiving information in connection with a modification to the 
terms of an existing loan to a borrower as part of the savings 
association's loss mitigation efforts when the borrower is reasonably 
likely to default.
    (b) Offering or negotiating terms of a loan. The following examples 
are designed to illustrate when an employee offers or negotiates terms 
of a loan, and conversely, what does not constitute offering or 
negotiating terms of a loan.
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting a loan offer to a consumer for acceptance, either 
verbally or in writing, including, but not limited to, providing a 
disclosure of the loan terms after application under the Truth in 
Lending Act, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process; or
    (D) Only the rate approved by the savings association's loan 
approval mechanism function for a specific loan product is communicated 
without authority to negotiate the rate.
    (ii) Responding to a consumer's request for a lower rate or lower 
points on a pending loan application by presenting to the consumer a 
revised loan offer, either verbally or in writing, that includes a lower 
interest rate or lower points than the original offer.
    (2) Offering or negotiating terms of a loan does not include solely 
or in combination:
    (i) Providing general explanations or descriptions in response to 
consumer queries regarding qualification for a specific loan product, 
such as explaining loan terminology (i.e., debt-to-income ratio); 
lending policies (i.e., the loan-to-value ratio policy of the savings 
association); or product-related services;
    (ii) In response to a consumer's request, informing a consumer of 
the loan rates that are publicly available, such as on the savings 
association's Web site, for specific types of

[[Page 222]]

loan products without communicating to the consumer whether 
qualifications are met for that loan product;
    (iii) Collecting information about a consumer in order to provide 
the consumer with information on loan products for which the consumer 
generally may qualify, without presenting a specific loan offer to the 
consumer for acceptance, either verbally or in writing;
    (iv) Arranging the loan closing or other aspects of the loan 
process, including communicating with a consumer about those 
arrangements, provided that communication with the consumer only 
verifies loan terms already offered or negotiated;
    (v) Providing a consumer with information unrelated to loan terms, 
such as the best days of the month for scheduling loan closings at the 
savings association;
    (vi) Making an underwriting decision about whether the consumer 
qualifies for a loan;
    (vii) Explaining or describing the steps or process that a consumer 
would need to take in order to obtain a loan offer, including 
qualifications or criteria that would need to be met without providing 
guidance specific to that consumer's circumstances; or
    (viii) Communicating on behalf of a mortgage loan originator that a 
written offer, including disclosures provided pursuant to the Truth in 
Lending Act, has been sent to a consumer without providing any details 
of that offer.
    (c) Offering or negotiating a loan for compensation or gain. The 
following examples illustrate when an employee does or does not offer or 
negotiate terms of a loan ``for compensation or gain.''
    (1) Offering or negotiating terms of a loan for compensation or gain 
includes engaging in any of the activities in paragraph (b)(1) of this 
Appendix in the course of carrying out employment duties, even if the 
employee does not receive a referral fee or commission or other special 
compensation for the loan.
    (2) Offering or negotiating terms of a loan for compensation or gain 
does not include engaging in a seller-financed transaction for the 
employee's personal property that does not involve the savings 
association.



                     Subpart E_Capital Distributions

    Source: 64 FR 2809, Jan. 19, 1999, unless otherwise noted.



Sec. 563.140  What does this subpart cover?

    This subpart applies to all capital distributions by a savings 
association (``you'').



Sec. 563.141  What is a capital distribution?

    A capital distribution is:
    (a) A distribution of cash or other property to your owners made on 
account of their ownership, but excludes:
    (1) Any dividend consisting only of your shares or rights to 
purchase your shares; or
    (2) If you are a mutual savings association, any payment that you 
are required to make under the terms of a deposit instrument and any 
other amount paid on deposits that the OTS determines is not a 
distribution for the purposes of this section;
    (b) Your payment to repurchase, redeem, retire or otherwise acquire 
any of your shares or other ownership interests, any payment to 
repurchase, redeem, retire, or otherwise acquire debt instruments 
included in your total capital under part 567 of this chapter, and any 
extension of credit to finance an affiliate's acquisition of your shares 
or interests;
    (c) Any direct or indirect payment of cash or other property to 
owners or affiliates made in connection with a corporate restructuring. 
This includes your payment of cash or property to shareholders of 
another association or to shareholders of its holding company to acquire 
ownership in that association, other than by a distribution of shares;
    (d) Any other distribution charged against your capital accounts if 
you would not be well capitalized, as set forth in Sec. 565.4(b)(1) of 
this chapter, following the distribution; and
    (e) Any transaction that the OTS or the Corporation determines, by 
order or regulation, to be in substance a distribution of capital.

[64 FR 2809, Jan. 19, 1999, as amended at 72 FR 69438, Dec. 7, 2007]



Sec. 563.142  What other definitions apply to this subpart?

    The following definitions apply to this subpart:
    Affiliate means an affiliate, as defined under Sec. 563.41(b) of 
this part.
    Capital means total capital, as computed under part 567 of this 
chapter.
    Net income means your net income computed in accordance with 
generally accepted accounting principles.

[[Page 223]]

    Retained net income means your net income for a specified period 
less total capital distributions declared in that period.
    Shares means common and preferred stock, and any options, warrants, 
or other rights for the acquisition of such stock. The term ``share'' 
also includes convertible securities upon their conversion into common 
or preferred stock. The term does not include convertible debt 
securities prior to their conversion into common or preferred stock or 
other securities that are not equity securities at the time of a capital 
distribution.

[64 FR 2809, Jan. 19, 1999, as amended at 72 FR 69438, Dec. 7, 2007]



Sec. 563.143  Must I file with OTS?

    Whether and what you must file with the OTS depends on whether you 
and your proposed capital distribution fall within certain criteria.
    (a) Application required.

------------------------------------------------------------------------
             If:                               Then you:
------------------------------------------------------------------------
(1) You are not eligible for   Must file an application with the OTS.
 expedited treatment under
 Sec.  516.5 of this chapter.
------------------------------------------------------------------------
(2) The total amount of all    Must file an application with the OTS.
 of your capital
 distributions (including the
 proposed capital
 distribution) for the
 applicable calendar year
 exceeds your net income for
 that year to date plus your
 retained net income for the
 preceding two years.
------------------------------------------------------------------------
(3) You would not be at least  Must file an application with the OTS.
 adequately capitalized, as
 set forth in Sec.
 565.4(b)(2) of this chapter,
 following the distribution.
------------------------------------------------------------------------
(4) Your proposed capital      Must file an application with the OTS.
 distribution would violate a
 prohibition contained in any
 applicable statute,
 regulation, or agreement
 between you and the OTS (or
 the Corporation), or violate
 a condition imposed on you
 in an OTS-approved
 application or notice.
------------------------------------------------------------------------

    (b) Notice required.

------------------------------------------------------------------------
  If you are not required to
  file an application under
    paragraph (a) of this                      Then you:
        section, but:
------------------------------------------------------------------------
(1) You would not be well      Must file a notice with the OTS.
 capitalized, as set forth
 under Sec.  565.4(b)(1),
 following the distribution.
------------------------------------------------------------------------
(2) Your proposed capital      Must file a notice with the OTS.
 distribution would reduce
 the amount of or retire any
 part of your common or
 preferred stock or retire
 any part of debt instruments
 such as notes or debentures
 included in capital under
 part 567 of this chapter
 (other than regular payments
 required under a debt
 instrument approved under
 Sec.  563.81).
------------------------------------------------------------------------
(3) You are a subsidiary of a  Must file a notice with the OTS.
 savings and loan holding
 company.
------------------------------------------------------------------------

    (c) No prior notice required.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
If neither you nor your        Then you do not need to file a notice or
 proposed capital               an application with the OTS before
 distribution meet any of the   making a capital distribution.
 criteria listed in
 paragraphs (a) and (b) of
 this section.
------------------------------------------------------------------------


[64 FR 2809, Jan. 19, 1999, as amended at 66 FR 13008, Mar. 2, 2001]



Sec. 563.144  How do I file with the OTS?

    (a) Contents. Your notice or application must:
    (1) Be in narrative form.
    (2) Include all relevant information concerning the proposed capital 
distribution, including the amount, timing, and type of distribution.
    (3) Demonstrate compliance with Sec. 563.146.
    (b) Schedules. Your notice or application may include a schedule 
proposing

[[Page 224]]

capital distributions over a specified period, not to exceed 12 months.
    (c) Timing. You must file your notice or application at least 30 
days before the proposed declaration of dividend or approval of the 
proposed capital distribution by your board of directors.



Sec. 563.145  May I combine my notice or application with other notices or 

applications?

    You may combine the notice or application required under Sec. 
563.143 with any other notice or application, if the capital 
distribution is a part of, or is proposed in connection with, another 
transaction requiring a notice or application under this chapter. If you 
submit a combined filing, you must:
    (a) State that the related notice or application is intended to 
serve as a notice or application under this subpart; and
    (b) Submit the notice or application in a timely manner.



Sec. 563.146  Will the OTS permit my capital distribution?

    The OTS will review your notice or application under the review 
procedures in 12 CFR part 516, subpart E. The OTS may disapprove your 
notice or deny your application filed under Sec. 563.143, in whole or 
in part, if the OTS makes any of the following determinations.
    (a) You will be undercapitalized, significantly undercapitalized, or 
critically undercapitalized as set forth in Sec. 565.4(b) of this 
chapter, following the capital distribution. If so, the OTS will 
determine if your capital distribution is permitted under 12 U.S.C. 
1831o(d)(1)(B).
    (b) Your proposed capital distribution raises safety or soundness 
concerns.
    (c) Your proposed capital distribution violates a prohibition 
contained in any statute, regulation, agreement between you and the OTS 
(or the Corporation), or a condition imposed on you in an OTS-approved 
application or notice. If so, the OTS will determine whether it may 
permit your capital distribution notwithstanding the prohibition or 
condition.

[64 FR 2809, Jan. 19, 1999, as amended at 67 FR 78152, Dec. 23, 2002]



                 Subpart F_Financial Management Policies



Sec. 563.161  Management and financial policies.

    (a)(1) For the protection of depositors and other savings 
associations, each savings association and each service corporation must 
be well managed and operate safely and soundly. Each also must pursue 
financial policies that are safe and consistent with economical home 
financing and the purposes of savings associations. In implementing this 
section, OTS will consider that service corporations may be authorized 
to engage in activities that involve a higher degree of risk than 
activities permitted to savings associations.
    (2) As part of meeting its requirements under paragraph (a)(1) of 
this section, each savings association and service corporation must 
maintain sufficient liquidity to ensure its safe and sound operation.
    (b) Compensation to officers, directors, and employees of each 
savings association and its service corporations shall not be in excess 
of that which is reasonable and commensurate with their duties and 
responsibilities. Former officers, directors, and employees of savings 
association or its service corporation who regularly perform services 
therefor under consulting contracts are employees thereof for purposes 
of this paragraph (b).

[54 FR 49552, Nov. 30, 1989, as amended at 66 FR 15017, Mar. 15, 2001]



Sec. 563.170  Examinations and audits; appraisals; establishment and 

maintenance of records.

    (a) Examinations and audits. Each savings association and affiliate 
thereof shall be examined periodically, and may be examined at any time, 
by the Office, with appraisals when deemed advisable, in accordance with 
general policies from time to time established by the Office. The costs, 
as computed by the Office, of any examinations made by it, including 
office analysis, overhead, per diem, travel expense, other supervision 
by the Office, and other indirect costs, shall be paid by the savings 
associations examined, except that in the case of service corporations 
of Federal savings associations

[[Page 225]]

the cost of examinations, as determined by the Office, shall be paid by 
the service corporations. Payments shall be made in accordance with a 
schedule of annual assessments based upon each savings association's 
total assets and of rates for examiner time in amounts determined by the 
Office.
    (b) Appraisals. (1) Unless otherwise ordered by the Office, 
appraisal of real estate by the Office in connection with any 
examination or audit of a savings association, affiliate, or service 
corporation shall be made by an appraiser, or by appraisers, selected by 
the Office's Regional Director of the Region in which such savings 
association is located. The cost of such appraisal shall promptly be 
paid by such savings association, affiliate, or service corporation 
direct to such appraiser or appraisers upon receipt by the savings 
association, affiliate, or service corporation of a statement of such 
cost as approved by such Regional Director. A copy of the report of each 
appraisal made by the Office pursuant to any of the foregoing provisions 
of this section shall be furnished to the savings association, 
affiliate, or service corporation, as appropriate within a reasonable 
time, not to exceed 90 days, following the completion of such appraisals 
and the filing of a report thereof by the appraiser, or appraisers, with 
such Regional Director.
    (2) The Office may obtain at any time, at its expense, such 
appraisals of any of the assets, including the security therefor, of a 
savings association, affiliate, or service corporation as the Office 
deems appropriate.
    (c) Establishment and maintenance of records. To enable the Office 
to examine savings associations and affiliates and audit savings 
associations, affiliates, and service corporations pursuant to the 
provisions of paragraph (a) of this section, each savings association, 
affiliate, and service corporation shall establish and maintain such 
accounting and other records as will provide an accurate and complete 
record of all business it transacts. This includes, without limitation, 
establishing and maintaining such other records as are required by 
statute or any other regulation to which the savings association, 
affiliate, or service corporation is subject. The documents, files, and 
other material or property comprising said records shall at all times be 
available for such examination and audit wherever any of said records, 
documents, files, material, or property may be.
    (d) Change in location of records. A savings association shall not 
transfer the location of any of its general accounting or control 
records, or the maintenance thereof, from its home office to a branch or 
service office, or from a branch or service office to its home office or 
to another branch or service office unless prior to the date of transfer 
its board of directors has:
    (1) By resolution authorized the transfer or maintenance and;
    (2) Sent a certified copy of the resolution to the Regional Director 
of the OTS Region in which the principal office of the savings 
association is located.
    (e) Use of data processing services for maintenance of records. A 
savings association which determines to maintain any of its records by 
means of data processing services shall so notify the Regional Director 
of the Region in which the principal office of such savings association 
is located, in writing, at least 90 days prior to the date on which such 
maintenance of records will begin. Such notification shall include 
identification of the records to be maintained by data processing 
services and a statement as to the location at which such records will 
be maintained. Any contract, agreement, or arrangement made by a savings 
association pursuant to which data processing services are to be 
performed for such savings association shall be in writing and shall 
expressly provide that the records to be maintained by such services 
shall at all times be available for examination and audit.

[54 FR 49552, Nov. 30, 1989, as amended at 55 FR 34547, Aug. 23, 1990; 
57 FR 14335, Apr. 20, 1992; 57 FR 40092, Sept. 2, 1992; 58 FR 28348, May 
13, 1993; 59 FR 29502, June 7, 1994; 59 FR 53571, Oct. 25, 1994; 59 FR 
60304, Nov. 23, 1994; 60 FR 66718, Dec. 26, 1995; 61 FR 50984, Sept. 30, 
1996]

[[Page 226]]



Sec. 563.171  Frequency of safety and soundness examination.

    (a) General. The OTS examines savings associations pursuant to 
authority conferred by 12 U.S.C. 1463 and the requirements of 12 U.S.C. 
1820(d). The OTS is required to conduct a full-scope, on-site 
examination of every savings association at least once during each 12-
month period.
    (b) 18-month rule for certain small institutions. The OTS may 
conduct a full-scope, on-site examination of a savings association at 
least once during each 18-month period, rather than each 12-month period 
as provided in paragraph (a) of this section, if the following 
conditions are satisfied:
    (1) The savings association has total assets of less than $500 
million;
    (2) The savings association is well capitalized as defined in Sec. 
565.4 of this chapter;
    (3) At its most recent examination, the OTS--
    (i) Assigned the savings association a rating of 1 or 2 for 
management as part of the savings association's composite rating under 
the Uniform Financial Institutions Rating System (commonly referred to 
as CAMELS), and
    (ii) Determined that the savings association was in outstanding or 
good condition, that is, it received a composite rating, as defined in 
Sec. 516.5(c) of this chapter, of 1 or 2;
    (4) The savings association currently is not subject to a formal 
enforcement proceeding or order by the OTS or the FDIC; and
    (5) No person acquired control of the savings association during the 
preceding 12-month period in which a full-scope, on-site examination 
would have been required but for this section.
    (c) Authority to conduct more frequent examinations. This section 
does not limit the authority of the OTS to examine any savings 
association as frequently as the agency deems necessary.

[63 FR 16381, Apr. 2, 1998, as amended at 64 FR 69185, Dec. 10, 1999; 66 
FR 13008, Mar. 2, 2001; 72 FR 17803, Apr. 10, 2007]



Sec. 563.172  Financial derivatives.

    (a) What is a financial derivative? A financial derivative is a 
financial contract whose value depends on the value of one or more 
underlying assets, indices, or reference rates. The most common types of 
financial derivatives are futures, forward commitments, options, and 
swaps. A mortgage derivative security, such as a collateralized mortgage 
obligation or a real estate mortgage investment conduit, is not a 
financial derivative under this section.
    (b) May I engage in transactions involving financial derivatives? 
(1) If you are a Federal savings association, you may engage in a 
transaction involving a financial derivative if you are authorized to 
invest in the assets underlying the financial derivative, the 
transaction is safe and sound, and you otherwise meet the requirements 
in this section.
    (2) If you are a state-chartered savings association, you may engage 
in a transaction involving a financial derivative if your charter or 
applicable State law authorizes you to engage in such transactions, the 
transaction is safe and sound, and you otherwise meet the requirements 
in this section.
    (3) In general, if you engage in a transaction involving a financial 
derivative, you should do so to reduce your risk exposure.
    (c) What are my board of directors' responsibilities with respect to 
financial derivatives? (1) Your board of directors is responsible for 
effective oversight of financial derivatives activities.
    (2) Before you may engage in any transaction involving a financial 
derivative, your board of directors must establish written policies and 
procedures governing authorized financial derivatives. Your board of 
directors should review Thrift Bulletin 13a, ``Management of Interest 
Rate Risk, Investment Securities, and Derivatives Activities,'' and 
other applicable agency guidance on establishing a sound risk management 
program.
    (3) Your board of directors must periodically review:
    (i) Compliance with the policies and procedures established under 
paragraph (c)(2) of this section; and
    (ii) The adequacy of these policies and procedures to ensure that 
they continue to be appropriate to the nature and scope of your 
operations and existing market conditions.
    (4) Your board of directors must ensure that management establishes 
an adequate system of internal controls

[[Page 227]]

for transactions involving financial derivatives.
    (d) What are management's responsibilities with respect to financial 
derivatives? (1) Management is responsible for daily oversight and 
management of financial derivatives activities. Management must 
implement the policies and procedures established by the board of 
directors and must establish a system of internal controls. This system 
of internal controls should, at a minimum, provide for periodic 
reporting to the board of directors and management, segregation of 
duties, and internal review procedures.
    (2) Management must ensure that financial derivatives activities are 
conducted in a safe and sound manner and should review Thrift Bulletin 
13a, ``Management of Interest Rate Risk, Investment Securities, and 
Derivatives Activities'' (available at the address listed at Sec. 516.1 
of this chapter), and other applicable agency guidance on implementing a 
sound risk management program.
    (e) What records must I keep on financial derivative transactions? 
You must maintain records adequate to demonstrate compliance with this 
section and with your board of directors' policies and procedures on 
financial derivatives.

[63 FR 66349, Dec. 1, 1998]



Sec. 563.176  Interest-rate-risk-management procedures.

    Savings associations shall take the following actions:
    (a) The board of directors or a committee thereof shall review the 
savings association's interest-rate-risk exposure and devise a policy 
for the savings association's management of that risk.
    (b) The board of directors shall formerly adopt a policy for the 
management of interest-rate risk. The management of the savings 
association shall establish guidelines and procedures to ensure that the 
board's policy is successfully implemented.
    (c) The management of the savings association shall periodically 
report to the board of directors regarding implementation of the savings 
association's policy for interest-rate-risk management and shall make 
that information available upon request to the Office.
    (d) The savings association's board of directors shall review the 
results of operations at least quarterly and shall make such adjustments 
as it considers necessary and appropriate to the policy for interest-
rate-risk management, including adjustments to the authorized acceptable 
level of interest-rate risk.

[54 FR 49552, Nov. 30, 1989, as amended at 58 FR 45813, Aug. 31, 1993; 
59 FR 53571, Oct. 25, 1994]



Sec. 563.177  Procedures for monitoring Bank Secrecy Act (BSA) compliance.

    (a) Purpose. The purpose of this regulation is to require savings 
associations (as defined by Sec. 561.43 of this chapter) to establish 
and maintain procedures reasonably designed to assure and monitor 
compliance with the requirements of subchapter II of chapter 53 of title 
31, United States Code, and the implementing regulations promulgated 
thereunder by the U.S. Department of Treasury, 31 CFR part 103.
    (b) Establishment of a BSA compliance program--(1) Program 
requirement. Each savings association shall develop and provide for the 
continued administration of a program reasonably designed to assure and 
monitor compliance with the recordkeeping and reporting requirements set 
forth in subchapter II of chapter 53 of title 31, United States Code and 
the implementing regulations issued by the Department of the Treasury at 
31 CFR part 103. The compliance program must be written, approved by the 
savings association's board of directors, and reflected in the minutes 
of the savings association.
    (2) Customer identification program. Each savings association is 
subject to the requirements of 31 U.S.C. 5318(l) and the implementing 
regulation jointly promulgated by the OTS and the Department of the 
Treasury at 31 CFR 103.121, which require a customer identification 
program to be implemented as part of the BSA compliance program required 
under this section.
    (c) Contents of compliance program. The compliance program shall, at 
a minimum:
    (1) Provide for a system of internal controls to assure ongoing 
compliance;
    (2) Provide for independent testing for compliance to be conducted 
by a

[[Page 228]]

savings association's in-house personnel or by an outside party;
    (3) Designate individual(s) responsible for coordinating and 
monitoring day-to-day compliance; and
    (4) Provide training for appropriate personnel.

(Approved by the Office of Management and Budget under control number 
3068-0530)

[54 FR 49552, Nov. 30, 1989, as amended at 68 FR 25112, May 9, 2003]



                     Subpart G_Reporting and Bonding



Sec. 563.180  Suspicious Activity Reports and other reports and statements.

    (a) Periodic reports. Each savings association and service 
corporation thereof shall make such periodic or other reports of its 
affairs in such manner and on such forms as the Office may prescribe. 
The Office may provide that reports filed by savings associations or 
service corporations to meet the requirements of other regulations also 
satisfy requirements imposed under this section.
    (b) False or misleading statements or omissions. No savings 
association or director, officer, agent, employee, affiliated person, or 
other person participating in the conduct of the affairs of such 
association nor any person filing or seeking approval of any application 
shall knowingly:
    (1) Make any written or oral statement to the Office or to an agent, 
representative or employee of the Office that is false or misleading 
with respect to any material fact or omits to state a material fact 
concerning any matter within the jurisdiction of the Office; or
    (2) Make any such statement or omission to a person or organization 
auditing a savings association or otherwise preparing or reviewing its 
financial statements concerning the accounts, assets, management 
condition, ownership, safety, or soundness, or other affairs of the 
association.
    (c) Notifications of loss and reports of increase in deductible 
amount of bond. A savings association maintaining bond coverage as 
required by Sec. 563.190 of this part shall promptly notify its bond 
company and file a proof of loss under the procedures provided by its 
bond, concerning any covered losses greater than twice the deductible 
amount.
    (d) Suspicious Activity Reports--(1) Purpose and scope. This 
paragraph (d) ensures that savings associations and service corporations 
file a Suspicious Activity Report when they detect a known or suspected 
violation of Federal law or a suspicious transaction related to a money 
laundering activity or a violation of the Bank Secrecy Act.
    (2) Definitions. For the purposes of this paragraph (d):
    (i) FinCEN means the Financial Crimes Enforcement Network of the 
Department of the Treasury.
    (ii) Institution-affiliated party means any institution-affiliated 
party as that term is defined in sections 3(u) and 8(b)(9) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(9)).
    (iii) SAR means a Suspicious Activity Report.
    (3) SARs required. A savings association or service corporation 
shall file a SAR with the appropriate Federal law enforcement agencies 
and the Department of the Treasury on the form prescribed by the OTS and 
in accordance with the form's instructions, by sending a completed SAR 
to FinCEN in the following circumstances:
    (i) Insider abuse involving any amount. Whenever the savings 
association or service corporation detects any known or suspected 
Federal criminal violation, or pattern of criminal violations, committed 
or attempted against the savings association or service corporation or 
involving a transaction or transactions conducted through the savings 
association or service corporation, where the savings association or 
service corporation believes that it was either an actual or potential 
victim of a criminal violation, or series of criminal violations, or 
that it was used to facilitate a criminal transaction, and it has a 
substantial basis for identifying one of its directors, officers, 
employees, agents or other institution-affiliated parties as having 
committed or aided in the commission of a criminal act, regardless of 
the amount involved in the violation.
    (ii) Violations aggregating $5,000 or more where a suspect can be 
identified. Whenever the savings association or service corporation 
detects any known

[[Page 229]]

or suspected Federal criminal violation, or pattern of criminal 
violations, committed or attempted against the savings association or 
service corporation or involving a transaction or transactions conducted 
through the savings association or service corporation and involving or 
aggregating $5,000 or more in funds or other assets, where the savings 
association or service corporation believes that it was either an actual 
or potential victim of a criminal violation or series of criminal 
violations, or that it was used to facilitate a criminal transaction, 
and it has a substantial basis for identifying a possible suspect or 
group of suspects. If it is determined prior to filing this report that 
the identified suspect or group of suspects has used an alias, then 
information regarding the true identity of the suspect or group of 
suspects, as well as alias identifiers, such as drivers' license or 
social security numbers, addresses and telephone numbers, must be 
reported.
    (iii) Violations aggregating $25,000 or more regardless of potential 
suspects. Whenever the savings association or service corporation 
detects any known or suspected Federal criminal violation, or pattern of 
criminal violations, committed or attempted against the savings 
association or service corporation or involving a transaction or 
transactions conducted through the savings association or service 
corporation and involving or aggregating $25,000 or more in funds or 
other assets, where the savings association or service corporation 
believes that it was either an actual or potential victim of a criminal 
violation or series of criminal violations, or that it was used to 
facilitate a criminal transaction, even though there is no substantial 
basis for identifying a possible suspect or group of suspects.
    (iv) Transactions aggregating $5,000 or more that involve potential 
money laundering or violations of the Bank Secrecy Act. Any transaction 
(which for purposes of this paragraph (d)(3)(iv) means a deposit, 
withdrawal, transfer between accounts, exchange of currency, loan, 
extension of credit, purchase or sale of any stock, bond, certificate of 
deposit, or other monetary instrument or investment security, or any 
other payment, transfer, or delivery by, through, or to a financial 
institution, by whatever means effected) conducted or attempted by, at 
or through the savings association or service corporation and involving 
or aggregating $5,000 or more in funds or other assets, if the savings 
association or service corporation knows, suspects, or has reason to 
suspect that:
    (A) The transaction involves funds derived from illegal activities 
or is intended or conducted in order to hide or disguise funds or assets 
derived from illegal activities (including, without limitation, the 
ownership, nature, source, location, or control of such funds or assets) 
as part of a plan to violate or evade any law or regulation or to avoid 
any transaction reporting requirement under Federal law;
    (B) The transaction is designed to evade any regulations promulgated 
under the Bank Secrecy Act; or
    (C) The transaction has no business or apparent lawful purpose or is 
not the sort in which the particular customer would normally be expected 
to engage, and the institution knows of no reasonable explanation for 
the transaction after examining the available facts, including the 
background and possible purpose of the transaction.
    (4) Service corporations. When a service corporation is required to 
file a SAR under paragraph (d)(3) of this section, either the service 
corporation or a savings association that wholly or partially owns the 
service corporation may file the SAR.
    (5) Time for reporting. A savings association or service corporation 
is required to file a SAR no later than 30 calendar days after the date 
of initial detection of facts that may constitute a basis for filing a 
SAR. If no suspect was identified on the date of detection of the 
incident requiring the filing, a savings association or service 
corporation may delay filing a SAR for an additional 30 calendar days to 
identify a suspect. In no case shall reporting be delayed more than 60 
calendar days after the date of initial detection of a reportable 
transaction. In situations involving violations requiring immediate 
attention, such as when a reportable violation is ongoing, the savings

[[Page 230]]

association or service corporation shall immediately notify, by 
telephone, an appropriate law enforcement authority and the OTS in 
addition to filing a timely SAR.
    (6) Reports to state and local authorities. A savings association or 
service corporation is encouraged to file a copy of the SAR with state 
and local law enforcement agencies where appropriate.
    (7) Exception. A savings association or service corporation need not 
file a SAR for a robbery or burglary committed or attempted that is 
reported to appropriate law enforcement authorities.
    (8) Retention of records. A savings association or service 
corporation shall maintain a copy of any SAR filed and the original or 
business record equivalent of any supporting documentation for a period 
of five years from the date of the filing of the SAR. Supporting 
documentation shall be identified and maintained by the savings 
association or service corporation as such, and shall be deemed to have 
been filed with the SAR. A savings association or service corporation 
shall make all supporting documentation available to appropriate law 
enforcement agencies upon request. A savings association or service 
corporation shall make all supporting documentation available to OTS, 
FinCEN, or any Federal, State, or local law enforcement agency, or any 
Federal regulatory authority that examines the savings association or 
service corporation for compliance with the Bank Secrecy Act, or any 
State regulatory authority administering a State law that requires the 
savings association or service corporation to comply with the Bank 
Secrecy Act or otherwise authorizes the State authority to ensure that 
the institution complies with the Bank Secrecy Act, upon request.
    (9) Notification to board of directors--(i) Generally. Whenever a 
savings association (or a service corporation in which the savings 
association has an ownership interest) files a SAR pursuant to this 
paragraph (d), the management of the savings association or service 
corporation shall promptly notify its board of directors, or a committee 
of directors or executive officers designated by the board of directors 
to receive notice.
    (ii) Suspect is a director or executive officer. If the savings 
association or service corporation files a SAR pursuant to this 
paragraph (d) and the suspect is a director or executive officer, the 
savings association or service corporation may not notify the suspect, 
pursuant to 31 U.S.C. 5318(g)(2), but shall notify all directors who are 
not suspects.
    (10) Compliance. Failure to file a SAR in accordance with this 
section and the instructions may subject the savings association or 
service corporation, its directors, officers, employees, agents, or 
other institution-affiliated parties to supervisory action.
    (11) Obtaining SARs. A savings association or service corporation 
may obtain SARs and the instructions from the appropriate OTS Regional 
Office listed in Sec. 516.40(a) of this chapter.
    (12) Confidentiality of SARs. A SAR, and any information that would 
reveal the existence of a SAR, are confidential, and shall not be 
disclosed except as authorized in this paragraph (d)(12).
    (i) Prohibition on disclosure by savings associations or service 
corporations. (A) General rule. No savings association or service 
corporation, and no director, officer, employee, or agent of a savings 
association or service corporation, shall disclose a SAR or any 
information that would reveal the existence of a SAR. Any savings 
association or service corporation, and any director, officer, employee, 
or agent of any savings association or service corporation that is 
subpoenaed or otherwise requested to disclose a SAR, or any information 
that would reveal the existence of a SAR, shall decline to produce the 
SAR or such information, citing this section and 31 U.S.C. 
5318(g)(2)(A)(i), and shall notify the following of any such request and 
the response thereto:
    (A) Deputy Chief Counsel, Litigation Division, Office of Thrift 
Supervision; and
    (B) The Financial Crimes Enforcement Network (FinCEN).
    (ii) Rules of construction. Provided that no person involved in any 
reported suspicious transaction is notified that the transaction has 
been reported, paragraph (d)(1) of this section shall not be construed 
as prohibiting:
    (A) The disclosure by a savings association or service corporation, 
or any

[[Page 231]]

director, officer, employee or agent of a savings association or service 
corporation of:
    (1) A SAR, or any information that would reveal the existence of a 
SAR, to FinCEN or OTS, or any Federal, State, or local law enforcement 
agency; or any Federal regulatory authority that examines the savings 
association or service corporation for compliance with the Bank Secrecy 
Act, or any State regulatory authority administering a State law that 
requires compliance with the Bank Secrecy Act or otherwise authorizes 
the State authority to ensure that the institution complies with the 
Bank Secrecy Act; or
    (2) The underlying facts, transactions, and documents upon which a 
SAR is based, including, but not limited to, disclosures:
    (i) To another financial institution, or any director, officer, 
employee or agent of a financial institution, for the preparation of a 
joint SAR; or
    (ii) In connection with certain employment references or termination 
notices, to the full extent authorized in 31 U.S.C. 5318(g)(2)(B); or
    (B) The sharing by a savings association or service corporation, or 
any director, officer, employee, or agent of a savings association or 
service corporation, of a SAR, or any information that would reveal the 
existence of a SAR, within the corporate organizational structure of the 
savings association or service corporation, for purposes consistent with 
Title II of the Bank Secrecy Act as determined by regulation or in 
guidance.
    (iii) Prohibition on disclosure by OTS. The OTS will not, and no 
officer, employee or agent of OTS, shall disclose a SAR, or any 
information that would reveal the existence of a SAR, except as 
necessary to fulfill official duties consistent with Title II of the 
Bank Secrecy Act. For purposes of this section, ``official duties'' 
shall not include the disclosure of a SAR, or any information that would 
reveal the existence of a SAR, in response to a request for use in a 
private legal proceeding or in response to a request for disclosure of 
non-public information under 12 CFR 510.5.
    (iv) Limitation on liability. A savings association or service 
corporation and any director, officer, employee or agent of a savings 
association or service corporation that makes a voluntary disclosure of 
any possible violation of law or regulation to a government agency or 
makes a disclosure pursuant to this section or any other authority, 
including a disclosure made jointly with another institution, shall be 
protected from liability for any such disclosure, or for failure to 
provide notice of such disclosure to any person identified in the 
disclosure, or both, to the full extent provided by 31 U.S.C. 
5318(g)(3).
    (13) Safe harbor. The safe harbor provision of 31 U.S.C. 5318(g), 
which exempts any financial institution that makes a disclosure of any 
possible violation of law or regulation from liability under any law or 
regulation of the United States, or any constitution, law or regulation 
of any state or political subdivision, covers all reports of suspected 
or known criminal violations and suspicious activities to law 
enforcement and financial institution supervisory authorities, including 
supporting documentation, regardless of whether such reports are filed 
pursuant to this paragraph (d), or are filed on a voluntary basis.
    (e) Adjustable-rate mortgage indices--(1) Reporting obligation. Upon 
the request of a Federal Home Loan Bank, all savings associations within 
the jurisdiction of that Federal Home Loan Bank shall report the data 
items set forth in paragraph (e)(2) of this section for the Federal Home 
Loan Bank to use in calculating and publishing an adjustable-rate 
mortgage index.
    (2) Data to be reported. For purposes of paragraph (e)(1) of this 
section, the term ``data items'' means the data items previously 
collected from the monthly Thrift Financial Report and such data items 
as may be altered, amended, or substituted by the requesting Federal 
Home Loan Bank.
    (3) Applicable indices. For the purpose of this reporting 
requirement, the term ``adjustable-rate mortgage index'' means any of 
the adjustable-rate mortgage indices calculated and published by a 
Federal Home Loan Bank or the

[[Page 232]]

Federal Home Loan Bank Board on or before August 9, 1989.

[54 FR 49552, Nov. 30, 1989, as amended at 56 FR 29566, June 28, 1991; 
56 FR 32474, July 16, 1991; 57 FR 61251, Dec. 24, 1992; 59 FR 66159, 
Dec. 23, 1994; 61 FR 6105, Feb. 16, 1996; 66 FR 13008, Mar. 2, 2001; 68 
FR 75110, Dec. 30, 2003; 75 FR 75592, Dec. 3, 2010]



Sec. 563.190  Bonds for directors, officers, employees, and agents; form of 

and amount of bonds.

    (a) Each savings association shall maintain fidelity bond coverage. 
The bond shall cover each director, officer, employee, and agent who has 
control over or access to cash, securities, or other property of the 
savings association.
    (b) The amount of coverage to be required for each savings 
association shall be determined by the association's management, based 
on its assessment of the level that would be safe and sound in view of 
the association's potential exposure to risk; provided, such 
determination shall be subject to approval by the association's board of 
directors.
    (c) Each savings association may maintain bond coverage in addition 
to that provided by the insurance underwriter industry's standard forms, 
through the use of endorsements, riders, or other forms of supplemental 
coverage, if, in the judgment of the association's board of directors, 
additional coverage is warranted.
    (d) The board of directors of each savings association shall 
formally approve the association's bond coverage. In deciding whether to 
approve the bond coverage, the board shall review the adequacy of the 
standard coverage and the need for supplemental coverage. Documentation 
of the board's approval shall be included as a part of the minutes of 
the meeting at which the board approves coverage. Additionally, the 
board of directors shall review the association's bond coverage at least 
annually to assess the continuing adequacy of coverage.

[57 FR 12698, Apr. 13, 1992]



Sec. 563.191  Bonds for agents.

    In lieu of the bond provided in Sec. 563.190 of this part in the 
case of agents appointed by a savings association, a fidelity bond may 
be provided in an amount at least twice the average monthly collections 
of such agents, provided such agents shall be required to make 
settlement with the savings association at least monthly, and provided 
such bond is approved by the board of directors of the savings 
association. No bond need be obtained for any agent that is a financial 
institution insured by the Federal Deposit Insurance Corporation.



Sec. 563.200  Conflicts of interest.

    If you are a director, officer, or employee of a savings 
association, or have the power to direct its management or policies, or 
otherwise owe a fiduciary duty to a savings association:
    (a) You must not advance your own personal or business interests, or 
those of others with whom you have a personal or business relationship, 
at the expense of the savings association; and
    (b) You must, if you have an interest in a matter or transaction 
before the board of directors:
    (1) Disclose to the board all material nonprivileged information 
relevant to the board's decision on the matter or transaction, 
including:
    (i) The existence, nature and extent of your interests; and
    (ii) The facts known to you as to the matter or transaction under 
consideration;
    (2) Refrain from participating in the board's discussion of the 
matter or transaction; and
    (3) Recuse yourself from voting on the matter or transaction (if you 
are a director).

[61 FR 60178, Nov. 27, 1996]



Sec. 563.201  Corporate opportunity.

    (a) If you are a director or officer of a savings association, or 
have the power to direct its management or policies, or otherwise owe a 
fiduciary duty to a savings association, you must not take advantage of 
corporate opportunities belonging to the savings association.
    (b) A corporate opportunity belongs to a savings association if:
    (1) The opportunity is within the corporate powers of the savings 
association or a subsidiary of the savings association; and

[[Page 233]]

    (2) The opportunity is of present or potential practical advantage 
to the savings association, either directly or through its subsidiary.
    (c) OTS will not deem you to have taken advantage of a corporate 
opportunity belonging to the savings association if a disinterested and 
independent majority of the savings association's board of directors, 
after receiving a full and fair presentation of the matter, rejected the 
opportunity as a matter of sound business judgment.

[61 FR 60179, Nov. 27, 1996]



   Subpart H_Notice of Change of Director or Senior Executive Officer

    Source: 63 FR 51274, Sept. 25, 1998, unless otherwise noted.



Sec. 563.550  What does this subpart do?

    This subpart implements 12 U.S.C. 1831i, which requires certain 
savings associations and savings and loan holding companies to notify 
the OTS before appointing or employing directors and senior executive 
officers.



Sec. 563.555  What definitions apply to this subpart?

    The following definitions apply to this subpart:
    Director means an individual who serves on the board of directors of 
a savings association or savings and loan holding company. 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 any committee of the board of directors;
    (3) Provides only general policy advice to the board of directors or 
any committee of the board of directors; and
    (4) Has not been identified by the OTS in writing as an individual 
who performs the functions of a director, or who exercises significant 
influence over, or participates in, major policymaking decisions of the 
board of directors.
    Senior executive officer means an individual who holds the title or 
performs the function of one or more of the following positions (without 
regard to title, salary, or compensation): president, chief executive 
officer, chief operating officer, chief financial officer, chief lending 
officer, or chief investment officer. Senior executive officer also 
includes any other person identified by the OTS in writing as an 
individual who exercises significant influence over, or participates in, 
major policymaking decisions, whether or not hired as an employee.
    Troubled condition means:
    (1) A savings association that has a composite rating of 4 or 5, as 
composite rating is defined in Sec. 516.5(c) of this chapter.
    (2) A savings and loan holding company that has an unsatisfactory 
rating under the OTS's holding company rating system, or that is 
informed in writing by the OTS that it has an adverse effect on its 
subsidiary savings association;
    (3) A savings association or savings and loan holding company that 
is subject to a capital directive, a cease-and-desist order, a consent 
order, a formal written agreement, or a prompt corrective action 
directive relating to the safety and soundness or financial viability of 
the savings association, unless otherwise informed in writing by the 
OTS; or
    (4) A savings association or savings and loan holding company that 
is informed in writing by the OTS that it is in troubled condition based 
on information available to the OTS.

[63 FR 51274, Sept. 25, 1998, as amended by 66 FR 13008, Mar. 2, 2001]



Sec. 563.560  Who must give prior notice?

    (a) Savings association or savings and loan holding company. Except 
as provided under Sec. 563.590, you must notify the OTS at least 30 
days before adding or replacing any member of your board of directors, 
employing any person as a senior executive officer, or changing the 
responsibilities of any senior executive officer so that the person 
would assume a different senior executive position if:
    (1) You are a savings association and at least one of the following 
circumstances apply:

[[Page 234]]

    (i) You do not comply with all minimum capital requirements under 
part 567 of this chapter;
    (ii) You are in troubled condition; or
    (iii) The OTS has notified you, in connection with its review of a 
capital restoration plan required under section 38 of the Federal 
Deposit Insurance Act or part 565 of this chapter or otherwise, that a 
notice is required under this subpart; or
    (2) You are a savings and loan holding company and you are in 
troubled condition.
    (b) Notice by individual. If you are an individual seeking election 
to the board of directors of a savings association or savings and loan 
holding company described in paragraph (a) of this section, and have not 
been nominated by management, you must either provide the prior notice 
required under paragraph (a) of this section or follow the process under 
Sec. 563.590(b).



Sec. 563.565  What procedures govern the filing of my notice?

    The procedures found in part 516, subpart A of this chapter govern 
the filing of your notice under Sec. 563.560.

[66 FR 13009, Mar. 2, 2001]



Sec. 563.570  What information must I include in my notice?

    (a) Content requirements. Your notice must include:
    (1) The information required under 12 U.S.C. 1817(j)(6)(A), and the 
information prescribed in the Interagency Notice of Change in Director 
or Senior Executive Officer and the Interagency Biographical and 
Financial Report which are available from OTS headquarters at the 
address in part 516 of this chapter; or from any OTS regional office;
    (2) Legible fingerprints of the proposed director or senior 
executive officer. You are not required to file fingerprints if, within 
three years prior to the date of submission of the notice, the proposed 
director or senior executive officer provided legible fingerprints as 
part of a notice filed with the OTS under 12 U.S.C. 1831i; and
    (3) Such other information required by the OTS.
    (b) Modification of content requirements. The OTS may require or 
accept other information in place of the content requirements in 
paragraph (a) of this section.



Sec. 563.575  What procedures govern OTS review of my notice for completeness?

    The OTS will first review your notice to determine whether it is 
complete.
    (a) If your notice is complete, the OTS will notify you in writing 
of the date that the OTS received the complete notice.
    (b) If your notice is not complete, the OTS will notify you in 
writing what additional information you need to submit, why we need the 
information, and when you must submit it. You must, within the specified 
time period, provide additional information or request that the OTS 
suspend processing of the notice. If you fail to act within the 
specified time period, the OTS may treat the notice as withdrawn or may 
review the application based on the information provided.



Sec. 563.580  What standards and procedures will govern OTS review of the 

substance of my notice?

    The OTS will disapprove a notice if, pursuant to the standard set 
forth in 12 U.S.C. 1831i(e), the OTS finds that the competence, 
experience, character, or integrity of the proposed director or senior 
executive officer indicates that it would not be in the best interests 
of the depositors of the savings association or of the public to permit 
the individual to be employed by, or associated with, the savings 
association or savings and loan holding company. If the OTS disapproves 
a notice, it will issue a written notice that explains why the OTS 
disapproved the notice. The OTS will send the notice to the savings 
association or savings and loan holding company and the individual.



Sec. 563.585  When may a proposed director or senior executive officer begin 

service?

    (a) A proposed director or senior executive officer may begin 
service 30 days after the date the OTS receives all required 
information, unless:
    (1) The OTS notifies you that it has disapproved the notice; or
    (2) The OTS extends the 30-day period for an additional period not 
to exceed

[[Page 235]]

60 days. If the OTS extends the 30-day period, it will notify you in 
writing that the period has been extended, and will state the reason for 
the extension. The proposed director or senior executive officer may 
begin service upon expiration of the extended period, unless the OTS 
notifies you that it has disapproved the notice during the extended 
period.
    (b) Notwithstanding paragraph (a) of this section, a proposed 
director or senior executive officer may begin service after the OTS 
notifies you, in writing, of its intention not to disapprove the notice.



Sec. 563.590  When will the OTS waive the prior notice requirement?

    (a) Waiver request. (1) An individual may serve as a director or 
senior executive officer before filing a notice under this subpart if 
the OTS issues a written finding that:
    (i) Delay would threaten the safety or soundness of the savings 
association;
    (ii) Delay would not be in the public interest; or
    (iii) Other extraordinary circumstances exist that justify waiver of 
prior notice.
    (2) If the OTS grants a waiver, you must file a notice under this 
subpart within the time period specified by the OTS.
    (b) Automatic waiver. An individual may serve as a director before 
filing a notice under this subpart, if the individual was not nominated 
by management and the individual submits a notice under this subpart 
within seven days after election as a director.
    (c) Subsequent OTS action. The OTS may disapprove a notice within 30 
days after the OTS issues a waiver under paragraph (a) of this section 
or within 30 days after the election of an individual who has filed a 
notice and is serving pursuant to an automatic waiver under paragraph 
(b) of this section.



PART 563b_CONVERSIONS FROM MUTUAL TO STOCK FORM--Table of Contents



Sec.
563b.5 What does this part do?
563b.10 May I form a holding company as part of my conversion?
563b.15 May I form a charitable organization as part of my conversion?
563b.20 May I acquire another insured stock depository institution as 
          part of my conversion?
563b.25 What definitions apply to this part?

                     Subpart A_Standard Conversions

                           Prior to Conversion

563b.100 What must I do before a conversion?
563b.105 What information must I include in my business plan?
563b.110 Who must review my business plan?
563b.115 How will OTS review my business plan?
563b.120 May I discuss my plans to convert with others?

                           Plan of Conversion

563b.125 Must my board of directors adopt a plan of conversion?
563b.130 What must I include in my plan of conversion?
563b.135 How do I notify my members that my board of directors approved 
          a plan of conversion?
563b.140 May I amend my plan of conversion?

                           Filing Requirements

563b.150 What must I include in my application for conversion?
563b.155 How do I file my application for conversion?
563b.160 May I keep portions of my application for conversion 
          confidential?
563b.165 How do I amend my application for conversion?

           Notice of Filing of Application and Comment Process

563b.180 How do I notify the public that I filed an application for 
          conversion?
563b.185 How may a person comment on my application for conversion?

              OTS Review of the Application for Conversion

563b.200 What actions may OTS take on my application?
563b.205 May a court review OTS's final action on my conversion?

                             Vote by Members

563b.225 Must I submit the plan of conversion to my members for 
          approval?
563b.230 Who is eligible to vote?
563b.235 How must I notify my members of the meeting?
563b.240 What must I submit to OTS after the members' meeting?

[[Page 236]]

                           Proxy Solicitation

563b.250 Who must comply with these proxy solicitation provisions?
563b.255 What must the form of proxy include?
563b.260 May I use previously executed proxies?
563b.265 How may I use proxies executed under this part?
563b.270 What must I include in my proxy statement?
563b.275 How do I file revised proxy materials?
563b.280 Must I mail a member's proxy solicitation material?
563b.285 What solicitations are prohibited?
563b.290 What will OTS do if a solicitation violates these prohibitions?
563b.295 Will OTS require me to re-solicit proxies?

                            Offering Circular

563b.300 What must happen before OTS declares my offering circular 
          effective?
563b.305 When may I distribute the offering circular?
563b.310 When must I file a post-effective amendment to the offering 
          circular?

                        Offers and Sales of Stock

563b.320 Who has priority to purchase my conversion shares?
563b.325 When may I offer to sell my conversion shares?
563b.330 How do I price my conversion shares?
563b.335 How do I sell my conversion shares?
563b.340 What sales practices are prohibited?
563b.345 How may a subscriber pay for my conversion shares?
563b.350 Must I pay interest on payments for conversion shares?
563b.355 What subscription rights must I give to each eligible account 
          holder and each supplemental eligible account holder?
563b.360 Are my officers, directors, and their associates eligible 
          account holders?
563b.365 May other voting members purchase conversion shares in the 
          conversion?
563b.370 Does OTS limit the aggregate purchases by officers, directors, 
          and their associates?
563b.375 How do I allocate my conversion shares if my shares are 
          oversubscribed?
563b.380 May my employee stock ownership plan purchase conversion 
          shares?
563b.385 May I impose any purchase limitations?
563b.390 Must I provide a purchase preference to persons in my local 
          community?
563b.395 What other conditions apply when I offer conversion shares in a 
          community offering, a public offering, or both?

                       Completion of the Offering

563b.400 When must I complete the sale of my stock?
563b.405 How do I extend the offering period?

                      Completion of the Conversion

563b.420 When must I complete my conversion?
563b.425 Who may terminate the conversion?
563b.430 What happens to my old charter?
563b.435 What happens to my corporate existence after conversion?
563b.440 What voting rights must I provide to stockholders after the 
          conversion?
563b.445 What must I provide my savings account holders?

                           Liquidation Account

563b.450 What is a liquidation account?
563b.455 What is the initial balance of the liquidation account?
563b.460 How do I determine the initial balances of liquidation sub-
          accounts?
563b.465 Do account holders retain any voting rights based on their 
          liquidation sub-accounts?
563b.470 Must I adjust liquidation sub-accounts?
563b.475 What is a liquidation?
563b.480 Does the liquidation account affect my net worth?
563b.485 What provision must I include in my new federal charter?

                             Post-Conversion

563b.500 What management stock benefit plans may I implement?
563b.505 May my directors, officers, and their associates freely trade 
          shares?
563b.510 May I repurchase shares after conversion?
563b.515 What information must I provide to OTS before I repurchase my 
          shares?
563b.520 May I declare or pay dividends after I convert?
563b.525 Who may acquire my shares after I convert?
563b.530 What other requirements apply after I convert?

                Contributions to Charitable Organizations

563b.550 May I donate conversion shares or conversion proceeds to a 
          charitable organization?
563b.555 How do my members approve a charitable contribution?
563b.560 How much may I contribute to a charitable organization?

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563b.565 What must the charitable organization include in its 
          organizational documents?
563b.570 How do I address conflicts of interest involving my directors?
563b.575 What other requirements apply to charitable organizations?

              Subpart B--Voluntary Supervisory Conversions

563b.600 What does this subpart do?
563b.605 How may I conduct a voluntary supervisory conversion?
563b.610 Do my members have rights in a voluntary supervisory 
          conversion?

                               Eligibility

563b.625 When is a savings association eligible for a voluntary 
          supervisory conversion?
563b.630 When is a state-chartered savings bank eligible for a voluntary 
          supervisory conversion?

                     Plan of Supervisory Conversion

563b.650 What must I include in my plan of voluntary supervisory 
          conversion?

              Voluntary Supervisory Conversion Application

563b.660 What must I include in my voluntary supervisory conversion 
          application?

     OTS Review of the Voluntary Supervisory Conversion Application

563b.670 Will OTS approve my voluntary supervisory conversion 
          application?
563b.675 What conditions will OTS impose on an approval?

                        Offers and Sales of Stock

563b.680 How do I sell my shares?

                             Post-Conversion

563b.690 Who may not acquire additional shares after the voluntary 
          supervisory conversion?

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901; 15 U.S.C. 
78c, 78l, 78m, 78n, 78w.

    Source: 67 FR 52020, Aug. 9, 2002, unless otherwise noted.



Sec. 563b.5  What does this part do?

    (a) General. This part governs how a savings association (``you'') 
may convert from the mutual to the stock form of ownership. Subpart A of 
this part governs standard mutual-to-stock conversions. Subpart B of 
this part governs voluntary supervisory mutual-to-stock conversions. 
This part supersedes all inconsistent charter and bylaw provisions of 
federal savings associations converting to stock form.
    (b) Prescribed forms. You must use the forms prescribed under this 
part and provide such information as OTS may require under the forms by 
regulation or otherwise. The forms required under this part include: 
Form AC (Application for Conversion); Form PS (Proxy Statement); Form OC 
(Offering Circular); and Form OF (Order Form).
    (c) Waivers. OTS may waive any requirement of this part or a 
provision in any prescribed form. To obtain a waiver, you must file a 
written request with OTS that:
    (1) Specifies the requirement(s) or provision(s) you want OTS to 
waive;
    (2) Demonstrates that the waiver is equitable; is not detrimental to 
you, your account holders, or other savings associations; and is not 
contrary to the public interest; and
    (3) Includes an opinion of counsel demonstrating that applicable law 
does not conflict with the requirement or provision.



Sec. 563b.10  May I form a holding company as part of my conversion?

    You may convert to the stock form of ownership as part of a 
transaction where you organize a holding company to acquire all of your 
shares upon their issuance. In such a transaction, your holding company 
will offer rights to purchase its shares instead of your shares. All of 
the requirements of subpart A generally apply to the holding company as 
they apply to the savings association. Section 574.6 of this chapter 
contains OTS's holding company application requirements.



Sec. 563b.15  May I form a charitable organization as part of my conversion?

    When you convert to the stock form, you may form a charitable 
organization. Your contributions to the charitable organization are 
governed by the requirements of Sec. Sec. 563b.550 through 563b.575.



Sec. 563b.20  May I acquire another insured stock depository institution as 

part of my conversion?

    When you convert to stock form, you may acquire for cash or stock 
another

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insured depository institution that is already in the stock form of 
ownership.



Sec. 563b.25  What definitions apply to this part?

    The following definitions apply to this part and the forms 
prescribed under this part:
    Acting in concert has the same meaning as in Sec. 574.2(c) of this 
chapter. The rebuttable presumptions of Sec. 574.4(d) of this chapter, 
other than Sec. Sec. 574.4(d)(1) and (d)(2) of this chapter, apply to 
the share purchase limitations at Sec. Sec. 563b.355 through 563b.395.
    Affiliate of, or a person affiliated with, a specified person is a 
person that directly or indirectly, through one or more intermediaries, 
controls, is controlled by, or is under common control with the 
specified person.
    Associate of a person is:
    (1) A corporation or organization (other than you or your majority-
owned subsidiaries), if the person is a senior officer or partner, or 
beneficially owns, directly or indirectly, 10 percent or more of any 
class of equity securities of the corporation or organization.
    (2) A trust or other estate, if the person has a substantial 
beneficial interest in the trust or estate or is a trustee or fiduciary 
of the trust or estate. For purposes of Sec. Sec. 563b.370, 563b.380, 
563b.385, 563b.390, 563b.395 and 563b.505, a person who has a 
substantial beneficial interest in your tax-qualified or non-tax-
qualified employee stock benefit plan, or who is a trustee or a 
fiduciary of the plan, is not an associate of the plan. For the purposes 
of Sec. 563b.370, your tax-qualified employee stock benefit plan is not 
an associate of a person.
    (3) Any person who is related by blood or marriage to such person 
and:
    (i) Who lives in the same home as the person; or
    (ii) Who is your director or senior officer, or a director or senior 
officer of your holding company or your subsidiary.
    Association members or members are persons who, under applicable 
law, are eligible to vote at the meeting on conversion.
    Control (including controlling, controlled by, and under common 
control with) means the direct or indirect power to direct or exercise a 
controlling influence over the management and policies of a person, 
whether through the ownership of voting securities, by contract, or 
otherwise as described in part 574 of this chapter.
    Eligibility record date is the date for determining eligible account 
holders. The eligibility record date must be at least one year before 
the date your board of directors adopts the plan of conversion.
    Eligible account holders are any persons holding qualifying deposits 
on the eligibility record date.
    IRS is the Internal Revenue Service.
    Local community includes:
    (1) Every county, parish, or similar governmental subdivision in 
which you have a home or branch office;
    (2) Each county's, parish's, or subdivision's metropolitan 
statistical area;
    (3) All zip code areas in your Community Reinvestment Act assessment 
area; and
    (4) Any other area or category you set out in your plan of 
conversion, as approved by OTS.
    Offer, offer to sell, or offer for sale is an attempt or offer to 
dispose of, or a solicitation of an offer to buy, a