[Federal Register Volume 76, Number 177 (Tuesday, September 13, 2011)]
[Rules and Regulations]
[Pages 56507-56606]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22854]



[[Page 56507]]

Vol. 76

Tuesday,

No. 177

September 13, 2011

Part II





Federal Reserve System





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12 CFR Parts 207, 215, 223, et al.





Availability of Information, Public Observation of Meetings, Procedure, 
Practice for Hearings, and Post-Employment Restrictions for Senior 
Examiners; Savings and Loan Holding Companies; Interim Final Rule

Federal Register / Vol. 76, No. 177 / Tuesday, September 13, 2011 / 
Rules and Regulations

[[Page 56508]]


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FEDERAL RESERVE SYSTEM

12 CFR Parts 207, 215, 223, 228, 238, 239, 261, 261b, 262, 263, and 
264a

[Regulations G, O, W, BB, LL, MM; Docket No. R- 1429]
RIN 7100 AD-80


Availability of Information, Public Observation of Meetings, 
Procedure, Practice for Hearings, and Post-Employment Restrictions for 
Senior Examiners; Savings and Loan Holding Companies

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim final rule; request for comment.

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SUMMARY: The Board of Governors of the Federal Reserve System 
(``Board'') is publishing an interim final rule with a request for 
public comment that sets forth regulations for savings and loan holding 
companies (``SLHCs''). On July 21, 2011, the responsibility for 
supervision and regulation of SLHCs transferred from the Office of 
Thrift Supervision (``OTS'') to the Board pursuant to section 312 of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-
Frank Act''). This interim final rule provides for the corresponding 
transfer from the OTS to the Board of the regulations necessary for the 
Board to administer the statutes governing SLHCs. Technical changes to 
other regulations have also been made to account for the transfer of 
authority over SLHCs to the Board.

DATES: This interim final rule is effective September 13, 2011. 
Comments must be received by November 1, 2011.

ADDRESSES: You may submit comments, identified by Docket No. R-1429 and 
RIN No. 7100 AD 80, by using any of the methods below. Please submit 
your comments using only one method.
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     Facsimile: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Street, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Regulation LL: Amanda K. Allexon, 
Senior Counsel, (202) 452-3818, or Paul F. Hannah, Counsel, (202) 452-
2810, Legal Division; Regulation MM: C. Tate Wilson, Attorney, (202) 
452-3696, Christine E. Graham, Senior Attorney, (202) 452-3005, Legal 
Division; Both Regulations: Kevin Bertsch, Associate Director, (202) 
452-5265, Kirk Odegard, Assistant Director, (202) 530-6225, or Mike 
Sexton, Assistant Director, (202) 452-3009, Division of Banking 
Supervision and Regulation; Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Ave., NW., Washington, DC 20551. 
All other regulatory amendments: Amanda K. Allexon, Senior Counsel, 
(202) 452-3818, or Paul F. Hannah, Counsel, (202) 452-2810, Legal 
Division. For the hearing impaired only, Telecommunication Device for 
the Deaf (TDD), (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    Title III of the Dodd-Frank Act transferred from OTS to the Board 
the responsibility for supervision of SLHCs and their non-depository 
subsidiaries. The Dodd-Frank Act also transferred supervisory functions 
related to Federal savings associations and state savings associations 
to the Office of the Comptroller of the Currency (``OCC'') and the 
Federal Deposit Insurance Corporation (``FDIC''), respectively.
    Specifically, section 312 of the Dodd-Frank Act provides that all 
functions of the OTS and the Director of the OTS (including rulemaking 
authority and authority to issue orders) with respect to the 
supervision of SLHCs and their non-depository subsidiaries transfer to 
the Board on July 21, 2011.\1\ Section 316 of the Dodd-Frank Act 
provides that all orders, resolutions, determinations, agreements, and 
regulations, interpretive rules, other interpretations, guidelines, and 
other advisory materials issued, made, prescribed, or allowed to become 
effective by the OTS on or before the transfer date with respect to 
SLHCs and their non-depository subsidiaries will remain in effect and 
shall be enforceable until modified, terminated, set aside, or 
superseded in accordance with applicable law by the Board, by any court 
of competent jurisdiction, or by operation of law. The Dodd-Frank Act 
includes parallel provisions applicable to the OCC and the FDIC with 
respect to Federal savings associations and state savings associations, 
respectively.
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    \1\ 12 U.S.C. 5412. Section 312 also transfers to the Board all 
rulemaking authority under section 11 of the Home Owners' Loan Act 
relating to transactions with affiliates and extensions of credit to 
insiders and section 5(q) relating to tying arrangements. 12 U.S.C. 
1461 et seq.
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    Given the extensive transfer of authority to multiple agencies, 
section 316 of the Dodd-Frank Act required the Board, OCC, and FDIC to 
identify and publish in the Federal Register separate lists of the 
current OTS regulations that each agency will continue to enforce after 
the transfer date.\2\ On July 21, 2011, the Board issued a notice of 
intent pursuant to this requirement. The notice of intent outlines all 
OTS regulations applicable to SLHCs and their non-depository 
subsidiaries that the Board has currently identified that it intends to 
enforce after the transfer date. The notice of intent also advised that 
the Board would issue an interim final rule to effectuate the 
transition of OTS regulations to the Board.
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    \2\ 12 U.S.C. 5414(c).
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II. Overview of Interim Final Rule

    The interim final rule has three components: (1) New Regulation LL 
(Part 238), which sets forth regulations generally governing SLHCs; (2) 
new Regulation MM (Part 239), which sets forth regulations governing 
SLHCs in mutual form; and (3) technical amendments to current Board 
regulations necessary to accommodate the transfer of supervisory 
authority for SLHCs from the OTS to the Board.
    The Board is seeking comment on all aspects of this interim final 
rule. The Board requests specific comment with respect to whether all 
regulations relating to the supervision of SLHCs are included in this 
rulemaking. Alternatively, does this rulemaking carry over regulatory 
provisions that currently do not apply to SLHCs or their non-depository 
subsidiaries?
    Regulation LL. In drafting new Regulation LL, the Board has sought 
to collect all current OTS regulations applicable to SLHCs (other than 
regulations pertaining uniquely to SLHCs in mutual form) and transfer 
them into a single part of Chapter 2 of Title 12 for ease of locating. 
Generally,

[[Page 56509]]

the structure of the new Regulation LL closely follows that of the 
Board's Regulation Y, which houses regulations directly related to bank 
holding companies (``BHCs''), in order to provide an overall structure 
to rules that were previously found in disparate locations.\3\ In many 
instances, this process has involved copying the current OTS 
regulations into the new Regulation LL with only technical 
modifications to account for the shift in supervisory responsibility 
from the OTS to the Board. In other situations, where the requirements 
or criteria found in the OTS rules were the same as those found in the 
Board's rules, Regulation LL attempts to conform the language and 
format used in the rule to that used by the Board.
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    \3\ 12 CFR part 225 (Regulation Y).
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    The Board also made several substantive changes to the OTS 
regulations as they were incorporated into Regulation LL. Additionally, 
the Board added or modified regulations to reflect substantive changes 
introduced by the Dodd-Frank Act. These modifications are discussed 
separately below.

Application Processing

    Throughout the new regulations, the Board has replaced the OTS 
procedures with respect to the processing of applications and filings 
for those of the Board to the extent possible. These changes do not 
alter the thresholds for filing an application or notice, or the 
standards for the Board's review of an application, but are intended to 
promote uniformity and consistency in the Board's processing of 
applications across the range of institutions. The Board will carryover 
the OTS applications forms, with technical changes, for the time being. 
SLHCs can find all application and notice forms on the Board's public 
Web site. This Web site also contains general information about the 
most common filings, publication requirements, and the Board's 
electronic application submission system.\4\
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    \4\ See Application Filing Information at http://www.federalreserve.gov/generalinfo/applications/afi/.
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    Among other things, migration to the Board's procedures for 
applications processing includes elimination of requirements in OTS 
rules for prefiling meetings and submission of draft business plans, 
and formal procedures for determining an application to be complete. 
The Board's application processing procedures contemplate both the 
collection and review of submitted information within specified time 
periods. Because an application to the Board in most instances is acted 
on within the standard 30 to 60 day processing periods, the Board 
expects that following the Board's applications procedures will result 
in applications processing that is at least as expeditious as 
processing under the OTS procedures.

Control Determinations

    Regulation LL modifies the regulations previously used by the OTS 
for purposes of determining when a company or natural person acquires 
control of a savings association or SLHC under the Home Owner's Loan 
Act (``HOLA'') \5\ or the Change in Bank Control Act (``CBCA'').\6\ In 
light of the similarity between the statutes governing BHCs and SLHCs, 
the Board has decided to use its established rules and processes with 
respect to control determinations under HOLA and the CBCA to ensure 
consistency between equivalent statutes administered by the same 
agency.
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    \5\ 12 U.S.C. 1461 et seq.
    \6\ 12 U.S.C. 1817(j).
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    The definition of control found in HOLA is virtually identical to 
that found in the Bank Holding Company Act (``BHC Act'').\7\ 
Specifically, both statutes have a similar three-prong test for 
determining when a company controls a bank or savings association. A 
company \8\ has control over either a bank or savings association if 
the company:
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    \7\ 12 U.S.C. 1841(a) and 1467a(a)(2).
    \8\ Unlike the BHC Act, HOLA's definition of control applies to 
persons, not just companies. Additionally, an acquirer will be 
deemed to control a company under HOLA if they have contributed more 
than 25 percent of the capital of the company. 12 U.S.C. 
1467a(a)(2)(B).
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    (1) Directly or indirectly or acting in concert with one or more 
persons, owns, controls, or has the power to vote 25 percent or more of 
the voting securities of a company;
    (2) Controls in any manner the election of a majority of the board;
    (3) Directly or indirectly exercises a controlling influence over 
management or policies, after reasonable notice and opportunity for 
hearing.
    Because of this similarity, Regulation LL includes provisions 
interpreting the definition of control under HOLA in the same manner as 
that term is interpreted under the BHC Act, adopts procedures for 
reviewing control determination that are identical for SLHCs and BHCs, 
and conforms the filing requirements under the CBCA for SLHCs to those 
for BHCs. As a result, OTS regulations relating to control 
determinations and rebuttals under HOLA, including the rebuttable 
control factors and process in section 574.4, the certification of 
ownership in section 574.5, and the rebuttal agreement in section 
574.100, are not included in the proposed regulation.
    Beginning on the date of approval of this interim final rule, the 
Board will review investments and relationships with SLHCs by companies 
using the current practices and policies applicable to BHCs to the 
extent possible. Overall, the indicia of control used by the Board 
under the BHC Act to determine whether a company has a controlling 
influence over the management or policies of a banking organization 
(which for Board purposes, will now include savings associations and 
SLHCs) are similar to the control factors found in OTS regulations.\9\ 
However, the OTS rules weigh these factors somewhat differently and use 
a different review process designed to be more mechanical.
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    \9\ The Board discussed these indicia in a 2008 policy statement 
on noncontrolling equity investments. See http://www.federalreserve.gov/newsevents/press/bcreg/2020080922c.htm. The 
policy statement outlines in greater detail the Board's views on 
certain indicia of control, such as the size of the voting and total 
equity investment, director and officer interlocks, business 
relationships, and actions (whether or not they are based in 
contract) that may influence or interfere with the major policies 
and operations of the banking organization.
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    First, the Board does not limit its review of companies with the 
potential to have a controlling influence to the two largest 
shareholders. The Board reviews all investors based on all of the facts 
and circumstances to determine if a controlling influence is present.
    Second, the Board does not have a separate application process for 
rebutting control under the BHC Act and Regulation LL does not include 
such a process. Under OTS rules, investors that triggered a control 
factor in section 574.4 could submit an application to the OTS 
requesting a determination that they have successfully rebutted control 
under HOLA. This application resulted in a rebuttal agreement between 
the investor and the OTS in the form found in section 574.100.
    Board practice is to consider potential control relationships for 
all investors in connection with applications submitted under section 3 
of the BHC Act.\10\ Accordingly, the Board intends to review potential 
control relationships for all investors in connection with applications 
submitted to the Board under section 10(e) or 10(o) of HOLA.\11\ In 
situations where investors believe no application is required, the 
Board

[[Page 56510]]

encourages investors to consult with staff at the appropriate Reserve 
Bank or the Board to determine what type of review is appropriate to 
confirm that the Board concurs that no BHC Act or HOLA filing is 
necessary. As with OTS practice, the Board often obtains a series of 
commitments from investors seeking non-control determinations.
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    \10\ 12 U.S.C. 1842.
    \11\ 12 U.S.C. 1467a(e) and 1467a(o).
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    The CBCA applies a somewhat different definition of control to the 
acquisition of both banks and savings associations and their holding 
companies by individuals or companies. The CBCA applies only to 
acquisitions of control of a holding company through the purchase or 
other disposition of the company's voting stock, and an acquiror is 
deemed to control the company if the acquiror would have the power, 
directly or indirectly, to direct the management or policies of an 
insured bank or to vote 25 percent or more of any class of voting 
securities of an insured bank.\12\
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    \12\ 12 U.S.C. 1817(j)(1) and (j)(8)(B).
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    A significant difference between OTS and Board regulations relating 
to the CBCA is the ability to use passivity commitments or rebuttal 
agreements to avoid filing a CBCA notice. Unlike the OTS, the Board 
does not allow investors to avoid required filings under the CBCA. The 
CBCA requires only a notice and background review by the Board and, 
unlike the BHC Act or HOLA, does not impose any ongoing activity 
restrictions or other requirements on the filer. For example, the Board 
may determine that a company does not have control for purposes of the 
BHC Act (or in the future, for purposes of HOLA) and rely on passivity 
commitments to support its determination, but that company would 
continue to be required to file a notice under the CBCA if the size of 
the investment triggers a filing under that Act.
    The Board does not anticipate revisiting ownership structures 
previously approved by the OTS. The Board would apply its rules only to 
new investments and would only reconsider the particular structures of 
past investments approved by the OTS if the company proposes a material 
transaction, such as an additional expansionary investment, significant 
recapitalization, or significant modification of business plan.

Financial Holding Company Activities

    Section 606(b) of the Dodd-Frank Act amends HOLA by inserting a new 
requirement that conditions the ability of SLHCs that are not exempt 
from HOLA's restrictions on activities (``Covered SLHCs'') to engage in 
certain activities.\13\ Pursuant to this new requirement, a Covered 
SLHC may engage in activities that are permissible only for a financial 
holding company under section 4(k) of the BHC Act (``4(k) Activities'') 
if the Covered SLHC meets all of the criteria to qualify as a financial 
holding company, and complies with all of the requirements applicable 
to a financial holding company as if the Covered SLHC was a bank 
holding company.\14\
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    \13\ 12 U.S.C. 1467a(c)(2)(H). HOLA provides an exemption from 
activities restrictions for certain SLHCs that only controlled, or 
were in the process of acquiring, one savings association at the 
time the Gramm-Leach-Bliley Act of 1999 was passed and that meet 
certain other criteria. Subsections 10(c)(3) and 10(c)(9)(C) of HOLA 
operate together to establish this exemption. Section 606(b) does 
not modify the operative provisions of either of these subsections 
and therefore should not be interpreted to modify the exemption. See 
12 U.S.C. 1467a(c)(3); 12 U.S.C. 1467a(c)(9).
    \14\ Id.
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    Section 4(l) of the BHC Act, as amended by section 606(a) of the 
Dodd-Frank Act, provides for the following requirements for an 
institution to qualify as a financial holding company: (1) All 
depository institution subsidiaries and the holding company itself must 
be well-managed and well-capitalized; (2) the holding company must file 
an election to engage in activities available only to financial holding 
companies and certify that it meets the above requirements; and (3) all 
depository institution subsidiaries must have a CRA rating of 
``satisfactory'' or better.\15\ Under section 606(b), these new 
conditions on the ability of Covered SLHCs to engage in 4(k) Activities 
took effect on the transfer date.
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    \15\ 12 U.S.C. 1843(l).
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    Prior to the Dodd-Frank Act, the authority for SLHCs to engage in 
4(k) Activities was based on subparagraphs 10(c)(9)(A) and (B) of HOLA, 
which were added to the statute by the Gramm-Leach-Bliley Act of 
1999.\16\ These provisions provide that, after May 4, 1999, no new or 
existing SLHC could conduct activities except for (i) those listed in 
subsection 10(c)(1)(C) or 10(c)(2) of HOLA \17\ or (ii) 4(k) 
Activities. The OTS interpreted this reference to 4(k) Activities to be 
an affirmative grant of authority to all Covered SLHCs to engage in 
4(k) Activities. Because there was no specific statutory requirement to 
do otherwise, the OTS permitted Covered SLHCs to engage in 4(k) 
Activities without having to satisfy any of the financial holding 
company-related criteria in the BHC Act.\18\ As a result, the OTS 
imposed only limited filing requirements on Covered SLHCs with respect 
to 4(k) Activities.\19\
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    \16\ 12 U.S.C. 1467a(c)(9)(A)-(B).
    \17\ 12 U.S.C. 1467(a)(c)(1)(C)-(2).
    \18\ See Notice of Proposed Rulemaking, Authority for Certain 
Savings and Loan Holding Companies to Engage in Financial 
Activities, 66 Federal Register 56488 (November 8, 2001).
    \19\ Prior to the transfer date, in order to engage in 4(k) 
Activities, SLHCs generally were not required to make any pre- or 
post-notice filings with the OTS. See Id.
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    In light of Section 606(b) of the Dodd-Frank Act, the Board 
believes that subsection 10(c)(2)(H) is the only grant of authority in 
HOLA for Covered SLHCs to engage in 4(k) Activities.\20\ Specifically, 
subparagraphs 10(c)(9)(A) and (B) do not grant separate authority to 
engage in 4(k) Activities without having to comply with the standards 
applicable to financial holding companies. As a result, the Board has 
concluded that the statute requires Covered SLHCs that wish to engage 
in 4(k) Activities after the transfer date to file a declaration with 
the Board to elect to be treated as a financial holding company and a 
certification that the financial holding company criteria are satisfied 
for the purpose of engaging in 4(k) Activities.
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    \20\ In this context, subparagraphs 10(c)(9)(A) and (B) of HOLA 
now should be read to act as limitations on the activities that an 
entity that acquires and holds savings associations may engage in.
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    Accordingly, in subpart G of Regulation LL, the Board has adopted 
regulations outlining the processes under which a Covered SLHC may 
elect to be treated as a financial holding company. These regulations 
are similar to those found in the Board's Regulation Y for BHCs. 
Subpart G also establishes a process under which Covered SLHCs 
currently engaged in 4(k) Activities may come into conformance with 
these new requirements.
    After the transfer date, HOLA will continue to permit SLHCs to 
engage in activities other than those implicated by section 606(b) of 
the Dodd-Frank Act. In particular, Covered SLHCs conducting certain 
4(k) Activities may not be subject to financial holding company 
requirements if the activities are permissible pursuant to HOLA 
provisions other than those impacted by section 606(b).

Section 4(c)(8) and 4(k)(4)(F) Activities

    Sections 4(c)(8) and 4(k)(4)(F) of the BHC Act permit BHCs and 
financial holding companies, respectively, to conduct activities the 
Board has determined by rule or order to be ``closely related to 
banking'' (``section 4(c)(8) Activities'').\21\ HOLA also

[[Page 56511]]

permits all SLHCs to conduct these activities.\22\ Under OTS practice, 
the OTS has not required a filing to engage in section 4(c)(8) 
Activities.\23\ After the transfer date, Covered SLHCs that only 
conduct section 4(c)(8) Activities will not need to submit the 
declaration described above. However, any SLHC that begins a new 
section 4(c)(8) Activity after the transfer date and has not made a 
declaration and submitted the appropriate post-notice will need to 
comply with relevant filing requirements in subpart F of this rule.
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    \21\ 12 U.S.C. 1843(c)(8) and 4(k)(4)(F).
    \22\ 12 U.S.C. 1467a(c)(2)(F)(i) (permitting activities listed 
in Section 4(c) of the BHC Act); 12 U.S.C. 1467a(c)(9) (permitting 
activities listed in Section 4(k) of the BHC Act).
    \23\ OTS has taken this view because Section 4(c)(8) Activities 
are a subset of 4(k) Activities, for which no OTS filing has been 
required.
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Insurance Agency Activities

    HOLA also allows SLHCs to engage in insurance and escrow activities 
(``insurance agency activities'').\24\ These activities fall within the 
scope of 4(k) Activities. However, because HOLA provides an explicit 
grant of authority to conduct insurance agency activities, the 
restrictions on 4(k) Activities will not apply to Covered SLHCs with 
respect to insurance agency activities. Accordingly, after the transfer 
date, Covered SLHCs do not have to submit a declaration and adhere to 
the financial holding company limitations in order to engage 
exclusively in this set of activities.
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    \24\ 12 U.S.C. 1467a(c)(2)(B).
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``1987 List'' Activities

    Additionally, HOLA permits SLHCs to engage in activities that 
multiple SLHCs were authorized, by regulation, to directly engage in on 
March 5, 1987.\25\ The OTS identified the activities that satisfy this 
section of HOLA in their regulations (``1987 List'').\26\ Some of the 
activities on the 1987 List, such as real estate development, are not 
permissible for BHCs or financial holding companies. The Dodd-Frank Act 
does not modify or condition the ability of SLHCs to engage in these 
activities. Therefore, the activities identified by the OTS on the 1987 
List remain permissible for Covered SLHCs, subject to the requirements 
in subpart F of Regulation LL. After the transfer date, Covered SLHCs 
do not have to submit a declaration and adhere to the financial holding 
company limitations in order to engage exclusively in this set of 
activities.
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    \25\ 12 U.S.C. 1467a(c)(2)(F)(2).
    \26\ 12 CFR 584.2-1, which can now be found in section 238.53 of 
the Board's rules.
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Dividends by Subsidiary Savings Associations

    Section 10(f) of HOLA provides that a subsidiary savings 
association of an SLHC must file a notice at least 30 days prior to 
declaring a dividend.\27\ Prior to July 21, 2011, these notices were 
filed with the OTS. However, section 369(8)(K) of the Dodd-Frank Act 
provides that such notices are to be filed with the Board after the 
transfer date.
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    \27\ 12 U.S.C. 1467a(f).
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    Subpart K of the interim final rule implements section 10(f) of 
HOLA. This subpart is substantially similar to portions of the OTS 
capital distribution regulation, which governed dividends by subsidiary 
savings associations of SLHCs as well as other savings association 
capital distributions. Subpart K of the interim final rule includes 
only the portions of the OTS capital distribution regulation that 
implement section 10(f) of HOLA.
    In processing notices pursuant to subpart K, the Board will work 
closely with the regulator(s) of a savings association that submits a 
dividend notice. The Board expects for example that on receiving a 
dividend notice pursuant to subpart K, a copy of the notice will 
immediately be sent to the savings association's regulator(s) with a 
request for comment.
    Regulation MM. Regulation MM organizes the current OTS regulations 
specific to SLHCs in mutual form (``MHCs'') and their subsidiary 
holding companies into a single part of the Board's regulations.\28\ 
Previously, regulations governing MHCs were largely found in parts 575 
and 563b of the OTS rules. In many cases, Regulation MM mirrors the 
current OTS rules with only technical modifications to account for the 
shift in supervisory responsibility from the OTS to the Board.\29\
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    \28\ The definition of ``mutual holding company'' in section 
10(o)(10)(A) of HOLA defines an MHC to be ``a corporation organized 
as a holding company under [section 10(o)].'' Thus, the provisions 
of Regulation MM do not apply to an MHC that is not organized under 
section 10(o) of HOLA. MHCs that own a bank (that have not elected 
to be treated as a saving association pursuant to section 10(l) of 
HOLA) remain subject to the BHC Act and related regulations.
    \29\ The Board notes that, in many cases, the former OTS 
regulations applied directly to savings associations and were 
indirectly applied to MHCs and their subsidiary holding companies by 
cross reference. After the transfer date, the Board is the primary 
federal regulator of SLHCs (including MHCs and their subsidiary 
holding companies) and the FDIC and OCC are the primary federal 
regulators of savings associations. As a result, the Board has 
transferred the provisions that applied indirectly to MHCs through 
cross references into Regulation MM and revised them as necessary to 
apply directly to MHCs and their subsidiary holding companies.
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    Regulation MM also reflects several substantive changes to OTS 
regulations. Some of the changes are necessary to take into account 
statutory changes made by the Dodd-Frank Act, and others are intended 
to promote consistent treatment of BHCs and SLHCs. The substantive 
changes are discussed below.

Application Processing

    As discussed above, throughout the new regulations, the Board has 
replaced the OTS procedures with respect to the processing of 
applications and filings with those of the Board to the extent 
possible. In general, the Board has conformed the processing period for 
applications and forms filed by MHCs, subsidiary holding companies of 
MHCs, and any other entities that are required to make a filing 
pursuant to Regulation MM with the standard processing periods 
currently applicable to BHCs. The Board's changes do not alter the 
thresholds for filing an application or notice or the regulatory 
standards of review of any filing. The changes are intended to promote 
uniformity and consistency in the Board's processing of applications 
across the range of filings to the Board.
    The Board is aware that certain conversion applications filed by 
MHCs with the OTS pursuant to part 563b were processed by the OTS 
according to a special six-to-eight week review period, notwithstanding 
the application of the processing periods previously found in subpart E 
of part 516. The Board understands this special review period was 
developed because the review period in part 516 made it highly unlikely 
an applicant would receive approval of a conversion application prior 
to the relevant financial statements' stale date under applicable 
federal securities law.
    The Board will process applications filed by MHCs to convert to 
stock form under the procedures set forth in section 238.14 in 
Regulation LL. The Board's standard 30- or 60-day processing periods 
are generally consistent with past OTS practice of processing 
conversion applications within six-to-eight weeks.\30\ However, section 
238.14 allows the Board to extend the processing period for a specified 
period, and the Board may determine to extend the review period of a 
conversion application beyond 60 calendar days.
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    \30\ Section 239.55 applies the processing period from section 
238.14 in Regulation LL to conversion applications. This processing 
period is consistent with the processing period that has been 
applied to past conversion applications submitted by BHCs in mutual 
form applying to convert to stock form.

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[[Page 56512]]

Waiver of Dividends

    Section 625 of the Dodd-Frank Act amended section 10(o) of HOLA to 
set forth the conditions under which an MHC may waive its right to 
receive dividends declared by a subsidiary of the MHC. Dividend waivers 
are permissible if:
    (1) No insider of the MHC, associate of an insider, or tax-
qualified or non-tax-qualified employee stock benefit plan of the MHC 
holds any share of the stock in the class of stock to which the waiver 
would apply, or
    (2) The MHC gives written notice to the Board of its intent to 
waive its right to receive dividends (``Dividend Waiver Notice'') not 
later than 30 days before the date of the proposed date of payment of 
the dividend, and the Board does not object to the waiver.\31\
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 1467a(o)(11)(B).
---------------------------------------------------------------------------

    With respect to dividend waivers under (2) above, the Dodd-Frank 
Act's amendment to section 10(o) of HOLA distinguishes between those 
MHCs that waived dividends prior to December 1, 2009 (``Grandfathered 
MHCs'') and those that did not (``non-Grandfathered MHCs'').
    For Grandfathered MHCs, new section 10(o)(11) of HOLA provides that 
the Board may not object to a waiver of dividends if: (1) The waiver 
would not be detrimental to the safe and sound operation of the savings 
association; and (2) the MHC's board of directors expressly determines 
that a waiver of dividends by the MHC is consistent with the fiduciary 
duties of the board of directors to the MHC's mutual members. The 
Grandfathered MHC must provide the Dividend Waiver Notice to the Board 
and include a copy of the resolution of the MHC's board of directors, 
in such form and substance as the Board may determine, which concludes 
that the proposed dividend waiver is consistent with the fiduciary 
duties of the board of directors to the mutual members of the MHC.\32\
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    \32\ 12 U.S.C. 1467a(o)(11)(C).
---------------------------------------------------------------------------

    Section 239.8(d) of Regulation MM implements the statutory 
framework for dividend waivers. To address the concern with respect to 
the inherent conflict of interest created by the waiver of dividends, 
section 239.8(d)(3) requires that the resolution of the MHC's board of 
directors contain certain elements designed to disclose and mitigate 
this conflict of interest. First, the board resolution must describe 
the conflict of interest that exists because of an MHC director's 
ownership of stock in the subsidiary declaring dividends and any 
actions the MHC and board of directors have taken to eliminate the 
conflict of interest, such as the directors waiving their right to 
receive dividends. Second, the resolution must contain an affirmation 
that a majority of the mutual members eligible to vote have, within the 
12 months prior to the declaration date of the dividend, voted to 
approve the waiver of dividends. Any proxy statement used in connection 
with the member vote must include disclosure of any MHC director's 
ownership of stock in the subsidiary. The Board requests comment 
concerning the substance of the board resolution and whether any 
additional provisions should be required to ensure that the fiduciary 
duties of the directors have been satisfied.
    HOLA is silent with respect to the standards the Board should 
consider when reviewing a Dividend Waiver Notice filed by non-
Grandfathered MHCs, and does not limit the Board's ability to deny such 
waivers. Consistent with the view that dividend waiver requests raise 
inherent conflict of interest issues, section 239.8(d)(4) would apply 
to non-Grandfathered MHCs all requirements applicable to Grandfathered 
MHCs' requests to waive dividends and would impose additional 
conditions that must be satisfied by non-Grandfathered MHCs before the 
Board will approve a request to waive dividends. These conditions are 
designed to highlight for the mutual members the conflict of interest 
inherent in dividend waivers where MHC directors own shares of the 
subsidiary issuing dividends. The conditions also are designed to 
employ certain accounting practices to ensure that the mutual members' 
financial interests in the MHC are protected in the event the MHC 
converts to stock form or is forced to liquidate.
    Specifically, non-Grandfathered MHCs must submit a copy of the non-
Grandfathered MHC's board resolution pursuant to paragraph 239.8(d)(2) 
and must also satisfy each of the conditions provided in paragraph 
239.8(d)(4).
    Non-Grandfathered MHCs need only satisfy one of the two conditions 
provided in paragraph 239.8(d)(4)(v). Paragraph 239.8(d)(4)(v)(A) 
requires a majority of the board of directors of the non-Grandfathered 
MHC to approve the waiver of dividends. Any director with direct or 
indirect ownership, control, or the power to vote shares of the 
subsidiary declaring the dividend, or who otherwise directly or 
indirectly benefits through an associate from the waiver of dividends, 
must abstain from the board vote. Regardless of the number of director 
abstentions, a majority of the entire board of directors must approve 
the waiver of dividends-not just a majority of the directors who vote. 
For example, if a non-Grandfathered MHC's board of directors has a 
total of nine members and four directors must abstain from the vote, 
all five voting directors must approve the waiver of dividends.
    If unable to comply with the procedures described above, Non-
Grandfathered MHCs may instead comply with subparagraph 
239.8(d)(4)(v)(B) under which each officer or director of the MHC or 
its affiliates, associate of such officer or director, and any tax-
qualified or non-tax-qualified employee stock benefit plan in which 
such officer or director participates that holds any share of the stock 
in the class of stock to which the waiver would apply waives their 
rights to dividends. The Board notes that for the purpose of 
subparagraph 239.8(d)(4)(v)(B) the tax-qualified or non-tax-qualified 
employee stock benefit plans in which an officer or director of the MHC 
or its affiliates may participate that hold any share of the stock in 
the class of stock to which the waiver would apply may include plans 
other than those offered or sponsored by the MHC or its affiliates.
    Non-Grandfathered MHCs should include in the Dividend Waiver Notice 
submitted to the Board pursuant to paragraph 239.8(d)(1)(ii) a 
description of the non-Grandfathered MHC's compliance with each of the 
requirements listed in paragraph 239.8(d)(4). Each of the requirements 
in paragraph 239.8(d)(4) should be addressed individually in the 
Dividend Waiver Notice.
    The Board requests comment on whether the conditions sufficiently 
address concerns regarding the inherent conflict of interest with 
dividend waivers. The Board also requests comment with respect to the 
conditions that require specific accounting of waived dividends.

Offering Circulars, Forms of Proxy, and Proxy Statements

    The Board has revised the process for review of offering circulars, 
forms of proxy, and proxy statements used in connection with MHC 
transactions. Under part 563b of the OTS regulations, the OTS declared 
effective offering circulars and approved forms of proxy and proxy 
statements. MHCs and their subsidiary holding companies were not 
permitted to conduct a securities offering or solicit proxies until the 
OTS declared effective or approved these documents, as relevant.
    The Board will continue to require MHCs and their subsidiary 
holding

[[Page 56513]]

companies to file offering circulars on Form OC and proxy statements on 
Form PS in the context of an application to the Board. The Board will 
closely review these documents in its review of an application as a 
whole and may comment on the adequacy, completeness, or accuracy of 
information in any of these documents. However, consistent with the 
Board's current practice with respect to bank holding companies and 
state member banks, the Board will not declare offering circulars 
effective and will not approve proxies or proxy statements. The Board 
may require an applicant make certain changes to any offering circular, 
form of proxy, or proxy statement.
    MHCs and subsidiary holding companies of MHCs must continue to 
abide by all applicable federal and state securities laws, rules, and 
regulations. For instance, the Board expects that all securities 
offering documents and proxy materials provided in the context of a 
securities offering will be governed by regulations and policies of the 
Securities and Exchange Commission (``SEC''), a state securities 
regulator as relevant, and the Board. For forms of proxy and proxy 
statements provided to mutual members and not filed with the SEC, the 
Board requires that all documents comply with all applicable Board 
regulations and policies.
    The Board requests comment regarding its review of offering 
circulars, forms of proxy, and proxy statements. The Board requests 
specific comment on whether there are circumstances in which an MHC or 
subsidiary holding company's offering circular would not be reviewed or 
declared effective by the SEC or approved by a state securities 
regulator. The Board also requests comment on whether it should 
continue to require MHCs and subsidiary holding companies of MHCs to 
file proxy statements on Form PS for proxies sent to shareholders, or 
if the Board should require only that MHCs and their subsidiary holding 
companies file proxy statements that conform to state and federal 
securities laws, rules, and regulations.
    The Board also requests specific comment on whether MHCs or 
subsidiary holding companies should be allowed to submit securities 
materials on the appropriate SEC forms, as opposed to on Form PS or 
Form OC, if the securities materials are subject to SEC review.

Stock Repurchases

    The Board has extended the prior notice period for stock 
repurchases by a resulting stock holding company within the first year 
of conversion from mutual to stock form. Under the interim final rule, 
a resulting stock holding company will be required to provide 30 days 
prior notice to the Board before engaging in a stock repurchase, which 
can be extended by the Board for an additional 60 days. Under section 
563b.515 of the OTS regulations, resulting stock holding companies were 
required to provide a 10-day prior notice.
    In addition, the Board expects that stock repurchases within a 
short period of time after conversion would generally constitute a 
material change from the business plan considered in connection with 
the conversion. In this case, the resulting stock holding company would 
be required to obtain prior approval from the Board before the material 
change to the business plan could be considered effective.
    Technical Amendments. The Board has made technical amendments to 
Board rules to facilitate supervision of SLHCs. These amendments 
include revisions to the interagency rules implementing requirements 
relating to the Community Reinvestment Act, as well as the procedural 
and administrative rules of the Board including those relating to the 
Freedom of Information Act. In general, the amendments add SLHCs to the 
institutions covered by the rule and create mirrored provisions to 
accommodate transactions under HOLA.
    In addition, the Board made technical amendments to implement 
section 312(b)(2)(A) of the Dodd Frank Act,\33\ which transfers to the 
Board all rulemaking authority under section 11 of HOLA relating to 
transactions with affiliates and extensions of credit to executive 
officers, directors, and principal shareholders.\34\ These amendments 
include revisions to parts 215 (Insider Transactions) \35\ and part 223 
(Transactions with Affiliates) \36\ of Board regulations.
---------------------------------------------------------------------------

    \33\ 12 U.S.C. 5412.
    \34\ 12 U.S.C. 1468.
    \35\ 12 CFR part 215 (Regulation O).
    \36\ 12 CFR part 223 (Regulation W).
---------------------------------------------------------------------------

III. Section-by-Section Analysis.

Regulation LL

1. Subpart A General Provisions
A. 238.1 Authority, Purpose and Scope
    This section sets forth the authority, purpose, and scope for the 
interim final rule.
B. 238.2 Definitions
    This section combines definitions from parts 574 and 583 of the OTS 
regulations in one location. Several definitions that were not used in 
the text of the rules were eliminated or moved to locations that 
correspond with placement in Regulation Y. Other definitions were 
modified or changed to those used in Regulation Y.
    Specifically, the definition of ``bank holding company,'' 
``person,'' ``shareholder,'' ``stock,'' ``voting securities'' 
(including voting and nonvoting shares) were modified to reflect the 
definitions in Regulation Y. The definition of ``savings association'' 
was modified to eliminate the inclusion of SLHCs within the definition. 
The definition of ``savings and loan holding company'' was modified to 
reflect two new exceptions to HOLA included in the Dodd-Frank Act. 
Section 10(a)(1)(D) of HOLA, as amended by section 604 of the Dodd-
Frank Act, now excludes from the definition of ``savings and loan 
holding company'' a company that controls a savings association that 
functions solely in a trust or fiduciary capacity as provided in 
section 2(c)(2)(D) of the BHC Act, as well as a company, described in 
section 10(c)(9)(C) of HOLA that would be a SLHC solely by virtue of 
such company's control of an intermediate holding company established 
under section 10A of HOLA.
    This section also includes definitions of ``well managed'' and 
``well capitalized'' for SLHCs. ``Well managed'' takes the meaning 
provided in section 225.2(s) of Regulation Y for BHCs, except that it 
clarifies that a ``satisfactory rating for management'' may mean either 
a management or risk-management rating, whichever rating is given. The 
definition of well-capitalized for SLHCs differs from the similar 
standard for BHCs because SLHCs are not currently subject to regulatory 
capital requirements. Instead, a SLHC will be considered well-
capitalized if (i) all of its subsidiary savings associations and other 
subsidiary depository institutions are well capitalized, and (iii) the 
SLHC is not subject to any outstanding formal administrative order or 
enforcement actions relating to capital.
    As discussed in the Board's Notice of Intent issued on April 15, 
2011, the Board, together with the other Federal banking agencies, is 
reviewing consolidated capital requirements for all depository 
institutions and their holding companies pursuant to section 171 of the 
Dodd-Frank Act and the Basel Committee on Banking Supervision's ``Basel 
III: A global regulatory framework for more resilient banks and banking 
systems'' report (``Basel III''). It is expected that the Basel III 
notice of proposed rulemaking also would

[[Page 56514]]

address any proposed application of Basel III-based requirements to 
SLHCs. When the rule-making process is complete, this definition will 
be changed to be more closely aligned to the definition of well-
capitalized for BHCs.
C. 238.3 Administration
    Section 238.3 includes two paragraphs that clarify some 
administrative processes of the Board that are specifically relevant to 
the provisions in these regulations. Paragraph (a) specifies that the 
Board has delegated certain functions to designated Board members and 
officers as well as the Federal Reserve Banks. These delegations can be 
found in parts 262 and 265 of the Board's rules, and in Board orders. 
In connection with the issuance of this interim final rule, the Board 
has approved an order extending to SLHCs many of the delegations in 
part 265 and in previous Board orders that are currently applicable to 
BHCs.
    In administering this regulation, the Board often relies on 
appropriate Reserve Banks to take certain actions, including on 
applications. Paragraph (b) clarifies the factors used in determining 
the appropriate Reserve Bank for a particular SLHC or for companies and 
individuals filing under the CBCA. If the standard delegation could 
impede the ability of the Federal Reserve to perform its functions 
under law, would not result in an efficient allocation of supervisory 
resources, or would not otherwise be appropriate, the Board may 
designate another appropriate Reserve Bank.
D. 238.4 Records, Reports, and Inspections
    This section combines provisions that apply to SLHCs from sections 
562.1, 562.2, and 584.1 of the OTS rules which establish basic records 
and reporting requirements. Minor changes have been made to these 
provisions to reflect similar provisions in Regulation Y.
    All reports required by the Board can be found on the Board's 
public Web site.\37\ As discussed in the Board's Notice of Intent 
issued on February 3, 2011, the Board anticipates transitioning SLHCs 
to the Board's reporting forms. The Board has considered the comments 
received on that Notice and will be issuing a revised proposal for 
comment shortly. Until such time as that proposal is finalized, SLHCs 
must still submit all current reports on the schedule prescribed by the 
OTS. As noted above, the Board will carryover the OTS applications 
forms, with technical changes, for the time being.
---------------------------------------------------------------------------

    \37\ See Reporting Forms at: http://www.federalreserve.gov/reportforms/default.cfm.
---------------------------------------------------------------------------

    This section also includes the registration and deregistration 
process provided for in HOLA. This interim final rule expands the 
deregistration process to include situations where a company no longer 
qualifies as a SLHC, in addition to when a company no longer controls a 
savings association. This change is to accommodate exemptions added to 
the definition of ``savings and loan holding company'' by the Dodd-
Frank Act that are discussed in detail above.
E. 238.5 Audit of Savings Association Holding Companies
    This section contains the provisions of section 562.4 of the OTS 
rules. These provisions require an independent audit for safety and 
soundness purposes for SLHCs that control a savings association(s) with 
aggregate consolidated assets of $500 million or more.
F. 238.6 Penalties for Violations
    Section 238.6 of Regulation LL puts SLHCs on notice that section 10 
of HOLA provides for criminal and civil penalties for violations by any 
company or individual of HOLA or any regulation or order issued under 
it, as well as for making a false entry in any book, report, or 
statement of an SLHC. This section also specifies that the Board may 
institute a cease-and-desist order for any violation of HOLA, the CBCA 
or this regulation. The Board has provisions for BHCs in section 225.6 
of Regulation Y.
G. 238.7 Tying Restriction Exception
    Section 312(b)(2) of the Dodd-Frank Act \38\ gives the Board rule-
writing authority with respect to section 5(q) of HOLA, which contains 
tying restrictions for savings associations.\39\ This section of the 
interim final rule contains the provisions previously found in section 
563.36 of the OTS rules. Although the requirements for savings 
associations are comparable to those applicable to banks under the 
Board's Regulation Y, this section also applies these restrictions 
reciprocally to SLHCs. BHCs are not subject to equivalent restrictions 
under current Board rules. In the future, the Board will evaluate if 
these rules should be conformed. Additionally, following the transfer 
date, the Board has authority under section 5(q) to grant exceptions to 
these restrictions, after consultation with the OCC and the FDIC, so 
long as any exception conforms to section 106 of the Bank Holding 
Company Amendments of 1970.\40\
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    \38\ 12 U.S.C. 5412.
    \39\ 12 U.S.C. 1464.
    \40\ 12 U.S.C. 1972(1).
---------------------------------------------------------------------------

H. 238.8 Safe and Sound Operations
    This section of the interim final rule states that a SLHC must 
serve as a source of financial and managerial strength to its 
subsidiary savings associations and may not conduct its operations in 
an unsafe and unsound manner. Although these are long standing 
prudential standards applied by the Board, section 38A of the Federal 
Deposit Insurance Act (``FDI Act''), as amended by section 616(d) of 
the Dodd-Frank Act, now requires all SLHCs to serve as a source of 
strength to their subsidiary depository institutions.\41\
---------------------------------------------------------------------------

    \41\ 12 U.S.C. 1831o-1.
---------------------------------------------------------------------------

    Additionally, this section of the interim final rule specifies that 
if the Board believes that an activity of the SLHC or a nonbank 
subsidiary constitutes a serious risk to the financial safety, 
soundness, or stability of a subsidiary savings association and is 
inconsistent with the principles of sound banking, the purposes of HOLA 
or other applicable statutes, the Board may require the SLHC to 
terminate the activity or divest control of the nonbanking subsidiary. 
This obligation is established in section 10(g)(5) of HOLA \42\ and 
BHCs are subject to equivalent obligations under the BHC Act and 
Regulation Y.
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    \42\ 12 U.S.C. 1467a(g)(5).
---------------------------------------------------------------------------

2. Subpart B Acquisitions of Savings Association Securities or Assets
A. 238.11 Transactions Requiring Board Approval
    This section specifies certain acquisition transactions involving 
savings associations and SLHCs that require the prior approval of the 
Board under section 10(e) of HOLA.\43\ These prior approval 
requirements were previously found in section 574.3(a) and section 
584.4 of the OTS regulations. As discussed above, although OTS 
regulations integrated the concepts of prior approval under HOLA and 
the CBCA with respect to companies, the prior approval requirements 
found in subpart B only relate to the requirements of HOLA.
---------------------------------------------------------------------------

    \43\ 12 U.S.C. 1467a(e).
---------------------------------------------------------------------------

B. 238.12 Transactions Not Requiring Board Approval
    Section 238.12 of Regulation LL outlines certain acquisition 
transactions involving savings associations or SLHCs that do not 
require the prior approval of the Board. These exclusions from prior 
notice requirements were previously

[[Page 56515]]

found at sections 574.4(c) and 584.4(c) of the OTS rules and only 
include minor modifications. Because there is a separate regulatory 
provision relating to CBCA, this section does not include the 
exceptions from prior notice for CBCA filings that were also included 
in section 574.4(c). Those provisions can now be found in subpart D.
    Section 10(e) of HOLA requires SLHCs to request prior approval to 
acquire a savings association through merger. The Bank Merger Act \44\ 
also requires savings associations to seek prior approval to acquire 
another savings association by merger. As a result, when a savings 
association owned by a SLHC acquired another savings association by 
merger, the OTS required both the SLHC and the savings association to 
submit requests for prior approval under the appropriate statute. This 
requirement did not lead to unnecessary duplication because the same 
agency and staff processed both requests concurrently. However, now 
that SLHCs and savings associations will be regulated and supervised by 
separate agencies, the Board has considered whether SLHCs should be 
required to submit an application under HOLA for certain merger and 
reorganization transactions. The Board has determined that SLHCs should 
be provided exceptions similar to those provided to BHCs in Regulation 
Y. As a result, paragraph (d) sets forth regulations governing the 
conditions under which certain transactions subject to the Bank Merger 
Act and internal corporate reorganizations would not require the 
Board's approval under section 238.11 of subpart B.
---------------------------------------------------------------------------

    \44\ 12 U.S.C. 1828.
---------------------------------------------------------------------------

    Paragraph (d) of this section is intended to reduce regulatory 
burden in certain circumstances by eliminating the requirement to file 
an application if the core of the proposal is a merger subject to the 
Bank Merger Act. The Board recognizes that, in such circumstances, no 
regulatory purpose would be served by requiring an application to 
provide essentially the same information for a minor part of the 
proposal. The Board retains jurisdiction over these transactions, 
however, because it recognizes that a proposal may have an effect on 
financial, managerial, and other resources of the parent holding 
company, which would not be reviewed by the primary regulator of the 
transaction under the Bank Merger Act. Alternatively, a proposal may 
raise other issues regarding factors over which the Board has primary 
or exclusive jurisdiction under HOLA. Accordingly, paragraph (d) 
provides that the Board or Reserve Bank may inform the holding company 
that an application is required if the proposal presents issues unique 
to the Board's jurisdiction. Paragraph (d) also makes clear that 
transactions involving holding companies organized in mutual form, 
subsidiary holding companies of SLHCs organized in mutual form, or 
depository institutions organized in mutual form do not qualify for 
waivers of the Board's approval requirements under section 238.11 of 
subpart B.
    Additionally, paragraph (d) of this section provides an exemption 
for certain transactions performed in the United States that constitute 
an internal corporate reorganization by an SLHC. The transaction must 
be solely a reorganization involving holding companies and insured 
depository institutions that both, preceding and following the 
transaction, are lawfully controlled by the same top-tier holding 
company. In addition, the companies and insured depository institutions 
must not have acquired additional voting securities, and they must have 
complied with the other requirements in paragraph (d) of this section.
    Paragraph (d) of this section is substantially similar to section 
225.12 of subpart B of the Board's Regulation Y. References to SLHCs 
have generally been substituted for references to BHCs, and references 
to savings associations have generally been substituted for references 
to banks. In addition, consistent with the overall approach taken in 
this interim final rule, the Board has substituted its procedures for 
those of the OTS with respect to filing and informational requirements. 
The Board also will process requests submitted pursuant to this section 
in the same manner as it processes requests submitted under section 
225.12 of Regulation Y.
C. 238.13 Prohibited Acquisitions
    This section of the interim final rule contains provisions from 
sections 584.8(d) and 584.9 of the OTS rules, which prohibit certain 
types of transactions by an SLHC related to uninsured savings 
associations and mutual savings associations. The remaining provisions 
of section 584.9 have been integrated into Regulation LL at other 
locations.
D. 238.14 Procedural Requirements
    As discussed above, the Board has replaced OTS processing 
requirements for applications and notices with those currently used by 
the Board for similar transactions. As a result, section 238.13 of the 
interim final rule replaces part 516 and section 574.6 of the OTS 
rules. The requirements in this section are similar to those found in 
sections 225.15 and 225.16 of the Board's Regulation Y with respect to 
applications submitted by BHCs.
    Paragraph (a) of this section indicates that applications required 
under section 238.11 must be filed with the appropriate Reserve Bank on 
the designated form. As noted above, investors can find all application 
and notice forms on the Board's public Web site, as well as additional 
information about the applications process and the Board's electronic 
application submission system.\45\
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    \45\ See Application Filing Information at http://www.federalreserve.gov/generalinfo/applications/afi/.
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    Paragraph (b) of this section notes that applicants may request 
confidential treatment for portions of their application under the 
Board's Freedom of Information Act regulations found at part 261.
    Paragraph (c) specifies the public notice requirements for 
applications required under this subpart. Generally, the newspaper 
publication requirement is the same as that previously found in the OTS 
rules. However, the Board also publishes notices of proposed 
acquisitions in the Federal Register and provides interested persons 
the opportunity to comment on the proposal for a period no longer than 
30 days. This paragraph also permits advance publication as well as 
waiver or shortening of these notice requirements in the case of a 
failure or if the Board determines that an emergency exists that 
requires expeditious action.
    Paragraph (d) outlines the Board's rules with regard to public 
comment, including determining when a comment is timely, when a comment 
is of substance, and when the comment period may be extended.
    Paragraph (e) specifies that the Board may order a formal or 
informal hearing or other proceeding on an application and that any 
requests for a hearing must comply with the requirements of part 262 of 
the Board's rules.
    Paragraph (f) of this section requires the Reserve Bank to accept 
applications submitted under this subpart for processing within 7 
calendar days of filing. Substantially incomplete applications will be 
returned. The paragraph also indicates that a copy of each application 
will be sent to the Board and the primary bank supervisor for the 
savings association to be acquired.
    Paragraph (g) outlines the processing timeline for applications 
submitted under this subpart. Except as otherwise

[[Page 56516]]

provided, Reserve Banks may act on applications under delegated 
authority not earlier than the third business day following the close 
of the public comment period, and not later than the fifth business day 
following the close of the public comment period or the 30th day after 
the acceptance of the application. The Board must act on an application 
within 60 calendar days after the acceptance of the application unless 
the Board extends the processing time for a specified period and states 
the reasons for the extension. Both the Board and the Reserve Bank may 
request additional information throughout the processing period if 
necessary. An application will be deemed approved if the Board fails to 
act on an application within 91 calendar days after the submission to 
the Board of the complete record. This paragraph defines when the Board 
considers a record on an application to be complete. Finally, this 
paragraph creates an expedited process for certain reorganizations.
E. 238.15 Factors Considered in Acting on Applications
    This section includes the factors that the Board will use to review 
applications submitted under this subpart. To the extent that the 
factors for review under section 10(e) of HOLA are the same as those 
found in section 3 of the BHC Act, the language in this section has 
been conformed to that found in Regulation Y. This section does 
preserve the presumptive disqualifier related to the integrity and 
financial factors that were found in section 574.7 of the OTS rules.
3. Subpart C Control Proceedings
    As discussed in detail above, Regulation LL modifies the 
regulations previously used by the OTS for purposes of determining when 
a company or natural person acquires control of a savings association 
or SLHC under HOLA. The OTS regulations relating to control 
determinations and rebuttals under HOLA, including the rebuttable 
control factors and process in section 574.4, the certification of 
ownership in section 574.5, and the rebuttal agreement in 574.100, will 
not be enforced by the Board. In its place, Regulation LL adopts 
provisions equivalent to those found in subpart D of Regulation Y. 
These provisions establish the process under which the Board may issue 
a preliminary determination of control and the presumptions the Board 
will use in any such proceeding.
4. Subpart D Change in Bank Control
    Consistent with its views expressed above, the Board has concluded 
that it is appropriate to use its own rules and processes with respect 
to application of the CBCA to ensure consistency between equivalent 
statutes administered by the same agency. As a result, Regulation LL 
conforms OTS regulations relating to control determinations and 
rebuttals under the CBCA with those currently found in Regulation Y and 
that are applicable to BHCs and state member banks.
    Accordingly, subpart D of the interim final rule is substantially 
similar to the current subpart B of Regulation Y with technical and 
conforming changes. For example, references to BHCs and state member 
banks have been replaced where appropriate with references to SLHCs. In 
addition, section 238.32(a)(4) and (5), the exemptions have been 
modified to refer to the appropriate provisions of HOLA.
5. Subpart E Qualified Stock Issuances
    Sections 10(a)(4) and (o) of HOLA pertain to certain issuances of 
new voting shares to an unaffiliated SLHC by an undercapitalized 
savings association or by its parent SLHC.\46\ The statute provides 
that the acquiring SLHC will not be deemed to control the issuer so 
long as the acquirer will not after the acquisition own or control more 
than 15 percent of the issuer, certain other conditions are met, and 
the appropriate federal banking agency for the acquiring SLHC approves 
the acquisition.
---------------------------------------------------------------------------

    \46\ 12 U.S.C. 1467a(a)(4) and 1467a(o).
---------------------------------------------------------------------------

    The OTS implementing regulation with respect to qualified stock 
issuances is located at part 574.8. Subpart E of the Regulation LL 
interim final rule is substantially similar to 574.8, with appropriate 
adjustments to reflect the transfer of supervisory authority for SLHCs 
from OTS to the Board, and the use of Board applications processing 
procedures instead of OTS applications processing procedures.
6. Subpart F Savings and Loan Holding Company Activities and 
Acquisitions
    This subpart of this interim final rule contains provisions that 
were previously found at section 584.2 through 584.2-2 of the OTS 
regulation, which outline the nonbanking activities permissible for 
SLHCs and require prior approval in order to engage in these activities 
in certain situations. Regulation LL makes appropriate adjustments to 
reflect the transfer of supervisory authority for SLHCs from OTS to the 
Board as well as the use of Board applications processing procedures. 
Additionally, the Board will note that, in the near future, the Board 
may propose modifying these application and notice processes in order 
to better align them with those required by BHCs in order to engage in 
identical nonbanking activities.
7. Subpart G Financial Holding Company Activities
    As discussed separately above, section 606(b) of the Dodd-Frank Act 
amends HOLA to require SLHCs that wish to engage in financial holding 
company activities to be well-capitalized and well-managed at both the 
holding company and savings association level.\47\ Additionally, HOLA, 
as amended, requires SLHCs seeking to engage in financial holding 
company activities to otherwise comply with other financial holding 
company obligations, such as providing a notice to the Board after 
commencing a financial holding company activity or consummating an 
acquisition of a company engaged in 4(k) Activities. Subpart G of the 
interim final rule implements these requirements. Subpart G does not 
apply to SLHCs described in section 10(c)(9)(C) of HOLA.\48\
---------------------------------------------------------------------------

    \47\ 12 U.S.C. 1467a(c)(2).
    \48\ 12 U.S.C. 1467a(c)(9)(C). These SLHCs are referred to as 
``grandfathered unitary savings and loan holding companies.''
---------------------------------------------------------------------------

A. 238.64 Election Required
    This section of the interim rule specifies that SLHCs seeking to 
engage in 4(k) Activities must file an election to be treated as a 
financial holding company and have that election be deemed effective by 
the Federal Reserve. No Covered SLHC may commence a 4(k) Activity or 
consummate the acquisition of shares of a company engaged in 4(k) 
Activities unless it has filed an effective election to be treated as a 
financial holding company. This section also explains that if a Covered 
SLHC engages only in activities otherwise permissible under HOLA, no 
election is required.
B. 238.65 Election Procedures
    This section outlines the process that an SLHC should follow to 
make an effective election, including the content of the declaration. 
This section rule specifies that the declaration should contain the 
following:
     A statement that the Covered SLHC elects to be treated as 
a financial holding company in order to engage in activities 
permissible for a financial holding company;
     The name and head office address of the Covered SLHC and 
of each

[[Page 56517]]

depository institution controlled by the Covered SLHC;
     A certification that the Covered SLHC and each depository 
institution controlled by the Covered SLHC is well capitalized as of 
the date the Covered SLHC submits its declaration;
     A certification that the Covered SLHC and each depository 
institution controlled by the Covered SLHC are well managed as of the 
date the Covered SLHC submits its declaration.
    An election filed by a Covered SLHC to be treated as a financial 
holding company is effective on the 31st calendar day after the date 
that a complete declaration is filed with the appropriate Reserve Bank, 
unless the Board notifies the SLHC prior to that time that the election 
is ineffective. The Board or the appropriate Reserve Bank may notify an 
SLHC that its election is effective prior to the 31st day after the 
date that a complete declaration is filed with the appropriate Reserve 
Bank. Such notification must be in writing. An election by a SLHC shall 
not be effective if, during the 31 day period, the Board finds that, as 
of the date the declaration was filed with the appropriate Reserve 
Bank: (i) any insured depository institution controlled by the SLHC 
(except institutions excluded under paragraph (d) of section 238.65, 
including under certain circumstances savings associations acquired 
during the 12-month period preceding the filing of the election) has 
not achieved at least a rating of ``satisfactory record of meeting 
community credit needs'' under the Community Reinvestment Act at the 
savings association's most recent examination; or (ii) the SLHC or any 
depository institution controlled by the SLHC is not both well 
capitalized and well managed.
Special Rules for the OTS Transfer Date
    This section also contains special rules applicable to SLHCs that 
are engaged in 4(k) Activities on the transfer date. Prior to the Dodd-
Frank Act, Covered SLHCs were not required to file with the OTS to 
engage in 4(k) Activities. However, given that the amendment to HOLA 
establishing these additional requirements was effective on the 
transfer date, the Board expects all Covered SLHCs wishing to continue 
4(k) Activities to provide a declaration as described above, along with 
a description of the 4(k) Activities conducted by the SLHC, to the 
Board by December 31, 2011. These elections will be effective on the 
61st day after the date a complete declaration and description of 4(k) 
Activities is filed with the appropriate Reserve Bank, unless the Board 
notifies the SLHC prior to that time that the election is ineffective.
    This section also creates a special process for those Covered SLHCs 
engaged in 4(k) Activities on the transfer date that are not able to 
file a declaration that can be declared effective. These Covered SLHCs 
are required to file an alternate declaration with the Board by 
December 31, 2011 that includes (i) a list of the 4(k) Activities they 
engage in, (ii) a description of why the SLHC cannot file a declaration 
that can be declared effective, and (iii) a description of how the 
Covered SLHC will achieve compliance prior to June 30, 2012.
    Covered SLHCs that are not able to file a declaration that can be 
declared effective are subject to the same notice, remediation 
agreement, divestiture and other provisions that apply to financial 
holding companies that fail to meet the requirements of section 4(l) of 
the BHC Act. These rules are stated in section 4(m) of the BHC Act and 
the Board's implementing regulations, and are referred to below. 
However, in exercising its discretion under these processes, the Board 
will take into account the fact that previously Covered SLHCs were not 
subject to the new requirements implemented pursuant to section 606(b) 
of the Dodd-Frank Act and this rule. The Board intends to review the 
individual circumstances of Covered SLHCs and apply reasonable 
deadlines in light of those circumstances.
C. 238.66 Ongoing Requirements
    This section outlines the ongoing obligations of a Covered SLHC 
that has made an effective election and the consequences of failing to 
meet the applicable requirements. In general, a Covered SLHC that has 
made an effective election to be treated as a financial holding company 
is subject to the requirements applicable to a financial holding 
company under sections 4(l) and 4(m) of the BHC Act and the regulations 
thereunder and section 804(c) of the Community Reinvestment Act of 1977 
\49\ as if the Covered SLHC was a BHC. The language in this section 
imposes the notice, approval and other requirements of Regulation Y to 
these Covered SLHCs, specifically the provisions of sections 225.83 
through 225.89. Certain provisions, as discussed below, will also be 
applied to Covered SLHCs themselves as a result of section 606(a) of 
the Dodd-Frank Act.
---------------------------------------------------------------------------

    \49\ 12 U.S.C. 2903(c).
---------------------------------------------------------------------------

Notification Requirements
    In general, a SLHC that has made an effective election to be 
treated as a financial holding company may conduct the activities 
listed in section 225.86 of Regulation Y subject to the notice, 
approval, and any other requirements described in sections 225.85 
through 225.89 of Regulation Y. Section 225.83(a) of the Board's 
existing regulations provides that the Board will notify a financial 
holding company if the Board finds that the company controls any 
depository institution that is not well capitalized or well managed. 
After the transfer date, consistent with section 606(a) of the Dodd-
Frank Act, the Board intends to also notify a financial holding company 
if the Board finds that the company itself is not well capitalized or 
well managed. Similarly, after the transfer date, the Board intends to 
notify Covered SLHCs if their depository institutions or the Covered 
SLHC itself is not well capitalized or well managed.
    In addition, in recognition of the fact that a company may know 
that one of its depository institution subsidiaries has ceased to be 
well capitalized or well managed before its regulators will have access 
to such data, the Board's current regulations provide that a financial 
holding company must notify the Board in writing within 15 calendar 
days of becoming aware that any depository institution controlled by 
the company has ceased to be well capitalized or well managed.\50\ 
Consistent with section 606(a) of the Dodd-Frank Act, the Board intends 
to require that a Covered SLHC must also provide such notification when 
the company has ceased to be well capitalized or well managed. 
Accordingly, for Covered SLHCs that file the declaration described 
above and thereafter cease to meet the well-capitalized and well-
managed requirements of section 4(l), the Board intends to apply a 
similar 15-day notice requirement in a rule.
---------------------------------------------------------------------------

    \50\ 12 CFR 225.83(b)(1).
---------------------------------------------------------------------------

Remediation Requirements
    Pursuant to section 4(m) of the BHC Act and the Board's existing 
regulations for BHCs, within 45 days (plus any additional time that the 
Board may grant) after receiving a notice of noncompliance from the 
Board, a company must execute an agreement with the Board to comply 
with applicable capital and management requirements.\51\ Until the 
Board determines that all deficiencies have been corrected, a company 
may not engage in any additional activity or

[[Page 56518]]

acquire control or shares of any company under section 4(k) of the BHC 
Act without prior approval from the Board.\52\ If the conditions giving 
rise to a notice of noncompliance are not corrected within 180 days (or 
such longer period permitted by the Board), the Board may order the 
company to divest its subsidiary depository institutions.\53\ A company 
may comply by instead ceasing to engage in activities that are 
permissible only for financial holding companies.\54\
---------------------------------------------------------------------------

    \51\ 12 U.S.C. 1843(m)(2); 12 CFR 225.83(c).
    \52\ 12 CFR 225.83(d).
    \53\ 12 CFR 225.83(e)(1).
    \54\ 12 CFR 225.83(e)(2)
---------------------------------------------------------------------------

    As required by section 606(b) of the Dodd-Frank Act, the Board 
intends to apply these processes analogously to Covered SLHCs. After 
the transfer date, consistent with section 606(a) of the Dodd-Frank 
Act, the Board further intends that a financial holding company or a 
Covered SLHC that itself fails to remain well capitalized or well 
managed will also be subject to these analogous remedial measures.
8. Subpart H Notice of Change of Director or Senior Executive Officer
    Subpart H sets forth regulations governing the filing of notices 
with respect to the service of individuals as directors or senior 
executive officers of SLHCs in troubled condition. These regulations 
implement section 32 of the FDI Act.\55\
---------------------------------------------------------------------------

    \55\ 12 U.S.C. 1831i.
---------------------------------------------------------------------------

    Subpart H of the interim final rule is substantially similar to 
subpart H of part 563, the OTS regulation implementing section 32. 
References to the Board or Reserve Bank have been substituted for 
references in the OTS regulations to OTS. In addition, consistent with 
the overall approach taken in this interim final rule, the Board has 
substituted its procedures for those of the OTS with respect to the 
filing and informational requirements.
    Subpart H of the interim final rule also provides for appeals and 
for informal hearings to be requested in the event of disapproval of a 
notice. These provisions are modeled on the appeals and hearing 
provisions of the Board's regulations implementing the section 32 
requirements with respect to BHCs and state member banks.\56\ The OTS 
regulation does not provide for hearings or appeals.
---------------------------------------------------------------------------

    \56\ 12 CFR 225.73(d) and (e).
---------------------------------------------------------------------------

9. Subpart I Prohibited Service at Savings and Loan Holding Companies
    Subpart I of the interim final rule sets forth regulations to 
implement section 19 of the FDI Act \57\ with respect to SLHCs. Section 
19 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 an SLHC. Section 19 also 
permits the Board to provide exemptions, by regulation or order, from 
the application of the prohibition. Subpart I is substantially similar 
to the existing OTS prohibited service regulations \58\ except that 
references to the Board or Reserve Bank have been substituted for 
references in the OTS.
---------------------------------------------------------------------------

    \57\ 12 U.S.C. 1829.
    \58\ 12 CFR part 585.
---------------------------------------------------------------------------

10. Subpart J Management Official Interlocks
    Subpart J sets forth regulations restricting management officials 
from serving simultaneously with two nonaffiliated depository 
organizations where the management interlock would likely have an anti-
competitive effect unless the service is permitted by statute or an 
exemption applies. These regulations implement the Depository 
Institution Management Interlocks Act (``Interlocks Act'').\59\
---------------------------------------------------------------------------

    \59\ 12 U.S.C. 3201 et seq.
---------------------------------------------------------------------------

    Subpart J of the interim final rule is substantially similar to 
subpart F of part 563, the OTS regulation implementing the Interlocks 
Act but makes appropriate adjustments to reflect the transfer of 
supervisory authority for SLHCs from OTS to the Board.
11. Subpart K Dividends by Subsidiary Savings Associations
    Section 10(f) of HOLA provides that a subsidiary savings 
association of an SLHC must file a notice at least 30 days prior to 
declaring a dividend.\60\ Prior to July 21, 2011, these notices were 
filed with the OTS. However, section 369(8)(K) of the Dodd-Frank Act 
provides that such notices are to be filed with the Board after the 
transfer date.
---------------------------------------------------------------------------

    \60\ 12 U.S.C. 1467(f).
---------------------------------------------------------------------------

    Subpart K of the interim final rule implements section 10(f) of 
HOLA. This subpart is substantially similar to portions of the OTS 
capital distribution regulation, which governed dividends by subsidiary 
savings associations of SLHCs as well as other savings association 
capital distributions. Subpart K of the interim final rule includes 
only the portions of the OTS capital distribution regulation that 
implement section 10(f) of HOLA. Consistent with the general approach 
of the interim final rule, subpart K substitutes references to OTS with 
references to the Board, and Board procedures for OTS procedures.
12. Subpart L Investigative Proceedings and Formal Examination 
Proceedings
    This section contains the provisions previously found in part 512 
of the OTS regulations relating to investigative and formal examination 
proceedings. The Board does not have similar rules but has followed 
similar practices for some time. In the future, the Board will consider 
extending these rules to BHCs and other supervised entities.
    The following chart summarizes where particular parts and sections 
of the OTS rules have been placed within Regulation LL.

                            Comparison Chart
------------------------------------------------------------------------
        Regulation LL            Previous location in  OTS regulations
------------------------------------------------------------------------
                      Subpart A--General Provisions
------------------------------------------------------------------------
238.1--Authority, purpose and  .........................................
 scope.
238.2--Definitions...........  Sec.   574.2, part 583.
238.3--Administration........  .........................................
238.4--Records, reports, and   Sec.  Sec.   562.1, 562.2, 584.1.
 inspections.
238.5--Audit of savings        Sec.   562.4.
 association holding
 companies.
238.6--Penalties for           .........................................
 violations.
238.7--Tying restriction       Sec.   563.36.
 exception.
238.8--Safe and sound          .........................................
 operations.
------------------------------------------------------------------------

[[Page 56519]]

 
   Subpart B--Acquisitions of Savings Association Securities or Assets
------------------------------------------------------------------------
238.11--Transactions           Sec.  Sec.   574.3(a), 584.4.
 requiring Board approval.
238.12--Transactions not       Sec.  Sec.   574.3(c), 584.4(c).
 requiring Board approval.
238.13--Prohibited             Sec.  Sec.   584.8(d), 584.9.
 acquisitions.
238.14--Procedural             Sec.  Sec.   516, 574.6.
 requirements.
238.15--Factors considered in  Sec.   547.7.
 acting on acquisition
 proposals.
------------------------------------------------------------------------
                     Subpart C--Control Proceedings
------------------------------------------------------------------------
238.21--Control proceedings..  Sec.   574.4.
------------------------------------------------------------------------
                    Subpart D--Change in Bank Control
------------------------------------------------------------------------
238.31--Transactions           Sec.   574.3(a)-(b).
 requiring prior notice.
238.32--Transactions not       Sec.   574.3(c)-(d).
 requiring prior notice.
238.33--Procedures for         Sec.  Sec.   516, 574.6.
 filing, processing,
 publishing, and acting on
 notices.
------------------------------------------------------------------------
                  Subpart E--Qualified Stock Issuances
------------------------------------------------------------------------
238.41--Qualified stock        Sec.   547.8.
 issuances by
 undercapitalized savings
 associations or holding
 companies.
------------------------------------------------------------------------
 Subpart F--Savings and Loan Holding Company Activities and Acquisitions
------------------------------------------------------------------------
238.51--Prohibited activities  Sec.   584.2.
238.52--Exempt savings and     Sec.   584.2a.
 loan holding companies and
 grandfathered activities.
238.53--Prescribed services    Sec.   584.2-1.
 and activities of savings
 and loan holding companies.
238.54--Permissible bank       Sec.   584.2-2.
 holding company activities
 of savings and loan holding
 companies.
------------------------------------------------------------------------
             Subpart G--Financial Holding Company Activities
------------------------------------------------------------------------
238.61--Scope................  .........................................
238.62--Definitions..........  .........................................
238.63--Requirements to        .........................................
 engage in financial holding
 company activities.
238.64--Election required....  .........................................
238.65--Election procedures..  .........................................
238.66--Ongoing requirements.  .........................................
------------------------------------------------------------------------
   Subpart H--Notice of Change of Director or Senior Executive Officer
------------------------------------------------------------------------
238.71--Purpose..............  Sec.   563.550.
238.72--Definitions..........  Sec.   563.555.
238.73--Prior notice           Sec.   563.560.
 requirements.
238.74--Filing and processing  Sec.  Sec.   563.565, 563.570, 563.575.
 procedures.
238.75--Standards for review.  Sec.   563.580.
238.76--Waiting period.......  Sec.   563.585.
238.77--Waiver of prior        Sec.   563.590.
 notice requirement.
------------------------------------------------------------------------
   Subpart I--Prohibited Service at Savings and Loan Holding Companies
------------------------------------------------------------------------
238.81--Purpose..............  Sec.   585.10.
238.82--Definitions..........  Sec.   585.20.
238.83--Prohibited actions...  Sec.   585.30.
238.84--Covered convictions    Sec.   585.40.
 or agreements to enter into
 pre-trial diversions or
 similar programs.
238.85--Adjudications and      Sec.   585.50.
 offenses not covered.
238.86--Exemptions...........  Sec.   585.100.
238.87--Filing procedures....  Sec.   585.110.
238.88--Factors for review...  Sec.   585.120.
238.89--Board action.........  Sec.   585.130.
------------------------------------------------------------------------
                Subpart J--Management Official Interlocks
------------------------------------------------------------------------
238.91--Authority, purpose,    Sec.   563f.1.
 and scope.
238.92--Definitions..........  Sec.   563f.2.
238.93--Prohibitions.........  Sec.   563f.3.
238.94--Interlocking           Sec.   563f.4.
 relationships permitted by
 statute.
238.95--Small market share     Sec.   563f.5.
 exemption.
238.96--General exemption....  Sec.   563f.6.
238.97--Change in              Sec.   563f.7.
 circumstances.
238.98--Enforcement..........  Sec.   563f.8.
238.99--Interlocking           Sec.   563f.9.
 relationships permitted
 pursuant to Federal Deposit
 Insurance Act.
------------------------------------------------------------------------

[[Page 56520]]

 
         Subpart K--Dividends by Subsidiary Savings Associations
------------------------------------------------------------------------
238.101--Purpose.............  Sec.   563.140.
238.102--Definitions.........  Sec.   563.141.
238.103--Filing requirement..  Sec.  Sec.   563.143, 563.144, 563.145.
238.104--Board action and      Sec.   563.146.
 criteria for review.
------------------------------------------------------------------------
 Subpart L--Investigative Proceedings and Formal Examination Proceedings
------------------------------------------------------------------------
238.111--Scope of part.......  Sec.   512.1.
238.112--Definitions.........  Sec.   512.2.
238.113--Confidentiality of    Sec.   512.3.
 proceedings.
238.114--Transcripts.........  Sec.   512.4.
238.115--Rights of Witnesses.  Sec.   512.5.
238.116--Obstruction of        Sec.   512.6.
 proceedings.
238.117--Subpoenas...........  Sec.   512.7.
------------------------------------------------------------------------

Regulation MM Mutual Holding Companies

1. Subpart A General Provisions
A. 239.1 Authority, Purpose and Scope
    This section sets forth the authority, purpose and scope of the 
interim final rule.
B. 239.2 Definitions
    This section combines needed definitions from parts 563b, 574, 575, 
and 583 of OTS regulations in one location. The Board has modified 
certain definitions to cross reference like definitions in Regulation 
LL and has revised the style and format of section 239.2 to conform to 
the Board's Regulation Y.\61\
---------------------------------------------------------------------------

    \61\ 12 CFR part 225.
---------------------------------------------------------------------------

    For instance, in Regulation LL, the Board has conformed the rules 
relating to control determinations and rebuttals in the CBCA and the 
rules relating to control determinations and rebuttals under HOLA to 
the rules found in Regulation Y for the CBCA and the BHC Act, 
respectively. As a result, for purposes of Regulation MM the Board has 
defined ``acting in concert'' and ``control'' by reference to those 
terms in Regulation LL. In addition, in Regulation LL the Board 
modified the definition of ``savings and loan holding company'' to 
reflect two new exceptions to HOLA added by the Dodd-Frank Act; in 
Regulation MM, the Board defined that term by cross reference to the 
definition in Regulation LL.
    As in Regulation LL, the definition of ``person'' was modified to 
reflect the definition in Regulation Y, and the definition of ``savings 
association'' was modified to eliminate the inclusion of SLHCs within 
the definition.
2. Subpart B Mutual Holding Companies
    Subpart B contains many of the regulatory requirements specific to 
MHCs, including provisions concerning a mutual savings association 
reorganizing to mutual holding company form, mutual member membership 
rights, operating restrictions, procedural requirements, charters, 
bylaws, and voluntary dissolution.\62\ Many of the sections in this 
subpart were taken directly from the OTS regulations in 12 CFR Part 575 
and modified as necessary to reflect changes in nomenclature and other 
non-substantive changes. Substantive changes are described below.
---------------------------------------------------------------------------

    \62\ 12 CFR part 239, subpart B. As noted elsewhere, Regulation 
MM does not apply to bank holding companies in mutual form.
---------------------------------------------------------------------------

A. 239.3 Mutual Holding Company Reorganizations
    This section sets forth the process by which a mutual savings 
association may reorganize to become a holding company. These 
provisions were previously contained in section 575.3 of the OTS 
regulations and have been modified to delete unnecessary provisions 
specific to savings associations and to reflect the change in 
supervisory authority.
    As discussed above, the Board has generally replaced OTS processing 
requirements for applications and notices with those currently used by 
the Board for similar transactions. These revised processing 
requirements are found in section 238.14 of Regulation LL. In order to 
align the processing of reorganization notices with other notices filed 
by SLHCs, section 239.3 provides that reorganization notices will be 
processed in accordance with the procedural requirements set forth in 
section 238.14. As noted above, the Board will carryover the OTS 
applications forms, with technical changes, for the time being. All 
application and notice forms can be found on the Board's public Web 
site.
    In addition, in light of the fact that the Board is not the primary 
federal supervisor of savings associations, paragraph (b) of section 
239.3 provides that the appropriate Reserve Bank will furnish notice 
and a copy of the reorganization notice to the primary federal 
supervisor of the mutual savings association. The primary supervisor 
will have 30 calendar days from the date of the letter giving notice in 
which to submit its views and recommendations to the Board.
B. 239.4 Grounds for Disapproval of Reorganizations
    This section sets forth the grounds under which the Board will 
disapprove of reorganizations. These provisions were previously found 
at section 575.4 of the OTS regulations and have been revised to delete 
unnecessary provisions specific to savings associations and to reflect 
the change in supervisory authority.
    Similar to section 575.4 of the OTS regulations, section 239.4 
provides that the Board will disapprove a reorganization to capitalize 
an MHC in an amount in excess of a nominal amount if the relevant 
savings association would fail to be ``adequately capitalized.'' 
Section 239.4 clarifies that, for the purpose of considering an 
application to reorganize to holding company form, ``adequately 
capitalized'' will be calculated under the regulatory capital 
requirements applicable to the savings association.

[[Page 56521]]

C. 239.5 Membership Rights
    This section sets forth the minimum rights of members of MHCs that 
were previously found in section 575.5 of OTS regulations.
D. 239.6 Contents of Reorganization Plan
    This section sets forth the required contents of a mutual savings 
association's plan to reorganize to an MHC structure. These provisions 
were contained in section 575.6 of the OTS regulations and have been 
revised to delete unnecessary provisions specific to savings 
associations.
E. 239.7 Acquisition and Disposition of Savings Associations, Savings 
and Loan Holding Companies, and Other Corporations by Mutual Holding 
Companies
    This section governs the acquisition and disposal of savings 
associations, SLHCs, and other corporations by MHCs. It contains the 
provisions of section 575.10 of the OTS regulations and has been 
revised to delete unnecessary provisions specific to savings 
associations and to reflect the change in supervisory authority.
F. 239.8 Operating Restrictions
    This section establishes limitations on activities and transactions 
by MHCs. These provisions were found in section 575.11 of OTS 
regulations and have been revised as discussed below.
    Paragraph (a) sets forth the activities restrictions applicable to 
MHCs and is updated to cross reference the procedural requirements of 
subparts F and G of Regulation LL relating to activities restrictions 
for SLHCs.
    The Board revised the dividend waiver provision in paragraph (d) to 
implement an amendment to HOLA made by the Dodd-Frank Act, new section 
10(o)(11). Section 10(o)(11)(B) of HOLA states that an MHC may waive 
the right to receive a dividend declared by a subsidiary of the MHC if 
(1) no insider of the MHC, associate of an insider, or tax-qualified or 
non-tax-qualified employee stock benefit plan of the MHC holds any 
share of the stock in the class of stock to which the waiver would 
apply, or (2) the MHC gives written notice to the Board of the MHC's 
intent to waive the right to receive dividends, not later than 30 days 
before the date of the proposed date of payment of the dividend, and 
the Board does not object to the waiver.\63\ Section 10(o)(11)(D) 
provides that the Board may not object to a waiver of dividends under 
section 10(o)(11)(B) by an MHC if (1) the waiver would not be 
detrimental to the safe and sound operation of the savings association, 
(2) the MHC's board of directors expressly determines that a waiver of 
the dividend by the MHC is consistent with the fiduciary duties of the 
board of directors to the mutual members of the MHC, and (3) the MHC 
has waived dividends from a subsidiary prior to December 1, 2009. MHCs 
that meet all of these conditions may waive their right to receive 
dividends from a subsidiary after providing the Dividend Waiver Notice 
to the Board. The Dividend Waiver Notice must include a copy of the 
resolution of the MHC's board of directors, in such form and substance 
as the Board may determine, together with any supporting materials 
relied upon by the MHC's board of directors, concluding that the 
proposed dividend waiver is consistent with the fiduciary duties of the 
board of directors to the mutual members of the MHC.\64\
---------------------------------------------------------------------------

    \63\ 12 U.S.C. 1467a(o)(11)(B).
    \64\ 12 U.S.C. 1467a(o)(11)(C).
---------------------------------------------------------------------------

    Paragraph (d)(1) sets forth the statutory standard in section 
10(o)(11)(B) of HOLA. It provides that an MHC may waive the right to 
receive any dividend declared by a subsidiary of the MHC, if (i) no 
insider of the MHC, associate of an insider, or tax-qualified or non-
tax-qualified employee stock benefit plan of the MHC holds any share of 
the stock in the class of stock to which the waiver would apply; or 
(ii) the MHC gives written notice to the Board of the intent of the MHC 
to waive the right to receive dividends, not later than 30 days before 
the date of the proposed date of payment of the dividend, and the Board 
does not object to the waiver.
    Paragraph (d)(2) sets forth the requirements for the form and 
substance of notice of waiver and resolution of the MHC's board of 
directors to be provided under paragraph (d)(1)(ii), above. Under 
paragraph (d)(2), the notice of waiver must include a copy of the 
resolution of the board of directors of the MHC together with any 
supporting materials relied upon by the board of directors of the MHC, 
concluding that the proposed dividend waiver is consistent with the 
fiduciary duties of the board of directors to the mutual members of the 
MHC. The resolution must include:
     A description of the conflict of interest that exists 
because of an MHC director's ownership of stock in the subsidiary 
declaring dividends and any actions the MHC and board of directors have 
taken to eliminate the conflict of interest, such as waiver by the 
directors of their right to receive dividends;
     A finding by the MHC's board of directors that the waiver 
of dividends is consistent with the board of directors' fiduciary 
duties despite any conflict of interest;
     If the MHC has pledged the stock of a subsidiary holding 
company or subsidiary savings association as collateral for a loan made 
to the MHC, or is subject to any other loan agreement, an affirmation 
that the MHC is able to meet the terms of the loan agreement; and
     An affirmation that a majority of the mutual members of 
the MHC eligible to vote have, within the 12 months prior to the 
declaration date of the dividend by the subsidiary of the MHC, approved 
a waiver of dividends by the MHC, and any proxy statement used in 
connection with the member vote contained--
     [cir] A detailed description of the proposed waiver of dividends 
by the MHC and the reasons the board of directors requested the waiver 
of dividends;
     [cir] The disclosure of any MHC director's ownership of stock in 
the subsidiary declaring dividends and any actions the MHC and board of 
directors have taken to eliminate the conflict of interest, such as the 
directors waiving their right to receive dividends; and
     [cir] A provision providing that the proxy concerning the waiver 
of dividends given by the mutual members may be used for no more than 
12 months from the date it is given.
    Paragraph (d)(3) implements the statutory conditions under which 
the Board may not object to a dividend waiver filed by a Grandfathered 
MHC. It provides that the Board may not object to a waiver of dividends 
under paragraph (d)(1)(ii) if:
     The waiver would not be detrimental to the safe and sound 
operation of the savings association;
     The board of directors of the MHC expressly determines 
that a waiver of the dividend by the MHC is consistent with the 
fiduciary duties of the board of directors to the mutual members of the 
MHC; and
     The MHC has, prior to December 1, 2009--
     [cir] Reorganized into an MHC under section 10(o) of HOLA;
     [cir] Issued minority stock either from its subsidiary stock 
holding company or its subsidiary stock savings association; and
     [cir] Waived dividends it had a right to receive from the 
subsidiary stock savings association.
    In addition to the Dividend Waiver Notice, Grandfathered MHCs must 
file a copy of the board resolution concluding that the proposed 
dividend waiver is consistent with the MHC board's fiduciary duties to 
the mutual members.

[[Page 56522]]

The required form and substance of the board resolution is discussed in 
more detail above.
    Paragraph (d)(4) sets forth the conditions the Board will consider 
when it reviews a dividend waiver notice filed under paragraph 
(d)(1)(ii) by a non-Grandfathered MHC. An MHC must satisfy each 
condition provided in paragraph (d)(4). The conditions are:
     The savings association currently operates in a manner 
consistent with the safe and sound operation of a savings association, 
and the waiver is not detrimental to the safe and sound operation of 
the savings association;
     If the MHC has pledged the stock of a subsidiary holding 
company or subsidiary savings association as collateral for a loan made 
to the MHC, or is subject to any other loan agreement, an affirmation 
that the MHC is able to meet the terms of the loan agreement;
     Within the 12 months prior to the declaration date of the 
dividend by the subsidiary of the MHC, a majority of the mutual members 
of the MHC has approved the waiver of dividends by the MHC. Any proxy 
statement used in connection with the member vote must contain--
     [cir] A detailed description of the proposed waiver of dividends 
by the MHC and the reasons the board of directors requested the waiver 
of dividends;
     [cir] The disclosure of any MHC director's ownership of stock in 
the subsidiary declaring dividends and any actions the MHC and board of 
directors have taken to eliminate the conflict of interest, such as the 
directors waiving their right to receive dividends; and
     [cir] A provision providing that the proxy concerning the waiver 
of dividends given by the mutual members may be used for no more than 
12 months from the date it is given;
     The board of directors of the MHC expressly determines 
that the waiver of dividends is consistent with the board of directors' 
fiduciary duties despite any conflict of interest;
     A majority of the entire board of directors of the MHC 
approves the waiver of dividends and any director with direct or 
indirect ownership, control, or the power to vote shares of the 
subsidiary declaring the dividend, or who otherwise directly or 
indirectly benefits through an associate from the waiver of dividends, 
has abstained from the board vote; or each officer or director of the 
MHC or its affiliates, associate of such officer or director, and any 
tax-qualified or non-tax-qualified employee stock benefit plan in which 
such officer or director participates that holds any share of the stock 
in the class of stock to which the waiver would apply waives the right 
to receive any dividend declared by a subsidiary of the MHC;
     The Board does not object to the amount of dividends 
declared by a subsidiary of the MHC. In reviewing whether a declaration 
by a subsidiary of the MHC is appropriate, the Board may consider, 
among other factors, the reasonableness of the entire dividend 
distribution declared if the waiver is not approved;
     The waived dividends are excluded from the capital 
accounts of the subsidiary holding company or savings association, as 
applicable, for purposes of calculating any future dividend payments;
     The MHC appropriately accounts for all waived dividends in 
a manner that permits the Board to consider the waived dividends in 
evaluating the proposed exchange ratio in the event of a full 
conversion of the MHC to stock form; and
     The MHC complies with such other conditions as the Board 
may require to prevent conflicts of interest or actions detrimental to 
the safe and sound operation of the savings association.
    Paragraph (d)(5) provides that the Board will consider waived 
dividends in determining an appropriate exchange ratio in the event of 
a full conversion to stock form pursuant to subpart E of Regulation MM. 
However, consistent with section 10(o)(11)(E)(ii) of HOLA, paragraph 
(d)(5) clarifies that in the case of a savings association that has 
reorganized into an MHC, has issued minority stock from a subsidiary 
stock holding company or a subsidiary stock savings association of the 
MHC, and has waived dividends it had a right to receive from a 
subsidiary savings association before December 1, 2009, the Board will 
not consider waived dividends in determining an appropriate exchange 
ratio in the event of a full conversion to stock form.
    Paragraph (f), which concerns compliance with community 
reinvestment requirements, has been revised to cross reference the 
Board's Regulation BB. The interim final rule revises Regulation BB to 
apply to SLHCs.
    The Board has stricken the OTS requirement that MHCs provide 10-day 
after-the-fact notice of pledges of stock of subsidiary savings 
association or subsidiary holding companies. While the Board recognizes 
that stock pledges may pose safety and soundness concerns, the Board 
believes these concerns are adequately addressed through the regular 
supervisory process.
G. 239.9 Conversion or Liquidation of Mutual Holding Companies
    This section governs the conversion or liquidation of MHCs. These 
procedures were previously contained in section 575.12 of the OTS 
regulations and have been revised to delete unnecessary provisions 
specific to savings associations and to reflect the change in 
supervisory authority.
H. 239.10 Procedural Requirements
    This section provides certain procedural requirements applicable to 
MHCs. It contains provisions previously found in section 575.13 and has 
been revised to reflect the Board's revised procedures for reviewing 
forms of proxy and proxy statements and to applications procedures.
    As discussed above, whereas the OTS previously reviewed and 
approved forms of proxy and proxy statements before they could be used, 
the Board will review these materials in connection with transactions 
but will not authorize or approve them.
    Paragraph (a) provides that sections 239.56 and 239.57(a)-(d) and 
(f)-(h) will apply to all solicitations of proxies by any person in 
connection with any membership vote required by this part. In addition, 
proxy materials required by Regulation MM must be in the form specified 
by the Board and contain information specified in section 239.57(b) and 
(d) (sections setting forth the requirements for proxy materials with 
respect to conversions of MHCs to stock form), to the extent such 
information is relevant to the action that members are being asked to 
approve, with any additions, deletions, and other modifications as are 
required under Regulation MM with respect to that action.
    In order to align the processing of notices and applications filed 
by MHCs and subsidiary holding companies under part 239 with other 
notices filed by SLHCs, paragraph (f) provides that the rules of 
section 238.14 governing disclosure of any notice, application 
submitted under this section, or public comment submitted under 
paragraph (c), will be the same as set forth in section 238.14.
    The provisions of this section have also been revised to delete 
unnecessary provisions specific to savings associations and to reflect 
the change in supervisory authority.
I. 239.11 Subsidiary Holding Companies
    This section provides for the formation of and requirements for 
stock issuances by subsidiary holding

[[Page 56523]]

companies of MHCs. It contains certain provisions from section 575.14, 
as revised to delete unnecessary provisions specific to savings 
associations and to reflect the change in supervisory authority. The 
provisions of section 575.14 concerning the model charter, charter 
amendments, bylaws, and annual reports and books and records are found 
in sections 239.21, 239.22, 239.23, and 239.30, respectively.
J. 239.12 Communication Between Members of a Mutual Holding Company
    This section sets forth the rights of mutual members to communicate 
with one another and sets forth the procedures for communication. These 
provisions were contained in section 544.8 (previously incorporated by 
reference by section 575.9) and have been revised to delete unnecessary 
provisions specific to savings associations and to reflect the change 
in supervisory authority.
K. 239.13 Charters
    This section sets forth the requirements for MHC charters. It 
contains the provisions from section 575.9 concerning charters, as 
revised to delete unnecessary provisions specific to savings 
associations and to reflect the change in supervisory authority. The 
model charter previously set forth in section 575.9(a)(1) is now in 
Appendix A.
L. 239.14 Charter Amendments
    This section contains provisions governing amendments to MHC 
charters. It contains the provisions from section 544.2 governing MHC 
charter amendments (previously incorporated by reference by section 
575.9(a)(2)), as revised to delete unnecessary provisions specific to 
savings associations and to reflect the change in supervisory 
authority.
M. 239.15 Bylaws
    This section sets forth the requirements for MHC bylaws. It 
contains the provisions of section 544.5 governing MHC bylaws 
(previously incorporated by reference by section 575.9(a)(4)), as 
revised to delete unnecessary provisions specific to savings 
associations. The Board deleted the prior reference in the OTS 
regulations to the model bylaws for mutual savings associations in the 
OTS Applications Processing Handbook and instead inserted the model MHC 
bylaws in Appendix C. The model MHC bylaws have been revised to delete 
unnecessary provisions specific to savings associations and to reflect 
the change in supervisory authority.
N. 239.16 Voluntary Dissolution
    This section sets forth the processes for the dissolution of an MHC 
or a subsidiary holding company. It contains the provisions of section 
546.4 providing for voluntary dissolution, previously incorporated by 
reference by section 575.12(c), and has been revised to delete 
unnecessary provisions specific to savings associations and to reflect 
the change in supervisory authority. Specifically, the section does not 
incorporate the provisions of paragraph (a) of section 546.4 of the OTS 
regulations, providing that the plan of dissolution may provide for 
appointment of the FDIC as receiver, because this provision was 
specific to savings associations.
3. Subpart C Subsidiary Holding Companies
    In organizing Regulation MM, the Board placed most of the 
regulatory requirements applicable to subsidiary holding companies of 
MHCs in one subpart, subpart C.\65\ Except as noted below, these 
provisions are substantively the same as those that applied to 
subsidiary holding companies of MHCs under OTS regulations. The 
provisions have been revised to delete unnecessary provisions specific 
to savings associations and to reflect the change in supervisory 
authority.
---------------------------------------------------------------------------

    \65\ Certain requirements are found in section 239.11, described 
above.
---------------------------------------------------------------------------

A. 239.20 Scope
    The Board added this section in order to clarify that this subpart 
applies only to subsidiary holding companies of MHCs.
B. 239.21 Charters
    This section sets forth the required elements of a subsidiary 
holding company's charter. These provisions were contained in section 
575.14(c)(1) and (3) of the OTS regulations, as revised to delete 
unnecessary provisions specific to savings associations and to reflect 
the change in supervisory authority. In order to streamline the 
regulatory text, the Board moved the model charter previously set forth 
in section 575.14(c)(1) to Appendix B.
C. 239.22 Charter Amendments
    This section contains the provisions governing amendments to 
subsidiary holding company charters that were contained in section 
552.4 (previously incorporated by reference by section 575.14(c)(2)).
D. 239.23 Bylaws
    This section sets forth requirements for a subsidiary holding 
company's bylaws that were contained in section 552.5 (previously 
incorporated by reference by section 575.14(c)(4)). In addition, to 
streamline the rule text, the Board deleted the prior reference in the 
OTS regulations to the model bylaws for federal savings associations 
contained in the OTS Applications Processing Handbook and instead 
inserted the model subsidiary holding company bylaws in Appendix D, as 
revised to delete unnecessary provisions specific to savings 
associations.
E. 239.24 Issuances of Stock by Subsidiary Holding Companies of Mutual 
Holding Companies
    This section contains requirements for the issuances of stock by 
subsidiary holding companies. These provisions were previously 
contained in section 575.7.
F. 239.25 Contents of Stock Issuance Plans
    This section sets forth the required contents of stock issuance 
plans. These provisions were previously contained in section 575.8.
G. 239.26 Shareholders
    This section governs the procedures for shareholder meetings. It 
contains provisions of section 552.6 (section 575.14(c)(4) incorporated 
by reference the requirements of section 552.5, which in turn required 
that the bylaws comply with section 552.6, among others).
H. 239.27 Board of Directors
    This section sets forth the requirements for the constitution and 
meetings of a subsidiary holding company's board of directors. These 
provisions were contained in section 552.6-1 (section 575.14(c)(4) 
incorporated by reference the requirements of section 552.5, which in 
turn required that the bylaws comply with section 552.6-1, among 
others).
I. 239.28 Officers
    This section sets forth the requirements for a subsidiary holding 
company's officers. These provisions were contained in section 552.6-2 
(section 575.14(c)(4) incorporated by reference the requirements of 
section 552.5, which in turn required that the bylaws comply with 
section 552.6-2, among others).

[[Page 56524]]

J. 239.29 Certificates for Shares and Their Transfer
    This section sets forth the requirements for share certificates and 
transfer procedures. These provisions were contained in section 552.6-3 
(section 575.14(c)(4) incorporated by reference the requirements of 
section 552.5, which in turn required that the bylaws comply with 
section 552.6-3, among others).
K. 239.30 Annual Reports; Books And Records
    This section contains the requirements for annual reports and books 
and records of a subsidiary holding company. These provisions were 
contained in section 552.10 and 552.11 (previously incorporated by 
reference by section 575.14(c)(5)).
L. 239.31 Indemnification; Employment Contracts
    This section clarifies that regulations governing indemnification 
of directors, officers, and employees, and restrictions on employment 
contracts set forth in sections 239.40 and 239.41 (discussed below) 
apply to subsidiary holding companies of MHCs.
4. Subpart D Indemnification; Employment Contracts
    Subpart D contains provisions concerning indemnification of 
directors, officers, and employees of MHCs and their subsidiary holding 
companies, and restrictions on employment contracts.\66\
---------------------------------------------------------------------------

    \66\ 12 CFR part 239, subpart D.
---------------------------------------------------------------------------

A. 239.40 Indemnification of Directors, Officers and Employees
    Section 239.40 contains provisions of section 545.121, which 
previously applied to MHCs and their subsidiary holding companies 
through a cross reference in section 575.11(f). These provisions have 
been revised to reflect nomenclature changes and the change in 
supervisory authority.
B. 239.41 Employment Contracts
    Section 239.41 contains provisions of section 563.39, which 
previously applied to MHCs and their subsidiary holding companies 
through a cross reference in section 575.11(g). Paragraph (b)(5) 
provides a specific requirement for employment contracts. Under this 
section, unless prior written approval is secured from the Board, each 
employment contract between an MHC or subsidiary holding company and 
its officers or other employees must provide that all obligations of 
the MHC or subsidiary holding company under the contract shall 
terminate if the MHC or subsidiary holding company is subject to 
bankruptcy proceedings under title 11 of the United States Code but 
vested rights of the contracting parties shall not be affected.
5. Subpart E Conversions From Mutual to Stock Form
    Subpart E contains provisions concerning the conversion of an MHC 
to stock form.\67\ The Board based subpart E on part 563b of OTS 
regulations. Part 563b governed the conversion of mutual savings 
associations to stock form. By cross reference, section 575.12 of the 
OTS regulations applied part 563b to MHC conversions to stock form. 
Subpart E revises the provisions of part 563b such that they now apply 
to MHCs directly. The Board also revised the general format of subpart 
E to be consistent with the format of other Board regulations.
---------------------------------------------------------------------------

    \67\ 12 CFR part 239, subpart E.
---------------------------------------------------------------------------

A. 239.50 Purpose and Scope
    This section sets forth the purpose and scope of subpart E of the 
interim final rule.
B. 239.51 Acquiring Another Insured Stock Depository Institution as 
Part of a Conversion
    This section provides that an MHC may acquire another insured 
depository institution as part of a conversion, as previously provided 
in section 563b.25. The acquisition must also comply with the rules 
governing acquisitions of savings association securities set forth in 
subpart B of Regulation LL.
C. 239.52 Definitions
    This section contains many of the definitions previously found in 
section 563b.25 of the OTS regulations. The Board defined several terms 
in section 239.2 that were previously defined in section 563b.25 and 
has therefore included fewer definitions in subpart E as a result. In 
addition, the Board added the term ``resulting stock holding company'' 
to describe the stock holding company that is issuing stock in 
connection with the conversion of an MHC.
D. 239.53 Prior to Conversion
    This section imposes certain pre-filing requirements on MHCs. 
Paragraph (a), previously section 563b.100, concerns pre-filing 
meetings between an MHC's board of directors and the Reserve Bank or 
Board. The Board revised this provision to make these pre-filing 
meetings voluntary, instead of mandatory. The Board does, however, 
encourage pre-filing communication--which may include a pre-filing 
meeting--between an MHC, its board of directors, and the appropriate 
Reserve Bank to discuss the contemplated conversion, including the MHC 
board of directors' overall strategic plan and plans for the use of the 
offering proceeds.
    Paragraphs (b) through (e) of this section contain the provisions 
of sections 563b.105, 563b.110, 563b.115, and 563b.120 of the OTS 
regulations, as revised to reflect the change in supervisory authority.
E. 239.54 Plan of Conversion
    This section sets forth the necessary requirements and procedure 
for a plan of conversion. It contains the provisions of sections 
563b.125, 563b.130, 563b.135, and 563b.140 of the OTS regulations.
F. 239.55 Filing Requirements
    This section contains the filing requirements previously set forth 
in sections 563b.150, 563b.155, 563b.160, 563b.165, 563b.180, 563b.185, 
563b.200, and 563b.205 of the OTS regulations.
    As noted above, the Board has replaced OTS processing requirements 
for applications and notices with those currently used by the Board for 
similar transactions. Thus, paragraph (f) provides the applicant must 
publish public notice of the application in accordance with section 
238.14. Commenters must submit comments on the application in 
accordance with the procedures in that section.
    In addition, paragraph (c) provides that the appropriate Reserve 
Bank will furnish notice and a copy of the application to the primary 
federal supervisor of any subsidiary savings association. The primary 
supervisor will have 30 calendar days from the date of the letter 
giving notice in which to submit its views and recommendations to the 
Board.
G. 239.56 Vote by Members
    This section contains the provisions governing the member vote on a 
plan of conversion. These provisions were contained in sections 
563b.225, 563b.230, 563b.235, and 563b.240 of the OTS regulations and 
have been revised to reflect nomenclature changes and the change in 
supervisory authority. As noted below, section 239.57 provides that the 
Board will review forms of proxy and proxy statements in its review of 
the conversion application, but it will not approve these materials. 
Section 239.56 reflects this change.

[[Page 56525]]

H. 239.57 Proxy Solicitation
    This section contains provisions governing the content and 
solicitation of proxies. These provisions were previously found in 
sections 563.250, 563.255, 563b.260, 563b.265, 563b.270, 563b.275, 
563b.280, 563b.285, 563b.290, and 563b.295 of the OTS regulations.
    Consistent with the Board's current practice with respect to bank 
holding company and state member bank filings, section 239.57 provides 
that the Board will review proxy materials in its review of a 
conversion application as a whole and may require changes to ensure 
that the disclosure is adequate, complete, and accurate. However, 
section 239.57 does not continue past OTS practice of approving forms 
of proxy and proxy statements. As a result, in paragraph (d) the Board 
revised the requirement from section 563b.270 that the MHC mail proxy 
solicitation material to its members within ten days after OTS 
authorizes the solicitation to require distribution no later than ten 
days after the Board approves the conversion.
I. 239.58 Offering Circular
    This section contains the offering circular requirements related to 
an MHC's conversion to stock form. These provisions were contained in 
563b.300, 563b.305, and 563b.310 of the OTS regulations and have been 
revised to reflect nomenclature changes and the change in supervisory 
authority.
    As discussed above, the Board will continue to require MHCs and 
their subsidiary holding companies to file offering circulars with the 
Board on Form OC in connection with applications, and will require that 
MHCs and their subsidiary holding companies continue to abide by all 
applicable federal and state securities laws, rules, and regulations. 
The Board will not, however, declare effective offering circulars used 
by MHCs in conversions to stock form or by subsidiary holding companies 
of MHCs in initial or subsequent issuances of stock, or in any other 
context. As a result, in paragraph (b) the Board has revised the 
requirement from section 563b.305 that the MHC distribute the offering 
circular within ten days after OTS declared it effective to require 
distribution no later than ten days after the Board approves the 
conversion.
J. 239.59 Offers and Sales of Stock
    This section contains provisions governing the offering, pricing, 
purchase limitations, and timing restrictions of an offering of stock 
in connection with a conversion. These provisions were contained in 
sections 563b.320, 563b.325, 563b.330, 563b.335, 563b.340, 563b.345, 
563b.350, 563b.360, 563b.365, 563b.370, 563b.375, 563b.380, 563b.385, 
563b.390, and 563b.395 of the OTS regulations and have been revised to 
reflect nomenclature changes and the change in supervisory authority. 
Because the Board is not declaring offering circulars effective, the 
section provides that the offer may commence after the Board approves 
the conversion, subject to compliance with SEC requirements.
K. 239.60 Completion of the Offering
    This section governs the time period for an offering under a 
conversion. It contains provisions of sections 563b.400 and 563b.405 of 
the OTS regulations.
L. 239.61 Completion of the Conversion
    This section sets forth requirements for the execution of the 
conversion and the voting and liquidation rights following conversion. 
It contains provisions of sections 563b.420, 563b.425, 563b.435, 
563b.440, and 563b.445 of the OTS regulations.
M. 239.62 Liquidation Accounts
    This section governs the creation and maintenance of a liquidation 
account by a resulting stock company. It contains provisions of 
sections 563b.450, 563b.455, 563b.460, 563b.465, 563b.470, 563b.475, 
and 563b.480 of the OTS regulations.
N. 239.63 Post-conversion
    This section contains provisions of sections 563b.420, 563b.425, 
563b.435, 563b.440, and 563b.445 of the OTS regulations. As discussed 
above, the Board has extended the prior notice period for stock 
repurchases by the resulting stock holding company within the first 
year of conversion from requiring 10 days prior notice to requiring 30 
days prior notice, which can be extended by the Board for an additional 
60 days. The Board believes that particular scrutiny of stock 
repurchases is warranted because of the potential for conflicts of 
interest that could arise when directors, management, and other 
insiders of the resulting stock holding company also are or may become 
shareholders of that resulting stock holding company.
O. 239.64 Contributions to Charitable Organizations
    This section governs the formation of and donation to charitable 
organizations in connection with a conversion. It contains provisions 
of sections 563.15, 563b.550, 563b.555, 563b.560, 563b.565, 563b.570, 
and 563b.575 of the OTS regulations, as revised to reflect nomenclature 
changes and the change in supervisory authority.
P. 239.65 Voluntary Supervisory Conversions
    This section governs supervisory conversions by MHCs. It contains 
provisions of sections 563b.600, 563b.605, 563b.610, 563b.625, 
563b.650, 563b.660, 563b.680, and 563b.690 of the OTS regulations.
    Paragraph (d) clarifies that an MHC may be eligible for a voluntary 
supervisory conversion based on either the MHC or subsidiary savings 
association's capital levels. These capital levels are measured based 
on the regulatory capital requirements applicable to the relevant 
institution.
Q. 239.66 Board Review of the Voluntary Supervisory Conversion 
Application
    This section governs review by the Board of a voluntary supervisory 
conversion application. These provisions were contained in sections 
563b.670 and 563b.675 of the OTS regulations and have been revised to 
reflect nomenclature changes and the change in supervisory authority. 
Paragraph (b) clarifies that the Board may condition approval of a 
voluntary supervisory conversion on actions to be taken by either the 
MHC or the resulting stock holding company.

Comparison Chart

    The following chart summarizes where particular parts and sections 
of the OTS rules have been placed within Regulation MM.

----------------------------------------------------------------------------------------------------------------
                   Regulation MM                                Previous location in  OTS regulations
----------------------------------------------------------------------------------------------------------------
                                          SUBPART A--General Provisions
----------------------------------------------------------------------------------------------------------------
239.1--Authority, Purpose and Scope...............  Sec.   575.1
239.2--Definitions................................  Sec.  Sec.   563b, 574, 575, and 583
----------------------------------------------------------------------------------------------------------------

[[Page 56526]]

 
                                       SUBPART B--Mutual Holding Companies
----------------------------------------------------------------------------------------------------------------
239.3--Mutual holding company reorganizations.....  Sec.   575.3
239.4--Grounds for disapproval of reorganizations.  Sec.   575.4
239.5--Membership rights..........................  Sec.   575.5
239.6--Contents of Reorganization Plan............  Sec.   575.6
239.7--Acquisition and disposition of savings       Sec.   575.10
 associations, savings and loan holding companies,
 and other corporations by mutual holding
 companies.
239.8--Operating restrictions.....................  Sec.   575.11
239.9--Conversion or liquidation of mutual holding  Sec.   575.12
 companies.
239.10--Procedural requirements...................  Sec.   575.13
239.11--Subsidiary holding companies..............  Sec.   575.14
239.12--Communication between members of a mutual   Sec.   575.9
 holding company.
239.13--Charters..................................  Sec.   575.9
239.14--Charter amendments........................  Sec.   575.9
239.15--Bylaws....................................  Sec.   575.9
239.16--Voluntary dissolution.....................  Sec.   575.12(c)
----------------------------------------------------------------------------------------------------------------
                                     SUBPART C--Subsidiary Holding Companies
----------------------------------------------------------------------------------------------------------------
239.20--Scope.....................................  ............................................................
239.21--Charters..................................  Sec.   575.14(c)(1), (3)
239.22--Charter amendments........................  Sec.   575.14(c)(2)
239.23--Bylaws....................................  Sec.   575.14(c)(4)
239.24--Issuances of stock by subsidiary holding    Sec.   575.7
 companies of mutual holding companies.
239.25--Contents of Stock Issuance Plans..........  Sec.   575.8
239.26--Shareholders..............................  Sec.   575.14(c)(4)
239.27--Board of directors........................  Sec.   575.14(c)(4)
239.28--Officers..................................  Sec.   575.14(c)(4)
239.29--Certificates for shares and their transfer  Sec.   575.14(c)(4)
239.30--Annual reports; books and records.........  Sec.   575.14(c)(5)
239.31--Indemnification; employment contracts.....
----------------------------------------------------------------------------------------------------------------
                                SUBPART D--Indemnification; Employment Contracts
----------------------------------------------------------------------------------------------------------------
239.40--Indemnification of directors, officers and  Sec.   575.11(f)
 employees.
239.41--Employment contracts......................  Sec.   575.11(g)
----------------------------------------------------------------------------------------------------------------
                         SUBPART E--Conversions from Mutual to Stock Form--Sec.   575.12
----------------------------------------------------------------------------------------------------------------
239.50--Purpose and scope.........................  Sec.   575.12 (Sec.   563b.5)
239.51--Acquiring another insured stock depository  Sec.   575.12 (Sec.   563b.20)
 institution as part of a conversion.
239.52--Definitions...............................  Sec.   575.12 (Sec.   563b.25)
239.53--Prior to conversion.......................
239.54--Plan of conversion........................  Sec.   575.12 (Sec.  Sec.   563b.125, 563b.130, 563b.135,
                                                     563b.140)
239.55--Filing requirements.......................  Sec.   575.12 (Sec.  Sec.   563b.150, 563b.155, 563b.160,
                                                     563b.165, 563b.180, 563b.185, 563b.200, 563b.205)
239.56--Vote by members...........................  Sec.   575.12 (Sec.  Sec.   563b.225, 563b.230, 563b.235,
                                                     563b.240)
239.57--Proxy solicitation........................  Sec.   575.12 (Sec.  Sec.   563.250, 563.255, 563b.260,
                                                     563b.265, 563b.270, 563b.275, 563b.280, 563b.285, 563b.290,
                                                     563b.295)
239.58--Offering circular.........................  Sec.   575.12 (Sec.  Sec.   563b.300, 563b.305, 563b.310)
239.59--Offers and sales of stock.................  Sec.   575.12 (Sec.  Sec.   563b.320, 563b.325, 563b.330,
                                                     563b.335, 563b.340, 563b.345, 563b.350, 563b.360, 563b.365,
                                                     563b.370, 563b.375, 563b.380, 563b.385, 563b.390, 563b.395)
239.60--Completion of the offering................  Sec.   575.12 (Sec.  Sec.   563b.400, 563b.405)
239.61--Completion of the conversion..............  Sec.   575.12 (Sec.  Sec.   563b.420, 563b.425, 563b.435,
                                                     563b.440, 563b.445)
239.62--Liquidation account.......................  Sec.   575.12 (Sec.  Sec.   563b.450, 563b.455, 563b.460,
                                                     563b.465, 563b.470, 563b.475, 563b.480)
239.63--Post-conversion...........................  Sec.   575.12 (Sec.  Sec.   563b.500, 563b.505, 563b.510,
                                                     563b.515, 563b.520, 563b.525, 563b.530)

[[Page 56527]]

 
239.64--Contributions to charitable organizations.  Sec.   575.12 (Sec.  Sec.   563.15, 563b.550, 563b.555,
                                                     563b.560, 563b.565, 563b.570, 563b.575)
239.65--Voluntary supervisory conversions.........  Sec.   575.12 (Sec.  Sec.   563b.600, 563b.605, 563b.610,
                                                     563b.625, 563b.650, 563b.660, 563b.680, 563b.690)
239.66--Board review of the voluntary supervisory   Sec.   575.12 (Sec.  Sec.   563b.670, 563b.675)
 conversion application.
----------------------------------------------------------------------------------------------------------------

Technical Amendments

    The Board has made a number of technical amendments to Board rules 
to facilitate supervision of SLHCs. These amendments include revisions 
to the interagency rules implementing the Community Reinvestment Act, 
including Regulation G \68\ and Regulation BB.\69\ Previously, these 
requirements were located in parts 533 and 563e of the OTS regulations. 
These technical changes also include revisions to the Board procedural 
rules, including part 261 (Availability of Information), 261B (Public 
Observation of Meetings), part 262 (Rules of Procedure), part 263 
(Rules of Practice for Hearings), and part 264A (Post-Employment 
Restrictions for Senior Examiners). In general, these amendments add 
SLHCs to the types of institutions covered by the rule and create 
mirrored provisions to accommodate transactions under HOLA.
---------------------------------------------------------------------------

    \68\ 12 CFR part 207 (Disclosure and Reporting of CRA-Related 
Amendments).
    \69\ 12 CFR part 228 (Community Reinvestment).
---------------------------------------------------------------------------

    In addition, the Board made technical amendments to implement 
section 312(b)(2)(A) of the Dodd-Frank Act,\70\ which transfers to the 
Board all rulemaking authority under section 11 of HOLA relating to 
transactions with affiliates and extensions of credit to executive 
officers, directors, and principal shareholders.\71\ These amendments 
include revisions to parts 215 (Insider Transactions) and part 223 
(Transactions with Affiliates) of Board regulations.
---------------------------------------------------------------------------

    \70\ 12 U.S.C. 5412.
    \71\ 12 U.S.C. 1468.
---------------------------------------------------------------------------

    With respect to transactions with affiliates, the Board has added a 
new subpart I to the Board's Regulation W.\72\ Savings associations 
have been subject to most of the provisions of Regulation W pursuant to 
section 563.41 of OTS regulations. New subpart I contains the 
provisions of section 563.41, other than paragraphs (c)(3) and (4), and 
is revised to reflect nomenclature changes. The Board has decided not 
to adopt the recordkeeping and notice requirements previously set forth 
in section 563.41(c)(3) and (4). When adopting amendments to Regulation 
W, the Board considered, and decided against, imposing recordkeeping 
requirements on institutions subject to Regulation W. At that time, the 
Board concluded, and continues to believe, that the primary supervisors 
of the insured depository institutions are the appropriate authorities 
to determine the recordkeeping requirements of their institutions. The 
Board also believes that the requirement for a savings association 
under section 563.41(b)(4) to provide notice to its primary supervisory 
in certain circumstances does not need to be incorporated into 
Regulation W because the OCC may require such notice in its general 
capacity as the primary supervisor of the institution.
---------------------------------------------------------------------------

    \72\ 12 CFR part 223 (Transactions Between Member Banks and 
Their Affiliates).
---------------------------------------------------------------------------

    With respect to extensions of credit to executive officers, 
directors, and principal shareholders, the Board has revised Regulation 
O to extend to savings associations all provisions applicable to state 
member banks.\73\ Section 563.43 of the OTS regulations previously 
extended all of the provisions of Regulation O to savings associations.
---------------------------------------------------------------------------

    \73\ 12 CFR part 215 (Loans to Executive Officers, Directors, 
and Principal Shareholders of Member Banks).
---------------------------------------------------------------------------

IV. Request for Comments

    The Board is seeking comment on all aspects of this interim final 
rule. The Board requests specific comment with respect to whether all 
regulations relating to the supervision of SLHCs are included in this 
rulemaking. Alternatively, does this rulemaking carry over regulatory 
provisions that currently do not apply to SLHCs or their non-depository 
subsidiaries?

V. Legal Authority

Rulemaking Authority

    As noted, the Dodd-Frank Act explicitly provides for transfer of 
rulemaking authority for SLHCs from OTS to the Board effective July 
21.\74\ The Dodd-Frank Act also amends other statutes effective July 
21, so as to provide the Board with rulemaking authority over SLHCs 
pursuant to HOLA,\75\ the CBCA,\76\ section 32 of the FDI Act 
(requiring notices by troubled institutions prior to appointment of a 
director or senior executive officer),\77\ the Interlocks Act \78\ and 
section 19 of the FDI Act (preventing service at SLHCs of individuals 
convicted of crimes of dishonesty).\79\ The Board is issuing this 
interim final rule pursuant to this authority.
---------------------------------------------------------------------------

    \74\ 12 U.S.C. 5412(b)(1)(A)(ii).
    \75\ 12 U.S.C. 1461 et seq.
    \76\ 12 U.S.C. 1817(j)(13).
    \77\ 12 U.S.C. 1831i.
    \78\ 12 U.S.C. 3207.
    \79\ 12 U.S.C. 1829(a).
---------------------------------------------------------------------------

Authority To Issue Interim Final Rule Without Notice and Comment

    The Administrative Procedures Act (``APA''), 5 U.S.C. 551 et seq., 
generally requires public notice before promulgation of 
regulations.\80\ The APA provides an exception for this requirement, 
however, when there is good cause because notice and public procedure 
is impracticable.\81\ The Board finds that for this interim rule there 
is ``good cause'' to conclude that providing notice and an opportunity 
to comment would be impracticable and, therefore, is not required.
---------------------------------------------------------------------------

    \80\ 5 U.S.C. 553(b).
    \81\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------

    Because the authority to supervise SLHCs was transferred by 
operation of law effective on July 21, 2011, the Board has concluded 
that adopting this rule on an interim basis effective immediately, and 
subject to change as a result of comments received, would allow 
efficient and effective supervision and regulation of SLHCs immediately 
while also allowing the public an opportunity to comment.
    Specifically, the OTS regulations often integrate requirements for 
savings associations with those of SLHCs. The Board does not believe 
that SLHCs should be obligated to independently determine which 
regulations remain applicable after transfer. The OTS regulations also 
contain references to the OTS as recipient of and decision maker with 
respect to SLHC applications. Absent immediate modification of these 
rules, the Board

[[Page 56528]]

would lack procedures to receive and process applications and therefore 
would be unable to fully carry out this important portion of its 
supervisory responsibilities. Additionally, the Board must take 
immediate action to amend a number of its own administrative 
regulations to ensure the SLHCs and transactions under HOLA are 
appropriately accommodated.
    In order to effectuate the Dodd-Frank Act, prevent a disruption of 
agency business, and ensure that SLHCs are aware of their obligations, 
and the expectations of the Board as the new supervisory authority, the 
Board is issuing this interim final rule. The Board is seeking comment 
from interested parties before final rules are issued.

VI. Regulatory Flexibility Act

    In accordance with section 4 of the Regulatory Flexibility Act 
(``RFA''), 5 U.S.C. 601 et seq., the Board is publishing an initial 
regulatory flexibility analysis for the interim final rule. The RFA 
generally requires an agency to assess the impact a rule is expected to 
have on small entities.\82\ The RFA requires an agency either to 
provide a regulatory flexibility analysis or to certify that the final 
rule will not have a significant economic impact on a substantial 
number of small entities. Based on this analysis and for the reasons 
stated below, the Board believes that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
The Board recognizes that the final rule will affect some small 
business entities; however the Board does not expect that the final 
rule will have a significant economic impact on them, particularly in 
light of the information already required to be collected or disclosed 
under HOLA. Nevertheless, the Board is publishing an initial regulatory 
flexibility analysis and requesting public comment on the effect of the 
interim final rule on small entities. A final regulatory flexibility 
analysis will be conducted after consideration of comments received 
during the public comment period.
---------------------------------------------------------------------------

    \82\ Under standards the U.S. Small Business Administration 
sets, an entity is considered ``small'' if it has $175 million or 
less in assets for banks and other depository institutions. U.S. 
Small Business Administration, Table of Small Business Size 
Standards Matched to North American Industry Classification System 
Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
---------------------------------------------------------------------------

A. Reasons for the Interim Final Rule

    Title III of the Dodd-Frank Act transfers from OTS to the Board the 
responsibility for supervision of SLHCs and their non-depository 
subsidiaries. Specifically, section 312 of the Dodd-Frank Act provides 
that all functions of the OTS and the Director of the OTS (including 
rulemaking authority and authority to issue orders) with respect to the 
supervision of SLHCs and their non-depository subsidiaries transferred 
to the Board on July 21, 2011.\83\ The interim final rule is the 
mechanism for the corresponding transfer from OTS to the Board of the 
regulations necessary for the Board to administer the statutes 
governing SLHCs.
---------------------------------------------------------------------------

    \83\ 12 U.S.C. 5412.
---------------------------------------------------------------------------

B. Statement of Objectives and Legal Basis

    The SUPPLEMENTARY INFORMATION sets forth the objectives and the 
legal basis for the interim final rule. In summary, this interim final 
rule is the mechanism for the transfer from the OTS to the Board of the 
regulations necessary for the Board to administer the statutes 
governing SLHCs.

C. Description of Small Entities to Which the Final Rule Applies

    The interim final rule would apply to any SLHC and its non-
depository subsidiaries. The Board can identify through data from the 
National Information Center the approximate numbers of small SLHCs that 
would be subject to the interim final rule. Based on March 2011 data, 
approximately 124 small SLHCs would be subject to the interim final 
rule.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The reporting and recordkeeping requirements of the interim final 
rule are described in the SUPPLEMENTARY INFORMATION.
    The interim final rule is composed of new Regulation LL and new 
Regulation MM, into which the Board has sought to collect all current 
OTS regulations applicable to, respectively, SLHCs and SLHCs in mutual 
form and transfer them into a single part of Chapter 2 of Title 12 for 
ease of locating. The interim final rule also makes technical 
amendments to current Board regulations necessary to accommodate the 
transfer of supervisory authority for SLHCs from OTS to the Board. In 
light of the information already required to be collected or disclosed 
under HOLA, the Board does not expect that the costs associated with 
this interim final rule will place a significant burden on small 
entities.

E. Identification of Duplicative, Overlapping, or Conflicting Federal 
Regulations

    The Board has not identified any federal statutes or regulations 
that would duplicate, overlap, or conflict with the interim final rule.

F. Significant Alternatives to the Interim Final Rule

    As noted above, the interim final rule implements the statutory 
requirements of the Dodd-Frank Act. The Board has implemented these 
requirements to minimize burden while retaining benefits and 
protections to the banking system. The Board welcomes comment on any 
significant alternatives that would minimize the impact of the interim 
final rule on small entities.
    The Board also welcomes further information and comment on any 
costs, compliance requirements, or changes in operating procedures 
arising from the application of the interim final rule to small 
business. The Board will carefully review any comments received on 
these issues during the public comment period.

VII. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
(``PRA'') of 1995 (44 U.S.C. 3501-3521), the Board may not conduct or 
sponsor, and the respondent is not required to respond to, an 
information collection unless it displays a currently valid Office of 
Management and Budget (``OMB'') control number. The Board reviewed the 
interim final rule under the authority delegated to the Board by OMB. 
In addition, as permitted by the PRA, the Board also proposes to extend 
for three years the current information collections listed below.

Regulation LL

Title of Information Collections
     Savings and Loan Holding Company Registration Statement 
(H(b)(10)),
     Savings Association Holding Company Report (H-(e) series),
     Interagency Bank Merger Act Application (FR 2070),
     Interagency Notice of Change in Control (FR 2081a),
     Notification by a Bank Holding Company to Acquire a 
Nonbank Company and/or Engage in Nonbanking Activities (FR Y-4),
     Filings Related to the Gramm-Leach-Bliley Act (FR 4010),
     Application to Become a Bank Holding Company and/or 
Acquire an Additional Bank or Bank Holding Company (FR Y-3),

[[Page 56529]]

     Notice for Prior Approval to Become a Bank Holding Company 
(FR Y-3N),
     Interagency Notice of Change in Director or Senior 
Executive Officer (FR 2081b),
     Prohibited Service at Savings and Loan Holding Companies,
     Interagency Biographical or Financial Report (FR 2081c), 
and
     Notice or Application for Capital Distribution (OTS 1583).
    Frequency of Response: Event-generated.
    Affected Public: Savings and loan holding companies (``SLHCs'') and 
individuals
    Abstract: The information collection requirements are found in 
sections 238.4, 238.11, 238.12, 238.14, 238.31, 238.33, 238.53, 238.54, 
238.65, 238.73, 238.74, 238.86, 238.96, and 238.103 of the interim 
final rule. These requirements would implement regulations related to 
Section 312 of the Dodd-Frank Act, which transfered supervision of 
SLHCs from the OTS to the Board on July 21, 2011.
    Section 238.4 sets forth the requirements for SLHCs to register 
with the Federal Reserve. The Federal Reserve will collect these data 
using the former OTS reporting form H(b)(10) (former OMB No. 1550-0020, 
current OMB No. 7100-0337). Sections 238.11 and 238.14 set forth the 
requirements for SLHCs to seek prior approval to form a holding 
company, acquire a subsidiary savings association, acquire control of a 
savings association or savings and loan holding company securities, 
acquire bank assets, merge SLHCs, and acquire control of an SLHC by 
certain individuals. The Federal Reserve will collect these data using 
former OTS reporting form H-(e) series (former OMB No. 1550-0015, 
current OMB No. 7100-0336) and Federal Reserve reporting form FR 2081a 
(OMB No. 7100-0134). Section 238.12 sets forth requirements for SLHCs 
involved in savings association mergers and internal corporate 
reorganizations to file information under the Bank Merger Act. The 
Federal Reserve will collect these data using Federal Reserve reporting 
form FR 2070 (OMB No. 7100-0171). Sections 238.31 and 238.33 set forth 
requirements for SLHCs to provide prior notice for changes in control 
of an SLHC. The Federal Reserve will collect these data using Federal 
Reserve reporting form FR 2081a (OMB No. 7100-0134). Sections 238.53 
and 238.54 set forth requirements for SLHCs to engage in or acquire a 
company engaged in certain services or activities. The Federal Reserve 
will collect these data using Federal Reserve reporting form FR Y-4 
(OMB No. 7100-0121). Section 238.65 sets forth requirements for SLHCs 
electing to be treated as a financial holding company, SLHCs that do 
not meet the requirements to be financial holding company engaging in 
financial holding company activities, and companies requesting to be 
treated as a financial holding company as part of an application to 
become an SLHC. The Federal Reserve will collect these data under the 
Federal Reserve's FR 4010 information collection, which is filed in a 
letter format (OMB No. 7100-0292), and the Federal Reserve's FR Y-3/3N 
reporting form (OMB No. 7100-0121). Sections 238.73 and 238.74 set 
forth requirements for SLHCs to provide prior notice to the Federal 
Reserve before adding or replacing any member of its board of 
directors, employing any person as a senior executive officer, or 
changing the responsibilities of any senior executive officer. The 
Federal Reserve will collect these data under the Federal Reserve's 
reporting form FR 2081b (OMB No. 7100-0134). Section 238.86 sets forth 
requirements for exemptions from prohibited services by individuals at 
SLHCs. The Federal Reserve will collect these data under a former OTS 
information collection that is filed in a letter format (former OMB No. 
1550-0117, current OMB No. 7100-0338). Section 238.96 sets forth 
requirements for an SLHC to apply for an exemption to a management 
interlock. The Federal Reserve will collect these data under Federal 
Reserve reporting forms FR 2070, FR 2081c, FR Y-3/3N (OMB Nos. 7100-
0171, 7100-0134, and 7100-0121). Section 238.103 sets forth filing 
requirements for subsidiary savings associations of SLHCs regarding 
dividend declarations. The Federal Reserve will collect these data 
under former OTS reporting form 1583 (former OMB No. 1550-0059, current 
OMB No. 7100-0339).
Estimated Burden
    The hourly burden estimates associated with each information 
collection described above are not expected to change materially as the 
information to be collected is substantively similar to that which is 
currently being collected from SLHCs and those managing these entities. 
There are approximately 427 SLHCs as of June 30, 2011. For the existing 
Federal Reserve information collections mentioned above, the Federal 
Reserve will increase the respondent counts as appropriate to include 
SLHCs. For additional information on the current burden associated with 
any of these information collections, please see OMB's public Web site 
at: http://www.reginfo.gov/public/do/PRAMain. For copies of the current 
reporting forms, please see the Federal Reserve's public Web site at 
http://www.federalreserve.gov/reportforms/default.cfm.

Regulation MM

Title of Information Collections
     Mutual Holding Company Reorganization (MHC-1; OTS 1522),
     Minority Stock Issuance by a Savings Association 
Subsidiary of a Mutual Holding Company (MHC-2; OTS 1523),
     Mutual to Stock Applications (OTS Forms 1680, 1681, 1682, 
1683),
     Holding Company Applications/Information Filing (H-(e) 
series),
     Interagency Notice of Change in Director or Senior 
Executive Officer (FR 2081b), and
     Interagency Biographical or Financial Report (FR 2081c).
    Frequency of Response: Event-generated.
    Affected Public: Mutual holding companies (MHCs) and individuals
    Abstract: The information collection requirements are found in 
sections 239.1, 239.3, 239.4, 239.6 through 239.8, 239.10, 239.11, 
239.15, 239.16, 239.22 through 239.25, 239.40, 239.50, 239.53 through 
239.55, 239.57 through 239.60, and 239.63 through 239.65 of the interim 
final rule. These requirements would implement regulations related to 
section 312 of the Dodd-Frank Act, which transfers supervision of MHCs 
from the OTS to the Board on July 21, 2011.
    Sections 239.1, 239.3, 239.4, 239.6 through 239.8, 239.10, 239.24, 
239.25, and 239.63 sets forth the requirements for MHCs to reorganize 
and for subsidiary holding companies of MHCs to issue minority stock. 
The Federal Reserve will collect these data using former OTS reporting 
forms 1522 and 1523 (former OMB No. 1550-0072; current OMB No. 7100-
0340). Sections 239.8, 239.10, 239.15, 239.57 through 239.60, and 
239.63 through 239.65 set forth the requirements for materials related 
to proxy statements, meetings, bylaws, offering circulars, selling 
conversion shares of MHCs, conflicts of interest of directors, and 
voluntary supervision conversions. The Federal Reserve will collect 
these data using former OTS reporting forms 1680 through 1683 (formerly 
OMB No. 1550-0014, current OMB No. 7100-0335). Section 239.11 sets 
forth requirements for MHCs with respect to communicating with members. 
MHCs would provide this information using a letter. Section 239.16 sets 
forth

[[Page 56530]]

requirements for MHCs to propose dissolution. MHCs would provide this 
information in a letter format. Section 239.22 and 239.23 sets forth 
requirements for MHC charter and bylaw amendments.
    This information would be submitted in a letter format. Section 
239.40 sets forth requirements for MHCs to notify the Board about their 
intent to indemnify directors, officers, and employees. The Federal 
Reserve will collect these data using Federal Reserve reporting form FR 
2081b (OMB No. 7100-0134). Section 239.50 sets forth requirements for 
MHCs to convert from the mutual to the stock form of ownership. The 
Federal Reserve will collect these data using former OTS reporting form 
H-(e) series (formerly OMB No. 1550-0015, current OMB No. 7100-0336) 
and Federal Reserve reporting form FR 2081c (OMB No. 7100-0134). 
Sections 239.53 through 239.55 set forth requirements for MHCs to 
provide a business plan prior to conversion from mutual to stock form, 
make certain certifications regarding the business plan, and notify its 
members and the public of the plan. The Federal Reserve will collect 
these data under Federal Reserve reporting form FR 2081c (OMB No. 7100-
0134). Section 239.65 requires a plan of voluntary supervisory 
conversion and related application. The Federal Reserve will use former 
OTS reporting forms H-(e)1-S (formerly OMB No. 1550-0015, current OMB 
No. 7100-0336) to collect these data.
Estimated Burden
    The hourly burden estimates associated with each information 
collection described above is not expected to change materially as the 
information to be collected is substantively similar to that which is 
currently being collected from MHCs and those managing these entities. 
There are approximately 100 MHCs as of June 30, 2011. For the existing 
Federal Reserve information collections mentioned above, the Federal 
Reserve will increase the respondent counts as appropriate to include 
MHCs. For additional information on the current burden associated with 
any of these information collections, please see OMB's public Web site 
at: http://www.reginfo.gov/public/do/PRAMain. For copies of the current 
reporting forms, please see the Federal Reserve's public Web site at 
http://www.federalreserve.gov/reportforms/default.cfm.
    Comments are invited on:
    (a) Whether the collection of information is necessary for the 
proper performance of the Board's functions, including whether the 
information has practical utility;
    (b) The accuracy of the estimates of the burden of the information 
collection, including the validity of the methodology and assumptions 
used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or start up costs and costs of operation, 
maintenance, and purchase of services to provide information.

Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach Bliley Act of 1999 requires the 
Federal banking agencies to use plain language in all proposed and 
final rules published after January 1, 2000.\84\ The Board invites 
comment on whether the interim final rule is clearly stated and 
effectively organized, and how the Board might make the text of the 
rule easier to understand.
---------------------------------------------------------------------------

    \84\ 12 U.S.C. 4809.
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 207

    Banks, Banking, Community development, Federal Reserve System, 
Holding companies, Reporting and recordkeeping requirements.

12 CFR Part 215

    Credit, Penalties, Reporting and recordkeeping requirements.

12 CFR Part 223

    Banks, Banking, Federal Reserve System.

12 CFR Part 228

    Banks, banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

12 CFR Part 238

    Administrative practice and procedure, Banks, Banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Holding companies, Securities.

12 CFR Part 239

    Administrative practice and procedure, Banks, Banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

12 CFR Part 261

    Confidential business information, Federal Reserve System, Freedom 
of information.

12 CFR Part 261b

    Sunshine Act.

12 CFR Part 262

    Administrative practice and procedure, Banks, banking, Federal 
Reserve System.

12 CFR Part 263

    Administrative practice and procedure, Claims, Crime, Equal Access 
to Justice, Lawyers, Penalties.

12 CFR Part 264a

    Conflicts of interest.

    For the reasons stated in the preamble, the Board amends 12 CFR 
chapter II as follows:

PART 207--DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS 
(REGULATION G)

0
1. The authority citation for part 207 continues to read as follows:

    Authority: 12 U.S.C. 1831y.

0
2. In Sec.  207.1:


0
A. Redesignate paragraphs (b)(3) and (b)(4) as paragraphs (b)(4) and 
(b)(5) respectively;
0
B. Add new paragraph (b)(3); and
0
C. Revise newly redesignated paragraphs (b)(4) and (b)(5). The 
additions and revisions read as follows:


Sec.  207.1  Purpose and scope of this part.

    (b)* * *
    (3) Savings and loan holding companies;
    (4) Affiliates of bank holding companies and savings and loan 
holding companies, other than banks, savings associations and 
subsidiaries of banks and savings associations; and
    (5) Nongovernmental entities or persons that enter into covered 
agreements with any company listed in paragraph (b)(1) through (4) of 
this section.
* * * * *

PART 215--LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL 
SHAREHOLDERS OF MEMBER BANKS (REGULATION O)

0
3. The authority citation for part 215 is revised to read as follows:

    Authority: 12 U.S.C. 248(a), 375a(10), 375b(9) and (10), 1468, 
1817(k), 5412; and Pub. L. 102-242, 105 Stat. 2236 (1991).


[[Page 56531]]


0
4. In Sec.  215.1, revise paragraph (a) to read as follows:


Sec.  215.1  Authority, purpose and scope.

    (a) Authority. This part is issued pursuant to sections 11(a), 
22(g), and 22(h) of the Federal Reserve Act (12 U.S.C. 248(a), 375a, 
and 375b), 12 U.S.C. 1817(k), section 306 of the Federal Deposit 
Insurance Corporation Improvement Act of 1991 (Pub. L. 102-242, 105 
Stat. 2236 (1991)), section 11 of the Home Owners' Loan Act (12 U.S.C. 
1468), and section 312(b)(2)(A) of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (12 U.S.C. 5412).
* * * * *

0
5. In Sec.  215.9, revise paragraph (a)(1) to read as follows:


Sec.  215.9  Disclosure of credit from member banks to executive 
officers and principal shareholders.

    (a) * * *
    (1) Principal shareholder of a member bank means any person other 
than an insured bank, or a foreign bank as defined in 12 U.S.C. 
3101(7), that, directly or indirectly, owns, controls, or has power to 
vote more than 10 percent of any class of voting securities of the 
member bank. The term includes a person that controls a principal 
shareholder (e.g., a person that controls a bank holding company). 
Shares of a bank (including a foreign bank), bank holding company, 
savings and loan holding company or other company owned or controlled 
by a member of an individual's immediate family are presumed to be 
owned or controlled by the individual for the purposes of determining 
principal shareholder status.
* * * * *

0
6. Section 215.12 is added to read as follows:


Sec.  215.12  Application to savings associations.

    The requirements of this part apply to savings associations, as 
defined in 12 CFR 238.2(l) (including any subsidiary of a savings 
association), in the same manner and to the same extent as if the 
savings association were a member bank; provided that a savings 
association's unimpaired capital and unimpaired surplus will be 
determined under regulatory capital rules applicable to that savings 
association.

PART 223--TRANSACTIONS BETWEEN MEMBER BANKS AND THEIR AFFILIATES 
(REGULATION W)

0
7. The authority citation for part 223 is revised to read as follows:

    Authority: 12 U.S.C. 371c(b)(1)(E), (b)(2)(A), and (f), 371c-
1(e), 1828(j), 1468(a), and section 312(b)(2)(A) of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (12 U.S.C. 5412).


0
8. In Sec.  223.1, revise paragraph (a) to read as follows:


Sec.  223.1  Authority, purpose and scope.

    (a) Authority. The Board of Governors of the Federal Reserve System 
(Board) has issued this part (Regulation W) under the authority of 
sections 23A(f) and 23B(e) of the Federal Reserve Act (FRA) (12 U.S.C. 
371c(f), 371c-1(e)) section 11 of the Home Owners' Loan Act (12 U.S.C. 
1468), and section 312(b)(2)(A) of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (12 U.S.C. 5412).
* * * * *

0
9. Add Subpart I to read as follows:

Subpart I--Savings Associations--Transactions with Affiliates


Sec.  223.72  Transactions with affiliates.

    (a) Scope. (1) This subpart 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 the Board to impose additional 
restrictions on a savings association's transactions with affiliates.
    (2) For the purposes of this subpart, ``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 is treated as part of the savings 
association. For purposes of this subpart, a ``non-affiliate 
subsidiary'' is a subsidiary of a savings association other than a 
subsidiary described at 12 CFR 223.2(b)(1)(i), and (b)(1)(iii) through 
(v).
    (b) Sections 23A and 23B of the FRA. A savings association must 
comply with sections 23A and 23B of the Federal Reserve Act and this 
part as if it were a member bank, except as described in the following 
chart.

----------------------------------------------------------------------------------------------------------------
          Provision of Regulation W                                       Application
----------------------------------------------------------------------------------------------------------------
(1) 12 CFR 223.2(a)(8)--``Affiliate''          Does not apply. Savings association subsidiaries do not meet the
 includes a financial subsidiary.               statutory definition of financial subsidiary.
(2) 12 CFR 223.2(a)(12)--Determination that    Read to include the following statement: ``Affiliate also
 ``affiliate'' includes other types of          includes any company that the Board determines, by order or
 companies.                                     regulation, to present a risk to the safety and soundness of the
                                                savings association.''
(3) 12 CFR 223.2(b)(1)(ii)--``Affiliate''      Does not apply. Savings association subsidiaries do not meet the
 includes a subsidiary that is a financial      statutory definition of financial subsidiary.
 subsidiary.
(4) 12 CFR 223.3(d)--Definition of ``capital   ``Capital stock and surplus'' for a savings association has the
 stock and surplus.''                           same meaning as under the regulatory capital requirements
                                                applicable to that savings association.
(5) 12 CFR 223.3(h)(1)--Section 23A covered    Read to incorporate paragraph (c)(1) of this section, which
 transactions include an extension of credit    prohibits loans or extensions of credit to an affiliate, unless
 to the affiliate.                              the affiliate is engaged only in the activities described at 12
                                                U.S.C. 1467a(c)(2)(F)(i), as defined in Regulation LL at 12 CFR
                                                238.54.
(6) 12 CFR 223.3(h)(2)--Section 23A covered    Read to incorporate paragraph (c)(2) of this section, which
 transactions include a purchase of or          prohibits purchases and investments in securities issued by an
 investment in securities issued by an          affiliate, other than with respect to shares of a subsidiary.
 affiliate.
(7) 12 CFR 223.3(k)--Definition of             Read to include the following statement: ``For the purposes of
 ``depository institution.''                    this definition, a non-affiliate subsidiary of a savings
                                                association is treated as part of the depository institution.''
(8) 12 CFR 223.3(p)--Definition of             Does not apply. Savings association subsidiaries do not meet the
 ``financial subsidiary.''                      statutory definition of financial subsidiary.
(9) 12 CFR 223.3(w)--Definition of ``member    Read to include the following statement: ``Member bank also
 bank.''                                        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.''
(10) 12 CFR 223.3(aa)--Definition of           Does not apply.
 ``operating subsidiary.''

[[Page 56532]]

 
(11) 12 CFR 223.31--Application of section     Read to refer to ``a non-affiliate subsidiary'' instead of
 23A to an acquisition of an affiliate that     ``operating subsidiary.''
 becomes an operating subsidiary.
(12) 12 CFR 223.32--Rules that apply to        Does not apply. Savings association subsidiaries do not meet the
 financial subsidiaries of a bank.              statutory definition of financial subsidiary.
(13) 12 CFR 223.42(f)(2)--Exemption for        Read to refer to ``Thrift Financial Report'' instead of ``Call
 purchasing certain marketable securities.      Report.'' References to ``state member bank'' are unchanged.
(14) 12 CFR 223.42(g)(2)--Exemption for        Read to refer to ``Thrift Financial Report'' instead of ``Call
 purchasing municipal securities.               Report.'' References to ``state member bank'' are unchanged.
(15) 12 CFR 223.61--Application of sections    Does not apply to savings associations or their subsidiaries.
 23A and 23B to U.S. branches and agencies of
 foreign banks.
----------------------------------------------------------------------------------------------------------------

    (c) Additional prohibitions and restrictions. A savings association 
must comply with the additional prohibitions and restrictions in this 
paragraph (c). Except as described in paragraph (b) of this section, 
the definitions in this part 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.  238.54 of Regulation LL 
(12 CFR 238.54). 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 the Board 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.  238.54 of Regulation LL (12 CFR 
238.54), or the Board has other supervisory concerns concerning the 
transaction, the Board 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 of this 
paragraph (c)(2), subsidiary includes a bank and a savings association.

PART 228--COMMUNITY REINVESTMENT (REGULATION BB)

0
10. The authority citation for part 228 continues to read as follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1820(d)(9), 1823(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 
2901-2907, 3105, 3106a(1), 3108(a), 3310, 3331-3351, and 3906-3909, 
5101 et seq., 15 U.S.C. 78b, 78l(b), 78l(g), 78l(i), 78o-4(c)(5), 
78q, 78q-1, 78w, 1681s, 1681w, 6801 and 6805; 31 U.S.C. 5318, 42 
U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.


0
11. In Sec.  228.11:
0
A. Revise paragraphs (a)(2), (a)(3)(iii), and (a)(3)(iv); and
0
B. Add paragraph (a)(3)(v) to read as follows:


Sec.  228.11  Authority, purposes, and scope.

    (a) * * *
    (2) To conduct examinations of bank holding companies and their 
subsidiaries (12 U.S.C. 1844) and savings and loan holding companies 
and their subsidiaries (12 U.S.C. 1467a); and
    (3) * * *
    (iii) Formations of, acquisitions of banks by, and mergers of, bank 
holding companies (12 U.S.C. 1842);
    (iv) The acquisition of savings associations by bank holding 
companies (12 U.S.C. 1843); and
    (v) Formations of, acquisitions of savings associations by, 
conversions of, and mergers of, savings and loan holding companies (12 
U.S.C. 1467a).
* * * * *

0
12. In Sec.  228.29:
0
A. Revise paragraphs (a)(2)(ii) and (a)(2)(iii);
0
B. Add paragraphs (a)(2)(iv) and (a)(2)(v); and
0
C. Revise paragraphs (c) and (d).
    The additions and revisions read as follows:


Sec.  228.29  Effect of CRA performance on applications.

    (a) * * *
    (2) * * *
    (ii) To acquire ownership or control of shares or all or 
substantially all of the assets of a bank, to cause a bank to become a 
subsidiary of a bank holding company, or to merge or consolidate a bank 
holding company with any other bank holding company in a transaction 
that requires approval under section 3 of the Bank Holding Company Act 
(12 U.S.C. 1842);
    (iii) To own, control or operate a savings association in a 
transaction that requires approval under section 4 of the Bank Holding 
Company Act (12 U.S.C. 1843);
    (iv) To become a savings and loan holding company in a transaction 
that requires approval under section 10 of the Home Owners' Loan Act 
(12 U.S.C. 1467a); and
    (v) To acquire ownership or control of shares or all or 
substantially all of the assets of a savings association, to cause a 
savings association to become a subsidiary of a savings and loan 
holding company, or to merge or consolidate a savings and loan holding 
company with any other savings and loan holding company in a 
transaction that requires approval under section 10 of the Home Owners' 
Loan Act (12 U.S.C. 1467a).
* * * * *
    (c) Denial or conditional approval of application. A bank or 
savings association's record of performance may be the basis for 
denying or conditioning approval of an application listed in paragraph 
(a) of this section.
    (d) Definitions. For purposes of paragraphs (a)(2)(i), (ii), and 
(iii) of this section, ``bank,'' ``bank holding company,'' 
``subsidiary,'' and ``savings association'' have the meanings given to 
those terms in section 2 of the Bank Holding Company Act (12 U.S.C. 
1841). For purposes of paragraphs (a)(2)(iv) and (v) of this section, 
``savings and loan holding company'' and ``subsidiary'' has the meaning 
given to that term in section 10 of the Home Owners' Loan Act (12 
U.S.C. 1467a).

0
13. Add new part 238 to read as follows:

PART 238--SAVINGS AND LOAN HOLDING COMPANIES (REGULATION LL)

Subpart A--General Provisions
Sec.
238.1 Authority, purpose and scope.
238.2 Definitions.

[[Page 56533]]

238.3 Administration.
238.4 Records, reports, and inspections.
238.5 Audit of savings association holding companies.
238.6 Penalties for violations.
238.7 Tying restriction exception.
238.8 Safe and sound operations.
Subpart B--Acquisitions of Savings Association Securities or Assets
Sec.
238.11 Transactions requiring Board approval.
238.12 Transactions not requiring Board approval.
238.13 Prohibited acquisitions.
238.14 Procedural requirements.
238.15 Factors considered in acting on applications.
Subpart C--Control Proceedings
Sec.
238.21 Control proceedings.
Subpart D--Change in Bank Control
Sec.
238.31 Transactions requiring prior notice.
238.32 Transactions not requiring prior notice.
238.33 Procedures for filing, processing, publishing, and acting on 
notices.
Subpart E--Qualified Stock Issuances
Sec.
238.41 Qualified stock issuances by undercapitalized savings 
associations or holding companies.
Subpart F--Savings and Loan Holding Company Activities and Acquisitions
Sec.
238.51 Prohibited activities.
238.52 Exempt savings and loan holding companies and grandfathered 
activities.
238.53 Prescribed services and activities of savings and loan 
holding companies.
238.54 Permissible bank holding company activities of savings and 
loan holding companies.
Subpart G--Financial Holding Company Activities
Sec.
238.61 Scope.
238.62 Definitions.
238.63 Requirements to engage in financial holding company 
activities.
238.64 Election required.
238.65 Election procedures.
238.66 Ongoing requirements.
Subpart H--Notice of Change of Director or Senior Executive Officer
Sec.
238.71 Purpose.
238.72 Definitions.
238.73 Prior notice requirement.
238.74 Filing and processing procedures.
238.75 Standards for review.
238.76 Waiting period.
238.77 Waiver of prior notice requirement.
Subpart I--Prohibited Service at Savings and Loan Holding Companies
Sec.
238.81 Purpose.
238.82 Definitions.
238.83 Prohibited actions.
238.84 Covered convictions or agreements to enter into pre-trial 
diversions or similar programs.
238.85 Adjudications and offenses not covered.
238.86 Exemptions.
238.87 Filing procedures.
238.88 Factors for review.
238.89 Board action.
239.90 Hearings.
Subpart J--Management Official Interlocks
Sec.
238.91 Authority, purpose, and scope.
238.92 Definitions.
238.93 Prohibitions.
238.94 Interlocking relationships permitted by statute.
238.95 Small market share exemption.
238.96 General exemption.
238.97 Change in circumstances.
238.98 Enforcement.
238.99 Interlocking relationships permitted pursuant to Federal 
Deposit Insurance Act.
Subpart K--Dividends by Subsidiary Savings Associations
Sec.
238.101 Authority and purpose.
238.102 Definitions.
238.103 Filing requirement.
238.104 Board action and criteria for review.
Subpart L--Investigative Proceedings and Formal Examination Proceedings
Sec.
238.111 Scope.
238.112 Definitions.
238.113 Confidentiality of proceedings.
238.114 Transcripts.
238.115 Rights of witnesses.
238.116 Obstruction of the proceedings.
238.117 Subpoenas.

    Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462, 1462a, 1463, 1464, 
1467, 1467a, 1468, 1813, 1817, 1829e, 1831i, 1972; 15 U.S.C. 78 l.

Subpart A--General Provisions


Sec.  238.1  Authority, purpose and scope.

    (a) Authority. This part is issued by the Board of Governors of the 
Federal Reserve System (Board) under section 10(g) of the Home Owners' 
Loan Act (HOLA); section 7(j)(13) of the Federal Deposit Insurance Act, 
as amended by the Change in Bank Control Act of 1978 (12 U.S.C. 
1817(j)(13)) (Bank Control Act ); sections 8(b), 19 and 32 of the 
Federal Deposit Insurance Act (12 U.S.C. 1818(b), 1829, and 1831i); and 
section 914 of the Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (12 U.S.C. 1831i) and the Depository 
Institution Management Interlocks Act (12 U.S.C. 3201 et seq.).
    (b) Purpose. The principal purposes of this part are to:
    (1) Regulate the acquisition of control of savings associations by 
companies and individuals;
    (2) Define and regulate the activities in which savings and loan 
holding companies may engage;
    (3) Set forth the procedures for securing approval for these 
transactions and activities; and
    (4) Set forth the procedures under which directors and executive 
officers may be appointed or employed by savings and loan holding 
companies in certain circumstances.


Sec.  238.2  Definitions.

    As used in this part and in the forms under this part, the 
following definitions apply, unless the context otherwise requires:
    (a) Affiliate means any person or company which controls, is 
controlled by or is under common control with a person, savings 
association or company.
    (b) Bank means any national bank, state bank, state-chartered 
savings bank, cooperative bank, or industrial bank, the deposits of 
which are insured by the Deposit Insurance Fund.
    (c) Bank holding company has the meaning found in the Board's 
Regulation Y (12 CFR 225.2(c)).
    (d) Company means any corporation, partnership, trust, association, 
joint venture, pool, syndicate, unincorporated organization, joint-
stock company or similar organization, as defined in paragraph (o) of 
this section; but a company does not include:
    (1) The Federal Deposit Insurance Corporation, the Resolution Trust 
Corporation, or any Federal Home Loan Bank, or
    (2) Any company the majority of shares of which is owned by:
    (i) The United States or any State,
    (ii) An officer of the United States or any State in his or her 
official capacity, or
    (iii) An instrumentality of the United States or any State.
    (e) A person shall be deemed to have control of:
    (1) A savings association if the person directly or indirectly or 
acting in concert with one or more other persons, or through one or 
more subsidiaries, owns, controls, or holds with power to vote, or 
holds proxies representing, more than 25 percent of the voting shares 
of such savings association, or controls in any manner the election of 
a majority of the directors of such association;
    (2) Any other company if the person directly or indirectly or 
acting in concert with one or more other persons, or through one or 
more subsidiaries, owns, controls, or holds with power to

[[Page 56534]]

vote, or holds proxies representing, more than 25 percent of the voting 
shares or rights of such other company, or controls in any manner the 
election or appointment of a majority of the directors or trustees of 
such other company, or is a general partner in or has contributed more 
than 25 percent of the capital of such other company;
    (3) A trust if the person is a trustee thereof; or
    (4) A savings association or any other company if the Board 
determines, after reasonable notice and opportunity for hearing, that 
such person directly or indirectly exercises a controlling influence 
over the management or policies of such association or other company.
    (f) Director means any director of a corporation or any individual 
who performs similar functions in respect of any company, including a 
trustee under a trust.
    (g) Management official means any president, chief executive 
officer, chief operating officer, vice president, director, partner, or 
trustee, or any other person who performs or has a representative or 
nominee performing similar policymaking functions, including executive 
officers of principal business units or divisions or subsidiaries who 
perform policymaking functions, for a savings association or a company, 
whether or not incorporated.
    (h) Multiple savings and loan holding company means any savings and 
loan holding company which directly or indirectly controls two or more 
savings associations.
    (i) Officer means the chairman of the board, president, vice 
president, treasurer, secretary, or comptroller of any company, or any 
other person who participates in its major policy decisions.
    (j) Person includes an individual, bank, corporation, partnership, 
trust, association, joint venture, pool, syndicate, sole 
proprietorship, unincorporated organization, or any other form of 
entity.
    (k) Qualified thrift lender means a financial institution that 
meets the appropriate qualified thrift lender test set forth in 12 
U.S.C. 1467a(m).
    (l) Savings Association means a Federal savings and loan 
association or a Federal savings bank chartered under section 5 of the 
Home Owners' Loan Act, a building and loan, savings and loan or 
homestead association or a cooperative bank (other than a cooperative 
bank described in 12 U.S.C. 1813(a)(2)) the deposits of which are 
insured by the Federal Deposit Insurance Corporation, and any 
corporation (other than a bank) the deposits of which are insured by 
the Federal Deposit Insurance Corporation that the Office of the 
Comptroller of the Currency and the Federal Deposit Insurance 
Corporation jointly determine to be operating in substantially the same 
manner as a savings association, and shall include any savings bank or 
any cooperative bank which is deemed by the Office of the Comptroller 
of the Currency to be a savings association under 12 U.S.C. 1467a(1).
    (m) Savings and loan holding company means any company (including a 
savings association) that directly or indirectly controls a savings 
association, but does not include:
    (1) Any company by virtue of its ownership or control of voting 
stock of a savings association acquired in connection with the 
underwriting of securities if such stock is held only for such period 
of time (not exceeding 120 days unless extended by the Board) as will 
permit the sale thereof on a reasonable basis;
    (2) Any trust (other than a pension, profit-sharing, stockholders', 
voting, or business trust) which controls a savings association if such 
trust by its terms must terminate within 25 years or not later than 21 
years and 10 months after the death of individuals living on the 
effective date of the trust, and:
    (i) Was in existence and in control of a savings association on 
June 26, 1967, or
    (ii) Is a testamentary trust;
    (3) A bank holding company that is registered under, and subject 
to, the Bank Holding Company Act of 1956, or any company directly or 
indirectly controlled by such company (other than a savings 
association);
    (4) A company that controls a savings association that functions 
solely in a trust or fiduciary capacity as provided in section 
2(c)(2)(D) of the Bank Holding Company Act; or
    (5) A company described in section 10(c)(9)(C) of HOLA solely by 
virtue of such company's control of an intermediate holding company 
established under section 10A of the Home Owners' Loan Act.
    (n) Shareholder--(1) Controlling shareholder means a person that 
owns or control, directly or indirectly, more than 25 percent of any 
class of voting securities of a savings association or other company.
    (2) Principal shareholder means a person that owns or controls, 
directly or indirectly, 10 percent or more of any class of voting 
securities of a savings association or other company, or any person 
that the Board determines has the power, directly or indirectly, to 
exercise a controlling influence over the management or policies of a 
savings association or other company.
    (o) Stock means common or preferred stock, general or limited 
partnership shares or interests, or similar interests.
    (p) Subsidiary means any company which is owned or controlled 
directly or indirectly by a person, and includes any service 
corporation owned in whole or in part by a savings association, or a 
subsidiary of such service corporation.
    (q) Uninsured institution means any financial institution the 
deposits of which are not insured by the Federal Deposit Insurance 
Corporation.
    (r)(1) Voting securities means shares of common or preferred stock, 
general or limited partnership shares or interests, or similar 
interests if the shares or interest, by statute, charter, or in any 
manner, entitle the holder:
    (i) To vote for or to select directors, trustees, or partners (or 
persons exercising similar functions of the issuing company); or
    (ii) To vote on or to direct the conduct of the operations or other 
significant policies of the issuing company.
    (2) Nonvoting shares. Preferred shares, limited partnership shares 
or interests, or similar interests are not voting securities if:
    (i) Any voting rights associated with the shares or interest are 
limited solely to the type customarily provided by statute with regard 
to matters that would significantly and adversely affect the rights or 
preference of the security or other interest, such as the issuance of 
additional amounts or classes of senior securities, the modification of 
the terms of the security or interest, the dissolution of the issuing 
company, or the payment of dividends by the issuing company when 
preferred dividends are in arrears;
    (ii) The shares or interest represent an essentially passive 
investment or financing device and do not otherwise provide the holder 
with control over the issuing company; and
    (iii) The shares or interest do not entitle the holder, by statute, 
charter, or in any manner, to select or to vote for the selection of 
directors, trustees, or partners (or persons exercising similar 
functions) of the issuing company.
    (3) Class of voting shares. Shares of stock issued by a single 
issuer are deemed to be the same class of voting shares, regardless of 
differences in dividend rights or liquidation preference, if the shares 
are voted together as a single class on all matters for which the 
shares have voting rights other than matters described in paragraph 
(r)(2)(i) of this section that affect solely the rights or preferences 
of the shares.

[[Page 56535]]

    (s) Well capitalized.
    (1) A savings and loan holding company is well capitalized if:
    (i) Each of the savings and loan holding company's depository 
institutions is well capitalized; and
    (ii) The savings and loan holding company is not subject to any 
written agreement, order, capital directive, or prompt corrective 
action directive issued by the Board to meet and maintain a specific 
capital level for any capital measure.
    (2) In the case of a savings association, ``well capitalized'' 
takes the meaning provided in Sec.  225.2(r)(2) of this chapter.
    (t) Well managed. The term ``well managed'' takes the meaning 
provided in Sec.  225.2(s) of this chapter except that a ``satisfactory 
rating for management'' refers to a management rating, if such rating 
is given, or otherwise a risk-management rating, if such rating is 
given.
    (u) Depository institution. For purposes of this part, the term 
``depository institution'' has the same meaning as in section 3(c) of 
Federal Deposit Insurance Act (12 U.S.C. 1813(c)).


Sec.  238.3  Administration.

    (a) Delegation of authority. Designated Board members and officers 
and the Federal Reserve Banks are authorized by the Board to exercise 
various functions prescribed in this regulation, in the Board's Rules 
Regarding Delegation of Authority (12 CFR part 265), the Board's Rules 
of Procedure (12 CFR part 262), and in Board orders.
    (b) Appropriate Federal Reserve Bank. In administering this 
regulation, unless a different Federal Reserve Bank is designated by 
the Board, the appropriate Federal Reserve Bank is as follows:
    (1) For a savings and loan holding company (or a company applying 
to become a savings and loan holding company): the Reserve Bank of the 
Federal Reserve district in which the company's banking operations are 
principally conducted, as measured by total domestic deposits in its 
subsidiary savings association on the date it became (or will become) a 
savings and loan holding company;
    (2) For an individual or company submitting a notice under subpart 
D of this part: The Reserve Bank of the Federal Reserve district in 
which the banking operations of the savings and loan holding company to 
be acquired are principally conducted, as measured by total domestic 
deposits on the date the notice is filed.


Sec.  238.4  Records, reports, and inspections.

    (a) Records. Each savings and loan holding company shall maintain 
such books and records as may be prescribed by the Board. Each savings 
and loan holding company and its non-depository 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 Board 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 Board, at a location acceptable to 
the Board.
    (b) Reports. Each savings and loan holding company and each 
subsidiary thereof, other than a savings association, shall file with 
the Board such reports as may be required by the Board. Such reports 
shall be made under oath or otherwise, and shall be in such form and 
for such periods, as the Board may prescribe. Each report shall contain 
information concerning the operations of such savings and loan holding 
company and its subsidiaries as the Board may require.
    (c) Registration statement--(1) Filing of registration statement. 
Not later than 90 days after becoming a savings and loan holding 
company, each savings and loan holding company shall register with the 
Board by furnishing information in the manner and form prescribed by 
the Board.
    (2) Date of registration. The date of registration of a savings and 
loan holding company shall be the date on which its registration 
statement is received by the Board.
    (3) Extension of time for registration. For timely and good cause 
shown, the Board may extend the time within which a savings and loan 
holding company shall register.
    (d) Release from registration. The Board may at any time, upon its 
own motion or upon application, release a registered savings and loan 
holding company from any registration theretofore made by such company, 
if the Board shall determine that such company no longer has control of 
any savings association or no longer qualifies as a savings and loan 
holding company.
    (e) Examinations. Each savings and loan holding company and each 
subsidiary thereof shall be subject to such examinations as the Board 
may prescribe. The Board shall, to the extent deemed feasible, use for 
the purposes of this section reports filed with or examinations made by 
other Federal agencies or the appropriate State supervisory authority.
    (f) Appointment of agent. The Board may require any savings and 
loan holding company, or persons connected therewith if it is not a 
corporation, to execute and file a prescribed form of irrevocable 
appointment of agent for service of process.


Sec.  238.5  Audit of savings association holding companies.

    (a) General. The Board may require, at any time, an independent 
audit of the financial statements of, or the application of procedures 
agreed upon by the Board to a savings and loan holding company, or 
nondepository affiliate by qualified independent public accountants 
when needed for any safety and soundness reason identified by the 
Board.
    (b) Audits required for safety and soundness purposes. The Board 
requires an independent audit for safety and soundness purposes 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 Board requires an independent audit 
because such an audit is needed for safety and soundness purposes, the 
Board shall determine whether the audit was conducted and filed in a 
manner satisfactory to the Board.
    (2) When the Board requires the application of procedures agreed 
upon by the Board for safety and soundness purposes, the Board shall 
identify the procedures to be performed. The Board shall also determine 
whether the agreed upon procedures were conducted and filed in a manner 
satisfactory to the Board.
    (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 Board 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

[[Page 56536]]

    (4) Has received, or is enrolled in, a peer review program that 
meets guidelines acceptable to the Board.
    (e) Voluntary audits. When a savings and loan holding company or 
nondepository affiliate 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.


Sec.  238.6  Penalties for violations.

    (a) Criminal and civil penalties. (1) Section 10 of the HOLA 
provides criminal penalties for willful violation, and civil penalties 
for violation, by any company or individual, of HOLA or any regulation 
or order issued under it, or for making a false entry in any book, 
report, or statement of a savings and loan holding company.
    (2) Civil money penalty assessments for violations of HOLA shall be 
made in accordance with subpart C of the Board's Rules of Practice for 
Hearings (12 CFR part 263, subpart C). For any willful violation of the 
Bank Control Act or any regulation or order issued under it, the Board 
may assess a civil penalty as provided in 12 U.S.C. 1817(j)(15).
    (b) Cease-and-desist proceedings. For any violation of HOLA, the 
Bank Control Act, this regulation, or any order or notice issued 
thereunder, the Board may institute a cease-and-desist proceeding in 
accordance with the Financial Institutions Supervisory Act of 1966, as 
amended (12 U.S.C. 1818(b) et seq.).


Sec.  238.7  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 Board 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 Board that its 
exercise of this authority is resulting in anti-competitive practices.


Sec.  238.8  Safe and sound operations.

    (a) Savings and loan holding company policy and operations. (1) A 
savings and loan holding company shall serve as a source of financial 
and managerial strength to its subsidiary savings associations and 
shall not conduct its operations in an unsafe or unsound manner.
    (2) Whenever the Board believes an activity of a savings and loan 
holding company or control of a nonbank subsidiary (other than a 
nonbank subsidiary of a savings association) constitutes a serious risk 
to the financial safety, soundness, or stability of a subsidiary 
savings association of the savings and loan holding company and is 
inconsistent with sound banking principles or the purposes of HOLA or 
the Financial Institutions Supervisory Act of 1966, as amended (12 
U.S.C. 1818(b) et seq.), the Board may require the savings and loan 
holding company to terminate the activity or to terminate control of 
the subsidiary, as provided in section 10(g)(5) of the HOLA.

Subpart B--Acquisitions of Saving Association Securities or Assets


Sec.  238.11  Transactions requiring Board approval.

    The following transactions require the Board's prior approval under 
section 10 of HOLA except as exempted under Sec.  238.12:
    (a) Formation of savings and loan holding company. Any action that 
causes a savings association or other company to become a savings and 
loan holding company.
    (b) Acquisition of subsidiary savings association. Any action that 
causes a savings association to become a subsidiary of a savings and 
loan holding company.
    (c) Acquisition of control of savings association or savings and 
loan holding company securities. (1) The acquisition by a savings and 
loan holding company of direct or indirect ownership or control of any 
voting securities of a savings association or savings and loan holding 
company, that is not a subsidiary, if the acquisition results in the 
company's control of more than 5 percent of the outstanding shares of 
any class of voting securities of the savings association or savings 
and loan holding company.
    (2) An acquisition includes the purchase of additional securities 
through the exercise of preemptive rights, but does not include 
securities received in a stock dividend or stock split that does not 
alter the savings and loan holding company's proportional share of any 
class of voting securities.
    (3) In the case of a multiple savings and loan holding company, 
acquisition of direct or indirect ownership or control of any voting 
securities of a savings association or savings and loan holding 
company, that is not a subsidiary, if the acquisition results in the 
company's control of more than 5 percent of the outstanding shares of 
any class of voting securities of the savings association or savings 
and loan holding company that is engaged in any business activity other 
than those specified in Sec.  238.51 of this part.
    (d) Acquisition of savings association or savings and loan holding 
company assets. The acquisition by a savings and loan holding company 
or by a subsidiary thereof (other than a savings association) of all or 
substantially all of the assets of a savings association, or savings 
and loan holding company.
    (e) Merger of savings and loan holding companies. The merger or 
consolidation of savings and loan holding companies, and the 
acquisition of a savings association through a merger or consolidation.
    (f) Acquisition of control by certain individuals. The acquisition, 
by a director or officer of a savings and loan holding company, or by 
any individual who owns, controls, or holds the power to vote (or holds 
proxies representing) more than 25 percent of the voting shares of such 
savings and loan holding company, of control of any savings association 
that is not a subsidiary of such savings and loan holding company.


Sec.  238.12  Transactions not requiring Board approval.

    (a) The requirements of Sec.  238.11(a), (b), (d), (e) and (f) do 
not apply to:
    (1) Control of a savings association acquired by devise under the 
terms of a will creating a trust which is excluded from the definition 
of savings and loan holding company;
    (2) Control of a savings association acquired in connection with a 
reorganization that involves solely the acquisition of control of that 
association by a newly formed company that is controlled by the same 
acquirors that controlled the savings association for the immediately 
preceding three years, and entails no other transactions, such as an 
assumption of the acquirors' debt by the newly formed company: 
Provided, that the acquirors have filed the designated form with the 
appropriate Reserve Bank and have provided all additional information

[[Page 56537]]

requested by the Board or Reserve Bank, and the Board nor the 
appropriate Reserve Bank object to the acquisition within 30 days of 
the filing date;
    (3) Control of a savings association acquired by a bank holding 
company that is registered under and subject to, the Bank Holding 
Company Act of 1956, or any company controlled by such bank holding 
company;
    (4) Control of a savings association acquired solely as a result of 
a pledge or hypothecation of stock to secure a loan contracted for in 
good faith or the liquidation of a loan contracted for in good faith, 
in either case where such loan was made in the ordinary course of the 
business of the lender: Provided, further, That acquisition of control 
pursuant to such pledge, hypothecation or liquidation is reported to 
the Board within 30 days, and Provided, further, That the acquiror 
shall not retain such control for more than one year from the date on 
which such control was acquired; however, the Board may, upon 
application by an acquiror, extend such one-year period from year to 
year, for an additional period of time not exceeding three years, if 
the Board finds such extension is warranted and would not be 
detrimental to the public interest;
    (5) Control of a savings association acquired through a percentage 
increase in stock ownership following a pro rata stock dividend or 
stock split, if the proportional interests of the recipients remain 
substantially the same;
    (6) Acquisitions of up to twenty-five percent (25%) of a class of 
stock by a tax-qualified employee stock benefit plan; and
    (7) Acquisitions of up to 15 percent of the voting stock of any 
savings association by a savings and loan holding company (other than a 
bank holding company) in connection with a qualified stock issuance if 
such acquisition is approved by the Board pursuant to subpart E.
    (b) The requirements of Sec.  238.11(c) do not apply to voting 
shares of a savings association or of a savings and loan holding 
company--
    (1) Held as a bona fide fiduciary (whether with or without the sole 
discretion to vote such shares);
    (2) Held temporarily pursuant to an underwriting commitment in the 
normal course of an underwriting business;
    (3) Held in an account solely for trading purposes or over which no 
control is held other than control of voting rights acquired in the 
normal course of a proxy solicitation;
    (4) Acquired in securing or collecting a debt previously contracted 
in good faith, for two years after the date of acquisition or for such 
additional time (not exceeding three years) as the Board may permit if, 
in the Board's judgment, such an extension would not be detrimental to 
the public interest;
    (5) Acquired under section 13(k)(1)(A)(i) of the Federal Deposit 
Insurance Act (or section 408(m) of the National Housing Act as in 
effect immediately prior to the enactment of the Financial Institutions 
Reform, Recovery and Enforcement Act of 1989);
    (6) Held by any insurance companies as defined in section 2(a)(17) 
of the Investment Company Act of 1940: Provided, That all shares held 
by all insurance company affiliates of such savings association or 
savings and loan holding company may not, in the aggregate, exceed five 
percent of all outstanding shares or of the voting power of the savings 
association or savings and loan holding company, and such shares are 
not acquired or retained with a view to acquiring, exercising, or 
transferring control of the savings association or savings and loan 
holding company; and
    (7) Acquired pursuant to a qualified stock issuance if such a 
purchase is approved pursuant to subpart E of this part.
    (c) The aggregate amount of shares held under paragraph (b) of this 
section (other than pursuant to paragraphs (b)(1) through (4) and 
(b)(6)) may not exceed 15 percent of all outstanding shares or the 
voting power of a savings association or savings and loan holding 
company.
    (d) Acquisitions involving savings association mergers and internal 
corporate reorganizations--The requirements of Sec.  238.11 do not 
apply to:
    (1) Certain transactions subject to the Bank Merger Act. The 
acquisition by a savings and loan holding company of shares of a 
savings association or company controlling a savings association or the 
merger of a company controlling a savings association with the savings 
and loan holding company, if the transaction is part of the merger or 
consolidation of the savings association with a subsidiary savings 
association (other than a nonoperating subsidiary savings association) 
of the acquiring savings and loan holding company, or is part of the 
purchase of substantially all of the assets of the savings association 
by a subsidiary savings association (other than a nonoperating 
subsidiary savings association) of the acquiring savings and loan 
holding company, and if:
    (i) The savings association merger, consolidation, or asset 
purchase occurs simultaneously with the acquisition of the shares of 
the savings association or savings and loan holding company or the 
merger of holding companies, and the savings association is not 
operated by the acquiring savings and loan holding company as a 
separate entity other than as the survivor of the merger, 
consolidation, or asset purchase;
    (ii) The transaction requires the prior approval of a federal 
supervisory agency under the Bank Merger Act (12 U.S.C. 1828(c));
    (iii) The transaction does not involve the acquisition of any 
company that would require prior notice or approval under section 10(c) 
of the HOLA;
    (iv) The transaction does not involve a depository institution 
organized in mutual form, a savings and loan holding company organized 
in mutual form, a subsidiary holding company of a savings and loan 
holding company organized in mutual form, or a bank holding company 
organized in mutual form;
    (v) The transaction will not have a material adverse impact on the 
financial condition of the acquiring savings and loan holding company;
    (vi) At least 10 days prior to the transaction, the acquiring 
savings and loan holding company has provided to the Reserve Bank 
written notice of the transaction that contains:
    (A) A copy of the filing made to the appropriate federal banking 
agency under the Bank Merger Act; and
    (B) A description of the holding company's involvement in the 
transaction, the purchase price, and the source of funding for the 
purchase price; and
    (vii) Prior to expiration of the period provided in paragraph 
(d)(1)(vi) of this section, neither the Board nor the Reserve Bank has 
informed the savings and loan holding company that an application under 
Sec.  238.11 is required.
    (2) Internal corporate reorganizations. (i) Subject to paragraph 
(d)(2)(ii) of this section, any of the following transactions performed 
in the United States by a savings and loan holding company:
    (A) The merger of holding companies that are subsidiaries of the 
savings and loan holding company;
    (B) The formation of a subsidiary holding company; \1\
---------------------------------------------------------------------------

    \1\ In the case of a transaction that results in the formation 
or designation of a new savings and loan holding company, the new 
savings and loan holding company must complete the registration 
requirements described in section 238.11.
---------------------------------------------------------------------------

    (C) The transfer of control or ownership of a subsidiary savings 
association or a subsidiary holding company between one subsidiary 
holding company and another

[[Page 56538]]

subsidiary holding company or the savings and loan holding company.
    (ii) A transaction described in paragraph (d)(2)(i) of this section 
qualifies for this exception if--
    (A) The transaction represents solely a corporate reorganization 
involving companies and insured depository institutions that, both 
preceding and following the transaction, are lawfully controlled and 
operated by the savings and loan holding company;
    (B) The transaction does not involve the acquisition of additional 
voting shares of an insured depository institution that, prior to the 
transaction, was less than majority owned by the savings and loan 
holding company;
    (C) The transaction does not involve a savings and loan holding 
company organized in mutual form, a subsidiary holding company of a 
savings and loan holding company organized in mutual form, or a bank 
holding company organized in mutual form; and
    (D) The transaction will not have a material adverse impact on the 
financial condition of the holding company.


Sec.  238.13  Prohibited acquisitions.

    (a) No savings and loan holding company may, directly or 
indirectly, or through one or more subsidiaries or through one or more 
transactions, acquire control of an uninsured institution or retain, 
for more than one year after the date any savings association 
subsidiary becomes uninsured, control of such association.
    (b) Control of mutual savings association. No savings and loan 
holding company or any subsidiary thereof, or any director, officer, or 
employee of a savings and loan holding company or subsidiary thereof, 
or person owning, controlling, or holding with power to vote, or 
holding proxies representing, more than 25 percent of the voting shares 
of such holding company or subsidiary, may hold, solicit, or exercise 
any proxies in respect of any voting rights in a mutual savings 
association.


Sec.  238.14  Procedural requirements.

    (a) Filing application. An application for the Board's prior 
approval under Sec.  238.11 shall be governed by the provisions of this 
section and shall be filed with the appropriate Reserve Bank on the 
designated form.
    (b) Request for confidential treatment. An applicant may request 
confidential treatment for portions of its application pursuant to 12 
CFR 261.15.
    (c) Public notice.--(1) Newspaper publication--(i) Location of 
publication. In the case of each application, the applicant shall 
publish a notice in a newspaper of general circulation, in the form and 
at the locations specified in Sec.  262.3 of the Rules of Procedure (12 
CFR 262.3) in this chapter;
    (ii) Contents of notice. A newspaper notice under this paragraph 
shall provide an opportunity for interested persons to comment on the 
proposal for a period of at least 30 calendar days;
    (iii) Timing of publication. Each newspaper notice published in 
connection with a proposal under this paragraph shall be published no 
more than 15 calendar days before and no later than 7 calendar days 
following the date that an application is filed with the appropriate 
Reserve Bank.
    (2) Federal Register Notice. (i) Publication by Board. Upon receipt 
of an application, the Board shall promptly publish notice of the 
proposal in the Federal Register and shall provide an opportunity for 
interested persons to comment on the proposal for a period of no more 
than 30 days;
    (ii) Request for advance publication. An applicant may request 
that, during the 15-day period prior to filing an application, the 
Board publish notice of a proposal in the Federal Register. A request 
for advance Federal Register Notice publication shall be made in 
writing to the appropriate Reserve Bank and shall contain the 
identifying information prescribed by the Board for Federal Register 
Notice publication.
    (3) Waiver or shortening of notice. The Board may waive or shorten 
the required notice periods under this section if the Board determines 
that an emergency exists requiring expeditious action on the proposal, 
or if the Board finds that immediate action is necessary to prevent the 
probable failure of an insured depository institution.
    (d) Public comment--
    (1) Timely comments. Interested persons may submit information and 
comments regarding a proposal filed under this subpart. A comment shall 
be considered timely for purposes of this subpart if the comment, 
together with all supplemental information, is submitted in writing in 
accordance with the Board's Rules of Procedure and received by the 
Board or the appropriate Reserve Bank prior to the expiration of the 
latest public comment period provided in paragraph (c) of this section.
    (2) Extension of comment period--
    (i) In general. The Board may, in its discretion, extend the public 
comment period regarding any proposal submitted under this subpart.
    (ii) Requests in connection with obtaining application or notice. 
In the event that an interested person has requested a copy of a notice 
or application submitted under this subpart, the Board may, in its 
discretion and based on the facts and circumstances, grant such person 
an extension of the comment period for up to 15 calendar days.
    (iii) Joint requests by interested person and applicant. The Board 
will grant a joint request by an interested person and the applicant 
for an extension of the comment period for a reasonable period for a 
purpose related to the statutory factors the Board must consider under 
this subpart.
    (3) Substantive comment. A comment will be considered substantive 
for purposes of this subpart unless it involves individual complaints, 
or raises frivolous, previously-considered or wholly unsubstantiated 
claims or irrelevant issues.
    (e) Hearings. The Board may order a formal or informal hearing or 
other proceeding on the application, as provided in Sec.  262.3(i)(2) 
of this chapter. Any request for a hearing (other than from the primary 
supervisor) shall comply with Sec.  262.3(e) in this chapter.
    (f) Accepting application for processing. Within 7 calendar days 
after the Reserve Bank receives an application under this section, the 
Reserve Bank shall accept it for processing as of the date the 
application was filed or return the application if it is substantially 
incomplete. Upon accepting an application, the Reserve Bank shall 
immediately send copies to the Board and to the primary banking 
supervisor of the savings association to be acquired and to the 
Attorney General, and shall request from the Attorney General a report 
on the competitive factors involved. The Reserve Bank or the Board may 
request additional information necessary to complete the record of an 
application at any time after accepting the application for processing.
    (g) Action on applications--(1) Action under delegated authority. 
Except as provided in paragraph (g)(4) of this section, unless the 
Reserve Bank, upon notice to the applicant, refers the application to 
the Board for decision because action under delegated authority is not 
appropriate, the Reserve Bank shall approve an application under this 
section:
    (i) Not earlier than the third business day following the close of 
the public comment period; and
    (ii) Not later than the later of the fifth business day following 
the close of the public comment period or the 30th calendar day after 
the acceptance date for the application.
    (2) Board action. The Board shall act on an application under this 
section that

[[Page 56539]]

is referred to it for decision within 60 calendar days after the 
acceptance date for the application, unless the Board notifies the 
applicant that the 60-day period is being extended for a specified 
period and states the reasons for the extension. The Board may, at any 
time, request additional information that it believes is necessary for 
its decision.
    (3) Approval through failure to act--(i) Ninety-one day rule. An 
application shall be deemed approved if the Board fails to act on the 
application within 91 calendar days after the date of submission to the 
Board of the complete record on the application. For this purpose, the 
Board acts when it issues an order stating that the Board has approved 
or denied the application or notice, reflecting the votes of the 
members of the Board, and indicating that a statement of the reasons 
for the decision will follow promptly.
    (ii) Complete record. For the purpose of computing the commencement 
of the 91-day period, the record is complete on the latest of:
    (A) The date of receipt by the Board of an application that has 
been accepted by the Reserve Bank;
    (B) The last day provided in any notice for receipt of comments and 
hearing requests on the application or notice;
    (C) The date of receipt by the Board of the last relevant material 
regarding the application that is needed for the Board's decision, if 
the material is received from a source outside of the Federal Reserve 
System; or
    (D) The date of completion of any hearing or other proceeding.
    (4) Expedited reorganization.--(i) In general. The Board or the 
appropriate Reserve Bank shall act on an application of a 
reorganization that meets the requirements of Sec.  238.15(f):
    (A) Not earlier than the third business day following the close of 
the public comment period; and
    (B) Not later than the fifth business day following the close of 
the public comment period, except that the Board may extend the period 
for action under this paragraph (g)(4) for up to 5 business days.
    (ii) Acceptance of notice in event expedited procedure not 
available. In the event that the Board or the Reserve Bank determines 
that an application filed pursuant to 238.15(f) does not meet one or 
more of the requirements of Sec.  238.15(f), paragraph (g)(4) of this 
section shall not apply and the Board or Reserve Bank will act on the 
application according to the other provisions of paragraph (g) of this 
section.


Sec.  238.15  Factors considered in acting on applications.

    (a) Generally. The Board may not approve any application under this 
subpart if:
    (1) The transaction would result in a monopoly or would further any 
combination or conspiracy to monopolize, or to attempt to monopolize, 
the savings and loan business in any part of the United States;
    (2) The effect of the transaction may be substantially to lessen 
competition in any section of the country, tend to create a monopoly, 
or in any other manner be in restraint of trade, unless the Board finds 
that the transaction's anti-competitive effects are clearly outweighed 
by its probable effect in meeting the convenience and needs of the 
community;
    (3) The applicant has failed to provide the Board with adequate 
assurances that it will make available such information on its 
operations or activities, and the operations or activities of any 
affiliate of the applicant, that the Board deems appropriate to 
determine and enforce compliance with HOLA and other applicable federal 
banking statutes, and any regulations thereunder; or
    (4) In the case of an application involving a foreign banking 
organization, the foreign banking organization is not subject to 
comprehensive supervision or regulation on a consolidated basis by the 
appropriate authorities in its home country, as provided in Sec.  
211.24(c)(1)(ii) of the Board's Regulation K (12 CFR 211.24(c)(1)(ii)).
    (5) In the case of an application by a savings and loan holding 
company to acquire an insured depository institution, section 
10(e)(2)(E) of HOLA prohibits the Board from approving the transaction.
    (b) Other factors. In deciding applications under this subpart, the 
Board also considers the following factors with respect to the 
acquiror, its subsidiaries, any savings associations or banks related 
to the acquiror through common ownership or management, and the savings 
association or associations to be acquired:
    (1) Financial condition. Their financial condition and future 
prospects, including whether current and projected capital positions 
and levels of indebtedness conform to standards and policies 
established by the Board.
    (2) Managerial resources. The competence, experience, and integrity 
of the officers, directors, and principal shareholders of the acquiror, 
its subsidiaries, and the savings association and savings and loan 
holding companies concerned; their record of compliance with laws and 
regulations; and the record of the applicant and its affiliates of 
fulfilling any commitments to, and any conditions imposed by, the Board 
in connection with prior applications.
    (3) Convenience and needs of community. In the case of an 
application required under Sec.  238.11(c), (d), or (e), (or an 
application by a savings and loan holding company under Sec.  
238.11(b)), the convenience and needs of the communities to be served, 
including the record of performance under the Community Reinvestment 
Act of 1977 (12 U.S.C. 2901 et seq.) and regulations issued thereunder, 
including the Board's Regulation BB (12 CFR part 228).
    (c) Presumptive disqualifiers --(1) Integrity factors. The 
following factors shall give rise to a rebuttable presumption that an 
acquiror may fail to satisfy the managerial resources and future 
prospects tests of paragraph (b) of this section:
    (i) During the 10-year period immediately preceding filing of the 
application or notice, criminal, civil or administrative judgments, 
consents or orders, and any indictments, formal investigations, 
examinations, or civil or administrative proceedings (excluding routine 
or customary audits, inspections and investigations) that terminated in 
any agreements, undertakings, consents or orders, issued against, 
entered into by, or involving the acquiror or affiliates of the 
acquiror by any federal or state court, any department, agency, or 
commission of the U.S. Government, any state or municipality, any 
Federal Home Loan Bank, any self-regulatory trade or professional 
organization, or any foreign government or governmental entity, which 
involve:
    (A) Fraud, moral turpitude, dishonesty, breach of trust or 
fiduciary duties, organized crime or racketeering;
    (B) Violation of securities or commodities laws or regulations;
    (C) Violation of depository institution laws or regulations;
    (D) Violation of housing authority laws or regulations; or
    (E) Violation of the rules, regulations, codes of conduct or ethics 
of a self-regulatory trade or professional organization;
    (ii) Denial, or withdrawal after receipt of formal or informal 
notice of an intent to deny, by the acquiror or affiliates of the 
acquiror, of
    (A) Any application relating to the organization of a financial 
institution,
    (B) An application to acquire any financial institution or holding

[[Page 56540]]

company thereof under HOLA or the Bank Holding Company Act or 
otherwise,
    (C) A notice relating to a change in control of any of the 
foregoing under the CIC Act; or
    (D) An application or notice under a state holding company or 
change in control statute;
    (iii) The acquiror or affiliates of the acquiror were placed in 
receivership or conservatorship during the preceding 10 years, or any 
management official of the acquiror was a management official or 
director (other than an official or director serving at the request of 
the Board, the Federal Deposit Insurance Corporation, the Resolution 
Trust Corporation, the former Federal Savings and Loan Insurance 
Corporation, or their predecessors) or principal shareholder of a 
company or savings association that was placed into receivership, 
conservatorship, or a management consignment program, or was liquidated 
during his or her tenure or control or within two years thereafter;
    (iv) Felony conviction of the acquiror, an affiliate of the 
acquiror or a management official of the acquiror or an affiliate of 
the acquiror;
    (v) Knowingly making any written or oral statement to the Board or 
any predecessor agency (or its delegate) in connection with an 
application, notice or other filing under this part that is false or 
misleading with respect to a material fact or omits to state a material 
fact with respect to information furnished or requested in connection 
with such an application, notice or other filing;
    (vi) Acquisition and retention at the time of submission of an 
application or notice, of stock in the savings association by the 
acquiror in violation of this part or its predecessor regulations.
    (2) Financial factors. The following shall give rise to a 
rebuttable presumption that an acquiror may fail to satisfy the 
financial-resources and future-prospects tests of paragraph (c) of this 
section:
    (i) Liability for amounts of debt which, in the opinion of the 
Board, create excessive risks of default and pressure on the savings 
association to be acquired; or
    (ii) Failure to furnish a business plan or furnishing a business 
plan projecting activities which are inconsistent with economical home 
financing.
    (d) Competitive factor. Before approving any such acquisition, 
except a transaction under section 13(k) of the Federal Deposit 
Insurance Act, the Board shall consider any report rendered by the 
Attorney General within 30 days of such request under Sec.  238.14(f) 
on the competitive factors involved.
    (e) Expedited reorganizations. An application by a savings 
association solely for the purpose of obtaining approval for the 
creation of a savings and loan holding company by such savings 
association shall be eligible for expedited processing under Sec.  
238.14(g)(4) if it satisfies the following criteria:
    (1) The holding company shall not be capitalized initially in an 
amount exceeding the amount the savings association is permitted to pay 
in dividends to its holding company as of the date of the 
reorganization pursuant to applicable regulations or, in the absence 
thereof, pursuant to the then current policy guidelines;
    (2) The creation of the savings and loan holding company by the 
association is the sole transaction contained in the application, and 
there are no other transactions requiring approval incident to the 
creation of the holding company (other than the creation of an interim 
association that will disappear upon consummation of the reorganization 
and the merger of the savings association with such interim association 
to effect the reorganization), and the holding company is not also 
seeking any regulatory waivers, regulatory forbearances, or resolution 
of legal or supervisory issues;
    (3) The board of directors and executive officers of the holding 
company are composed of persons who, at the time of acquisition, are 
executive officers and directors of the association;
    (4) The acquisition raises no significant issues of law or policy;
    (5) Prior to consummation of the reorganization transaction, the 
holding company shall enter into any dividend limitation, regulatory 
capital maintenance, or prenuptial agreement required by Board 
regulations, or in the absence thereof, required pursuant to policy 
guidelines issued by the Board; and
    (f) Conditional approvals. The Board may impose conditions on any 
approval, including conditions to address competitive, financial, 
managerial, safety and soundness, convenience and needs, compliance or 
other concerns, to ensure that approval is consistent with the relevant 
statutory factors and other provisions of HOLA.
    (g) No acquisition shall be approved by the Board pursuant to Sec.  
238.11 which would result in the formation by any company, through one 
or more subsidiaries or through one or more transactions, of a multiple 
savings and loan holding company controlling savings associations in 
more than one state where the acquisition causes a savings association 
to become an affiliate of another savings association with which it was 
not previously affiliated unless:
    (1) Such company, or a savings association subsidiary of such 
company, is authorized to acquire control of a savings association 
subsidiary, or to operate a home or branch office, in the additional 
state or states pursuant to section 13(k) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1823(k) (or section 408(m) of the National 
Housing Act as in effect immediately prior to enactment of the 
Financial Institutions Reform, Recovery and Enforcement Act of 1989);
    (2) Such company controls a savings association subsidiary which 
operated a home or branch office in the additional state or states as 
of March 5, 1987; or
    (3) The statute laws of the state in which the savings association, 
control of which is to be acquired, is located are such that a savings 
association chartered by such state could be acquired by a savings 
association chartered by the state where the acquiring savings 
association or savings and loan holding company is located (or by a 
holding company that controls such a state chartered savings 
association), and such statute laws specifically authorize such an 
acquisition by language to that effect and not merely by implication.

Subpart C--Control Proceedings


Sec.  238.21  Control proceedings.

    (a) Preliminary determination of control. (1) The Board may issue a 
preliminary determination of control under the procedures set forth in 
this section in any case in which:
    (i) Any of the presumptions of control set forth in paragraph (d) 
of this section is present; or
    (ii) It otherwise appears that a company has the power to exercise 
a controlling influence over the management or policies of a savings 
association or other company.
    (2) If the Board makes a preliminary determination of control under 
this section, the Board shall send notice to the controlling company 
containing a statement of the facts upon which the preliminary 
determination is based.
    (b) Response to preliminary determination of control. Within 30 
calendar days of issuance by the Board of a preliminary determination 
of control or such longer period permitted by the Board, the company 
against whom the determination has been made shall:

[[Page 56541]]

    (1) Submit for the Board's approval a specific plan for the prompt 
termination of the control relationship;
    (2) File an application under this regulation to retain the control 
relationship; or
    (3) Contest the preliminary determination by filing a response, 
setting forth the facts and circumstances in support of its position 
that no control exists, and, if desired, requesting a hearing or other 
proceeding.
    (c) Hearing and final determination. (1) The Board shall order a 
formal hearing or other appropriate proceeding upon the request of a 
company that contests a preliminary determination that the company has 
the power to exercise a controlling influence over the management or 
policies of a savings association or other company, if the Board finds 
that material facts are in dispute. The Board may also in its 
discretion order a formal hearing or other proceeding with respect to a 
preliminary determination that the company controls voting securities 
of the savings association or other company under the presumptions in 
paragraph (d)(1) of this section.
    (2) At a hearing or other proceeding, any applicable presumptions 
established by paragraph (d) of this section shall be considered in 
accordance with the Federal Rules of Evidence and the Board's Rules of 
Practice for Formal Hearings (12 CFR part 263).
    (3) After considering the submissions of the company and other 
evidence, including the record of any hearing or other proceeding, the 
Board shall issue a final order determining whether the company 
controls voting securities, or has the power to exercise a controlling 
influence over the management or policies, of the savings association 
or other company. If a control relationship is found, the Board may 
direct the company to terminate the control relationship or to file an 
application for the Board's approval to retain the control relationship 
under subpart B of this part.
    (d) Rebuttable presumptions of control. The following rebuttable 
presumptions shall be used in any proceeding under this section:
    (1) Control of voting securities-- (i) Securities convertible into 
voting securities. A company that owns, controls, or holds securities 
that are immediately convertible, at the option of the holder or owner, 
into voting securities of a bank or other company, controls the voting 
securities.
    (ii) Option or restriction on voting securities. A company that 
enters into an agreement or understanding under which the rights of a 
holder of voting securities of a savings association or other company 
are restricted in any manner controls the securities. This presumption 
does not apply where the agreement or understanding:
    (A) Is a mutual agreement among shareholders granting to each other 
a right of first refusal with respect to their shares;
    (B) Is incident to a bona fide loan transaction; or
    (C) Relates to restrictions on transferability and continues only 
for the time necessary to obtain approval from the appropriate Federal 
supervisory authority with respect to acquisition by the company of the 
securities.
    (2) Control over company -- (i) Management agreement. A company 
that enters into any agreement or understanding with a savings 
association or other company (other than an investment advisory 
agreement), such as a management contract, under which the first 
company or any of its subsidiaries directs or exercises significant 
influence over the general management or overall operations of the 
savings association or other company controls the savings association 
or other company.
    (ii) Shares controlled by company and associated individuals. A 
company that, together with its management officials or principal 
shareholders (including members of the immediate families of either), 
owns, controls, or holds with power to vote 25 percent or more of the 
outstanding shares of any class of voting securities of a savings 
association or other company controls the savings association or other 
company, if the first company owns, controls, or holds with power to 
vote more than 5 percent of the outstanding shares of any class of 
voting securities of the savings association or other company.
    (iii) Common management officials. A company that has one or more 
management officials in common with a savings association or other 
company controls the savings association or other company, if the first 
company owns, controls or holds with power to vote more than 5 percent 
of the outstanding shares of any class of voting securities of the 
savings association or other company, and no other person controls as 
much as 5 percent of the outstanding shares of any class of voting 
securities of the savings association or other company.
    (e) Presumption of non-control-- (1) In any proceeding under this 
section, there is a presumption that any company that directly or 
indirectly owns, controls, or has power to vote less than 5 percent of 
the outstanding shares of any class of voting securities of a savings 
association or other company does not have control over that savings 
association or other company.
    (2) In any proceeding under this section, or judicial proceeding 
under the Home Owners' Loan Act, other than a proceeding in which the 
Board has made a preliminary determination that a company has the power 
to exercise a controlling influence over the management or policies of 
the savings association or other company, a company may not be held to 
have had control over the savings association or other company at any 
given time, unless that company, at the time in question, directly or 
indirectly owned, controlled, or had power to vote 5 percent or more of 
the outstanding shares of any class of voting securities of the savings 
association or other company, or had already been found to have control 
on the basis of the existence of a controlling influence relationship.

Subpart D--Change in Bank Control


Sec.  238.31  Transactions requiring prior notice.

    (a) Prior notice requirement. Any person acting directly or 
indirectly, or through or in concert with one or more persons, shall 
give the Board 60 days' written notice, as specified in Sec.  238.33 of 
this subpart, before acquiring control of a savings and loan holding 
company, unless the acquisition is exempt under Sec.  238.32.
    (b) Definitions. For purposes of this subpart:
    (1) Acquisition includes a purchase, assignment, transfer, or 
pledge of voting securities, or an increase in percentage ownership of 
a savings and loan holding company resulting from a redemption of 
voting securities.
    (2) Acting in concert includes knowing participation in a joint 
activity or parallel action towards a common goal of acquiring control 
of a savings and loan holding company whether or not pursuant to an 
express agreement.
    (3) Immediate family includes a person's father, mother, 
stepfather, stepmother, brother, sister, stepbrother, stepsister, son, 
daughter, stepson, stepdaughter, grandparent, grandson, granddaughter, 
father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-
law, daughter-in-law, the spouse of any of the foregoing, and the 
person's spouse.
    (c) Acquisitions requiring prior notice --(1) Acquisition of 
control. The acquisition of voting securities of a savings and loan 
holding company constitutes the acquisition of control

[[Page 56542]]

under the Bank Control Act, requiring prior notice to the Board, if, 
immediately after the transaction, the acquiring person (or persons 
acting in concert) will own, control, or hold with power to vote 25 
percent or more of any class of voting securities of the institution.
    (2) Rebuttable presumption of control. The Board presumes that an 
acquisition of voting securities of a savings and loan holding company 
constitutes the acquisition of control under the Bank Control Act, 
requiring prior notice to the Board, if, immediately after the 
transaction, the acquiring person (or persons acting in concert) will 
own, control, or hold with power to vote 10 percent or more of any 
class of voting securities of the institution, and if:
    (i) The institution has registered securities under section 12 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78l); or
    (ii) No other person will own, control, or hold the power to vote a 
greater percentage of that class of voting securities immediately after 
the transaction.\2\
---------------------------------------------------------------------------

    \2\ If two or more persons, not acting in concert, each propose 
to acquire simultaneously equal percentages of 10 percent or more of 
a class of voting securities of the savings and loan holding 
company, each person must file prior notice to the Board.
---------------------------------------------------------------------------

    (d) Rebuttable presumption of concerted action. The following 
persons shall be presumed to be acting in concert for purposes of this 
subpart:
    (1) A company and any principal shareholder, partner, trustee, or 
management official of the company, if both the company and the person 
own voting securities of the savings and loan holding company;
    (2) An individual and the individual's immediate family;
    (3) Companies under common control;
    (4) Persons that are parties to any agreement, contract, 
understanding, relationship, or other arrangement, whether written or 
otherwise, regarding the acquisition, voting, or transfer of control of 
voting securities of a savings and loan holding company, other than 
through a revocable proxy as described in Sec.  238.32(a)(5) of this 
subpart;
    (5) Persons that have made, or propose to make, a joint filing 
under sections 13 or 14 of the Securities Exchange Act of 1934 (15 
U.S.C. 78m or 78n), and the rules promulgated thereunder by the 
Securities and Exchange Commission; and
    (6) A person and any trust for which the person serves as trustee.
    (e) Acquisitions of loans in default. The Board presumes an 
acquisition of a loan in default that is secured by voting securities 
of a savings and loan holding company to be an acquisition of the 
underlying securities for purposes of this section.
    (f) Other transactions. Transactions other than those set forth in 
paragraph (c) of this section resulting in a person's control of less 
than 25 percent of a class of voting securities of a savings and loan 
holding company are not deemed by the Board to constitute control for 
purposes of the Bank Control Act.
    (g) Rebuttal of presumptions. Prior notice to the Board is not 
required for any acquisition of voting securities under the presumption 
of control set forth in this section, if the Board finds that the 
acquisition will not result in control. The Board shall afford any 
person seeking to rebut a presumption in this section an opportunity to 
present views in writing or, if appropriate, orally before its 
designated representatives at an informal conference.


Sec.  238.32  Transactions not requiring prior notice.

    (a) Exempt transactions. The following transactions do not require 
notice to the Board under this subpart:
    (1) Existing control relationships. The acquisition of additional 
voting securities of a savings and loan holding company by a person 
who:
    (i) Continuously since March 9, 1979 (or since the institution 
commenced business, if later), held power to vote 25 percent or more of 
any class of voting securities of the institution; or
    (ii) Is presumed, under Sec.  238.31(c)(2), to have controlled the 
institution continuously since March 9, 1979, if the aggregate amount 
of voting securities held does not exceed 25 percent or more of any 
class of voting securities of the institution or, in other cases, where 
the Board determines that the person has controlled the institution 
continuously since March 9, 1979;
    (2) Increase of previously authorized acquisitions. Unless the 
Board or the Reserve Bank otherwise provides in writing, the 
acquisition of additional shares of a class of voting securities of a 
savings and loan holding company by any person (or persons acting in 
concert) who has lawfully acquired and maintained control of the 
institution (for purposes of Sec.  238.31(c)), after complying with the 
procedures and receiving approval to acquire voting securities of the 
institution under this subpart, or in connection with an application 
approved under section 10(e) of HOLA (12 U.S.C. 1467a(e) and Sec.  
238.11 or section 18(c) of the Federal Deposit Insurance Act (Bank 
Merger Act, 12 U.S.C. 1828(c));
    (3) Acquisitions subject to approval under HOLA or Bank Merger Act. 
Any acquisition of voting securities subject to approval under section 
10(e) of HOLA (12 U.S.C. 1467a(e) and Sec.  238.11), or section 18(c) 
of the Federal Deposit Insurance Act (Bank Merger Act, 12 U.S.C. 
1828(c));
    (4) Transactions exempt under HOLA. Any transaction described in 
sections 10(a)(3)(A) or 10(e)(1)(B)(ii) of HOLA by a person described 
in those provisions;
    (5) Proxy solicitation. The acquisition of the power to vote 
securities of a savings and loan holding company through receipt of a 
revocable proxy in connection with a proxy solicitation for the 
purposes of conducting business at a regular or special meeting of the 
institution, if the proxy terminates within a reasonable period after 
the meeting;
    (6) Stock dividends. The receipt of voting securities of a savings 
and loan holding company through a stock dividend or stock split if the 
proportional interest of the recipient in the institution remains 
substantially the same; and
    (7) Acquisition of foreign banking organization. The acquisition of 
voting securities of a qualifying foreign banking organization. (This 
exemption does not extend to the reports and information required under 
paragraphs 9, 10, and 12 of the Bank Control Act (12 U.S.C. 1817(j) 
(9), (10), and (12)) and Sec.  238.34.)
    (b) Prior notice exemption. (1) The following acquisitions of 
voting securities of a savings and loan holding company, which would 
otherwise require prior notice under this subpart, are not subject to 
the prior notice requirements if the acquiring person notifies the 
appropriate Reserve Bank within 90 calendar days after the acquisition 
and provides any relevant information requested by the Reserve Bank:
    (i) Acquisition of voting securities through inheritance;
    (ii) Acquisition of voting securities as a bona fide gift; and
    (iii) Acquisition of voting securities in satisfaction of a debt 
previously contracted (DPC) in good faith.
    (2) The following acquisitions of voting securities of a savings 
and loan holding company, which would otherwise require prior notice 
under this subpart, are not subject to the prior notice requirements if 
the acquiring person does not reasonably have advance knowledge of the 
transaction, and provides the written notice required under Sec.  
238.33 to the appropriate

[[Page 56543]]

Reserve Bank within 90 calendar days after the transaction occurs:
    (i) Acquisition of voting securities resulting from a redemption of 
voting securities by the issuing savings and loan holding company; and
    (ii) Acquisition of voting securities as a result of actions 
(including the sale of securities) by any third party that is not 
within the control of the acquiror.
    (3) Nothing in paragraphs (b)(1) or (b)(2) of this section limits 
the authority of the Board to disapprove a notice pursuant to Sec.  
238.33(h).


Sec.  238.33  Procedures for filing, processing, publishing, and acting 
on notices.

    (a) Filing notice. (1) A notice required under this subpart shall 
be filed with the appropriate Reserve Bank and shall contain all the 
information required by paragraph 6 of the Bank Control Act (12 U.S.C. 
1817(j)(6)), or prescribed in the designated Board form.
    (2) The Board may waive any of the informational requirements of 
the notice if the Board determines that it is in the public interest.
    (3) A notificant shall notify the appropriate Reserve Bank or the 
Board immediately of any material changes in a notice submitted to the 
Reserve Bank, including changes in financial or other conditions.
    (4) When the acquiring person is an individual, or group of 
individuals acting in concert, the requirement to provide personal 
financial data may be satisfied by a current statement of assets and 
liabilities and an income summary, as required in the designated Board 
form, together with a statement of any material changes since the date 
of the statement or summary. The Reserve Bank or the Board, 
nevertheless, may request additional information, if appropriate.
    (b) Acceptance of notice. The 60-day notice period specified in 
Sec.  238.31 of this subpart begins on the date of receipt of a 
complete notice. The Reserve Bank shall notify the person or persons 
submitting a notice under this subpart in writing of the date the 
notice is or was complete and thereby accepted for processing. The 
Reserve Bank or the Board may request additional relevant information 
at any time after the date of acceptance.
    (c) Publication--(1) Newspaper Announcement. Any person(s) filing a 
notice under this subpart shall publish, in a form prescribed by the 
Board, an announcement soliciting public comment on the proposed 
acquisition. The announcement shall be published in a newspaper of 
general circulation in the community in which the head office of the 
savings and loan holding company is located and in the community in 
which the head office of each of its subsidiary savings associations is 
located. The announcement shall be published no earlier than 15 
calendar days before the filing of the notice with the appropriate 
Reserve Bank and no later than 10 calendar days after the filing date; 
and the publisher's affidavit of a publication shall be provided to the 
appropriate Reserve Bank.
    (2) Contents of newspaper announcement. The newspaper announcement 
shall state:
    (i) The name of each person identified in the notice as a proposed 
acquiror of the savings and loan holding company;
    (ii) The name of the savings and loan holding company to be 
acquired, including the name of each of the savings and loan holding 
company's subsidiary savings association; and
    (iii) A statement that interested persons may submit comments on 
the notice to the Board or the appropriate Reserve Bank for a period of 
20 days, or such shorter period as may be provided, pursuant to 
paragraph (c)(5) of this section.
    (3) Federal Register Announcement. The Board shall, upon filing of 
a notice under this subpart, publish announcement in the Federal 
Register of receipt of the notice. The Federal Register announcement 
shall contain the information required under paragraphs (c)(2)(i) and 
(c)(2)(ii) of this section and a statement that interested persons may 
submit comments on the proposed acquisition for a period of 15 calendar 
days, or such shorter period as may be provided, pursuant to paragraph 
(c)(5) of this section. The Board may waive publication in the Federal 
Register if the Board determines that such action is appropriate.
    (4) Delay of publication. The Board may permit delay in the 
publication required under paragraphs (c)(1) and (c)(3) of this section 
if the Board determines, for good cause shown, that it is in the public 
interest to grant such delay. Requests for delay of publication may be 
submitted to the appropriate Reserve Bank.
    (5) Shortening or waiving notice. The Board may shorten or waive 
the public comment or newspaper publication requirements of this 
paragraph, or act on a notice before the expiration of a public comment 
period, if it determines in writing that an emergency exists, or that 
disclosure of the notice, solicitation of public comment, or delay 
until expiration of the public comment period would seriously threaten 
the safety or soundness of the savings and loan holding company to be 
acquired.
    (6) Consideration of public comments. In acting upon a notice filed 
under this subpart, the Board shall consider all public comments 
received in writing within the period specified in the newspaper or 
Federal Register announcement, whichever is later. At the Board's 
option, comments received after this period may, but need not, be 
considered.
    (7) Standing. No person (other than the acquiring person) who 
submits comments or information on a notice filed under this subpart 
shall thereby become a party to the proceeding or acquire any standing 
or right to participate in the Board's consideration of the notice or 
to appeal or otherwise contest the notice or the Board's action 
regarding the notice.
    (d) Time period for Board action-- (1) Consummation of 
acquisition-- (i) The notificant(s) may consummate the proposed 
acquisition 60 days after submission to the Reserve Bank of a complete 
notice under paragraph (a) of this section, unless within that period 
the Board disapproves the proposed acquisition or extends the 60-day 
period, as provided under paragraph (d)(2) of this section.
    (ii) The notificant(s) may consummate the proposed transaction 
before the expiration of the 60-day period if the Board notifies the 
notificant(s) in writing of the Board's intention not to disapprove the 
acquisition.
    (2) Extensions of time period. (i) The Board may extend the 60-day 
period in paragraph (d)(1) of this section for an additional 30 days by 
notifying the acquiring person(s).
    (ii) The Board may further extend the period during which it may 
disapprove a notice for two additional periods of not more than 45 days 
each, if the Board determines that:
    (A) Any acquiring person has not furnished all the information 
required under paragraph (a) of this section;
    (B) Any material information submitted is substantially inaccurate;
    (C) The Board is unable to complete the investigation of an 
acquiring person because of inadequate cooperation or delay by that 
person; or
    (D) Additional time is needed to investigate and determine that no 
acquiring person has a record of failing to comply with the 
requirements of the Bank Secrecy Act, subchapter II of Chapter 53 of 
Title 31, United States Code.
    (iii) If the Board extends the time period under this paragraph, it 
shall notify the acquiring person(s) of the reasons therefor and shall 
include a statement of the information, if any, deemed incomplete or 
inaccurate.

[[Page 56544]]

    (e) Advice to bank supervisory agencies. The Reserve Bank shall 
send a copy of any notice to the Comptroller of the Currency and the 
Federal Deposit Insurance Corporation.
    (f) Investigation and report. (1) After receiving a notice under 
this subpart, the Board or the appropriate Reserve Bank shall conduct 
an investigation of the competence, experience, integrity, and 
financial ability of each person by and for whom an acquisition is to 
be made. The Board shall also make an independent determination of the 
accuracy and completeness of any information required to be contained 
in a notice under paragraph (a) of this section. In investigating any 
notice accepted under this subpart, the Board or Reserve Bank may 
solicit information or views from any person, including any savings and 
loan holding company involved in the notice, and any appropriate state, 
federal, or foreign governmental authority.
    (2) The Board or the appropriate Reserve Bank shall prepare a 
written report of its investigation, which shall contain, at a minimum, 
a summary of the results of the investigation.
    (g) Factors considered in acting on notices. In reviewing a notice 
filed under this subpart, the Board shall consider the information in 
the record, the views and recommendations of the appropriate bank 
supervisor, and any other relevant information obtained during any 
investigation of the notice.
    (h) Disapproval and hearing-- (1) Disapproval of notice. The Board 
may disapprove an acquisition if it finds adverse effects with respect 
to any of the factors set forth in paragraph 7 of the Bank Control Act 
(12 U.S.C. 1817(j)(7)) (i.e., competitive, financial, managerial, 
banking, or incompleteness of information).
    (2) Disapproval notification. Within three days after its decision 
to issue a notice of intent to disapprove any proposed acquisition, the 
Board shall notify the acquiring person in writing of the reasons for 
the action.
    (3) Hearing. Within 10 calendar days of receipt of the notice of 
the Board's intent to disapprove, the acquiring person may submit a 
written request for a hearing. Any hearing conducted under this 
paragraph shall be in accordance with the Rules of Practice for Formal 
Hearings (12 CFR part 263). At the conclusion of the hearing, the Board 
shall, by order, approve or disapprove the proposed acquisition on the 
basis of the record of the hearing. If the acquiring person does not 
request a hearing, the notice of intent to disapprove becomes final and 
unappealable.

Subpart E--Qualified Stock Issuances


Sec.  238.41  Qualified stock issuances by undercapitalized savings 
associations or holding companies.

    (a) Acquisitions by savings and loan holding companies. No savings 
and loan holding company shall be deemed to control a savings 
association solely by reason of the purchase by such savings and loan 
holding company of shares issued by such savings association, or issued 
by any savings and loan holding company (other than a bank holding 
company) which controls such savings association, in connection with a 
qualified stock issuance if prior approval of such acquisition is 
granted by the Board under this subpart, unless the acquiring savings 
and loan holding company, directly or indirectly, or acting in concert 
with 1 or more other persons, or through one or more subsidiaries, 
owns, controls, or holds with power to vote, or holds proxies 
representing, more than 15 percent of the voting shares of such savings 
association or holding company.
    (b) Qualification. For purposes of this section, any issuance of 
shares of stock shall be treated as a qualified stock issuance if the 
following conditions are met:
    (1) The shares of stock are issued by--
    (i) An undercapitalized savings association, which for purposes of 
this paragraph (b)(1)(i) shall mean any savings association--
    (A) The assets of which exceed the liabilities of such association; 
and
    (B) Which does not comply with one or more of the capital standards 
in effect under section 5(t) of HOLA; or
    (ii) A savings and loan holding company which is not a bank holding 
company but which controls an undercapitalized savings association if, 
at the time of issuance, the savings and loan holding company is 
legally obligated to contribute the net proceeds from the issuance of 
such stock to the capital of an undercapitalized savings association 
subsidiary of such holding company.
    (2) All shares of stock issued consist of previously unissued stock 
or treasury shares.
    (3) All shares of stock issued are purchased by a savings and loan 
holding company that is registered, as of the date of purchase, with 
the Board in accordance with the provisions of section 10(b) of the 
HOLA and the Board's regulations promulgated thereunder.
    (4) Subject to paragraph (c) of this section, the Board approves 
the purchase of the shares of stock by the acquiring savings and loan 
holding company.
    (5) The entire consideration for the stock issued is paid in cash 
by the acquiring savings and loan holding company.
    (6) At the time of the stock issuance, each savings association 
subsidiary of the acquiring savings and loan holding company (other 
than an association acquired in a transaction pursuant to section 13(c) 
or 13(k) of the Federal Deposit Insurance Act, or section 408(m) of the 
National Housing Act, as in effect immediately prior to enactment of 
the Financial Institutions Reform, Recovery and Enforcement Act of 
1989) has capital (after deducting any subordinated debt, intangible 
assets, and deferred, unamortized gains or losses) of not less than 
6\1/2\ percent of the total assets of such savings association.
    (7) Immediately after the stock issuance, the acquiring savings and 
loan holding company holds not more than 15 percent of the outstanding 
voting stock of the issuing undercapitalized savings association or 
savings and loan holding company.
    (8) Not more than one of the directors of the issuing association 
or company is an officer, director, employee, or other representative 
of the acquiring company or any of its affiliates.
    (9) Transactions between the savings association or savings and 
loan holding company that issues the shares pursuant to this section 
and the acquiring company and any of its affiliates shall be subject to 
the provisions of section 11 of HOLA and the Board's regulations 
promulgated thereunder.
    (c) Approval of acquisitions--(1) Criteria. The Board, in deciding 
whether to approve or deny an application filed on the basis that it is 
a qualified stock issuance, shall apply the application criteria set 
forth in Sec.  238.15(a), (b), and (c).
    (2) Additional capital commitments not required. The Board shall 
not disapprove any application for the purchase of stock in connection 
with a qualified stock issuance on the grounds that the acquiring 
savings and loan holding company has failed to undertake to make 
subsequent additional capital contributions to maintain the capital of 
the undercapitalized savings association at or above the minimum level 
required by the Board or any other Federal agency having jurisdiction.
    (3) Other conditions. The Board shall impose such conditions on any 
approval of an application for the purchase of stock in connection with 
a qualified

[[Page 56545]]

stock issuance as the Board determines to be appropriate, including--
    (i) A requirement that any savings association subsidiary of the 
acquiring savings and loan holding company limit dividends paid to such 
holding company for such period of time as the Board may require; and
    (ii) Such other conditions as the Board deems necessary or 
appropriate to prevent evasions of this section.
    (4) Application deemed approved if not disapproved within 90 days. 
(i) An application for approval of a purchase of stock in connection 
with a qualified stock issuance shall be deemed to have been approved 
by the Board if such application has not been disapproved by the Board 
before the end of the 90-day period beginning on the date of submission 
to the Board of the complete record on the application as defined in 
Sec.  238.14(g)(3)(ii).
    (d) No limitation on class of stock issued. The shares of stock 
issued in connection with a qualified stock issuance may be shares of 
any class.
    (e) Application form. A savings and loan holding company making 
application to acquire a qualified stock issuance pursuant to this 
subpart shall submit the appropriate form to the appropriate Reserve 
Bank.

Subpart F--Savings and Loan Holding Company Activities and 
Acquisitions


Sec.  238.51  Prohibited activities.

    (a) Evasion of law or regulation. No savings and loan holding 
company or subsidiary thereof which is not a savings association shall, 
for or on behalf of a subsidiary savings association, engage in any 
activity or render any services for the purpose or with the effect of 
evading any law or regulation applicable to such savings association.
    (b) Unrelated business activity. No savings and loan holding 
company or subsidiary thereof that is not a savings association shall 
commence any business activity at any time, or continue any business 
activity after the end of the two-year period beginning on the date on 
which such company received approval to become a savings and loan 
holding company that is subject to the limitations of this paragraph 
(b), except (in either case) the following:
    (1) Furnishing or performing management services for a savings 
association subsidiary of such company;
    (2) Conducting an insurance agency or an escrow business;
    (3) Holding, managing, or liquidating assets owned by or acquired 
from a subsidiary savings association of such company;
    (4) Holding or managing properties used or occupied by a subsidiary 
savings association of such company;
    (5) Acting as trustee under deed of trust;
    (6) Any other activity:
    (i) That the Board of Governors of the Federal Reserve System has 
permitted for bank holding companies pursuant to regulations 
promulgated under section 4(c) of the Bank Holding Company Act; or
    (ii) Is set forth in Sec.  238.53, subject to the limitations 
therein; or
    (7) (i) In the case of a savings and loan holding company, 
purchasing, holding, or disposing of stock acquired in connection with 
a qualified stock issuance if prior approval for the acquisition of 
such stock by such savings and loan holding company is granted by the 
Board pursuant to Sec.  238.41.
    (ii) Notwithstanding the provisions of this paragraph (b), any 
savings and loan holding company that, between March 5, 1987 and August 
10, 1987, received approval pursuant to 12 U.S.C. 1730a(e), as then in 
effect, to acquire control of a savings association shall not continue 
any business activity other than those activities set forth in this 
paragraph (b) after August 10, 1987.
    (c) Treatment of certain holding companies. If a director or 
officer of a savings and loan holding company, or an individual who 
owns, controls, or holds with the power to vote (or proxies 
representing) more than 25 percent of the voting shares of a savings 
and loan holding company, directly or indirectly controls more than one 
savings association, any savings and loan holding company controlled by 
such individual shall be subject to the activities limitations 
contained in paragraph (b) of this section, to the same extent such 
limitations apply to multiple savings and loan holding companies 
pursuant to Sec. Sec.  238.51, 238.52, 238.53, and 238.54.


Sec.  238.52  Exempt savings and loan holding companies and 
grandfathered activities.

    (a) Exempt savings and loan holding companies. (1) The following 
savings and loan holding companies are exempt from the limitations of 
Sec.  238.51(b):
    (i) Any savings and loan holding company (or subsidiary of such 
company) that controls only one savings association, if the savings 
association subsidiary of such company is a qualified thrift lender as 
defined in Sec.  238.2(k).
    (ii) Any savings and loan holding company (or subsidiary thereof) 
that controls more than one savings association if all, or all but one 
of the savings association subsidiaries of such company were acquired 
pursuant to an acquisition under section 13(c) or 13(k) of the Federal 
Deposit Insurance Act, or section 408(m) of the National Housing Act, 
as in effect immediately prior to the date of enactment of the 
Financial Institutions Reform, Recovery and Enforcement Act of 1989, 
and all of the savings association subsidiaries of such company are 
qualified thrift lenders as defined in Sec.  238.2(k).
    (2) Any savings and loan holding company whose subsidiary savings 
association(s) fails to qualify as a qualified thrift lender pursuant 
to 12 U.S.C. 1467a(m) may not commence, or continue, any service or 
activity other than those permitted under Sec.  238.51(b) of this part, 
except that, the Board may allow, for good cause shown, such company 
(or subsidiary of such company which is not a savings association) up 
to 3 years to comply with the limitations set forth in Sec.  238.51(b) 
of this part: Provided, That effective August 9, 1990, any company that 
controls a savings association that should have become or ceases to be 
a qualified thrift lender, except a savings association that 
requalified as a qualified thrift lender pursuant to section 
10(m)(3)(D) of the Home Owners' Loan Act, shall within one year after 
the date on which the savings association fails to qualify as a 
qualified thrift lender, register as and be deemed to be a bank holding 
company, subject to all of the provisions of the Bank Holding Company 
Act, section 8 of the Federal Deposit Insurance Act, and other statutes 
applicable to bank holding companies in the same manner and to the same 
extent as if the company were a bank holding company and the savings 
association were a bank, as those terms are defined in the Bank Holding 
Company Act.
    (b) Grandfathered activities for certain savings and loan holding 
companies. Notwithstanding Sec.  238.51(b) and subject to paragraph (c) 
of this section, any savings and loan holding company that received 
approval prior to March 5, 1987 to acquire control of a savings 
association may engage, directly or indirectly or through any 
subsidiary (other than a subsidiary savings association of such 
company) in any activity in which it was lawfully engaged on March 5, 
1987, provided, that:
    (1) The holding company does not, after August 10, 1987, acquire 
control of a bank or an additional savings association, other than a 
savings association acquired pursuant to section

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13(c) or 13(k) of the Federal Deposit Insurance Act, or section 406(f) 
or 408(m) of the National Housing Act, as in effect immediately prior 
to the date of enactment of the Financial Institutions Reform, Recovery 
and Enforcement Act of 1989;
    (2) Any savings association subsidiary of the holding company 
continues to qualify as a domestic building and loan association under 
section 7701(a)(19) of the Internal Revenue Code of 1986 after August 
10, 1987;
    (3) The holding company does not engage in any business activity 
other than those permitted under Sec.  238.51(b) or in which it was 
engaged on March 5, 1987;
    (4) Any savings association subsidiary of the holding company does 
not increase the number of locations from which such savings 
association conducts business after March 5, 1987, other than an 
increase due to a transaction under section 13(c) or 13(k) of the 
Federal Deposit Insurance Act, or under section 408(m) of the National 
Housing Act, as in effect immediately prior to the date of enactment of 
the Financial Institutions Reform, Recovery and Enforcement Act of 
1989; and
    (5) Any savings association subsidiary of the holding company does 
not permit any overdraft (including an intra-day overdraft) or incur 
any such overdraft in its account at a Federal Reserve bank, on behalf 
of an affiliate, unless such overdraft results from an inadvertent 
computer or accounting error that is beyond the control of both the 
savings association subsidiary and the affiliate.
    (c) Termination by the Board of grandfathered activities. 
Notwithstanding the provisions of paragraph (b) of this section, the 
Board may, after opportunity for hearing, terminate any activity 
engaged in under paragraph (b) of this section upon determination that 
such action is necessary:
    (1) To prevent conflicts of interest;
    (2) To prevent unsafe or unsound practices; or
    (3) To protect the public interest.
    (d) Foreign holding company. Any savings and loan holding company 
organized under the laws of a foreign country as of June 1, 1984 
(including any subsidiary thereof that is not a savings association) 
that controlled a single savings association on August 10, 1987, shall 
not be subject to the restrictions set forth in Sec.  238.51(b) with 
respect to any activities of such holding company that are conducted 
exclusively in a foreign country.


Sec.  238.53  Prescribed services and activities of savings and loan 
holding companies.

    (a) General. For the purpose of Sec.  238.51(b)(6)(ii), the 
activities set forth in paragraph (b) of this section are, and were as 
of March 5, 1987, permissible services and activities for savings and 
loan holding companies or subsidiaries thereof that are neither savings 
associations nor service corporation subsidiaries of subsidiary savings 
associations. Services and activities of service corporation 
subsidiaries of savings and loan holding company subsidiary savings 
associations are prescribed by paragraph (d) of this section.
    (b) Prescribed services and activities. Subject to the provisions 
of paragraph (c) of this section, a savings and loan holding company 
subject to restrictions on its activities pursuant to Sec.  238.51(b), 
or a subsidiary thereof which is neither a savings association nor a 
service corporation of a subsidiary savings association, may furnish or 
perform the following services and engage in the following activities 
to the extent that it has legal power to do so:
    (1) Originating, purchasing, selling and servicing any of the 
following:
    (i) Loans, and participation interests in loans, on a prudent basis 
and secured by real estate, including brokerage and warehousing of such 
real estate loans, except that such a company or subsidiary shall not 
invest in a loan secured by real estate as to which a subsidiary 
savings association of such company has a security interest;
    (ii) Manufactured home chattel paper (written evidence of both a 
monetary obligation and a security interest of first priority in one or 
more manufactured homes, and any equipment installed or to be installed 
therein), including brokerage and warehousing of such chattel paper;
    (iii) Loans, with or without security, for the altering, repairing, 
improving, equipping or furnishing of any residential real estate;
    (iv) Educational loans; and
    (v) Consumer loans, as defined in Sec.  160.3 of this title, 
Provided, That, no subsidiary savings association of such holding 
company or service corporation of such savings association shall engage 
directly or indirectly, in any transaction with any affiliate involving 
the purchase or sale, in whole or in part, of any consumer loan.
    (2) Subject to the provisions of 12 U.S.C. 1468, furnishing or 
performing clerical accounting and internal audit services primarily 
for its affiliates;
    (3) Subject to the provisions of 12 U.S.C. 1468, furnishing or 
performing the following services primarily for its affiliates, and for 
any savings association and service corporation subsidiary thereof, and 
for other multiple holding companies and affiliates thereof:
    (i) Data processing;
    (ii) Credit information, appraisals, construction loan inspections, 
and abstracting;
    (iii) Development and administration of personnel benefit programs, 
including life insurance, health insurance, and pension or retirement 
plans;
    (iv) Research, studies, and surveys;
    (v) Purchase of office supplies, furniture and equipment;
    (vi) Development and operation of storage facilities for microfilm 
or other duplicate records; and
    (vii) Advertising and other services to procure and retain both 
savings accounts and loans;
    (4) Acquisition of unimproved real estate lots, and acquisition of 
other unimproved real estate for the purpose of prompt development and 
subdivision, for:
    (i) Construction of improvements,
    (ii) Resale to others for such construction, or
    (iii) Use as mobile home sites;
    (5) Development, subdivision and construction of improvements on 
real estate acquired pursuant to paragraph (b)(4) of this section, for 
sale or rental;
    (6) Acquisition of improved real estate and mobile homes to be held 
for rental;
    (7) Acquisition of improved real estate for remodeling, 
rehabilitation, modernization, renovation, or demolition and rebuilding 
for sale or for rental;
    (8) Maintenance and management of improved real estate;
    (9) Underwriting or reinsuring contract of credit life or credit 
health and accident insurance in connection with extensions of credit 
by the savings and loan holding company or any of its subsidiaries, or 
extensions of credit by any savings association or service corporation 
subsidiary thereof, or any other savings and loan holding company or 
subsidiary thereof;
    (10) Preparation of State and Federal tax returns for 
accountholders of or borrowers from (including immediate family members 
of such accountholders or borrowers but not including an accountholder 
or borrower which is a corporation operated for profit) an affiliated 
savings association;
    (11) Purchase and sale of gold coins minted and issued by the 
United States Treasury pursuant to Public Law 99-185, 99 Stat. 1177 
(1985), and activities reasonably incident thereto; and
    (12) Any services or activities approved by order of the former 
Federal

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Savings and Loan Insurance Corporation prior to March 5, 1987, pursuant 
to its authority under section 408(c)(2)(F) of the National Housing 
Act, as in effect at the time.
    (c) Procedures for commencing services or activities. A notice to 
engage in or acquire a company engaged in a service or activity 
prescribed by paragraph (b) of this section (other than purchase or 
sale of a government debt security) shall be filed by a savings and 
loan holding company (including a company seeking to become a savings 
and loan holding company) with the appropriate Reserve Bank in 
accordance with this paragraph and the Board's Rules of Procedure (12 
CFR 262.3).
    (1) Engaging de novo in services or activities. A savings and loan 
holding company seeking to commence or to engage de novo in a service 
or activity pursuant to this section, either directly or through a 
subsidiary, shall file a notice containing a description of the 
activities to be conducted and the identity of the company that will 
conduct the activity.
    (2) Acquiring company engaged in services or activities. A savings 
and loan holding company seeking to acquire or control voting 
securities or assets of a company engaged in a service or activity 
pursuant to this section, shall file a notice containing the following:
    (i) A description of the proposal, including a description of each 
proposed service or activity;
    (ii) The identity of any entity involved in the proposal, and, if 
the notificant proposes to conduct the service or activity through an 
existing subsidiary, a description of the existing activities of the 
subsidiary;
    (iii) If the savings and loan holding company has consolidated 
assets of $150 million or more:
    (A) Parent company and consolidated pro forma balance sheets for 
the acquiring savings and loan holding company as of the most recent 
quarter showing credit and debit adjustments that reflect the proposed 
transaction;
    (B) Consolidated pro forma risk-based capital and leverage ratio 
calculations for the acquiring savings and loan holding company as of 
the most recent quarter; and
    (C) A description of the purchase price and the terms and sources 
of funding for the transaction;
    (iv) If the savings and loan holding company has consolidated 
assets of less than $150 million:
    (A) A pro forma parent-only balance sheet as of the most recent 
quarter showing credit and debit adjustments that reflect the proposed 
transaction; and
    (B) A description of the purchase price and the terms and sources 
of funding for the transaction and, if the transaction is debt funded, 
one-year income statement and cash flow projections for the parent 
company, and the sources and schedule for retiring any debt incurred in 
the transaction;
    (v) For each insured depository institution whose Tier 1 capital, 
total capital, total assets or risk-weighted assets change as a result 
of the transaction, the total risk-weighted assets, total assets, Tier 
1 capital and total capital of the institution on a pro forma basis; 
and
    (vi) A description of the management expertise, internal controls 
and risk management systems that will be utilized in the conduct of the 
proposed service or activity; and
    (vii) A copy of the purchase agreements, and balance sheet and 
income statements for the most recent quarter and year-end for any 
company to be acquired.
    (d) Notice provided to Board. The Reserve Bank shall immediately 
send to the Board a copy of any notice received under paragraphs (c)(1) 
or (c)(2) of this section.
    (e) Notice to public--(1) the Reserve Bank shall notify the Board 
for publication in the Federal Register immediately upon receipt by the 
Reserve Bank of:
    (i) A notice under paragraph (c) of this section or
    (ii) A written request that notice of a proposal under paragraph 
(c) of this section be published in the Federal Register. Such a 
request may request that Federal Register publication occur up to 15 
calendar days prior to submission of a notice under this subpart.
    (2) The Federal Register notice published under this paragraph (e) 
shall invite public comment on the proposal, generally for a period of 
15 days.
    (f) Action on notices--(1) Reserve Bank action--(i) In general. 
Within 30 calendar days after receipt by the Reserve Bank of a notice 
filed pursuant to paragraphs (c)(1) or (c)(2) of this section, the 
Reserve Banks shall:
    (A) Approve the notice; or
    (B) Refer the notice to the Board for decision because action under 
delegated authority is not appropriate.
    (ii) Return of incomplete notice. Within 7 calendar days of 
receipt, the Reserve Bank may return any notice as informationally 
incomplete that does not contain all of the information required by 
this section. The return of such a notice shall be deemed action on the 
notice.
    (iii) Notice of action. The Reserve Bank shall promptly notify the 
savings and loan holding company of any action or referral under this 
paragraph.
    (iv) Close of public comment period. The Reserve Bank shall not 
approve any notice under this paragraph (e)(1) of this section prior to 
the third business day after the close of the public comment period, 
unless an emergency exists that requires expedited or immediate action.
    (2) Board action; internal schedule. The Board seeks to act on 
every notice referred to it for decision within 60 days of the date 
that the notice is filed with the Reserve Bank. If the Board is unable 
to act within this period, the Board shall notify the notificant and 
explain the reasons and the date by which the Board expects to act.
    (3)(i) Required time limit for System action. The Board or the 
Reserve Bank shall act on any notice under this section within 60 days 
after the submission of a complete notice.
    (ii) Extension of required period for action. The Board may extend 
the 60-day period required for Board action under paragraph (e)(3)(i) 
of this section for an additional 30 days upon notice to the 
notificant.
    (4) Requests for additional information. The Board or the Reserve 
Bank may modify the information requirements under this section or at 
any time request any additional information that either believes is 
needed for a decision on any notice under this section.
    (5) Tolling of period. The Board or the Reserve Bank may at any 
time extend or toll the time period for action on a notice for any 
period with the consent of the notificant.
    (g) Modification or termination of service or activity. The Board 
may require a savings and loan holding company or subsidiary thereof 
which has commenced a service or activity pursuant to this section to 
modify or terminate, in whole or in part, such service or activity as 
the Board finds necessary in order to ensure compliance with the 
provisions and purposes of this part and of section 10 of the Home 
Owners' Loan Act, as amended, or to prevent evasions thereof.
    (h) Alterations. Except as may be otherwise provided in a 
resolution by or on behalf of the Board in a particular case, a service 
or activity commenced pursuant to this section shall not be altered in 
any material respect from that described in the notice filed under 
paragraph (c)(1) of this section, unless before making such alteration 
notice of intent to do so is filed in compliance with the appropriate 
procedures of said paragraph (c)(1) of this section.

[[Page 56548]]

    (i) Service corporation subsidiaries of savings associations. The 
Board hereby approves without application the furnishing or performing 
of such services or engaging in such activities as permitted by the OTS 
pursuant to Sec.  545.74 of this title, as in effect on March 5, 1987, 
if such service or activity is conducted by a service corporation 
subsidiary of a subsidiary savings association of a savings and loan 
holding company and if such service corporation has legal power to do 
so.


Sec.  238.54  Permissible bank holding company activities of savings 
and loan holding companies.

    (a) General. For purposes of Sec.  238.51(b)(6)(i), the services 
and activities permissible for bank holding companies pursuant to 
regulations that the Board has promulgated pursuant to section 4(c) of 
the Bank Holding Company Act are permissible for savings and loan 
holding companies, or subsidiaries thereof that are neither savings 
associations nor service corporation subsidiaries of subsidiary savings 
associations: Provided, That no savings and loan holding company shall 
commence any activity described in this paragraph (a) without the prior 
approval of this Board pursuant to paragraph (b) of this section, 
unless--
    (1) The holding company received a rating of satisfactory or above 
prior to January 1, 2008, or a composite rating of ``1'' or ``2'' 
thereafter, in its most recent examination, and is not in a troubled 
condition as defined in Sec.  238.72, and the holding company does not 
propose to commence the activity by an acquisition (in whole or in 
part) of a going concern; or
    (2) The activity is permissible under authority other than section 
10(c)(2)(F)(i) of the HOLA without prior notice or approval. Where an 
activity is within the scope of both Sec.  238.53 and this section, the 
procedures of Sec.  238.53 shall govern.
    (b) Procedures for applications. Applications to commence any 
activity prescribed under paragraph (a) of this section shall be filed 
with the appropriate Reserve Bank on the designated form. The Board 
must act upon such application according to the procedures of Sec.  
238.53(d), (e), and (f).
    (c) Factors considered in acting on applications. In evaluating an 
application filed under paragraph (b) of this section, the Board shall 
consider whether the performance by the applicant of the activity can 
reasonably be expected to produce benefits to the public (such as 
greater convenience, increased competition, or gains in efficiency) 
that outweigh possible adverse effects (such as undue concentration of 
resources, decreased or unfair competition, conflicts of interest, or 
unsound financial practices). This consideration includes an evaluation 
of the financial and managerial resources of the applicant, including 
its subsidiaries, and of any company to be acquired, and the effect of 
the proposed transaction on those resources.

Subpart G--Financial Holding Company Activities


Sec.  238.61  Scope.

    Section 10(c)(2)(H) of the HOLA (12 U.S.C. 1467a(c)(2)(H)) permits 
a savings and loan holding company to engage in activities that are 
permissible for a financial holding company if the savings and holding 
company meets the criteria to qualify as a financial holding company 
and complies with all of the requirements applicable to a financial 
holding company under sections 4(l) and 4(m) of the BHC Act as if the 
savings and loan holding company was a bank holding company. This 
subpart provides the requirements and restrictions for a savings and 
holding company to be treated as a financial holding company for the 
purpose of engaging in financial holding company activities. This 
subpart does not apply to savings and loan holding companies described 
in section 10(c)(9)(C) of the HOLA (12 U.S.C. 1467a(c)(9)(C)).


Sec.  238.62  Definitions.

    For the purposes of this subpart:
    (a) Financial holding company activities refers to activities 
permissible under section 4(k) of the Bank Holding Company Act of 1956 
(12 U.S.C. 1843(k)) and Sec.  225.86 of this chapter.
    (b) [Reserved]


Sec.  238.63  Requirements to engage in financial holding company 
activities.

    (a) In general. In order for a savings and loan holding company to 
engage in financial holding company activities:
    (1) The savings and loan holding company and all depository 
institutions controlled by the savings and loan holding company must be 
and remain well capitalized;
    (2) The savings and loan holding company and all depository 
institutions controlled by the savings and loan company must be and 
remain well managed; and
    (3) The savings and loan holding company must have made an 
effective election to be treated as a financial holding company.


Sec.  238.64  Election required.

    (a) In general. Except as provided below, a savings and loan 
holding company that wishes to engage in financial holding company 
activities must have an effective election to be treated as a financial 
holding company.
    (b) Activities performed under separate HOLA authority. A savings 
and loan holding company that conducts only the following activities is 
not required to elect to be treated as a financial holding company:
    (1) BHC Act section 4(c)(8) activities. Activities permissible 
under section 10(c)(2)(F)(i) of the HOLA (12 U.S.C. 1467a(c)(2)(F)(i)).
    (2) Insurance agency or escrow business activities. Activities 
permissible under section 10(c)(2)(B) of the HOLA (12 U.S.C. 
1467a(c)(2)(B)).
    (3) ``1987 List'' activities. Activities permissible under section 
10(c)(2)(F)(ii) of the HOLA (12 U.S.C. 1467a(c)(2)(F)(ii)).
    (c) Existing requirements apply. A savings and loan holding company 
that has not made an effective election to be treated as a financial 
holding company and that conducts the activities described in 
paragraphs (b)(1) through (3) of this section remains subject to any 
rules and requirements applicable to the conduct of such activities.


Sec.  238.65  Election procedures.

    (a) Filing requirement. A savings and loan holding company may 
elect to be treated as a financial holding company by filing a written 
declaration with the appropriate Reserve Bank. A declaration by a 
savings and loan holding company is considered to be filed on the date 
that all information required by paragraph (b) of this section is 
received by the appropriate Reserve Bank.
    (b) Contents of declaration. To be deemed complete, a declaration 
must:
    (1) State that the savings and loan holding company elects to be 
treated as a financial holding company in order to engage in financial 
holding company activities;
    (2) Provide the name and head office address of the savings and 
loan holding company and of each depository institution controlled by 
the savings and loan holding company;
    (3) Certify that the savings and loan holding company and each 
depository institution controlled by the savings and loan holding 
company is well capitalized as of the date the savings and loan holding 
company submits its declaration;
    (4) Certify that the savings and loan holding company and each 
savings association controlled by the savings and loan holding company 
is well managed as of the date the savings and loan holding company 
submits its declaration;

[[Page 56549]]

    (c) Effectiveness of election. An election by a savings and loan 
holding company to be treated as a financial holding company shall not 
be effective if, during the period provided in paragraph (d) of this 
section, the Board finds that, as of the date the declaration was filed 
with the appropriate Reserve Bank:
    (1) Any insured depository institution controlled by the savings 
and loan holding company (except an institution excluded under 
paragraph (d) of this section) has not achieved at least a rating of 
``satisfactory record of meeting community credit needs'' under the 
Community Reinvestment Act at the savings association's most recent 
examination; or
    (2) Any depository institution controlled by the bank holding 
company is not both well capitalized and well managed.
    (d) Consideration of the CRA performance of a recently acquired 
savings association. Except as provided in paragraph (f) of this 
section, a savings association will be excluded for purposes of the 
review of the Community Reinvestment Act rating provisions of paragraph 
(c)(1) of this section if:
    (1) The savings and loan holding company acquired the savings 
association during the 12-month period preceding the filing of an 
election under paragraph (a) of this section;
    (2) The savings and loan holding company has submitted an 
affirmative plan to the appropriate Federal banking agency for the 
savings association to take actions necessary for the institution to 
achieve at least a rating of ``satisfactory record of meeting community 
credit needs'' under the Community Reinvestment Act at the next 
examination of the savings association; and
    (3) The appropriate Federal banking agency for the savings 
association has accepted the plan described in paragraph (d)(2) of this 
section.
    (e) Effective date of election.
    (1) In general. An election filed by a savings and loan holding 
company under paragraph (a) of this section is effective on the 31st 
calendar day after the date that a complete declaration was filed with 
the appropriate Reserve Bank, unless the Board notifies the savings and 
loan holding company prior to that time that the election is 
ineffective.
    (2) Earlier notification that an election is effective. The Board 
or the appropriate Reserve Bank may notify a savings and loan holding 
company that its election to be treated as a financial holding company 
is effective prior to the 31st day after the date that a complete 
declaration was filed with the appropriate Reserve Bank. Such a 
notification must be in writing.
    (3) Special effective date rules for the OTS transfer date.
    (i) Deadline for filing declaration. For savings and loan holding 
companies that meet the requirements of Sec.  238.63 and that are 
engaged in financial holding company activities pursuant to existing 
authority as of July 21, 2011, an election under paragraph (a) must be 
filed with the appropriate Reserve Bank by December 31, 2011. The 
election must be accompanied by a description of the financial holding 
company activities conducted by the savings and loan holding company.
    (ii) Effective date of election. An election filed under paragraph 
(e)(3)(i) of this section is effective on the 61st calendar day after 
the date that a complete declaration was filed with the appropriate 
Reserve Bank, unless the Board notifies the savings and loan holding 
company prior to that time that the election is ineffective.
    (iii) Earlier notification that an election is effective. The Board 
or the appropriate Reserve Bank may notify a savings and loan holding 
company that its election under paragraph (e)(3)(i) of this section to 
be treated as a financial holding company is effective prior to the 
61st day after the date that a complete declaration was filed with the 
appropriate Reserve Bank. Such notification must be in writing.
    (iv) Filings by savings and loan holding companies that do not meet 
requirements. (A) For savings and loan holding companies that are 
engaged in financial holding company activities as of July 21, 2011 but 
do not meet the requirements of Sec.  238.63, a declaration must be 
filed with the appropriate Reserve Bank by December 31, 2011, 
specifying:
    (1) The name and head office address of the savings and loan 
holding company and of each despoitory institution controlled by the 
savings and loan holding company;
    (2) The financial holding company activities that the savings and 
loan holding company is engaged in;
    (3) The requirements of Sec.  238.63 that the savings and loan 
holding company does not meet; and
    (4) A description of how the savings and loan holding company will 
achieve compliance with Sec.  238.63 prior to June 30, 2012.
    (B) A savings and loan holding company covered by this subparagraph 
will be subject to:
    (1) The notice, remediation agreement, divestiture, and any other 
requirements described in Sec.  225.83 of this chapter; or
    (2) The activities limitations and any other requirements described 
in Sec.  225.84 of this chapter, depending on which requirements of 
Sec.  238.63 the savings and loan holding company does not meet.
    (f) Requests to be treated as a financial holding company submitted 
as part of an application to become a savings and loan holding company. 
A company that is not a savings and loan holding company and has 
applied for the Board's approval to become a savings and loan holding 
company under section 10(e) of the HOLA (12 U.S.C. 1467a(e)) may as 
part of that application submit a request to be treated as a financial 
holding company. Such requests shall be made and reviewed by the Board 
as described in Sec.  225.82(f) of this chapter.
    (g) Board's authority to exercise supervisory authority over a 
savings and loan holding company treated as a financial holding 
company. An effective election to be treated as a financial holding 
company does not in any way limit the Board's statutory authority under 
the HOLA, the Federal Deposit Insurance Act, or any other relevant 
Federal statute to take appropriate action, including imposing 
supervisory limitations, restrictions, or prohibitions on the 
activities and acquisitions of a savings and loan holding company that 
has elected to be treated as a financial holding company, or enforcing 
compliance with applicable law.


Sec.  238.66  Ongoing requirements.

    (a) In general. A savings and loan holding company with an 
effective election to be treated as a financial holding company is 
subject to the same requirements applicable to a financial holding 
company, under sections 4(l) and 4(m) of the Bank Holding Company Act 
and section 804(c) of the Community Reinvestment Act of 1977 (12 U.S.C. 
2903(c)) as if the savings and loan holding company was a bank holding 
company.
    (b) Consequences of failing to continue to meet applicable capital 
and management requirements. A savings and loan holding company with an 
effective election to be treated as a financial holding company that 
fails to meet applicable capital and management requirements at Sec.  
238.63 is subject to the notice, remediation agreement, divestiture, 
and any other requirements described in Sec.  225.83 of this chapter.
    (c) Consequences of failing to continue to maintain a satisfactory 
or better rating under the Community

[[Page 56550]]

Reinvestment Act at all insured depository institution subsidiaries. A 
savings and loan holding company with an effective election to be 
treated as a financial holding company that fails to maintain a 
satisfactory or better rating under the Community Reinvestment Act at 
all insured deposit institution subsidiaries is subject to the 
activities limitations and any other requirements described in Sec.  
225.84 of this chapter.
    (d) Notice and approval requirements for conducting financial 
holding company activities; permissible activities. A savings and loan 
holding company with an effective election to be treated as a financial 
holding company may conduct the activities listed in Sec.  225.86 of 
this chapter subject to the notice, approval, and any other 
requirements described in Sec. Sec.  225.85 through 225.89 of this 
chapter.

Subpart H--Notice of Change of Director or Senior Executive Officer


Sec.  238.71  Purpose.

    This subpart implements 12 U.S.C. 1831i, which requires certain 
savings and loan holding companies to notify the Board before 
appointing or employing directors and senior executive officers.


Sec.  238.72  Definitions.

    The following definitions apply to this subpart:
    (a) Director means an individual who serves on the board of 
directors of a 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 Board or Reserve Bank 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.
    (b) 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 Board or Reserve Bank in writing as an individual who exercises 
significant influence over, or participates in, major policymaking 
decisions, whether or not hired as an employee.
    (c) Troubled condition means:
    (1) A savings and loan holding company that has an unsatisfactory 
rating under the applicable holding company rating system, or that is 
informed in writing by the Board or Reserve Bank that it has an adverse 
effect on its subsidiary savings association.
    (2) A 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 Board or Reserve Bank; or
    (3) A savings and loan holding company that is informed in writing 
by the Board or Reserve Bank that it is in troubled condition based on 
information available to the Board or Reserve Bank.


Sec.  238.73  Prior notice requirements.

    (a) Savings and loan holding company. Except as provided under 
Sec.  238.78, a savings and loan holding company must give the Board 30 
days' written notice, as specified in Sec.  238.74, before adding or 
replacing any member of its 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 the savings and loan holding company is in 
troubled condition.
    (b) Notice by individual. An individual seeking election to the 
board of directors of a savings and loan holding company described in 
paragraph (a) of this section that has not been nominated by 
management, must either provide the prior notice required under 
paragraph (a) of this section or follow the process under Sec.  
238.78(b).


Sec.  238.74  Filing and processing procedures.

    (a) Filing notice--(1) Content. The notice required in Sec.  238.73 
shall be filed with the appropriate Reserve Bank and shall contain:
    (i) The information required by paragraph 6(A) of the Change in 
Bank Control Act (12 U.S.C. 1817(j)(6)(A)) as may be prescribed in the 
designated Board form;
    (ii) Additional information consistent with the Federal Financial 
Institutions Examination Council's Joint Statement of Guidelines on 
Conducting Background Checks and Change in Control Investigations, as 
set forth in the designated Board form; and
    (iii) Such other information as may be required by the Board or 
Reserve Bank.
    (2) Modification. The Reserve Bank may modify or accept other 
information in place of the requirements of this section for a notice 
filed under this subpart.
    (3) Acceptance and processing of notice. The 30-day notice period 
specified in section 238.73 shall begin on the date all information 
required to be submitted by the notificant pursuant to this section is 
received by the appropriate Reserve Bank. The Reserve Bank shall notify 
the savings and loan holding company or individual submitting the 
notice of the date on which all required information is received and 
the notice is accepted for processing, and of the date on which the 30-
day notice period will expire. The Board or Reserve Bank may extend the 
30-day notice period for an additional period of not more than 60 days 
by notifying the savings and loan holding company or individual filing 
the notice that the period has been extended and stating the reason for 
not processing the notice within the 30-day notice period.
    (b) [Reserved]


Sec.  238.75  Standards for review.

    (a) Notice of disapproval. The Board or Reserve Bank will 
disapprove a notice if, pursuant to the standard set forth in 12 U.S.C. 
1831i(e), the Board or Reserve Bank finds that the competence, 
experience, character, or integrity of the proposed individual 
indicates that it would not be in the best interests of the depositors 
of the savings and loan holding company or of the public to permit the 
individual to be employed by, or associated with, the savings and loan 
holding company. If the Board or Reserve Bank disapproves a notice, it 
will issue a written notice that explains why the Board or Reserve Bank 
disapproved the notice. The Board or Reserve Bank will send the notice 
to the savings and loan holding company and the individual.
    (b) Appeal of a notice of disapproval. (1) A disapproved individual 
or a regulated institution that has submitted a notice that is 
disapproved under this section may appeal the disapproval to the Board 
within 15 days of the effective date of the notice of disapproval. An 
appeal shall be in writing and explain the reasons for the appeal and 
include all facts, documents, and arguments that the appealing party 
wishes to be considered in the appeal, and state whether the appealing 
party is requesting an informal hearing.

[[Page 56551]]

    (2) Written notice of the final decision of the Board shall be sent 
to the appealing party within 60 days of the receipt of an appeal, 
unless the appealing party's request for an informal hearing is 
granted.
    (3) The disapproved individual may not serve as a director or 
senior executive officer of the state member bank or bank holding 
company while the appeal is pending.
    (c) Informal hearing. (1) An individual or regulated institution 
whose notice under this section has been disapproved may request an 
informal hearing on the notice. A request for an informal hearing shall 
be in writing and shall be submitted within 15 days of a notice of 
disapproval. The Board may, in its sole discretion, order an informal 
hearing if the Board finds that oral argument is appropriate or 
necessary to resolve disputes regarding material issues of fact.
    (2) An informal hearing shall be held within 30 days of a request, 
if granted, unless the requesting party agrees to a later date.
    (3) Written notice of the final decision of the Board shall be 
given to the individual and the regulated institution within 60 days of 
the conclusion of any informal hearing ordered by the Board, unless the 
requesting party agrees to a later date.


Sec.  238.76  Waiting period.

    (a) At expiration of period. A proposed director or senior 
executive officer may begin service at the end of the 30-day period and 
any extension as provided under Sec.  238.74 unless the Board or 
Reserve Bank notifies you that it has disapproved the notice before the 
end of the period.
    (b) Prior to expiration of period. A proposed director or senior 
executive officer may begin service before the end of the 30-day period 
and any extension as provided under section 238.74 of this section, if 
the Board or the Reserve Bank notifies in writing the savings and loan 
holding company or individual submitting the notice of the Board's or 
Reserve Bank's intention not to disapprove the notice.


Sec.  238.77  Waiver of prior notice requirement.

    (a) Waiver request. An individual may serve as a director or senior 
executive officer before filing a notice under this subpart if the 
Board or Reserve Bank finds that:
    (1) Delay would threaten the safety or soundness of the savings and 
loan holding company;
    (2) Delay would not be in the public interest; or
    (3) Other extraordinary circumstances exist that justify waiver of 
prior notice.
    (b) Automatic waiver. An individual may serve as a director upon 
election to the board of directors before filing a notice under this 
subpart, if the individual:
    (1) Is not proposed by the management of the savings and loan 
holding company;
    (2) Is elected as a new member of the board of directors at a 
meeting of the savings and loan holding company; and
    (3) Provides to the appropriate Reserve Bank all the information 
required in Sec.  238.74 within two (2) business days after the 
individual's election.
    (c) Subsequent Board or Reserve Bank action. The Board or Reserve 
Bank may disapprove a notice within 30 days after the Board or Reserve 
Bank 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.

Subpart I--Prohibited Service at Savings and Loan Holding Companies


Sec.  238.81  Purpose.

    This subpart implements section 19(e)(1) of the Federal Deposit 
Insurance Act (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. This part also implements section 19(e)(2) of 
the FDIA, which permits the Board to provide exemptions, by regulation 
or order, from the application of the prohibition. This subpart 
provides an exemption for savings and loan holding company employees 
whose activities and responsibilities are limited solely to 
agriculture, forestry, retail merchandising, manufacturing, or public 
utilities operations, and a temporary exemption for certain persons who 
held positions with respect to a savings and loan holding company as of 
October 13, 2006. The subpart also describes procedures for applying to 
the Board for an exemption.


Sec.  238.82  Definitions.

    The following definitions apply to this subpart:
    (a) Institution-affiliated party is defined at 12 U.S.C. 1813(u), 
except that the phrase ``savings and loan holding company'' is 
substituted for ``insured depository institution'' each place that it 
appears in that definition.
    (b) Enforcement Counsel means any individual who files a notice of 
appearance to serve as counsel on behalf of the Board in the 
proceeding.
    (c) Person means an individual and does not include a corporation, 
firm or other business entity.
    (d) Savings and loan holding company is defined at Sec.  238.2(m), 
but excludes a subsidiary of a savings and loan holding company that is 
not itself a savings and loan holding company.


Sec.  238.83  Prohibited actions.

    (a) Person. If a person was convicted of a criminal offense 
described in Sec.  238.84, or agreed to enter into a pretrial diversion 
or similar program in connection with a prosecution for such a criminal 
offense, he or she may not:
    (1) Become, or continue as, an institution-affiliated party with 
respect to any savings and loan holding company.
    (2) Own or control, directly or indirectly, any savings and loan 
holding company. A person will own or control a savings and loan 
holding company if he or she owns or controls that company under 
subpart D of this part.
    (3) Otherwise participate, directly or indirectly, in the conduct 
of the affairs of any savings and loan holding company.
    (b) Savings and loan holding company. A savings and loan holding 
company may not permit any person described in paragraph (a) of this 
section to engage in any conduct or to continue any relationship 
prohibited under that paragraph.


Sec.  238.84  Covered convictions or agreements to enter into pre-trial 
diversions or similar programs.

    (a) Covered convictions and agreements. Except as described in 
Sec.  238.85, this subpart covers:
    (1) Any conviction of a criminal offense involving dishonesty, 
breach of trust, or money laundering. Convictions do not cover arrests, 
pending cases not brought to trial, acquittals, convictions reversed on 
appeal, pardoned convictions, or expunged convictions.
    (2) Any agreement to enter into a pretrial diversion or similar 
program in connection with a prosecution for a criminal offense 
involving dishonesty, breach of trust or money laundering. A pretrial 
diversion or similar program is a program involving a suspension or 
eventual dismissal of charges or of a criminal prosecution based upon 
an agreement for treatment, rehabilitation, restitution, or other non-
criminal or non-punitive alternative.
    (b) Dishonesty or breach of trust. A determination whether a 
criminal

[[Page 56552]]

offense involves dishonesty or breach of trust is based on the 
statutory elements of the crime.
    (1) ``Dishonesty'' means directly or indirectly to cheat or 
defraud, to cheat or defraud for monetary gain or its equivalent, or to 
wrongfully take property belonging to another in violation of any 
criminal statute. Dishonesty includes acts involving a want of 
integrity, lack of probity, or a disposition to distort, cheat, or act 
deceitfully or fraudulently, and may include crimes which federal, 
state or local laws define as dishonest.
    (2) ``Breach of trust'' means a wrongful act, use, 
misappropriation, or omission with respect to any property or fund 
which has been committed to a person in a fiduciary or official 
capacity, or the misuse of one's official or fiduciary position to 
engage in a wrongful act, use, misappropriation, or omission.


Sec.  238.85  Adjudications and offenses not covered.

    (a) Youthful offender or juvenile delinquent. This subpart does not 
cover any adjudication by a court against a person as:
    (1) A youthful offender under any youthful offender law; or
    (2) A juvenile delinquent by a court with jurisdiction over minors 
as defined by state law.
    (b) De minimis criminal offense. This subpart does not cover de 
minimis criminal offenses. A criminal offense is de minimis if:
    (1) The person has only one conviction or pretrial diversion or 
similar program of record;
    (2) The offense was punishable by imprisonment for a term of less 
than one year, a fine of less than $1,000, or both, and the person did 
not serve time in jail.
    (3) The conviction or program was entered at least five years 
before the date the person first held a position described in Sec.  
238.83(a); and
    (4) The offense did not involve an insured depository institution, 
insured credit union, or other banking organization (including a 
savings and loan holding company, bank holding company, or financial 
holding company).
    (5) The person must disclose the conviction or pretrial diversion 
or similar program to all insured depository institutions and other 
banking organizations the affairs of which he or she participates.
    (6) The person must be covered by a fidelity bond to the same 
extent as others in similar positions with the savings and loan holding 
company.


Sec.  238.86  Exemptions.

    (a) Employees. An employee of a savings and loan holding company is 
exempt from the prohibition in Sec.  238.83, if all of the following 
conditions are met:
    (1) The employee's responsibilities and activities are limited 
solely to agriculture, forestry, retail merchandising, manufacturing, 
or public utilities operations.
    (2) The savings and loan holding company maintains a list of all 
policymaking positions and reviews this list annually.
    (3) The employee's position does not appear on the savings and loan 
holding company's list of policymaking positions, and the employee does 
not, in fact, exercise any policymaking function with the savings and 
loan holding company.
    (4) The employee:
    (i) Is not an institution-affiliated party of the savings and loan 
holding company other than by virtue of the employment described in 
paragraph (a) of this section.
    (ii) Does not own or control, directly or indirectly, the savings 
and loan holding company; and
    (iii) Does not participate, directly or indirectly, in the conduct 
of the affairs of the savings and loan holding company.
    (b) Temporary exemption. (1) Any prohibited person who was an 
institution affiliated party with respect to a savings and loan holding 
company, who owned or controlled, directly or indirectly a savings and 
loan holding company, or who otherwise participated directly or 
indirectly in the conduct of the affairs of a savings and loan holding 
company on October 13, 2006, may continue to hold the position with the 
savings and loan holding company.
    (2) This exemption expires on December 31, 2012, unless the savings 
and loan holding company or the person files an application seeking a 
case-by-case exemption for the person under Sec.  238.87 by that date. 
If the savings and loan holding company or the person files such an 
application, the temporary exemption expires on:
    (i) The date of issuance of a Board approval of the application 
under Sec.  238.89(a);
    (ii) The expiration of the 20-day period for filing a request for 
hearing under Sec.  238.90(a) provided there is no timely request for 
hearing following the issuance by the Board of a denial of the 
application under that section;
    (iii) The date that the Board denies a timely request for hearing 
under Sec.  238.90(b) following the issuance of a Board denial of the 
application under Sec.  238.89(b);
    (iv) The date that the Board issues a decision under Sec.  
238.90(d); or
    (v) The date an applicant withdraws the application.


Sec.  238.87  Filing procedures.

    (a) Who may file. (1) A savings and loan holding company or a 
person who was convicted of a criminal offense described in Sec.  
238.84 or who has agreed to enter into a pre-trial diversion or similar 
program in connection with a prosecution for such a criminal offense 
may file an application with the Board seeking an exemption from the 
prohibitions in this subpart.
    (2) A savings and loan holding company or a person may seek an 
exemption only for a designated position (or positions) with respect to 
a named savings and loan holding company.
    (3) A savings and loan holding company or a person may not file an 
application less than one year after the latter of the date of a denial 
of the same exemption under Sec.  238.89(b), Sec.  238.90(a) or Sec.  
238.90(d).
    (b) Prohibition pending Board action. Unless a savings and loan 
holding company or a person is exempt under Sec.  238.86(b), the 
prohibitions in Sec.  238.83 continue to apply pending Board action on 
the application.


Sec.  238.88  Factors for review.

    (a) Board review. (1) In determining whether to approve an 
exemption application filed under Sec.  238.87, the Board will consider 
the extent to which the position that is the subject of the application 
enables a person to:
    (i) Participate in the major policymaking functions of the savings 
and loan holding company; or
    (ii) Threaten the safety and soundness of any insured depository 
institution that is controlled by the savings and loan holding company, 
the interests of its depositors, or the public confidence in the 
insured depository institution.
    (2) The Board will also consider whether the applicant has 
demonstrated the person's fitness to hold the described position. Some 
positions may be approved without an extensive review of a person's 
fitness because the position does not enable a person to take the 
actions described in paragraph (a)(1) of this section.
    (b) Factors. In making the determinations under paragraph (a) of 
this section, the Board will consider the following factors:
    (1) The position;
    (2) The amount of influence and control a person holding the 
position

[[Page 56553]]

will be able to exercise over the affairs and operations of the savings 
and loan holding company and the insured depository institution;
    (3) The ability of the management of the savings and loan holding 
company to supervise and control the activities of a person holding the 
position;
    (4) The level of ownership that the person will have at the savings 
and loan holding company;
    (5) The specific nature and circumstances of the criminal offense. 
The question whether a person who was convicted of a crime or who 
agreed to enter into a pretrial diversion or similar program for a 
crime was guilty of that crime is not relevant;
    (6) Evidence of rehabilitation; and
    (7) Any other relevant factor.


Sec.  238.89  Board action.

    (a) Approval. The Board will notify an applicant if an application 
under this subpart is approved. An approval by the Board may include 
such conditions as the Board determines to be appropriate.
    (b) Denial. If Board denies an application, the Board will notify 
an applicant promptly.


Sec.  238.90  Hearings.

    (a) Hearing requests. Within 20 days of the date of issuance of a 
denial of an application filed under this subpart, a savings and loan 
holding company or a person whose application the Board has denied may 
file a written request demonstrating good cause for a hearing on the 
denial.
    (b) Board review of hearing request. The Board will review the 
hearing request to determine if the savings and loan holding company or 
person has demonstrated good cause for a hearing on the application. 
Within 30 days after the filing of a timely request for a hearing, the 
Board will notify the savings and loan holding company or person in 
writing of its decision to grant or deny the hearing request. If the 
Board grants the request for a hearing, it will order a hearing to be 
commenced within 60 days of the issuance of the notification. Upon the 
request of a party, the Board may at its discretion order a later 
hearing date.
    (c) Hearing procedures. The following procedures apply to hearings 
under this subpart.
    (1) The hearing shall be held in Washington, DC, or at another 
designated place, before a presiding officer designated by the Board.
    (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 Enforcement Counsel and the 
applicant.
    (4) The provisions of Sec. Sec.  263.2, 263.4, 263.6 through 
263.12, and 263.16 of this chapter 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 prior 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. The Board 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 section 263.14 of this 
chapter.
    (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.
    (10) 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 Board, 
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 Board who shall promptly certify the entire record, including 
the presiding officer's recommendations. The Board's certification will 
close the record.
    (d) Decision. After the certification of the record, the Board will 
notify the parties of its 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 Sec.  238.88(b).

Subpart J--Management Official Interlocks


Sec.  238.91  Authority, purpose, and scope.

    (a) Authority. This subpart is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended.
    (b) Purpose. The purpose of the Interlocks Act and this subpart is 
to foster competition by generally prohibiting a management official 
from serving two nonaffiliated depository organizations in situations 
where the management interlock likely would have an anticompetitive 
effect.
    (c) Scope. This subpart applies to management officials of savings 
and loan holding companies, and their affiliates.


Sec.  238.92  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of 
that section 202, shares held by an individual include shares held by 
members of his or her immediate family. ``Immediate family'' means 
spouse, mother, father, child, grandchild, sister, brother, or any of 
their spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving a savings and 
loan holding company based on common ownership does not exist if the 
Board determines, after giving the affected persons the opportunity to 
respond, that the asserted affiliation was established in order to 
avoid the prohibitions of the Interlocks Act and does not represent a 
true commonality of interest between the depository organizations. In 
making this determination, the Board considers, among other things, 
whether a person, including members of his or her immediate family, 
whose shares are necessary to constitute the group owns a nominal 
percentage of the shares of one of the organizations and the percentage 
is substantially disproportionate to that person's ownership of shares 
in the other organization.
    (b) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a

[[Page 56554]]

depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (c) Community means a city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (d) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The 
property line of an office located in an unincorporated city, town, or 
village is the boundary line of that city, town, or village for the 
purpose of this definition.
    (e) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (f) Depository institution means a 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 
under the laws of the United States and having a principal office 
located in the United States. Additionally, a United States office, 
including a branch or agency, of a foreign commercial bank is a 
depository institution.
    (g) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (h) Depository organization means a depository institution or a 
depository holding company.
    (i) Low- and moderate-income areas means census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.
    (j) Management official. (1) The term management official means:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in Sec.  
225.71(c) of this chapter;
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (j)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (k) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (l) Person means a natural person, corporation, or other business 
entity.
    (m) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
Primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (n) Representative or nominee means a natural person who serves as 
a management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The Board will find 
that a person has an obligation to act on behalf of another person only 
if the first person has an agreement, express or implied, to act on 
behalf of the second person with respect to management 
responsibilities. The Board will determine, after giving the affected 
persons an opportunity to respond, whether a person is a representative 
or nominee.
    (o) Savings association means:
    (1) Any Federal savings association (as defined in section 3(b)(2) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(2)));
    (2) Any state savings association (as defined in section 3(b)(3) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3))) the deposits 
of which are insured by the Federal Deposit Insurance Corporation; and
    (3) Any corporation (other than a bank as defined in section 
3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)(1))) 
the deposits of which are insured by the Federal Deposit Insurance 
Corporation, that the Board of Directors of the Federal Deposit 
Insurance Corporation and the Comptroller of the Currency jointly 
determine to be operating in substantially the same manner as a savings 
association.
    (p) Total assets. (1) The term total assets means assets measured 
on a consolidated basis and reported in the most recent fiscal year-end 
Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that is exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (q) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.


Sec.  238.93  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices 
in the same community.
    (b) RMSA. A management official of a depository organization may 
not serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $50 million 
or more.
    (c) Major assets. A management official of a depository 
organization with total assets exceeding $2.5 billion (or any affiliate 
of such an organization) may not serve at the same time as a management 
official of an unaffiliated depository organization with total assets 
exceeding $1.5 billion (or any affiliate of such an organization), 
regardless of the location of the two depository organizations. The 
Board will adjust these thresholds, as necessary, based on the year-to-
year change in the average of the Consumer Price Index for the Urban 
Wage Earners and Clerical Workers, not seasonally adjusted, with 
rounding to the nearest $100 million. The Board will

[[Page 56555]]

announce the revised thresholds by publishing a final rule without 
notice and comment in the Federal Register.


Sec.  238.94  Interlocking relationships permitted by statute.

    The prohibitions of Sec.  238.93 do not apply in the case of any 
one or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the 
United States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan Bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository 
institutions regulatory agency and is acquired by another depository 
organization. This exemption lasts for five years, beginning on the 
date the depository organization is acquired;
    (h)(1) A diversified savings and loan holding company (as defined 
in section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who also is a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The Board may disapprove a notice of proposed service if it 
finds that:
    (i) The service cannot be structured or limited so as to preclude 
an anticompetitive effect in financial services in any part of the 
United States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the Board.
    (3) The Board may require that any interlock permitted under this 
paragraph (h) be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the 
notice period; and
    (i) Any savings association or any savings and loan holding company 
(as defined in section 10(a)(1)(D) of the Home Owners' Loan Act) which 
has issued stock in connection with a qualified stock issuance pursuant 
to section 10(q) of such Act, except that this paragraph (i) shall 
apply only with regard to service by a single management official of 
such savings association or holding company, or any subsidiary of such 
savings association or holding company, by a single management official 
of the savings and loan holding company which purchased the stock 
issued in connection with such qualified stock issuance, and shall 
apply only when the Board has determined that such service is 
consistent with the purposes of the Interlocks Act and the Home Owners' 
Loan Act.


Sec.  238.95  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by Sec.  
238.93 is permissible, if:
    (1) The interlock is not prohibited by Sec.  238.93(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have 
offices. The amount of deposits shall be determined by reference to the 
most recent annual Summary of Deposits published by the FDIC for the 
RMSA or community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.


Sec.  238.96  General exemption.

    (a) Exemption. The Board may by agency order exempt an interlock 
from the prohibitions in Sec.  238.93 if the Board finds that the 
interlock would not result in a monopoly or substantial lessening of 
competition and would not present safety and soundness concerns. A 
depository organization may apply to the Board for an exemption.
    (b) Presumptions. In reviewing an application for an exemption 
under this section, the Board will apply a rebuttable presumption that 
an interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low- and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in Sec.  
238.72.
    (c) Duration. Unless a shorter expiration period is provided in the 
Board approval, an exemption permitted by paragraph (a) of this section 
may continue so long as it does not result in a monopoly or substantial 
lessening of competition, or is unsafe or unsound. If the Board grants 
an interlock exemption in reliance upon a presumption under paragraph 
(b) of this section, the interlock may continue for three years, unless 
otherwise provided by the Board in writing.


Sec.  238.97  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, 
an increase in the aggregate deposits of the depository organization, 
or an acquisition, merger, consolidation, or reorganization of the 
ownership structure of a depository organization that causes a 
previously permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the depository organization 
involved in the interlock for 15 months following the date of the 
change in circumstances. The Board may shorten this period under 
appropriate circumstances.


Sec.  238.98  Enforcement.

    Except as provided in this section, the Board administers and 
enforces the Interlocks Act with respect to savings and loan holding 
companies and its affiliates, and may refer any case of a prohibited 
interlocking relationship

[[Page 56556]]

involving these entities to the Attorney General of the United States 
to enforce compliance with the Interlocks Act and this part. If an 
affiliate of a savings and loan holding company is subject to the 
primary regulation of another Federal depository organization 
supervisory agency, then the Board does not administer and enforce the 
Interlocks Act with respect to that affiliate.


Sec.  238.99  Interlocking relationships permitted pursuant to Federal 
Deposit Insurance Act.

    A management official or prospective management official of a 
depository organization may enter into an otherwise prohibited 
interlocking relationship with another depository organization for a 
period of up to 10 years if such relationship is approved by the 
Federal Deposit Insurance Corporation pursuant to section 
13(k)(1)(A)(v) of the Federal Deposit Insurance Act, as amended (12 
U.S.C. 1823(k)(1)(A)(v)).

Subpart K--Dividends by Subsidiary Savings Associations


Sec.  238.101  Authority and purpose.

    This subpart implements section 10(f) of HOLA which requires 
savings associations with holding companies to provide the Board not 
less than 30 days' notice of a proposed declaration of a dividend. This 
subpart applies to all declarations of dividends by a subsidiary 
savings association of a savings and loan holding company.


Sec.  238.102  Definitions.

    The following definitions apply to this subpart:
    (a) Appropriate Federal banking agency has the same meaning as in 
12 U.S.C. 1813(q) and includes, with respect to agreements entered into 
and conditions imposed prior to July 21, 2011, the Office of Thrift 
Supervision.
    (b) Dividend means:
    (1) A distribution of cash or other property to owners of a savings 
association made on account of their ownership, but not any dividend 
consisting only of shares or rights to purchase shares; or
    (2) Any transaction that the Board determines, by order or 
regulation, to be in substance a dividend.
    (c) 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 dividend.


Sec.  238.103  Filing requirement.

    (a) Filing. A subsidiary savings association of a savings and loan 
holding company must file a notice with the appropriate Reserve Bank on 
the designated form at least 30 days before the proposed declaration of 
a dividend by its board of directors.
    (b) Schedules. A notice may include a schedule proposing dividends 
over a specified period, not to exceed 12 months.


Sec.  238.104  Board action and criteria for review.

    (a) Board action. (1) A subsidiary savings association of a savings 
and loan holding company may declare a proposed dividend after the end 
of a 30-day review period commencing on the date of submission to the 
Federal Reserve System of the complete record on the notice, unless the 
Board or Reserve Bank disapproves the notice before the end of the 
period.
    (2) A subsidiary savings association of a savings and loan holding 
company may declare a proposed dividend before the end of the 30-day 
period if the Board or Reserve Bank notifies the applicant in writing 
of the Board's or Reserve Bank's intention not to disapprove the 
notice.
    (b) Criteria. The Board or Reserve Bank may disapprove a notice, in 
whole or in part, if the Board or Reserve Bank makes any of the 
following determinations.
    (1) Following the dividend the subsidiary savings association will 
be undercapitalized, significantly undercapitalized, or critically 
undercapitalized as set forth in applicable regulations under 12 U.S.C. 
1831o.
    (2) The proposed dividend raises safety or soundness concerns.
    (3) The proposed dividend violates a prohibition contained in any 
statute, regulation, enforcement action, or agreement between the 
subsidiary savings association or any savings and loan holding company 
of which it is a subsidiary and an appropriate Federal banking agency, 
a condition imposed on the subsidiary savings association or any 
savings and loan holding company of which it is a subsidiary in an 
application or notice approved by an appropriate Federal banking 
agency, or any formal or informal enforcement action involving the 
subsidiary savings association or any savings and loan holding company 
of which it is a subsidiary. If so, the Board will determine whether it 
may permit the dividend notwithstanding the prohibition, condition, or 
enforcement action.

Subpart L--Investigative Proceedings and Formal Examination 
Proceedings


Sec.  238.111  Scope.

    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 and loan holding companies 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 262 of this chapter.


Sec.  238.112  Definitions.

    As used in this part:
    (a) Investigative proceeding means an investigation conducted under 
section 10(g)(2) of the HOLA;
    (b) 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 and loan holding companies 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
    (c) Designated representative means the person or persons empowered 
by the Board to conduct an investigative proceeding or a formal 
examination proceeding.


Sec.  238.113  Confidentiality of proceedings.

    All formal examination proceedings shall be private and, unless 
otherwise ordered by the Board, all investigative proceedings shall 
also be private. Unless otherwise ordered or permitted by the Board, or 
required by law, and except as provided in Sec. Sec.  238.114 and 
238.115, the entire record of any investigative proceeding or formal 
examination proceeding, including the resolution of the Board or its 
delegate(s) authorizing the proceeding, the transcript of such 
proceeding, and all documents and information obtained by the 
designated

[[Page 56557]]

representative(s) during the course of said proceedings shall be 
confidential.


Sec.  238.114  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 Board stating the reason 
he desires to procure such transcript, and the Board 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.


Sec.  238.115  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 Board resolution authorizing such proceeding. Copies of such 
resolution shall be furnished, for their retention, to such persons 
only with the written approval of the Board.
    (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 Board in 
accordance with the provisions of part 263 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 Board, for good cause, may exclude a particular attorney 
from further participation in any investigation in which the Board has 
found the attorney to have engaged in dilatory, obstructionist, 
egregious, contemptuous or contumacious conduct. The person conducting 
an investigation may report to the Board instances of apparently 
dilatory, obstructionist, egregious, contemptuous or contumacious 
conduct on the part of an attorney. After due notice to the attorney, 
the Board 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 Board may permit or direct.


Sec.  238.116  Obstruction of proceedings.

    The designated representative shall report to the Board 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 Board may take such action as 
the circumstances warrant, including the exclusion of counsel from 
further participation in such proceeding.


Sec.  238.117  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 Board or its designee to quash or modify such subpoena, 
accompanying such application with a statement of the reasons 
therefore. The Board or its 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 
Board or its 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 Board by any of its designated representatives.

0
14. Add new part 239 to read as follows:

PART 239--MUTUAL HOLDING COMPANIES (REGULATION MM)

Subpart A--General Provisions
Sec.
239.1 Authority, purpose, and scope.
239.2 Definitions.
Subpart B--Mutual Holding Companies
Sec.

[[Page 56558]]

239.3 Mutual holding company reorganizations.
239.4 Grounds for disapproval of reorganizations.
239.5 Membership rights.
239.6 Contents of Reorganization Plans.
239.7 Acquisition and disposition of savings associations, savings 
and loan holding companies, and other corporations by mutual holding 
companies.
239.8 Operating restrictions.
239.9 Conversion or liquidation of mutual holding companies.
239.10 Procedural requirements.
239.11 Subsidiary holding companies.
239.12 Communication between members of a mutual holding company.
239.13 Charters.
239.14 Charter amendments.
239.15 Bylaws.
239.16 Voluntary dissolution.
Subpart C--Subsidiary Holding Companies
Sec.
239.20 Scope.
239.21 Charters.
239.22 Charter amendments.
239.23 Bylaws.
239.24 Issuances of stock by subsidiary holding companies of mutual 
holding companies.
239.25 Contents of Stock Issuance Plans.
239.26 Shareholders.
239.27 Board of directors.
239.28 Officers.
239.29 Certificates for shares and their transfer.
239.30 Annual reports; books and records.
239.31 Indemnification; employment contracts.
Subpart D--Indemnification; Employment Contracts
Sec.
239.40 Indemnification of directors, officers and employees.
239.41 Employment contracts.
Subpart E--Conversions from Mutual to Stock Form
Sec.
239.50 Purpose and scope.
239.51 Acquiring another insured stock depository institution as 
part of a conversion.
239.52 Definitions.
239.53 Prior to conversion.
239.54 Plan of conversion.
239.55 Filing requirements.
239.56 Vote by members.
239.57 Proxy solicitation.
239.58 Offering circular.
239.59 Offers and sales of stock.
239.60 Completion of the offering.
239.61 Completion of the conversion.
239.62 Liquidation account.
239.63 Post-conversion.
239.64 Contributions to charitable organizations.
239.65 Voluntary supervisory conversions.
239.66 Board review of the voluntary supervisory conversion 
application.
Appendix A to Part 239--Mutual Holding Company Model Charter
Appendix B to Part 239--Subsidiary Holding Company of a Mutual 
Holding Company Model Charter
Appendix C to Part 239--Mutual Holding Company Model Bylaws
Appendix D to Part 239--Subsidiary Holding Company of a Mutual 
Holding Company Model Bylaws

    Authority: 12 U.S.C. 1462, 1462a, 1464, 1467a, 1828, and 2901.

Subpart A--General Provisions


Sec.  239.1  Authority, purpose, and scope.

    (a) Authority. This part is issued by the Board of Governors of the 
Federal Reserve System (``Board'') under section 10(g) and (o) of the 
Home Owners' Loan Act (``HOLA'').
    (b) Purpose. The principal purposes of this part are to:
    (1) Regulate the reorganization of mutual savings associations to 
mutual holding companies and the creation of subsidiary holding 
companies of mutual holding companies;
    (2) Define and regulate the operations of mutual holding companies 
and subsidiary holding companies of mutual holding companies; and
    (3) Set forth the procedures for securing approval for these 
transactions.
    (c) Scope. Except as the Board may otherwise determine, the 
reorganization of mutual savings associations into mutual holding 
companies, any related stock issuances by subsidiary holding companies, 
and the conversion of mutual holding companies into stock form are 
exclusively governed by the provisions of this part, and no mutual 
savings association shall reorganize to a mutual holding company, no 
subsidiary holding company of a mutual holding company shall issue 
minority stock, and no mutual holding company shall convert into stock 
form without the prior written approval of the Board. The Board may 
grant a waiver in writing from any requirement of this part for good 
cause shown.


Sec.  239.2  Definitions.

    As used in this part and in the forms under this part, the 
following definitions apply, unless the context otherwise requires:
    (a) Acquiree association means any savings association, other than 
a resulting association, that:
    (1) Is acquired by a mutual holding company as part of, and 
concurrently with, a mutual holding company reorganization; and
    (2) Is in the mutual form immediately prior to such acquisition.
    (b) Acting in concert has the same meaning as in Sec.  238.31(b) of 
this chapter.
    (c) Affiliate has the same meaning as in Sec.  238.2(a) of this 
chapter.
    (d) Associate of a person is:
    (1) A corporation or organization (other than the mutual holding 
company, subsidiary holding company, or any majority-owned subsidiaries 
of such holding companies), 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.  239.59(k), 
239.59(m), 239.59(n), 239.59(o), 239.59(p), 239.63(b), a person who has 
a substantial beneficial interest in the mutual holding company or 
subsidiary holding company's 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.  
239.59(k), the mutual holding company or subsidiary holding company's 
tax-qualified employee stock benefit plan is not an associate of a 
person.
    (3) Any natural 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 a director or senior officer of the mutual holding 
company, subsidiary holding company, or other subsidiary.
    (e) Company means any corporation, partnership, trust, association, 
joint venture, pool, syndicate, unincorporated organization, joint-
stock company or similar organization, as defined in paragraph (u) of 
this section; but a company does not include:
    (1) The Federal Deposit Insurance Corporation, the Resolution Trust 
Corporation, or any Federal Home Loan Bank, or
    (2) Any company the majority of shares of which is owned by:
    (i) The United States or any State,
    (ii) An officer of the United States or any State in his or her 
official capacity, or
    (iii) An instrumentality of the United States or any State.
    (f) Control has the same meaning as in Sec.  238.2(e) of this 
chapter.
    (g) Default means any adjudication or other official determination 
of a court of competent jurisdiction or other public authority pursuant 
to which a conservator, receiver, or other legal custodian is appointed 
for a mutual holding company or subsidiary savings association of a 
mutual holding company.

[[Page 56559]]

    (h) Demand accounts mean 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.
    (i) Insider means any officer or director of a company or of any 
affiliate of such company, and any person acting in concert with any 
such officer or director.
    (j) Member means any depositor or borrower of a mutual savings 
association that is entitled, under the charter of the savings 
association, to vote on matters affecting the association, and any 
depositor or borrower of a subsidiary savings association of a mutual 
holding company that is entitled, under the charter of the mutual 
holding company, to vote on matters affecting the mutual holding 
company.
    (k) Mutual holding company means a holding company organized in 
mutual form under this part, and unless otherwise indicated, a 
subsidiary holding company controlled by a mutual holding company, 
organized under this part.
    (l) Parent means any company which directly or indirectly controls 
any other company or companies.
    (m) Person includes an individual, bank, corporation, partnership, 
trust, association, joint venture, pool, syndicate, sole 
proprietorship, unincorporated organization, or any other form of 
entity.
    (n) Reorganization Notice means a notice of a proposed mutual 
holding company reorganization that is in the form and contains the 
information required by the Board.
    (o) Reorganization Plan means a plan to reorganize into the mutual 
holding company format containing the information required by Sec.  
239.6.
    (p) Reorganizing association means a mutual savings association 
that proposes to reorganize to become a mutual holding company pursuant 
to this part.
    (q) Resulting association means a savings association in the stock 
form that is organized as a subsidiary of a reorganizing association to 
receive the substantial part of the assets and liabilities (including 
all deposit accounts) of the reorganizing association upon consummation 
of the reorganization.
    (r) Savings account means any withdrawable account, except a demand 
account, a tax and loan account, a note account, a United States 
Treasury general account, or a United States Treasury time deposit-open 
account.
    (s) Savings Association has the same meaning as in Sec.  238.2(l) 
of this chapter.
    (t) Savings and loan holding company has the same meaning as 
specified in section 10(a)(1) of the HOLA and Sec.  238.2(m) of this 
chapter.
    (u) Similar organization for purposes of paragraph (e) of this 
section means a combination of parties with the potential for or 
practical likelihood of continuing rather than temporary existence, 
where the parties thereto have knowingly and voluntarily associated for 
a common purpose pursuant to identifiable and binding relationships 
which govern the parties with respect to either:
    (1) The transferability and voting of any stock or other indicia of 
participation in another entity, or
    (2) Achievement of a common or shared objective, such as to 
collectively manage or control another entity.
    (v) Stock means common or preferred stock, or any other type of 
equity security, including (without limitation) warrants or options to 
acquire common or preferred stock, or other securities that are 
convertible into common or preferred stock.
    (w) Stock Issuance Plan means a plan, submitted pursuant to Sec.  
239.24 and containing the information required by Sec.  239.25, 
providing for the issuance of stock by a subsidiary holding company.
    (x) Subsidiary means any company which is owned or controlled 
directly or indirectly by a person, and includes any service 
corporation owned in whole or in part by a savings association, or a 
subsidiary of such service corporation.
    (y) Subsidiary holding company means a federally chartered stock 
holding company controlled by a mutual holding company that owns the 
stock of a savings association whose depositors have membership rights 
in the parent mutual holding company.
    (z) 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.
    (aa) Tax-qualified employee stock benefit plan means any defined 
benefit plan or defined contribution plan, such as an employee stock 
ownership plan, stock bonus plan, profit-sharing plan, or other plan, 
and a related trust, that is qualified under sec. 401 of the Internal 
Revenue Code (26 U.S.C. 401).
    (bb) 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.
    (cc) 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.

Subpart B--Mutual Holding Companies


Sec.  239.3  Mutual holding company reorganizations.

    (a) A mutual savings association may not reorganize to become a 
mutual holding company, or join in a mutual holding company 
reorganization as an acquiree association, unless it satisfies the 
following conditions:
    (1) A Reorganization Plan is approved by a majority of the board of 
directors of the reorganizing association and any acquiree association;
    (2) A Reorganization Notice is filed with the Board pursuant to 
Sec.  238.14 of this chapter;
    (3) The Reorganization Plan is submitted to the members of the 
reorganizing association and any acquiree association pursuant and is 
approved by a majority of the total votes of the members of each 
association eligible to be cast at a meeting held at the call of each 
association's directors in accordance with the procedures prescribed by 
each association's charter and bylaws; and
    (4) All necessary regulatory approvals have been obtained and all 
conditions imposed by the Board have been satisfied.
    (b) Upon receipt of an application under this section, the Reserve 
Bank will promptly furnish notice and a copy of the Reorganization Plan 
to the primary federal supervisor of any savings association involved 
in the transaction. The primary supervisor will have 30 calendar days 
from the date of the letter giving notice in which to submit its views 
and recommendations to the Board.


Sec.  239.4  Grounds for disapproval of reorganizations.

    (a) Basic standards. The Board may disapprove a proposed mutual 
holding company reorganization filed pursuant to Sec.  239.3(a) if:
    (1) Disapproval is necessary to prevent unsafe or unsound 
practices;
    (2) The financial or managerial resources of the reorganizing 
association

[[Page 56560]]

or any acquiree association warrant disapproval;
    (3) The proposed capitalization of the mutual holding company fails 
to meet the requirements of paragraph (b) of this section;
    (4) A stock issuance is proposed in connection with the 
reorganization pursuant to Sec.  239.24 that fails to meet the 
standards established by that section;
    (5) The reorganizing association or any acquiree association fails 
to furnish the information required to be included in the 
Reorganization Notice or any other information requested by the Board 
in connection with the proposed reorganization; or
    (6) The proposed reorganization would violate any provision of law, 
including (without limitation) Sec.  239.3(a) and (c) (regarding board 
of directors and membership approval) or Sec.  239.5(a) (regarding 
continuity of membership rights).
    (b) Capitalization. (1) The Board shall disapprove a proposal by a 
reorganizing association or any acquiree association to capitalize a 
mutual holding company in an amount in excess of a nominal amount if 
immediately following the reorganization, the resulting association or 
the acquiree association would fail to be ``adequately capitalized'' 
under the regulatory capital requirements applicable to the savings 
association.
    (2) Proposals by reorganizing associations and acquiree 
associations to capitalize mutual holding companies shall also comply 
with any applicable statutes, and with regulations or written policies 
of the Comptroller of the Currency or the Federal Deposit Insurance 
Corporation, as applicable, governing capital distributions by savings 
associations in effect at the time of the reorganization.
    (c) Presumptive disqualifiers --
    (1) Managerial resources. The factors specified in Sec.  
238.15(d)(1)(i) through (vi) of this chapter shall give rise to a 
rebuttable presumption that the managerial resources test of paragraph 
(a)(2) of this section is not met. For this purpose, each place the 
term acquiror appears in Sec.  238.15(d)(1)(i) through (vi) of this 
chapter, it shall be read to mean the reorganizing association or any 
acquiree association, and the reference in Sec.  238.15(d)(1)(v) of 
this chapter to filings under this part shall be deemed to include 
filings under either part 238 of this chapter or this part.
    (2) Safety and soundness and financial resources. Failure by a 
reorganizing association and any acquiree association to submit a 
business plan in connection with a Reorganization Notice, or submission 
of a business plan that projects activities that are inconsistent with 
the credit and lending needs of the reorganizing association or 
acquiree association's proposed market area or that fails to 
demonstrate that the capital of the mutual holding company will be 
deployed in a safe and sound manner, shall give rise to a rebuttable 
presumption that the safety and soundness and financial resources tests 
of paragraphs (a)(1) and (a)(2) of this section are not met.
    (d) Failure of the Board to act on a Reorganization Notice within 
the prescribed time period. A proposed reorganization that obtains 
regulatory clearance from the Board due to the operation of Sec.  
238.14 of this chapter may take place in the manner proposed, subject 
to the following conditions:
    (1) The reorganization shall be consummated within one year of the 
date of the expiration of the Board's review period under Sec.  238.14 
of this chapter;
    (2) The mutual holding company shall not be capitalized in an 
amount in excess of what is permissible under Sec.  239.4(b);
    (3) No request for regulatory waivers or forbearances shall be 
deemed granted;
    (4) The following information shall be submitted within the 
specified time frames:
    (i) On the business day prior to the date of the reorganization, 
the chief financial officers of the reorganizing association and any 
acquiree association shall certify to the Board in writing that no 
material adverse events or material adverse changes have occurred with 
respect to the financial condition or operations of their respective 
associations since the date of the financial statements submitted with 
the Reorganization Notice;
    (ii) No later than thirty days after the reorganization, the mutual 
holding company shall file with the Board a certification by legal 
counsel stating the effective date of the reorganization, the exact 
number of shares of stock of the resulting association and any acquiree 
association acquired by the mutual holding company and by any other 
persons, and that the reorganization has been consummated in accordance 
with Sec.  239.3 and all other applicable laws and regulations and the 
Reorganization Notice;
    (iii) No later than thirty days after the reorganization, the 
mutual holding company shall file with the Board an opinion from its 
independent auditors certifying that the reorganization was consummated 
in accordance with generally accepted accounting principles; and
    (iv) No later than thirty days after the reorganization, the mutual 
holding company shall file with the Board a certification stating that 
the mutual holding company will not deviate materially, or cause its 
subsidiary savings associations to deviate materially, from the 
business plan submitted in connection with the Reorganization Notice, 
unless prior written approval from the Board is obtained.


Sec.  239.5  Membership rights.

    (a) Depositors and borrowers of resulting associations, acquiree 
associations, and associations in mutual form when acquired. The 
charter of a mutual holding company must:
    (1) Confer upon existing and future depositors of the resulting 
association the same membership rights in the mutual holding company as 
were conferred upon depositors by the charter of the reorganizing 
association as in effect immediately prior to the reorganization;
    (2) Confer upon existing and future depositors of any acquiree 
association or any association that is in the mutual form when acquired 
by the mutual holding company the same membership rights in the mutual 
holding company as were conferred upon depositors by the charter of the 
acquired association immediately prior to acquisition, provided that if 
the acquired association is merged into another association from which 
the mutual holding company draws members, the depositors of the 
acquired association shall receive the same membership rights as the 
depositors of the association into which the acquired association is 
merged;
    (3) Confer upon the borrowers of the resulting association who are 
borrowers at the time of reorganization the same membership rights in 
the mutual holding company as were conferred upon them by the charter 
of the reorganizing association immediately prior to reorganization, 
but shall not confer any membership rights in connection with any 
borrowings made after the reorganization; and
    (4) Confer upon the borrowers of any acquiree association or any 
association that is in the mutual form when acquired by the mutual 
holding company who are borrowers at the time of the acquisition the 
same membership rights in the mutual holding company as were conferred 
upon them by the charter of the acquired association immediately prior 
to acquisition, but shall not confer any membership rights in 
connection with any borrowings

[[Page 56561]]

made after the acquisition, provided that if the acquired association 
is merged into another association from which the mutual holding 
company draws members, the borrowers of the acquired association shall 
instead receive the same grandfathered membership rights as the 
borrowers of the association into which the acquired association is 
merged received at the time that association became a subsidiary of the 
mutual holding company.
    (b) Depositors and borrowers of associations in the stock form when 
acquired. A mutual holding company that acquires a savings association 
in the stock form, other than a resulting association or an acquiree 
association, shall not confer any membership rights upon the depositors 
and borrowers of such association, unless such association is merged 
into an association from which the mutual holding company draws 
members, in which case the depositors of the stock association shall 
receive the same membership rights as other depositors of the 
association into which the stock association is merged.


Sec.  239.6  Contents of Reorganization Plans.

    Each Reorganization Plan shall contain a complete description of 
all significant terms of the proposed reorganization, shall attach and 
incorporate any Stock Issuance Plan proposed in connection with the 
Reorganization Plan, and shall:
    (a) Provide for amendment of the charter and bylaws of the 
reorganizing association to read in the form of the charter and bylaws 
of a mutual holding company, and attach and incorporate such charter 
and bylaws;
    (b) Provide for the organization of the resulting association, 
which shall be an interim federal or state subsidiary savings 
association of the reorganizing association, and attach and incorporate 
the proposed charter and bylaws of such association;
    (c) If the reorganizing association proposes to form a subsidiary 
holding company, provide for the organization of a subsidiary holding 
company and attach and incorporate the proposed charter and bylaws of 
such subsidiary holding company.
    (d) Provide for amendment of the charter and bylaws of any acquiree 
association to read in the form of the charter and bylaws of a state or 
federal savings association in the stock form, and attach and 
incorporate such charter and bylaws;
    (e) Provide that, upon consummation of the reorganization, 
substantially all of the assets and liabilities (including all savings 
accounts, demand accounts, tax and loan accounts, United States 
Treasury General Accounts, or United States Treasury Time Deposit Open 
Accounts, as those terms are defined in this part) of the reorganizing 
association shall be transferred to the resulting association, which 
shall thereupon become an operating subsidiary savings association of 
the mutual holding company;
    (f) Provide that all assets, rights, obligations, and liabilities 
of whatever nature of the reorganizing association that are not 
expressly retained by the mutual holding company shall be deemed 
transferred to the resulting association;
    (g) Provide that each depositor in the reorganizing association or 
any acquiree association immediately prior to the reorganization shall 
upon consummation of the reorganization receive, without payment, an 
identical account in the resulting association or the acquiree 
association, as the case may be (Appropriate modifications should be 
made to this provision if savings associations are being merged as a 
part of the reorganization);
    (h) Provide that the Reorganization Plan as adopted by the boards 
of directors of the reorganizing association and any acquiree 
association may be substantively amended by those boards of directors 
as a result of comments from regulatory authorities or otherwise prior 
to the solicitation of proxies from the members of the reorganizing 
association and any acquiree association to vote on the Reorganization 
Plan and at any time thereafter with the concurrence of the Board; and 
that the reorganization may be terminated by the board of directors of 
the reorganizing association or any acquiree association at any time 
prior to the meeting of the members of the association called to 
consider the Reorganization Plan and at any time thereafter with the 
concurrence of the Board;
    (i) Provide that the Reorganization Plan shall be terminated if not 
completed within a specified period of time (The time period shall not 
be more than 24 months from the date upon which the members of the 
reorganizing association or the date upon which the members of any 
acquiree association, whichever is earlier, approve the Reorganization 
Plan and may not be extended by the reorganizing or acquiree 
association); and
    (j) Provide that the expenses incurred in connection with the 
reorganization shall be reasonable.


Sec.  239.7  Acquisition and disposition of savings associations, 
savings and loan holding companies, and other corporations by mutual 
holding companies.

    (a) Acquisitions-- (1) Stock savings associations. A mutual holding 
company may not acquire control of a savings association that is in the 
stock form unless the necessary approvals are obtained from the Board, 
including approval pursuant to Sec.  238.11 of this chapter.
    (2) Mutual savings associations. A mutual holding company may not 
acquire a savings association in the mutual form by merger of such 
association into any subsidiary savings association of such holding 
company from which the parent mutual holding company draws members or 
into an interim subsidiary savings association of the mutual holding 
company, unless:
    (i) The proposed acquisition is approved by a majority of the board 
of directors of the mutual association;
    (ii) The proposed acquisition is submitted to the mutual 
association's members and is approved by a majority of the total votes 
of the association's members eligible to be cast at a meeting held at 
the call of the association's directors in accordance with the 
procedures prescribed by the association's charter and bylaws;
    (iii) The necessary approvals are obtained from the Board, 
including approval pursuant to Sec.  238.11 of this chapter, and any 
other approvals required to form an interim association, to amend the 
charter and bylaws of the association being acquired, and/or to amend 
the charter and bylaws of the mutual holding company consistent with 
Sec.  239.6(a); and
    (iv) The approval of the members of the mutual holding company is 
obtained, if the Board advises the mutual holding company in writing 
that such approval will be required.
    (3) Mutual holding companies. A mutual holding company that is not 
a subsidiary holding company may not acquire control of another mutual 
holding company, including a subsidiary holding company, by merging 
with or into such company, unless the necessary approvals are obtained 
from the Board, including approval pursuant to Sec.  238.11 of this 
chapter. The approval of the members of the mutual holding companies 
shall also be obtained if the Board advises the mutual holding 
companies in writing that such approval will be required.
    (4) Stock holding companies. A mutual holding company may not 
acquire control of a savings and loan holding company in the stock form 
that is not a subsidiary holding company,

[[Page 56562]]

unless the necessary approvals are obtained from the Board, including 
approval pursuant to Sec.  238.11 of this chapter. The acquired holding 
company may be held as a subsidiary of the mutual holding company or 
merged into the mutual holding company.
    (5) Non-controlling acquisitions of savings association stock. A 
mutual holding company may acquire non-controlling amounts of the stock 
of savings associations and savings and loan holding companies subject 
to the restrictions imposed by 12 U.S.C. 1467a(e) and (q) and 
Sec. Sec.  238.41 and 238.11 of this chapter.
    (6) Other corporations. A mutual holding company may not acquire 
control of, or make non-controlling investments in the stock of, any 
corporation other than a savings association or savings and loan 
holding company unless:
    (i)(A) Such corporation is engaged exclusively in activities that 
are permissible for mutual holding companies pursuant to Sec.  
239.8(a); or
    (B) It is lawful for the stock of such corporation to be purchased 
by a federal savings association under the applicable regulations of 
the Comptroller of the Currency or by a state savings association under 
the applicable regulations of the Federal Deposit Insurance Corporation 
and the laws of any state where any subsidiary savings association of 
the mutual holding company has its home office; and
    (ii) Such corporation is not controlled, directly or indirectly, by 
a subsidiary savings association of the mutual holding company.
    (b) Dispositions. (1) A mutual holding company shall provide 
written notice to the appropriate Reserve Bank at least 30 days prior 
to the effective date of any direct or indirect transfer of any of the 
stock that it holds in a subsidiary holding company, a resulting 
association, an acquiree association, or any subsidiary savings 
association that was in the mutual form when acquired by the mutual 
holding company, including stock transferred in connection with a 
pledge pursuant to Sec.  239.8(b) or any transfer of all or a 
substantial portion of the assets or liabilities of any such subsidiary 
holding company or association. Any such disposition shall comply with 
the requirements of this part, as appropriate, and with any other 
applicable statute or regulation.
    (2) A mutual holding company may, subject to applicable laws and 
regulations, transfer any or all of the stock or cause or permit the 
transfer of any or all of the assets and liabilities of:
    (i) Any subsidiary savings association that was in the stock form 
when acquired, provided such association is not a resulting association 
or an acquiree association;
    (ii) Any subsidiary holding company acquired pursuant to paragraph 
(a)(4) of this section; or
    (iii) Any corporation other than a savings association or savings 
and loan holding company.
    (3) A mutual holding company may, subject to applicable laws and 
regulations, transfer any stock acquired pursuant to paragraph (a)(5) 
of this section.
    (4) No transfer authorized by this section may be made to any 
insider of the mutual holding company, any associate of an insider of 
the mutual holding company, or any tax-qualified or non-tax-qualified 
employee stock benefit plan of the mutual holding company unless the 
mutual holding company provides notice to the appropriate Reserve Bank 
at least 30 days prior to the effective date of the proposed transfer. 
This notice shall be in addition to any other application or notice 
required under applicable laws or regulations, including those imposed 
by this part or Regulation LL.


Sec.  239.8  Operating restrictions.

    (a) Activities restrictions. A mutual holding company may engage in 
any business activity specified in 12 U.S.C. 1467a(c)(2) or 
(c)(9)(A)(ii). In addition, the business activities of subsidiaries of 
mutual holding companies may include the activities specified in Sec.  
239.7(a)(6). A mutual holding company or its subsidiaries may engage in 
the foregoing activities only upon compliance with the procedures 
specified in Sec. Sec.  238.53(c) or 238.54(b) of this chapter.
    (b) Pledging stock. (1) No mutual holding company may pledge the 
stock of its resulting association, an acquiree association, or any 
subsidiary savings association that was in the mutual form when 
acquired by the mutual holding company (or its parent mutual holding 
company), unless the proceeds of the loan secured by the pledge are 
infused into the association whose stock is pledged. No mutual holding 
company may pledge the stock of its subsidiary holding company unless 
the proceeds of the loan secured by the pledge are infused into any 
subsidiary savings association of the subsidiary holding company that 
is a resulting association, an acquiree association, or a subsidiary 
savings association that was in the mutual form when acquired by the 
subsidiary holding company (or its parent mutual holding company). In 
the event the subsidiary holding company has more than one subsidiary 
savings association, the loan proceeds shall, unless otherwise approved 
by the Board, be infused in equal amounts to each subsidiary savings 
association. Any amount of the stock of such association or subsidiary 
holding company may be pledged for these purposes. Nothing in this 
paragraph shall be deemed to prohibit:
    (i) The payment of dividends from a subsidiary savings association 
to its mutual holding company parent to the extent otherwise 
permissible; or
    (ii) The payment of dividends from a subsidiary holding company to 
its mutual holding company parent to the extent otherwise permissible; 
or
    (iii) A mutual holding company from pledging the stock of more than 
one subsidiary savings association provided that the stock pledged of 
each such subsidiary association is proportionate to the proceeds of 
the loan infused into each subsidiary association.
    (2) Any mutual holding company that fails to make any payment on a 
loan secured by the pledge of stock pursuant to paragraph (b)(1) of 
this section on or before the date on which such payment is due shall, 
on the first day after such payment is due, provide written notice of 
nonpayment to the appropriate Reserve Bank.
    (c) Restrictions on stock repurchases. (1) No subsidiary holding 
company that has any stockholders other than its parent mutual holding 
company may repurchase any share of stock within one year of its date 
of issuance (which may include the time period the shares issued by the 
savings association were outstanding if the subsidiary holding company 
was formed after the initial issuance by the savings association), 
unless the repurchase:
    (i) Is in compliance with the requirements set forth in Sec.  
239.63;
    (ii) Is part of a general repurchase made on a pro rata basis 
pursuant to an offer approved by the Board and made to all stockholders 
of the association or subsidiary holding company (except that the 
parent mutual holding company may be excluded from the repurchase with 
the Board's approval);
    (iii) Is limited to the repurchase of qualifying shares of a 
director; or
    (iv) Is purchased in the open market by a tax-qualified or non-tax-
qualified employee stock benefit plan of the savings association (or of 
a subsidiary holding company) in an amount reasonable and appropriate 
to fund such plan.
    (2) No mutual holding company may purchase shares of its subsidiary 
savings association or subsidiary holding company within one year after 
a stock

[[Page 56563]]

issuance, except if the purchase complies with Sec.  239.63. For 
purposes of this section, the reference in Sec.  239.63 to five percent 
refers to minority shareholders.
    (d) Restrictions on waiver of dividends. (1) A mutual holding 
company may waive the right to receive any dividend declared by a 
subsidiary of the mutual holding company, if--
    (i) No insider of the mutual holding company, associate of an 
insider, or tax-qualified or non-tax-qualified employee stock benefit 
plan of the mutual holding company holds any share of the stock in the 
class of stock to which the waiver would apply; or
    (ii) The mutual holding company gives written notice to the Board 
of the intent of the mutual holding company to waive the right to 
receive dividends, not later than 30 days before the date of the 
proposed date of payment of the dividend, and the Board does not object 
to the waiver.
    (2) A notice of a waiver under paragraph (d)(1)(ii) of this section 
shall include a copy of the resolution of the board of directors of the 
mutual holding company together with any supporting materials relied 
upon by the board of directors of the mutual holding company, 
concluding that the proposed dividend waiver is consistent with the 
fiduciary duties of the board of directors to the mutual members of the 
mutual holding company.
    The resolution shall include:
    (i) A description of the conflict of interest that exists because 
of a mutual holding company director's ownership of stock in the 
subsidiary declaring dividends and any actions the mutual holding 
company and board of directors have taken to eliminate the conflict of 
interest, such as waiver by the directors of their right to receive 
dividends;
    (ii) A finding by the mutual holding company's board of directors 
that the waiver of dividends is consistent with the board of directors' 
fiduciary duties despite any conflict of interest;
    (iii) If the mutual holding company has pledged the stock of a 
subsidiary holding company or subsidiary savings association as 
collateral for a loan made to the mutual holding company, or is subject 
to any other loan agreement, an affirmation that the mutual holding 
company is able to meet the terms of the loan agreement; and
    (iv) An affirmation that a majority of the mutual members of the 
mutual holding company eligible to vote have, within the 12 months 
prior to the declaration date of the dividend by the subsidiary of the 
mutual holding company, approved a waiver of dividends by the mutual 
holding company, and any proxy statement used in connection with the 
member vote contained--
    (A) A detailed description of the proposed waiver of dividends by 
the mutual holding company and the reasons the board of directors 
requested the waiver of dividends;
    (B) The disclosure of any mutual holding company director's 
ownership of stock in the subsidiary declaring dividends and any 
actions the mutual holding company and board of directors have taken to 
eliminate the conflict of interest, such as the directors waiving their 
right to receive dividends; and
    (C) A provision providing that the proxy concerning the waiver of 
dividends given by the mutual members may be used for no more than 12 
months from the date it is given.
    (3) The Board may not object to a waiver of dividends under 
paragraph (d)(1)(ii) of this section if:
    (i) The waiver would not be detrimental to the safe and sound 
operation of the savings association;
    (ii) The board of directors of the mutual holding company expressly 
determines that a waiver of the dividend by the mutual holding company 
is consistent with the fiduciary duties of the board of directors to 
the mutual members of the mutual holding company; and
    (iii) The mutual holding company has, prior to December 1, 2009--
    (A) Reorganized into a mutual holding company under section 10(o) 
of HOLA;
    (B) Issued minority stock either from its mid-tier stock holding 
company or its subsidiary stock savings association; and
    (C) Waived dividends it had a right to receive from the subsidiary 
stock savings association.
    (4) For a mutual holding company that does not meet each of the 
conditions in paragraph (d)(3) of this section, the Board will not 
object to a waiver of dividends under paragraph (d)(1)(ii) of this 
section if--:
    (i) The savings association currently operates in a manner 
consistent with the safe and sound operation of a savings association, 
and the waiver is not detrimental to the safe and sound operation of 
the savings association;
    (ii) If the mutual holding company has pledged the stock of a 
subsidiary holding company or subsidiary savings association as 
collateral for a loan made to the mutual holding company, or is subject 
to any other loan agreement, an affirmation that the mutual holding 
company is able to meet the terms of the loan agreement;
    (iii) Within the 12 months prior to the declaration date of the 
dividend by the subsidiary of the mutual holding company, a majority of 
the mutual members of the mutual holding company has approved the 
waiver of dividends by the mutual holding company. Any proxy statement 
used in connection with the member vote must contain--
    (A) A detailed description of the proposed waiver of dividends by 
the mutual holding company and the reasons the board of directors 
requested the waiver of dividends;
    (B) The disclosure of any mutual holding company director's 
ownership of stock in the subsidiary declaring dividends and any 
actions the mutual holding company and board of directors have taken to 
eliminate the conflict of interest, such as the directors waiving their 
right to receive dividends; and
    (C) A provision providing that the proxy concerning the waiver of 
dividends given by the mutual members may be used for no more than 12 
months from the date it is given;
    (iv) The board of directors of the mutual holding company expressly 
determines that the waiver of dividends is consistent with the board of 
directors' fiduciary duties despite any conflict of interest;
    (v)(A) A majority of the entire board of directors of the mutual 
holding company approves the waiver of dividends and any director with 
direct or indirect ownership, control, or the power to vote shares of 
the subsidiary declaring the dividend, or who otherwise directly or 
indirectly benefits through an associate from the waiver of dividends, 
has abstained from the board vote; or
    (B) Each officer or director of the mutual holding company or its 
affiliates, associate of such officer or director, and any tax-
qualified or non-tax-qualified employee stock benefit plan in which 
such officer or director participates that holds any share of the stock 
in the class of stock to which the waiver would apply waives the right 
to receive any dividend declared by a subsidiary of the mutual holding 
company;
    (vi) The Board does not object to the amount of dividends declared 
by a subsidiary of the mutual holding company. In reviewing whether a 
declaration by a subsidiary of the mutual holding company is 
appropriate, the Board may consider, among other factors, the 
reasonableness of the entire dividend distribution declared if the 
waiver is not approved;
    (vii) The waived dividends are excluded from the capital accounts 
of the subsidiary holding company or savings association, as 
applicable, for

[[Page 56564]]

purposes of calculating any future dividend payments;
    (viii) The mutual holding company appropriately accounts for all 
waived dividends in a manner that permits the Board to consider the 
waived dividends in evaluating the proposed exchange ratio in the event 
of a full conversion of the mutual holding company to stock form; and
    (ix) The mutual holding company complies with such other conditions 
as the Board may require to prevent conflicts of interest or actions 
detrimental to the safe and sound operation of the savings association.
    (5) Valuation. (i) The Board will consider waived dividends in 
determining an appropriate exchange ratio in the event of a full 
conversion to stock form.
    (ii) In the case of a savings association that has reorganized into 
a mutual holding company, has issued minority stock from a mid-tier 
stock holding company or a subsidiary stock savings association of the 
mutual holding company, and has waived dividends it had a right to 
receive from a subsidiary savings association before December 1, 2009, 
the Board shall not consider waived dividends in determining an 
appropriate exchange ratio in the event of a full conversion to stock 
form.
    (e) Restrictions on issuance of stock to insiders. A subsidiary of 
a mutual holding company that is not a savings association or 
subsidiary holding company may issue stock to any insider, associate of 
an insider or tax-qualified or non-tax-qualified employee stock benefit 
plan of the mutual holding company or any subsidiary of the mutual 
holding company, provided that such persons or plans provide written 
notice to the appropriate Reserve Bank at least 30 days prior to the 
stock issuance, and the Reserve Bank or the Board does not object to 
the subsequent stock issuance. Subsidiary holding companies may issue 
stock to such persons only in accordance with Sec.  239.24.
    (f) Applicability of rules governing savings and loan holding 
companies. Except as expressly provided in this part, mutual holding 
companies shall be subject to the provisions of 12 U.S.C. 1467a and 
3201 et seq. and the provisions of parts 207, 228, and 238 of this 
chapter.
    (g) Separate vote for charitable organization contribution. In a 
mutual holding company stock issuance, a separate vote of a majority of 
the outstanding shares of common stock held by stockholders other than 
the mutual holding company or subsidiary holding company must approve 
any charitable organization contribution.


Sec.  239.9  Conversion or liquidation of mutual holding companies.

    (a) Conversion--(1) Generally. A mutual holding company may convert 
to the stock form in accordance with the rules and regulations set 
forth in subpart E of this part.
    (2) Exchange of subsidiary savings association or subsidiary 
holding company stock. Any stock issued by a subsidiary savings 
association, or by a subsidiary holding company pursuant to Sec.  
239.24, of a mutual holding company to persons other than the parent 
mutual holding company may be exchanged for the stock issued by the 
successor to parent mutual holding company in connection with the 
conversion of the parent mutual holding company to stock form. The 
parent mutual holding company and the subsidiary holding company must 
demonstrate to the satisfaction of the Board that the basis for the 
exchange is fair and reasonable.
    (3) If a subsidiary holding company or subsidiary savings 
association has issued shares to an entity other than the mutual 
holding company, the conversion of the mutual holding company to stock 
form may not be consummated unless a majority of the shares issued to 
entities other than the mutual holding company vote in favor of the 
conversion. This requirement applies in addition to any otherwise 
required account holder or shareholder votes.
    (b) Involuntary liquidation. (1) The Board may file a petition with 
the federal bankruptcy courts requesting the liquidation of a mutual 
holding company pursuant to 12 U.S.C. 1467a(o)(9) and title 11, United 
States Code, upon the occurrence of any of the following events:
    (i) The default of the resulting association, any acquiree 
association, or any subsidiary savings association of the mutual 
holding company that was in the mutual form when acquired by the mutual 
holding company;
    (ii) The default of the parent mutual holding company or its 
subsidiary holding company; or
    (iii) Foreclosure on any pledge by the mutual holding company of 
subsidiary savings association stock or subsidiary holding company 
stock.
    (2) Except as provided in paragraph (b)(3) of this section, the net 
proceeds of any liquidation of any mutual holding company shall be 
transferred to the members of the mutual holding company and, if 
applicable, the stock holders of the subsidiary holding company in 
accordance with the charter of the mutual holding company and, if 
applicable, the charter of the subsidiary holding company.
    (3) If the FDIC incurs a loss as a result of the default of any 
subsidiary savings association of a mutual holding company and that 
mutual holding company is liquidated pursuant to paragraph (b)(1) of 
this section, the FDIC shall succeed to the membership interests of the 
depositors of such savings association in the mutual holding company to 
the extent of the FDIC's loss.
    (c) Voluntary liquidation. The provisions of Sec.  239.16 shall 
apply to mutual holding companies.


Sec.  239.10  Procedural requirements.

    (a) Proxies and proxy statements--(1) Solicitation of proxies. The 
provisions of Sec. Sec.  239.56 and 239.57(a) through (d) and (f) 
through (h) shall apply to all solicitations of proxies by any person 
in connection with any membership vote required by this part. Proxy 
materials must be in the form specified by the Board and contain the 
information specified in Sec. Sec.  239.57(b) and 239.57(d), to the 
extent such information is relevant to the action that members are 
being asked to approve, with such additions, deletions, and other 
modifications as are required under this part, or as are necessary or 
appropriate under the disclosure standard set forth in Sec.  239.57(f). 
File proxies and proxy statements in accordance with Sec.  239.55(c) 
and address them to the appropriate Reserve Bank. For purposes of this 
paragraph, the term conversion, as it appears in the provisions of part 
subpart E of this part, refers to the reorganization, the stock 
issuance, or other corporate action, as appropriate.
    (2) Additional proxy disclosure requirements. In addition to the 
requirements in paragraph (a) of this section, all proxies requesting 
accountholder approval of a mutual holding company reorganization shall 
address in detail:
    (i) The reasons for the reorganization, including the relative 
advantages and disadvantages of undertaking the transaction proposed 
instead of a standard conversion;
    (ii) Whether management believes the reorganization is in the best 
interests of the association and its accountholders and the basis of 
that belief;
    (iii) The fiduciary duties owed to accountholders by the 
association's officers and directors and why the reorganization is in 
accord with those duties and is otherwise equitable to the 
accountholders and the association;
    (iv) Any compensation agreements that will be entered into by 
management

[[Page 56565]]

in connection with the reorganization; and
    (v) Whether the mutual holding company intends to waive dividends, 
the implications to accountholders, and the reasons such waivers are 
consistent with the fiduciary duties of the directors of the mutual 
holding company.
    (3) Nonconforming minority stock issuances. Subsidiary holding 
companies proposing non-conforming minority stock issuances pursuant to 
Sec.  239.24(c)(6)(ii) must include in the proxy materials to 
accountholders seeking approval of a proposed reorganization an 
additional disclosure statement that serves as a cover sheet that 
clearly addresses:
    (i) The consequences to accountholders of voting to approve a 
reorganization in which their subscription rights are prioritized 
differently and potentially eliminated; and
    (ii) Any intent by the mutual holding company to waive dividends, 
and the implications to accountholders.
    (4) Use of ``running'' proxies. Unless otherwise prohibited, a 
mutual holding company may make use of any proxy conferring general 
authority to vote on any and all matters at any meeting of members, 
provided that the member granting such proxy has been furnished a proxy 
statement regarding the matters and the member does not grant a later-
dated proxy to vote at the meeting at which the matter will be 
considered or attend such meeting and vote in person, and further 
provided that ``running'' proxies or similar proxies may not be used to 
vote for a mutual holding company reorganization, mutual-to-stock 
conversion undertaken by a mutual holding company, dividend waiver, or 
any other material transaction. Subject to the limitations set forth in 
this paragraph, any proxy conferring on the board of directors or 
officers of a mutual savings association general authority to cast a 
member's votes on any and all matters presented to the members shall be 
deemed to cover the member's votes as a member of the mutual holding 
company and such authority shall be conferred on the board of directors 
or officers of a mutual holding company.
    (b) Applications under this part. Except as provided in paragraph 
(c) of this section, any application, notice or certification required 
to be filed with the Board under this part must be filed in accordance 
with Sec.  238.14 of this chapter. The Board will review any filing 
made under this part in accordance with Sec.  238.14 of this chapter.
    (c) Reorganization Notices and stock issuance applications--(1) 
Contents. Each Reorganization Notice submitted to the appropriate 
Reserve Bank pursuant to Sec.  239.3(a) and each application for 
approval of the issuance of stock submitted to the appropriate Reserve 
Bank pursuant to Sec.  239.24(a) shall be in the form and contain the 
information specified by the Board.
    (2) Filing instructions. Any Reorganization Notice submitted under 
Sec.  239.3(a) must be filed in accordance with Sec.  238.14 of this 
chapter. Any stock issuance application submitted pursuant to Sec.  
239.24(a) shall be filed in accordance with Sec.  239.55.
    (3) Public notice, public comment, and meetings. Mutual holding 
company reorganizations are subject to applicable public notice, public 
comment, and meeting requirements under the Bank Merger Act regulations 
at Sec.  238.11(e) of this chapter and the Savings and Loan Holding 
Company Act regulations at Sec.  238.14 of this chapter.
    (d) Amendments. Any mutual holding company may amend any notice or 
application submitted pursuant to this part or file additional 
information with respect thereto upon request of the Board or upon the 
mutual holding company's own initiative.
    (e) Time-frames. All Reorganization Notices and applications filed 
pursuant to this part must be processed in accordance with the 
processing procedures at Sec.  238.14 of this chapter. Any related 
approvals requested in connection with Reorganization Notices or 
applications for approval of stock issuances (including, without 
limitation, requests for approval to transfer assets to resulting 
associations, to acquire acquiree associations, and to organize 
resulting associations or interim associations, and requests for 
approval of charters, bylaws, and stock forms) shall be processed 
pursuant to the procedures specified in this section in conjunction 
with the Reorganization Notice or stock issuance application to which 
they pertain, rather than pursuant to any inconsistent procedures 
specified elsewhere in this chapter. The approval standards for all 
such related applications, however, shall remain unchanged. The review 
by the Board of any materials used in connection with the issuance of 
stock under Sec.  239.24 must not be subject to the applications 
processing time-frames set forth in Sec. Sec.  238.14(f) and (g) of 
this chapter.
    (f) Disclosure. The rules governing disclosure of any notice or 
application submitted pursuant to this part, or any public comment 
submitted pursuant to paragraph (c) of this section, shall be the same 
as set forth in Sec.  238.14(b) of this chapter for notices, 
applications, and public comments filed under Sec.  238.14 of this 
chapter.
    (g) Appeals. Any party aggrieved by a final action by the Board 
which approves or disapproves any application or notice pursuant to 
this part may obtain review of such action in accordance with 12 U.S.C. 
1467a(j).
    (h) Federal preemption. This part preempts state law with regard to 
the creation and regulation of mutual holding companies.


Sec.  239.11  Subsidiary holding companies.

    (a) Subsidiary holding companies. A mutual holding company may 
establish a subsidiary holding company as a direct subsidiary to hold 
100 percent of the stock of its subsidiary savings association. The 
formation and operation of the subsidiary holding company may not be 
utilized as a means to evade or frustrate the purposes of this part. 
The subsidiary holding company may be established either at the time of 
the initial mutual holding company reorganization or at a subsequent 
date, subject to the approval of the Board.
    (b) Stock issuances. Sec. Sec.  239.24 and 239.25 apply to issuance 
of stock by a subsidiary holding company. In the case of a stock 
issuance by a subsidiary holding company, the aggregate amount of 
outstanding common stock of the association owned or controlled by 
persons other than the subsidiary holding company's mutual holding 
company parent at the close of the proposed issuance shall be less than 
50 percent of the subsidiary holding company's total outstanding common 
stock.
    (c) Charters and bylaws for subsidiary holding companies. The 
charter and bylaws of a subsidiary holding company shall be in the form 
set forth in Appendices B and D, respectively.


Sec.  239.12  Communication between members of a mutual holding 
company.

    (a) Right of communication with other members. A member of a mutual 
holding company has the right to communicate, as prescribed in 
paragraph (b) of this section, with other members of the mutual holding 
company regarding any matter related to the mutual holding company's 
affairs, except for ``improper'' communications, as defined in 
paragraph (c) of this section. The mutual holding company may not 
defeat that right by redeeming a savings member's savings account in 
the subsidiary savings association.
    (b) Member communication procedures. If a member of a mutual 
holding company desires to

[[Page 56566]]

communicate with other members, the following procedures shall be 
followed:
    (1) The member shall give the mutual holding company a written 
request to communicate;
    (2) If the proposed communication is in connection with a meeting 
of the mutual holding company'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 mutual 
holding company 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 mutual holding company 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 mutual holding company's members and the 
estimated reasonable cost to the mutual holding company of mailing to 
them the proposed communication; or
    (ii) Notification that the mutual holding company 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 mutual holding company 
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 mutual holding company 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 appropriate Reserve Bank a copy of 
each of the requesting member's materials, the mutual holding company'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 mutual holding company receives the request 
for communication.
    (c) Improper communication. A communication is an ``improper 
communication'' if it contains material which:
    (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 mutual holding company or is not within 
the control of the mutual holding company; 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 
mutual holding company.


Sec.  239.13  Charters.

    (a) Charters. The charter of a mutual holding company shall be in 
the form set forth in Appendix A of this part and may be amended 
pursuant to this paragraph. The Board may amend the form of charter set 
forth in Appendix A to this part.
    (b) Corporate title. The corporate title of each mutual holding 
company shall include the term ``mutual'' or the abbreviation 
``M.H.C.''
    (c) Availability of charter. A mutual holding company shall make 
available to its members at all times in the offices of each subsidiary 
savings association from which the mutual holding company draws members 
a true copy of its charter, including any amendments, and shall deliver 
such a copy to any member upon request.


Sec.  239.14  Charter amendments.

    (a) General. In order to adopt a charter amendment, a mutual 
holding company must comply with the following requirements:
    (1) Board of directors approval. The board of directors of the 
mutual holding company 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 mutual holding 
company, or the removal of incumbent management; or involve a 
significant issue of law or policy; then, the mutual holding shall 
submit the charter amendment to the appropriate Reserve Bank for 
approval. Applications submitted under this paragraph are subject to 
the processing procedures at Sec.  238.14 of this chapter.
    (ii) Notice requirement. If the proposed charter amendment does not 
implicate paragraph (a)(2)(i) of this section and is permissible under 
all applicable laws, rules and regulations, the mutual holding company 
shall submit the proposed amendment to the appropriate Reserve Bank 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 with the appropriate Reserve Bank, 
provided that the mutual holding company follows the requirements of 
its charter in adopting such amendment, unless the Reserve Bank or the 
Board notifies the mutual holding company prior to the expiration of 
such 30-day period that such amendment is rejected or is deemed to be 
filed under the provisions of paragraph (a)(2)(i) of this section. 
Notwithstanding anything in paragraph (a) of this section to the 
contrary, the following charter amendments, including the adoption of 
the Federal mutual holding company charter as set forth in Appendix A, 
shall be effective and deemed approved at the time of adoption, if 
adopted without change and filed with Board, within 30 days after 
adoption, provided the mutual holding company follows the requirements 
of its charter in adopting such amendments.
    (1) Title change. (i) Subject to Sec.  239.13 and this paragraph 
(b), a mutual holding company may amend its charter by substituting a 
new corporate title in section 1 of its charter.

[[Page 56567]]

    (ii) Prior to changing its corporate title, a mutual holding 
company must file with the Board a written notice indicating the 
intended change. The Board shall provide to the mutual holding company 
a timely written acknowledgment stating when the notice was received. 
If, within 30 days of receipt of notice, the Board does not notify the 
mutual holding company of its objection to the corporate title change 
on the grounds that the title misrepresents the nature of the 
institution or the services it offers, the mutual holding company may 
change its title by amending its charter in accordance with Sec.  
239.14(b) or Sec.  239.22 and the amendment provisions of its charter.
    (2) Maximum number of votes. A mutual holding company may amend 
section 5 of its charter by substituting the maximum number of votes 
per member to any number from 1 to 1000.
    (c) Reissuance of charter. A mutual holding company that has 
amended its charter may apply to have its charter, including the 
amendments, reissued by the Board. Such request for reissuance should 
be filed with the appropriate Reserve Bank.


Sec.  239.15  Bylaws.

    (a) General. A mutual holding company shall operate under bylaws 
that contain provisions that comply with all requirements specified by 
the Board, the provisions of this section, the mutual holding company'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 Board. 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 mutual holding 
company's board of directors. Throughout this section, the term 
``trustee'' may be substituted for the term ``director'' as relevant.
    (b) The following requirements are applicable to mutual holding 
companies:
    (1) Annual meetings of members. A mutual holding company shall 
provide for and conduct an annual meeting of its members for the 
election of directors and at which any other business of the mutual 
holding company 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 subsidiary 
savings 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 mutual holding company's fiscal year. At each annual 
meeting, the officers shall make a full report of the financial 
condition of the mutual holding company 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 mutual holding company 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 subsidiary 
savings 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 mutual holding company. A similar notice 
shall be posted in a conspicuous place in each of the offices of the 
subsidiary savings 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 
subsidiary savings association the members entitled to vote. Such date 
shall be not more than 60 days or 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 Board, including the placing of such 
proxies on file with the secretary of the mutual holding company, 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 
subsidiary savings 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.  239.12. 
No member, however, shall have the right to inspect or copy any portion 
of any books or records of a mutual holding company containing:
    (i) A list of depositors in or borrowers from the subsidiary 
savings 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 Board. Each director of the 
mutual holding company shall be a member of the mutual holding company. 
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.

[[Page 56568]]

    (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 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 mutual holding company, their 
functions, duties, and powers. The officers of the mutual holding 
company 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 mutual holding company, as 
between themselves and the mutual holding company, shall have such 
authority and perform such duties in the management of the mutual 
holding company 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 officer 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 
mutual holding company 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.  239.41, 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 mutual holding 
company. 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 mutual holding 
company 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 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 mutual holding 
company at a legal meeting; and
    (B) After receipt of any applicable regulatory approval.
    (ii) When a mutual holding company 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 mutual 
holding company.
    (c) Form of filing--(1) Application requirement. (i) Any bylaw 
amendment shall be submitted to the appropriate Reserve Bank for 
approval if it would:
    (A) Render more difficult or discourage a merger, proxy contest, 
the assumption of control by a mutual account holder of the mutual 
holding company, 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 mutual holding company's 
charter.
    (ii) Applications submitted under paragraph (c)(1)(i) of this 
section are subject to the processing procedures at Sec.  238.14 of 
this chapter.
    (iii) For purposes of this paragraph (c), bylaw provisions that 
adopt the language of the model bylaws contained in Appendix C to this 
part, if adopted without change, and filed with Board within 30 days 
after adoption, are effective upon adoption. The Board may amend the 
model bylaws provided in Appendix C to this part.
    (2) Filing requirement. If the proposed bylaw amendment does not 
implicate paragraph (c)(1) or (c)(3) of this section, then the mutual 
holding company shall submit the amendment to the appropriate Reserve 
Bank at least 30 days prior to the date the bylaw

[[Page 56569]]

amendment is to be adopted by the mutual holding company.
    (3) Corporate governance procedures. A mutual holding company 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)(i) of this section. If this election is selected, a 
mutual holding company 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 do not require an 
application under paragraph (c)(1)(i) 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 mutual holding 
company follows the requirements of its charter and bylaws in adopting 
such amendment, unless the Board notifies the mutual holding company 
prior to the expiration of the 30-day period that such amendment is 
rejected or that such amendment requires an application to be filed 
pursuant to paragraph (c)(1) of this section.
    (e) Availability of bylaws. A mutual holding company shall make 
available to its members at all times in the offices of each subsidiary 
savings association from which the mutual holding company draws members 
a true copy of its bylaws, including any amendments, and shall deliver 
such a copy to any member upon request.


Sec.  239.16  Voluntary dissolution.

    (a) A mutual holding company's board of directors may propose a 
plan for dissolution of the mutual holding company. All references in 
this section to mutual holding company shall also apply to a subsidiary 
holding company organized under this part. The plan may provide for 
either:
    (1) Transfer of all the mutual holding company's assets to another 
mutual holding company or home-financing institutions under Federal 
charter either for cash sufficient to pay all obligations of the mutual 
holding company and retire all outstanding accounts or in exchange for 
that mutual holding company's payment of all the mutual holding 
company's outstanding obligations and issuance of share accounts or 
other evidence of interest to the mutual holding company's members on a 
pro rata basis; or
    (2) Dissolution in a manner proposed by the directors which they 
consider best for all concerned.
    (b) The plan, and a statement of reasons for proposing dissolution 
and for proposing the plan, shall be submitted to the appropriate 
Reserve Bank for approval. The Board will approve the plan if the Board 
believes dissolution is advisable and the plan is best for all 
concerned. If the Board considers the plan inadvisable, the Board may 
either make recommendations to the mutual holding company concerning 
the plan or disapprove it. When the plan is approved by the mutual 
holding company's board of directors and by the Board, it shall be 
submitted to the mutual holding company'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 
Board may require, shall immediately be filed with the Board. When the 
Board receives such evidence satisfactory to the Board, it will 
terminate the corporate existence of the dissolved mutual holding 
company and the mutual holding company's charter shall thereby be 
canceled.

Subpart C--Subsidiary Holding Companies


Sec.  239.20  Scope.

    This subpart applies only to a subsidiary holding company of a 
mutual holding company.


Sec.  239.21  Charters.

    (a) Charters. The charter of a subsidiary holding company of a 
mutual holding company shall be in the form set forth in Appendix B of 
this part and may be amended pursuant to Sec.  239.22. The Board may 
amend the form of charter provided in Appendix B.
    (b) Optional charter provision limiting minority stock ownership.
    (1) A subsidiary holding company that engages in its initial 
minority stock issuance after October 1, 2008 may, before it conducts 
its initial minority stock issuance, at the time it conducts its 
initial minority stock issuance, or, subject to the condition below, at 
any time during the five years following a minority stock issuance that 
such subsidiary holding company conducts in accordance with the 
purchase priorities set forth in subpart E of this part, include in its 
charter the provision set forth in paragraph (b)(2) of this section. 
For purposes of the charter provision set forth in paragraph (b)(2), 
the definitions set forth at Sec.  239.22(b)(8) apply. This charter 
provision expires a maximum of five years from the date of the minority 
stock issuance. The subsidiary holding company may adopt the charter 
provision set forth in paragraph (b)(2) of this section after a 
minority stock issuance only if it provided, in the offering materials 
related to its previous minority stock issuance or issuances, full 
disclosure of the possibility that the subsidiary holding company might 
adopt such a charter provision.
    (2) Beneficial ownership limitation. No person may directly or 
indirectly offer to acquire or acquire the beneficial ownership of more 
than 10 percent of the outstanding stock of any class of voting stock 
of the subsidiary holding company held by persons other than the 
subsidiary holding company's mutual holding company parent. This 
limitation expires on [insert date within five years of minority stock 
issuance] and does not apply to a transaction in which an underwriter 
purchases stock in connection with a public offering, or the purchase 
of stock by an employee stock ownership plan or other tax-qualified 
employee stock benefit plan which is exempt from the approval 
requirements under Sec.  238.12(a)(7) of this chapter.
    (c) In the event a person acquires stock in violation of this 
section, all stock beneficially owned in excess of 10 percent shall be 
considered ``excess stock'' and shall not be counted as stock entitled 
to vote and shall not be voted by any person or counted as voting stock 
in connection with any matters submitted to the stockholders for a 
vote.


Sec.  239.22  Charter amendments.

    (a) General. In order to adopt a charter amendment, a subsidiary 
holding company must comply with the following requirements:
    (1) Board of directors approval. The board of directors of the 
subsidiary holding company 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 
subsidiary holding company's stock, the removal of incumbent 
management, or involve a

[[Page 56570]]

significant issue of law or policy, the subsidiary holding company 
shall file the proposed amendment with and shall obtain the prior 
approval of the Board pursuant to Sec.  238.14 of this chapter; and
    (ii) Notice requirement. If the proposed charter amendment does not 
implicate paragraph (a)(2)(i) of this section and such amendment is 
permissible under all applicable laws, rules or regulations, the 
subsidiary holding company shall submit the proposed amendments to the 
appropriate Reserve Bank, at least 30 days prior to the date the 
proposed charter amendment is to be mailed for consideration by the 
subsidiary holding company'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 subsidiary 
holding company follows the requirements of its charter in adopting 
such amendment, unless the Board notifies the mutual holding company 
prior to the expiration of such 30-day period that such amendment is 
rejected or 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 charter as set forth in 
Appendix B of this part, shall be approved at the time of adoption, if 
adopted without change and filed with the Board within 30 days after 
adoption, provided the subsidiary holding company follows the 
requirements of its charter in adopting such amendments.
    (1) Title change. Prior to changing its corporate title, a 
subsidiary holding company must file with the appropriate Reserve Bank 
a written notice indicating the intended change. The Reserve Bank shall 
provide to the subsidiary holding company a timely written 
acknowledgment stating when the notice was received. If, within 30 days 
of receipt of notice, the Reserve Bank or the Board does not notify the 
subsidiary holding company of its objection on the grounds that the 
title misrepresents the nature of the institution or the services it 
offers, the subsidiary holding company may change its title by amending 
section 1 of its charter in accordance with this section and the 
amendment provisions of its charter.
    (2) Home office. A subsidiary holding company may amend its charter 
by substituting a new domicile in section 2 of its charter.
    (3) Number of shares of stock and par value. A subsidiary holding 
company 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 subsidiary holding company 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 subsidiary holding company 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 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 subsidiary holding 
company. 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 subsidiary holding company, 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 subsidiary holding company, 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 subsidiary 
holding company 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 
subsidiary holding company, 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 or subsidiary 
holding company 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 subsidiary holding company 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 subsidiary holding 
company 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 Board 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 subsidiary holding 
company in a merger or consolidation for the subsidiary holding 
company, shall not be considered to be such an adverse change.
    A description of the different classes and series (if any) of 
the subsidiary holding company'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 subsidiary holding company, 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 
subsidiary holding company available for distribution remaining 
after: (i)

[[Page 56571]]

Payment or provision for payment of the subsidiary holding company'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 common stock in the 
liquidation, dissolution, or winding up of the subsidiary holding 
company. 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 subsidiary holding company 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 subsidiary holding company;
    (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 subsidiary holding company 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 subsidiary holding company shall file with the 
appropriate Reserve Bank 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 subsidiary holding 
company 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 subsidiary holding company 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 subsidiary holding 
company is located, a subsidiary holding company 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 subsidiary holding 
company'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 subsidiary holding company from 
mutual to stock form, the following provisions shall apply:
    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 
subsidiary holding company. This limitation shall not apply to a 
transaction in which the subsidiary holding company 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.  238.12(a) of this 
chapter.
    In the event shares are acquired in violation of this section 8, 
all shares beneficially owned by any person in excess of 10 percent 
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 
subsidiary holding company.
    (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 subsidiary holding company or 
amendments to its charter shall be called only upon direction of the 
board of directors.

    (c) Anti-takeover provisions. The Board 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 subsidiary holding company shall file as part of its 
application for approval an opinion, acceptable to the Board, of 
counsel independent from the subsidiary holding company 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 
subsidiary holding company is located. Any such provision must be 
consistent with applicable statutes, regulations, and Board policies. 
Further, any such provision that would have the effect of rendering 
more difficult a change in control of the subsidiary

[[Page 56572]]

holding company 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 subsidiary holding company that has 
amended its charter may apply to have its charter, including the 
amendments, reissued by the Board. Such requests for reissuance should 
be filed with the appropriate Reserve Bank, and contain signatures 
required by the charter in Appendix B to this part, together with such 
supporting documents as needed to demonstrate that the amendments were 
properly adopted.


Sec.  239.23  Bylaws.

    (a) General. At its first organizational meeting, the board of 
directors of a subsidiary holding company 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 
subsidiary holding company in accordance with the requirements of 
Sec. Sec.  239.26, 239.27, 239.28, and 239.29 and shall not contain any 
provision that is inconsistent with those sections or with applicable 
laws, rules, regulations or the subsidiary holding company's charter, 
except that a bylaw provision inconsistent with Sec. Sec.  239.26, 
239.27, 239.28, and 239.29 may be adopted with the approval of the 
Board.
    (b) Form of filing --(1) Application requirement.
    (i) Any bylaw amendment shall be submitted to the appropriate 
Reserve Bank 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 subsidiary holding company's stock, or the removal of incumbent 
management; or
    (B) Be inconsistent with Sec. Sec.  239.26, 239.27, 239.28, and 
239.29, with applicable laws, rules, regulations or the subsidiary 
holding company'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 the processing procedures under Sec.  238.14 of 
this chapter;
    (iii) For purposes of this paragraph (b), bylaw provisions that 
adopt the language of the model bylaws contained in Appendix D to this 
part, if adopted without change and filed with Board within 30 days 
after adoption, are effective upon adoption. The Board may amend the 
model bylaws provided in Appendix D.
    (2) Filing requirement. If the proposed bylaw amendment does not 
implicate paragraph (b)(1) or (b)(3) of this section and is permissible 
under all applicable laws, rules, or regulations, the subsidiary 
holding company shall submit the amendment to the appropriate Reserve 
Bank at least 30 days prior to the date the bylaw amendment is to be 
adopted by the subsidiary holding company.
    (3) Corporate governance procedures. A subsidiary holding company 
may elect to follow the corporate governance procedures of: The laws of 
the state where the main office of the subsidiary holding company is 
located; 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)(i) of this section. If this 
election is selected, a subsidiary holding company 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 do not require an application under paragraph 
(b)(1)(i) 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 subsidiary 
holding company follows the requirements of its charter and bylaws in 
adopting such amendment, unless the Board notifies the subsidiary 
holding company prior to the expiration of such 30-day period that such 
amendment is rejected or 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 
subsidiary holding company to engage in any transaction shall be 
determined only by the subsidiary holding company's charter or bylaws 
then in effect, unless otherwise provided by Federal law or regulation.


Sec.  239.24  Issuances of stock by subsidiary holding companies of 
mutual holding companies.

    (a) Requirements. No subsidiary holding company of a mutual holding 
company may issue stock to persons other than its mutual holding 
company parent in connection with a mutual holding company 
reorganization, or at any time subsequent to the subsidiary holding 
company's acquisition by the mutual holding company, unless the 
subsidiary holding company obtains advance approval of each such 
issuance from the Board. Approval of a mutual holding company 
reorganization filed pursuant to Sec.  239.3(a) shall be deemed to 
constitute approval of any stock issuance specifically applied for 
pursuant to this section in connection with the reorganization, unless 
otherwise specified by the Board. The Board shall approve any proposed 
issuance that meets each of the criteria set forth below in paragraphs 
(a)(1) through (a)(7) of this section.
    (1) The proposed issuance is to be made pursuant to a Stock 
Issuance Plan that contains all the provisions required by Sec.  
239.25.
    (2) The Stock Issuance Plan is consistent with the terms of the 
subsidiary holding company's charter (or any proposed amendments 
thereto), including terms governing the type and amount of stock that 
may be issued.
    (3) The Stock Issuance Plan would provide the subsidiary holding 
company, its mutual holding company parent, and any subsidiary savings 
associations of the subsidiary holding company with fully sufficient 
capital and would not be inequitable or detrimental to the subsidiary 
holding company or its mutual holding company parent or to members of 
the mutual holding company parent.
    (4) The proposed price or price range of the stock to be issued is 
reasonable. The Board shall review the reasonableness of the proposed 
price or price range.
    (5) The aggregate amount of outstanding common stock of the 
subsidiary holding company owned or controlled by persons other than 
the subsidiary holding company's mutual holding company parent at the 
close of the proposed issuance shall be less than 50 percent of the 
subsidiary holding company's total outstanding common stock, unless the 
subsidiary holding company was a stock holding company when acquired by 
the mutual holding company, in which case the foregoing

[[Page 56573]]

restriction shall not apply. Any amount of preferred stock may be 
issued by any subsidiary holding company of a mutual holding company to 
persons other than the subsidiary holding company's mutual holding 
company, consistent with any other applicable laws and regulations.
    (6) The subsidiary holding company furnishes the information 
required by the Board in connection with the proposed issuance.
    (7) The proposed stock issuance meets the convenience and needs 
standard of Sec.  239.55(g).
    (8) The proposed issuance complies with all other applicable laws 
and regulations.
    (9) Unless otherwise determined by the Board, the limitations on 
the minimum and maximum amounts of the estimated price range required 
by Sec.  239.59(c) shall apply.
    (b) Related approvals. Approval by the Board of any stock issuance 
pursuant to this section shall also be deemed to constitute:
    (1) Approval of the form of stock certificate proposed to be 
utilized in connection with the stock issuance, provided such form was 
included in the application materials filed pursuant to this section; 
and
    (2) Approval of any charter or bylaw amendment required to 
authorize issuance of the stock, provided such amendment was proposed 
in the application materials filed pursuant to this section.
    (c) Offering restrictions. (1) No representations may be made in 
any manner in connection with the offer or sale of any stock issued 
pursuant to this section that the price, price range or any other 
pricing information related to such stock issuance has been approved by 
the Board or that the stock has been approved or disapproved by the 
Board or that the Board has endorsed the accuracy or adequacy of any 
securities offering documents disseminated in connection with such 
stock.
    (2) The sale of minority stock of the subsidiary holding company to 
be made under the minority stock issuance plan, including any sale in a 
public offering or direct community marketing, shall be completed as 
promptly as possible and within 45 calendar days after the last day of 
the subscription period, unless extended by the Board.
    (3) In the offer, sale, or purchase of stock issued pursuant to 
this section, no person shall:
    (i) Employ any device, scheme, or artifice to defraud;
    (ii) Make any untrue statement of a material fact or omit to state 
a material fact necessary in order to make the statements made, in the 
light of the circumstances under which they were made, not misleading; 
or
    (iii) Engage in any act, practice, or course of business which 
operates or would operate as a fraud or deceit upon a purchaser or 
seller.
    (4) Prior to the completion of a stock issuance pursuant to this 
section, no person shall transfer, or enter into any agreement or 
understanding to transfer, the legal or beneficial ownership of the 
stock to be issued to any other person.
    (5) Prior to the completion of a stock issuance pursuant to this 
section, no person shall make any offer, or any announcement of any 
offer, to purchase any stock to be issued, or knowingly acquire any 
stock in the issuance, in excess of the maximum purchase limitations 
established in the Stock Issuance Plan.
    (6) All stock issuances pursuant to this section must:
    (i) Comply with Sec.  239.59 and, to the extent applicable, the 
form or forms specified by the Board; and
    (ii) Provide that the offering be structured in a manner similar to 
a standard conversion under subpart E of this part, including the stock 
purchase priorities accorded members of the issuing subsidiary holding 
company's mutual holding company, unless the subsidiary holding company 
would qualify for a supervisory conversion if it were to undertake a 
conversion under subpart E of this part; or demonstrates to the 
satisfaction of the Board that a non-conforming issuance would be more 
beneficial to the savings association and subsidiary holding company 
compared to a conforming offering, considering, in the aggregate, the 
effect of each on the savings association and subsidiary holding 
company's financial and managerial resources and future prospects, the 
effect of the issuance upon the savings association and subsidiary 
holding company, the insurance risk to the Deposit Insurance Fund, and 
the convenience and needs of the community to be served.
    (7) Notwithstanding the restrictions in paragraph (c)(6)(ii) of 
this section, a subsidiary holding company of a mutual holding company 
may issue stock as part of a stock benefit plan to any insider, 
associate of an insider, or tax qualified or non-tax qualified employee 
stock benefit plan of the mutual holding company or subsidiary of the 
mutual holding company without including the purchase priorities of 
subpart E of this part.
    (8) As part of a reorganization, a reasonable amount of shares or 
proceeds may be contributed to a charitable organization that complies 
with Sec. Sec.  239.64(b) to 239.64(f), provided such contribution does 
not result in any taxes on excess business holdings under section 4943 
of the Internal Revenue Code (26 U.S.C. 4943).
    (d) Procedural and substantive requirements. The procedural and 
substantive requirements of subpart E of this part shall apply to all 
mutual holding company stock issuances and subsidiary holding company 
stock issuances under this section, unless clearly inapplicable, as 
determined by the Board. For purposes of this paragraph, the term 
conversion as it appears in the provisions of subpart E of this part 
shall refer to the stock issuance, and the term mutual holding company 
shall refer to the subsidiary holding company undertaking the stock 
issuance.


Sec.  239.25  Contents of Stock Issuance Plans.

    (a) Mandatory provisions. Each of the provisions mandatory for all 
stock issuance plans under this paragraph (a) shall be deemed 
regulatory requirements. Each Stock Issuance Plan shall contain a 
complete description of all significant terms of the proposed stock 
issuance (including the information specified in Sec.  239.65(f) to the 
extent known), shall attach and incorporate the proposed form of stock 
certificate, the proposed stock order form, and any agreements or other 
documents defining the rights of the stockholders, and shall:
    (1) Provide that the stock shall be sold at a total price equal to 
the estimated pro forma market value of such stock, based upon an 
independent valuation;
    (2) Provide that the aggregate amount of outstanding common stock 
of the subsidiary holding company owned or controlled by persons other 
than the subsidiary holding company's mutual holding company parent at 
the close of the proposed issuance shall be less than fifty percent of 
the subsidiary holding company's total outstanding common stock (This 
provision may be omitted if the proposed issuance will be conducted by 
a subsidiary holding company that was in the stock form when acquired 
by its mutual holding company parent);
    (3) Provide that all employee stock ownership plans or other tax-
qualified employee stock benefit plans (collectively, ESOPs) must not 
encompass, in the aggregate, more than either 4.9 percent of the 
outstanding shares of the subsidiary holding company's common stock or 
4.9 percent of the subsidiary holding company's

[[Page 56574]]

stockholders' equity at the close of the proposed issuance;
    (4) Provide that all ESOPs and management recognition plans (MRPs) 
must not encompass, in the aggregate, more than either 4.9 percent of 
the outstanding shares of the subsidiary holding company's common stock 
or 4.9 percent of the subsidiary holding company's stockholders' equity 
at the close of the proposed issuance. However, if the subsidiary 
holding company's tangible capital equals at least ten percent at the 
time of implementation of the plan, the Board may permit such ESOPs and 
MRPs to encompass, in the aggregate, up to 5.88 percent of the 
outstanding common stock or stockholders' equity at the close of the 
proposed issuance;
    (5) Provide that all MRPs must not encompass, in the aggregate, 
more than either 1.47 percent of the common stock of the subsidiary 
holding company or 1.47 percent of the subsidiary holding company's 
stockholders' equity at the close of the proposed issuance. However, if 
the subsidiary holding company's tangible capital is at least ten 
percent at the time of implementation of the plan, the Board may permit 
MRPs to encompass, in the aggregate, up to 1.96 percent of the 
outstanding shares of the subsidiary holding company's common stock or 
1.96 percent of the savings subsidiary holding company's stockholders' 
equity at the close of the proposed issuance;
    (6) Provide that all stock option plans (Option Plans) must not 
encompass, in the aggregate, more than either 4.9 percent of the 
subsidiary holding company's outstanding common stock at the close of 
the proposed issuance or 4.9 percent of the subsidiary holding 
company's stockholders' equity at the close of the proposed issuance;
    (7) Provide that an ESOP, a MRP or an Option Plan modified or 
adopted no earlier than one year after the close of: the proposed 
issuance, or any subsequent issuance that is made in substantial 
conformity with the purchase priorities Sec.  239.59(a) set forth in 
subpart E of this part, may exceed the percentage limitations contained 
in paragraphs (a)(3) through (6) of this section (plan expansion), 
subject to the following two requirements. First, all common stock 
awarded in connection with any plan expansion must be acquired for such 
awards in the secondary market. Second, such acquisitions must begin no 
earlier than when such plan expansion is permitted to be made;
    (8)(i) Provide that the aggregate amount of common stock that may 
be encompassed under all Option Plans and MRPs, or acquired by all 
insiders of the subsidiary holding company and subsidiary savings 
association and associates of insiders of the subsidiary holding 
company and subsidiary savings association, must not exceed the 
following percentages of common stock or stockholders' equity of the 
subsidiary holding company, held by persons other than the subsidiary 
holding company's mutual holding company parent at the close of the 
proposed issuance:

------------------------------------------------------------------------
                                                            Officer and
                                                             director
                    Institution size                         purchases
                                                             (percent)
------------------------------------------------------------------------
$ 50,000,000 or less....................................              35
$ 50,000,001-100,000,000................................              34
$100,000,001-150,000,000................................              33
$150,000,001-200,000,000................................              32
$200,000,001-250,000,000................................              31
$250,000,001-300,000,000................................              30
$300,000,001-350,000,000................................              29
$350,000,001-400,000,000................................              28
$400,000,001-450,000,000................................              27
$450,000,001-500,000,000................................              26
Over $500,000,000.......................................              25
------------------------------------------------------------------------

     (ii) The percentage limitations contained in paragraph 8(i) of 
this section may be exceeded provided that all stock acquired by 
insiders and associates of insiders or awarded under all MRPs and 
Option Plans in excess of those limitations is acquired in the 
secondary market. If acquired for such awards on the secondary market, 
such acquisitions must begin no earlier than one year after the close 
of the proposed issuance or any subsequent issuance that is made in 
substantial conformity with the purchase priorities set forth in 
subpart E of this part.
    (iii) In calculating the number of shares held by insiders and 
their associates under this provision, shares awarded but not delivered 
under an ESOP, MRP, or Option Plan that are attributable to such 
persons shall not be counted as being acquired by such persons.
    (9) Provide that the amount of common stock that may be encompassed 
under all Option Plans and MRPs must not exceed, in the aggregate, 25 
percent of the outstanding common stock held by persons other than the 
subsidiary holding company's mutual holding company parent at the close 
of the proposed issuance;
    (10) Provide that the issuance shall be conducted in compliance 
with, to the extent applicable, the forms required by the Board;
    (11) Provide that the sales price of the shares of stock to be sold 
in the issuance shall be a uniform price determined in accordance with 
Sec.  239.24;
    (12) Provide that, if at the close of the stock issuance the 
subsidiary holding company has more than thirty-five shareholders of 
any class of stock, the subsidiary holding company shall promptly 
register that class of stock pursuant to the Securities Exchange Act of 
1934, as amended (15 U.S.C. 78a-78jj), and undertake not to deregister 
such stock for a period of three years thereafter;
    (13) Provide that, if at the close of the stock issuance the 
subsidiary holding company has more than one hundred shareholders of 
any class of stock, the subsidiary holding company shall use its best 
efforts to:
    (i) Encourage and assist a market maker to establish and maintain a 
market for that class of stock; and
    (ii) List that class of stock on a national or regional securities 
exchange or on the NASDAQ quotation system;
    (14) Provide that, for a period of three years following the 
proposed issuance, no insider of the subsidiary holding company or his 
or her associates shall purchase, without the prior written approval of 
the Board, any stock of the subsidiary holding company except from a 
broker dealer registered with the Securities and Exchange Commission, 
except that the foregoing restriction shall not apply to:
    (i) Negotiated transactions involving more than one percent of the 
outstanding stock in the class of stock; or
    (ii) Purchases of stock made by and held by any tax-qualified or 
non-tax-qualified employee stock benefit plan of the subsidiary holding 
company even if such stock is attributable to insiders of the 
subsidiary holding company and subsidiary savings association or their 
associates;
    (15) Provide that stock purchased by insiders of the subsidiary 
holding company and subsidiary savings association and their associates 
in the proposed issuance shall not be sold for a period of at least one 
year following the date of purchase, except in the case of death of the 
insider or associate;
    (16) Provide that, in connection with stock subject to restriction 
on sale for a period of time:
    (i) Each certificate for such stock shall bear a legend giving 
appropriate notice of such restriction;
    (ii) Appropriate instructions shall be issued to the subsidiary 
holding company's transfer agent with respect to applicable 
restrictions on transfer of such stock; and
    (iii) Any shares issued as a stock dividend, stock split, or 
otherwise with respect to any such restricted stock shall

[[Page 56575]]

be subject to the same restrictions as apply to the restricted stock;
    (17) Provide that the subsidiary holding company will not offer or 
sell any of the stock proposed to be issued to any person whose 
purchase would be financed by funds loaned, directly or indirectly, to 
the person by the subsidiary holding company;
    (18) Provide that, if necessary, the subsidiary holding company's 
charter will be amended to authorize issuance of the stock and attach 
and incorporate by reference the text of any such amendment;
    (19) Provide that the expenses incurred in connection with the 
issuance shall be reasonable;
    (20) Provide that the Stock Issuance Plan, if proposed as part of a 
Reorganization Plan, may be amended or terminated in the same manner as 
the Reorganization Plan. Otherwise, the Stock Issuance Plan shall 
provide that it may be substantively amended by the board of directors 
of the issuing subsidiary holding company as a result of comments from 
regulatory authorities or otherwise prior to approval of the Plan by 
the Board, and at any time thereafter with the concurrence of the 
Board; and that the Stock Issuance Plan may be terminated by the board 
of directors at any time prior to approval of the Plan by the Board, 
and at any time thereafter with the concurrence of the Board;
    (21) Provide that, unless an extension is granted by the Board, the 
Stock Issuance Plan shall be terminated if not completed within 90 days 
of the date of such approval; or
    (22) Provide that the subsidiary holding company may make scheduled 
discretionary contributions to a tax-qualified employee stock benefit 
plan provided such contributions do not cause the subsidiary holding 
company to fail to meet any of its regulatory capital requirements.
    (b) Optional provisions. A Stock Issuance Plan may:
    (1) Provide that, in the event the proposed stock issuance is part 
of a Reorganization Plan, the stock offering may be commenced 
concurrently with or at any time after the mailing to the members of 
the reorganizing association and any acquiree association of any proxy 
statement(s). The offering may be closed before the required membership 
vote(s), provided the offer and sale of the stock shall be conditioned 
upon the approval of the Reorganization Plan and Stock Issuance Plan by 
the members of the reorganizing association and any acquiree 
association;
    (2) Provide that any insignificant residue of stock of the 
subsidiary holding company not sold in the offering may be sold in such 
other manner as provided in the Stock Issuance Plan, with the Board's 
approval;
    (3) Provide that the subsidiary holding company may issue and sell, 
in lieu of shares of its stock, units of securities consisting of stock 
and long-term warrants or other equity securities, in which event any 
reference in the provisions of this section and in Sec.  239.24 to 
stock shall apply to such units of equity securities unless the context 
otherwise requires; or
    (4) Provide that the subsidiary holding company may reserve shares 
representing up to ten percent of the proposed offering for issuance in 
connection with an employee stock benefit plan.
    (c) Applicability of provisions of Sec.  239.63(a)(1) to minority 
stock issuances. Notwithstanding Sec.  239.24(d), Sec.  
239.63(a)(1)(ii) do not apply to minority stock issuances, because the 
permissible sizes of ESOPs, MRPs, and Option Plans in minority stock 
issuances are subject to each of the requirements set forth at 
paragraphs (a)(3) through (a)(9) of this section. Section 239.63(a)(4) 
through (a)(14), apply for one year after the subsidiary holding 
company engages in a minority stock issuance that is conducted in 
accordance with the purchase priorities set forth in subpart E of this 
part. In addition to the shareholder vote requirement for Option Plans 
and MRPs set forth at Sec.  239.63(a)(1)(vi), any Option Plans and MRPs 
put to a shareholder vote after a minority stock issuance that is 
conducted in accordance with the purchase priorities set forth in 
subpart E of this part must be approved by a majority of the votes cast 
by stockholders other than the mutual holding company.


Sec.  239.26  Shareholders.

    (a) Shareholder meetings. An annual meeting of the shareholders of 
the subsidiary holding company for the election of directors and for 
the transaction of any other business of the subsidiary holding company 
shall be held annually within 150 days after the end of the subsidiary 
holding company's fiscal year. Unless otherwise provided in the 
subsidiary holding company'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 specified in the bylaws 
of the subsidiary holding company. 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 subsidiary savings 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 natural 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 subsidiary 
holding company 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 
subsidiary holding company 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 subsidiary holding company shall make a 
complete list of the stockholders of record entitled to vote at such 
meeting, or any adjournments thereof, arranged

[[Page 56576]]

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 subsidiary holding company 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 
subsidiary holding company 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 subsidiary holding 
company in performance of the act or acts required.
    (e) Shareholder quorum. A majority of the outstanding shares of the 
subsidiary holding company 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, 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 subsidiary holding company'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, 
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 subsidiary holding company. Neither 
treasury shares of its own stock held by the subsidiary holding company 
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 subsidiary holding company, 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 
subsidiary holding company at least five days prior to the date of the 
annual meeting. Ballots bearing the names of all the natural persons 
nominated shall be provided for use at the annual meeting.
    (h) Informal action by stockholders. If the bylaws of the 
subsidiary holding company 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.


Sec.  239.27  Board of directors.

    (a) General powers and duties. The business and affairs of the 
subsidiary holding company 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 Board. 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 subsidiary holding company 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 
Board.
    (e) Vacancies. Any vacancy occurring in the board of directors may 
be filled by the affirmative vote of a majority of 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.  239.41, by a vote of the 
holders of a majority of the shares then entitled to vote at an 
election of directors. Subsidiary holding companies 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.

[[Page 56577]]

    (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 subsidiary holding company, 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 subsidiary holding company; 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 subsidiary holding company otherwise than in the usual and regular 
course of its business; a voluntary dissolution of the subsidiary 
holding company; 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 subsidiary holding 
company who is present at a meeting of the board of directors at which 
action on any subsidiary holding company 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 individual 
acting as the secretary of the meeting before the adjournment thereof 
or shall be forwarded by registered mail to the secretary of the 
subsidiary holding company 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 a director who voted in favor of such action.
    (k) Age limitation on directors. A subsidiary holding company may 
provide a bylaw on age limitation for directors. Bylaws on age 
limitations must comply with all Federal laws, rules and regulations.


Sec.  239.28  Officers.

    (a) Positions. The officers of the subsidiary holding company 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 individual 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 subsidiary holding company 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 subsidiary holding 
company will be served thereby; but such removal, other than for cause, 
shall be without prejudice to the contractual rights, if any, of the 
individual so removed. Employment contracts shall conform with Sec.  
239.41.
    (c) Age limitation on officers. A subsidiary holding company may 
provide a bylaw on age limitation for officers. Bylaws on age 
limitations must comply with all Federal laws, rules, and regulations.


Sec.  239.29  Certificates for shares and their transfer.

    (a) Certificates for shares. Certificates representing shares of 
capital stock of the subsidiary holding company shall be in such form 
as shall be determined by the board of directors and approved by the 
Board. The certificates shall be signed by the chief executive officer 
or by any other officer of the subsidiary holding company 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 subsidiary holding company 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 
subsidiary holding company. All certificates surrendered to the 
subsidiary holding company 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 subsidiary holding company 
as the board of directors may prescribe.
    (b) Transfer of shares. Transfer of shares of capital stock of the 
subsidiary holding company 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 subsidiary holding company. 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 subsidiary holding company shall be 
deemed by the subsidiary holding company to be the owner for all 
purposes.


Sec.  239.30  Annual reports; books and records.

    (a) Annual reports to stockholders. A subsidiary holding company 
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

[[Page 56578]]

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 
subsidiary holding company, together with a copy of the report, shall 
be transmitted by the subsidiary holding company to the appropriate 
Reserve Bank.
    (b) Books and records. (1) Each subsidiary holding company 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.
    (2) Any stockholder or group of stockholders of a subsidiary 
holding company, holding of record the number of voting shares of such 
subsidiary holding company 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:
    (i) 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
    (ii) Not less than five percent of the total outstanding voting 
shares.
    No stockholder or group of stockholders of a subsidiary holding 
company 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.
    (3) The right to examination authorized by paragraph (b)(2) of this 
section and the right to inspect the list of stockholders provided by a 
subsidiary holding company'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 subsidiary holding company, 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 subsidiary holding 
company, 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 
subsidiary holding company 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.
    (4) 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 subsidiary 
holding company containing:
    (i) A list of depositors in or borrowers from such subsidiary 
holding company;
    (ii) Their addresses;
    (iii) Individual deposit or loan balances or records; or
    (iv) Any data from which such information could be reasonably 
constructed.


Sec.  239.31  Indemnification; employment contracts.

    (a) Restrictions on indemnification. The provisions of Sec.  239.40 
shall apply to subsidiary holding companies.
    (b) Restrictions on employment contracts. The provisions of Sec.  
239.41 and any policies of the Board thereunder shall apply to 
subsidiary holding companies.

Subpart D--Indemnification; Employment Contracts


Sec.  239.40  Indemnification of directors, officers and employees.

    A mutual holding company 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 means any judicial or administrative proceeding, or 
threatened proceeding, whether civil, criminal, or otherwise, including 
any appeal or other proceeding for review;
    (ii) Court includes, without limitation, any court to which or in 
which any appeal or any proceeding for review is brought.
    (iii) 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 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 mutual holding company, shall include legal 
representatives, successors, and assigns thereof.
    (b) General. Subject to paragraphs (c) and (g) of this section, a 
mutual holding company 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 mutual holding company, 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 mutual holding 
company 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 mutual holding company or its members.
    However, no indemnification shall be made unless the mutual holding 
company gives the Board 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 appropriate Reserve Bank, 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 Board advises the mutual holding company in writing, within such 
notice

[[Page 56579]]

period, of its objection to the indemnification.
    (d) Insurance. A mutual holding company may obtain insurance to 
protect it and its directors, officers, and employees from potential 
losses arising from claims against any of them for alleged wrongful 
acts, or wrongful acts, committed in their capacity as directors, 
officers, or employees. However, no mutual holding company may obtain 
insurance which provides for payment of losses of any individual 
incurred as a consequence of his or her willful or criminal misconduct.
    (e) Payment of expenses. If a majority of the directors of a mutual 
holding company 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 shall 
prevent the directors of a mutual holding company from imposing such 
conditions on a payment of expenses as they deem warranted and in the 
interests of the mutual holding company. Before making advance payment 
of expenses under this paragraph, the mutual holding company shall 
obtain an agreement that the mutual holding company 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 mutual holding company 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, a mutual holding company 
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).


Sec.  239.41  Employment contracts.

    (a) General. A mutual holding company 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 the respective mutual 
holding company's board of directors. A mutual holding company 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 mutual holding company 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 mutual holding company. 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 mutual holding company's board of directors may terminate 
the officer or employee's employment at any time, but any termination 
by the mutual holding company'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 mutual holding 
company's affairs by a notice served under section 8 (e)(3) or (g)(1) 
of Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)) the 
mutual holding company'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 mutual 
holding company 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 mutual holding 
company'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 mutual holding company 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 subsidiary 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) shall not affect any vested rights of 
the contracting parties: Provided, that this paragraph (b) need not be 
included in an employment contract if prior written approval is secured 
from the Board.
    (5) If the mutual holding company is subject to bankruptcy 
proceedings under title 11 of the United States Code, all obligations 
of the mutual holding company under the contract shall terminate as of 
the date that the petition is filed, but vested rights of the 
contracting parties shall not be affected: Provided, that this 
paragraph (b) need not be included in an employment contract if prior 
written approval is secured from the Board.
    (6) All obligations under the contract shall be terminated, except 
to the extent determined that continuation of the contract is necessary 
to the continued operation of the mutual holding company--
    (i) By the Board, at the time the Federal Deposit Insurance 
Corporation enters into an agreement to provide assistance to or on 
behalf of the subsidiary savings association under the authority 
contained in 13(c) of the Federal Deposit Insurance Act; or
    (ii) By the Board, at the time the Board approves a supervisory 
merger to resolve problems related to operation of the mutual holding 
company or when the mutual holding company is determined by the Board 
to be in an unsafe or unsound condition.

Subpart E--Conversions From Mutual to Stock Form


Sec.  239.50  Purpose and scope.

    (a) General. This subpart governs how a mutual holding company may 
convert from the mutual to the stock form of ownership. This subpart 
supersedes all inconsistent charter and bylaw provisions of mutual 
holding companies converting to stock form.
    (b) Prescribed forms. A mutual holding company must use the forms 
prescribed under this subpart and provide such information as the Board 
may require under the forms by regulation or otherwise. The forms

[[Page 56580]]

required under this subpart include: Form AC (Application for 
Conversion); Form PS (Proxy Statement); Form OC (Offering Circular); 
and Form OF (Order Form).
    (c) Waivers. The Board may waive any requirement of this subpart or 
a provision in any prescribed form. To obtain a waiver, a mutual 
holding company must file a written request with the Board that:
    (1) Specifies the requirement(s) or provision(s) that the mutual 
holding company wants the Board to waive;
    (2) Demonstrates that the waiver is equitable; is not detrimental 
to the mutual holding company, mutual members, or other mutual holding 
companies or 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 waiver of the requirement or provision.


Sec.  239.51  Acquiring another insured stock depository institution as 
part of a conversion.

    When a mutual holding company converts to stock form, the 
subsidiary savings association may acquire for cash or stock another 
insured depository institution that is already in the stock form of 
ownership.


Sec.  239.52  Definitions.

    The following definitions apply to this subpart and the forms 
prescribed under this subpart:
    (a) Association members or members are persons who, under 
applicable law, are eligible to vote at the meeting on conversion.
    (b) Eligibility record date is the date for determining eligible 
account holders. The eligibility record date must be at least one year 
before the date that the board of directors adopts the plan of 
conversion.
    (c) Eligible account holders are any persons holding qualifying 
deposits on the eligibility record date.
    (d) IRS is the United States Internal Revenue Service.
    (e) Local community includes:
    (1) Every county, parish, or similar governmental subdivision in 
which the mutual holding company has a home or branch office;
    (2) Each county's, parish's, or subdivision's metropolitan 
statistical area;
    (3) All zip code areas in the mutual holding company's Community 
Reinvestment Act assessment area; and
    (4) Any other area or category the mutual holding company sets out 
in its plan of conversion, as approved by the Board.
    (f) Mutual holding company has the same meaning in this subpart as 
that term is given in subpart A. For purposes of this subpart, 
references to mutual holding company shall also include a resulting 
stock holding company, where applicable.
    (g) 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 security or 
interest in a security for value. Preliminary negotiations or 
agreements with an underwriter, or among underwriters who are or will 
be in privity of contract with the mutual holding company or resulting 
stock holding company, are not offers, offers to sell, or offers for 
sale.
    (h) Proxy soliciting material includes a proxy statement, form of 
proxy, or other written or oral communication regarding the conversion.
    (i) Purchase or buy includes every contract to acquire a security 
or interest in a security for value.
    (j) Qualifying deposit is the total balance in an account holder's 
savings accounts at the close of business on the eligibility or 
supplemental eligibility record date. The mutual holding company's plan 
of conversion may provide that only savings accounts with total deposit 
balances of $50 or more will qualify.
    (k) Resulting stock holding company means the stock savings and 
loan holding company that is issuing stock in connection with 
conversion of a mutual holding company pursuant to this subpart.
    (l) Sale or sell includes every contract to dispose of a security 
or interest in a security for value. An exchange of securities in a 
merger or acquisition approved by the Board is not a sale.
    (m) Solicitation and solicit is a request for a proxy, whether or 
not accompanied by or included in a form of proxy; a request to 
execute, not execute, or revoke a proxy; or the furnishing of a form of 
proxy or other communication reasonably calculated to cause the members 
to procure, withhold, or revoke a proxy. Solicitation or solicit does 
not include providing a form of proxy at the unsolicited request of a 
member, the acts required to mail communications for members, or 
ministerial acts performed on behalf of a person soliciting a proxy.
    (n) Subscription offering is the offering of shares through 
nontransferable subscription rights to:
    (1) Eligible account holders under Sec.  239.59(h);
    (2) Tax-qualified employee stock ownership plans under Sec.  
239.59(m);
    (3) Supplemental eligible account holders under Sec.  239.59(h); 
and
    (4) Other voting members under Sec.  239.59(j).
    (o) Supplemental eligibility record date is the date for 
determining supplemental eligible account holders. The supplemental 
eligibility record date is the last day of the calendar quarter before 
the Board approves the conversion and will occur only if the Board has 
not approved the conversion within 15 months of the eligibility record 
date.
    (p) Supplemental eligible account holders are any persons, except 
officers, directors, and their associates of the mutual holding company 
or subsidiary savings association, holding qualifying deposits on the 
supplemental eligibility record date.
    (q) Underwriter is any person who purchases any securities from the 
mutual holding company or resulting stock holding company with a view 
to distributing the securities, offers or sells securities for the 
mutual stock holding company or resulting stock holding company in 
connection with the securities' distribution, or participates or has a 
direct or indirect participation in the direct or indirect underwriting 
of any such undertaking. Underwriter does not include a person whose 
interest is limited to a usual and customary distributor's or seller's 
commission from an underwriter or dealer.


Sec.  239.53  Prior to conversion.

    (a) Pre-filing meeting and consultation. (1) The mutual holding 
company's board, or a subcommittee of the board, may meet with the 
staff of the appropriate Reserve Bank or Board staff before the mutual 
holding company's board of directors votes on the plan of conversion. 
At that meeting the mutual holding company may provide the Reserve Bank 
or Board staff with a written strategic plan that outlines the 
objectives of the proposed conversion and the intended use of the 
conversion proceeds.
    (2) The mutual holding company should also consult with the Board 
or appropriate Reserve Bank before it files its application for 
conversion. The Reserve Bank or Board will discuss the information that 
the mutual holding company must include in the application for 
conversion, general issues that the mutual holding company may confront 
in the conversion process, and any other pertinent issues.
    (b) Business plan.
    (1) Prior to filing an application for conversion, the mutual 
holding company must adopt a business plan reflecting the mutual 
holding company's intended plans for deployment of the proposed 
conversion proceeds. The

[[Page 56581]]

business plan is required, under Sec.  239.55(b), to be included in the 
mutual holding company's conversion application. At a minimum, the 
business plan must address:
    (i) The subsidiary savings association's projected operations and 
activities for three years following the conversion. The business plan 
must describe how the conversion proceeds will be deployed at the 
savings association (and holding company, if applicable), what 
opportunities are available to reasonably achieve the planned 
deployment of conversion proceeds in the relevant proposed market 
areas, and how its deployment will provide a reasonable return on 
investment commensurate with investment risk, investor expectations, 
and industry norms, by the final year of the business plan. The 
business plan must include three years of projected financial 
statements. The business plan must provide that the subsidiary savings 
associations receive at least 50 percent of the net conversion 
proceeds. The Board may require that a larger percentage of proceeds be 
contributed to the subsidiary savings associations.
    (ii) The mutual holding company's plan for deploying conversion 
proceeds to meet credit and lending needs in the proposed market areas. 
The Board strongly discourages business plans that provide for a 
substantial investment in mortgage securities or other securities, 
except as an interim measure to facilitate orderly, prudent deployment 
of proceeds during the three years following the conversion, or as part 
of a properly managed leverage strategy.
    (iii) The risks associated with the plan for deployment of 
conversion proceeds, and the effect of this plan on management 
resources, staffing, and facilities.
    (iv) The expertise of the mutual holding company and saving 
association subsidiary's management and board of directors, or that the 
mutual holding company has planned for adequate staffing and controls 
to prudently manage the growth, expansion, new investment, and other 
operations and activities proposed in its business plan.
    (2) The mutual holding company may not project returns of capital 
or special dividends in any part of the business plan. A newly 
converted company may not plan on stock repurchases in the first year 
of the business plan.
    (c) Management and board review of business plan.
    (1) The chief executive officer and members of the board of 
directors of the mutual holding company must review, and at least two-
thirds of the board of directors must approve, the business plan.
    (2) The chief executive officer and at least two-thirds of the 
board of directors of the mutual holding company must certify that the 
business plan accurately reflects the intended plans for deployment of 
conversion proceeds, and that any new initiatives reflected in the 
business plan are reasonably achievable. The mutual holding company 
must submit these certifications with its business plan, as part of the 
conversion application under paragraph (b) of this section.
    (d) Board review of the business plan.
    (1) The Board will review the business plan to determine whether it 
demonstrates a safe and sound deployment of conversion proceeds, as 
part of its review of the conversion application. In making its 
determination, the Board will consider how the mutual holding company 
has addressed the applicable factors of paragraph (b) of this section. 
No single factor will be determinative. The Board will review every 
case on its merits.
    (2) The mutual holding company must file its business plan with the 
appropriate Reserve Bank. The Board or appropriate Reserve Bank may 
request additional information, if necessary, to support its 
determination under paragraph (d)(1) of this section. The mutual 
holding company must file its business plan as a confidential exhibit 
to the Form AC.
    (3) If the Board approves the application for conversion and the 
mutual holding company completes the conversion, the resulting stock 
holding company must operate within the parameters of the business 
plan. The Board must approve any material deviation from the business 
plan in writing prior to such material deviation.
    (e) Disclosure of business plan.
    (1) The mutual holding company may discuss information about the 
conversion with individuals that it authorizes to prepare documents for 
the conversion.
    (2) Except as permitted under paragraph (e)(1) of this section, the 
mutual holding company must keep all information about the conversion 
confidential until the board of directors adopts the plan of 
conversion.
    (3) If the mutual holding company violates this section, the Board 
may require it to take remedial action. For example, the Board may 
require the mutual holding company to take any or all of the following 
actions:
    (i) Publicly announce that the mutual holding company is 
considering a conversion;
    (ii) Set an eligibility record date acceptable to the Board;
    (iii) Limit the subscription rights of any person who violates or 
aids in a violation of this section; or
    (iv) Take any other action to ensure that the conversion is fair 
and equitable.


Sec.  239.54  Plan of conversion.

    (a) Adoption by the board of directors. Prior to filing an 
application for conversion, the board of directors of the mutual 
holding company must adopt a plan of conversion that conforms to 
Sec. Sec.  239.59 through 239.62 and 239.63(b). The board of directors 
must adopt the plan by at least a two-thirds vote. The plan of 
conversion is required, under Sec.  239.55(b), to be included in the 
conversion application.
    (b) Contents of the plan of conversion. The mutual holding company 
must include the information included in Sec. Sec.  239.59 through 
239.62 and 239.63(b) in the plan of conversion. The Board may require 
the mutual holding company to delete or revise any provision in the 
plan of conversion if the Board determines the provision is 
inequitable; is detrimental to the mutual holding company, the account 
holders, other mutual holding companies, or other savings associations; 
or is contrary to public interest.
    (c) Notice of board of directors' approval of the plan of 
conversion.
    (1) Notice. The mutual holding company must promptly notify its 
members that the board of directors adopted a plan of conversion and 
that a copy of the plan is available for the members' inspection in the 
mutual holding company's home office and in each of the subsidiary 
savings association's branch offices. The mutual holding company must 
mail a letter to each member or publish a notice in the local newspaper 
in every local community where the savings association has an office. 
The mutual holding company may also issue a press release. The Board 
may require broader publication, if necessary, to ensure adequate 
notice to the members.
    (2) Contents of notice. The mutual holding company may include any 
of the following statements and descriptions in the letter, notice, or 
press release.
    (i) The board of directors adopted a proposed plan to convert from 
mutual to stock form.
    (ii) The mutual holding company will send its members a proxy 
statement with detailed information on the proposed conversion before 
the mutual holding company convenes a members' meeting to vote on the 
conversion.

[[Page 56582]]

    (iii) The members will have an opportunity to approve or disapprove 
the proposed conversion at a meeting. At least a majority of the 
eligible votes must approve the conversion.
    (iv) The mutual holding company will not vote existing proxies to 
approve or disapprove the conversion. The mutual holding company will 
solicit new proxies for voting on the proposed conversion.
    (v) The Board must approve the conversion before the conversion 
will be effective. The members will have an opportunity to file written 
comments, including objections and materials supporting the objections, 
with the Board.
    (vi) The IRS must issue a favorable tax ruling, or a tax expert 
must issue an appropriate tax opinion, on the tax consequences of the 
conversion before the Board will approve the conversion. The ruling or 
opinion must indicate the conversion will be a tax-free reorganization.
    (vii) The Board might not approve the conversion, and the IRS or a 
tax expert might not issue a favorable tax ruling or tax opinion.
    (viii) Savings account holders will continue to hold accounts in 
the savings association with the same dollar amounts, rates of return, 
and general terms as existing deposits. The FDIC will continue to 
insure the accounts.
    (ix) The mutual holding company's conversion will not affect 
borrowers' loans, including the amount, rate, maturity, security, and 
other contractual terms.
    (x) The savings association's business of accepting deposits and 
making loans will continue without interruption.
    (xi) The current management and staff will continue to conduct 
current services for depositors and borrowers under current policies 
and in existing offices.
    (xii) The subsidiary savings association may continue to be a 
member of the Federal Home Loan Bank System.
    (xiii) The mutual holding company may substantively amend the 
proposed plan of conversion before the members' meeting.
    (xiv) The mutual holding company may terminate the proposed 
conversion.
    (xv) After the Board approves the proposed conversion, the mutual 
holding company will send proxy materials providing additional 
information. After the mutual holding company sends proxy materials, 
members may telephone or write to the mutual holding company with 
additional questions.
    (xvi) The proposed record date for determining the eligible account 
holders who are entitled to receive subscription rights to purchase the 
shares.
    (xvii) A brief description of the circumstances under which 
supplemental eligible account holders will receive subscription rights 
to purchase the shares.
    (xviii) A brief description of how voting members may participate 
in the conversion.
    (xix) A brief description of how directors, officers, and employees 
will participate in the conversion.
    (xx) A brief description of the proposed plan of conversion.
    (xxi) The par value (if any) and approximate number of shares that 
will be issued and sold in the conversion.
    (3) Other requirements.
    (i) The mutual holding company may not solicit proxies, provide 
financial statements, describe the benefits of conversion, or estimate 
the value of the shares upon conversion in the letter, notice, or press 
release.
    (ii) If the mutual holding company responds to inquiries about the 
conversion, it may address only the matters listed in paragraph (c)(2) 
of this section.
    (d) Amending a plan of conversion. The mutual holding company may 
amend its plan of conversion before it solicits proxies. After the 
mutual holding company solicits proxies, it may amend the plan of 
conversion only if the Board concurs.


Sec.  239.55  Filing requirements.

    (a) Applications under this subpart. Any filing with the Board 
required under this subpart must be filed in accordance with Sec.  
238.14 of this chapter. The Board will review any filing made under 
this subpart in accordance with Sec.  238.14 of this chapter.
    (b) Requirements.
    (1) The application for conversion must include all of the 
following information.
    (i) A plan of conversion meeting the requirements of Sec.  
239.54(b).
    (ii) Pricing materials meeting the requirements paragraph (g)(2) of 
this section.
    (iii) Proxy soliciting materials under Sec.  239.57(d), including:
    (A) A preliminary proxy statement with signed financial statements;
    (B) A form of proxy meeting the requirements of Sec.  239.57(b); 
and
    (C) Any additional proxy soliciting materials, including press 
releases, personal solicitation instructions, radio or television 
scripts that the mutual holding company plans to use or furnish to the 
members, and a legal opinion indicating that any marketing materials 
comply with all applicable securities laws.
    (iv) An offering circular described in Sec.  239.58(a).
    (v) The documents and information required by Form AC. The mutual 
holding company may obtain Form AC from the appropriate Reserve Bank 
and the Board's Web site (http://www.federalreserve.gov).
    (vi) Where indicated, written consents, signed and dated, of any 
accountant, attorney, investment banker, appraiser, or other 
professional who prepared, reviewed, passed upon, or certified any 
statement, report, or valuation for use. See Form AC, instruction B(7).
    (vii) The business plan, submitted as a separately bound, 
confidential exhibit. See paragraph (c) of this section.
    (viii) Any additional information the Board requests.
    (2) The Board will not accept for filing, and will return, any 
application for conversion that is improperly executed, materially 
deficient, substantially incomplete, or that provides for unreasonable 
conversion expenses.
    (c) Filing an application for conversion.
    (1) The mutual holding company must file the application for 
conversion on Form AC with the appropriate Reserve Bank.
    (2) Upon receipt of an application under this subpart, the Reserve 
Bank will promptly furnish notice and a copy of the application to the 
primary federal supervisor of any subsidiary savings association. The 
primary supervisor will have 30 calendar days from the date of the 
letter giving notice in which to submit its views and recommendations 
to the Board.
    (d) Confidential treatment of portions of an application for 
conversion.
    (1) The Board makes all filings under this subpart available to the 
public, but may keep portions of the application for conversion 
confidential under paragraph (d)(2) of this section.
    (2) The mutual holding company may request the Board keep portions 
of the application confidential. To do so, the mutual holding company 
must separately bind and clearly designate as ``confidential'' any 
portion of the application for conversion that the mutual holding 
company deems confidential. The mutual holding company must provide a 
written statement specifying the grounds supporting the request for 
confidentiality. The Board will not treat as confidential the portion 
of the

[[Page 56583]]

application describing how the mutual holding company plans to meet the 
Community Reinvestment Act (CRA) objectives. The CRA portion of the 
application may not incorporate by reference information contained in 
the confidential portion of the application.
    (3) The Board will determine whether confidential information must 
be made available to the public under 5 U.S.C. 552 and part 261 of this 
chapter. The Board will advise the mutual holding company before it 
makes information the mutual holding company designated as 
``confidential'' available to the public.
    (e) Amending an application for conversion. To amend an application 
for conversion, the mutual holding company must:
    (1) File an amendment with an appropriate facing sheet;
    (2) Number each amendment consecutively;
    (3) Respond to all issues raised by the Board; and
    (4) Demonstrate that the amendment conforms to all applicable 
regulations.
    (f) Notice of filing of application and comment process.
    (1) Public notice of an application for conversion.
    (i) The mutual holding company must publish a public notice of the 
application for conversion in accordance with the procedures in Sec.  
238.14 of this chapter. The mutual holding company must simultaneously 
prominently post the notice in its home office and in all of the branch 
offices of its subsidiary savings associations.
    (ii) Promptly after publication, the mutual holding company must 
file a copy of any public notice and an affidavit of publication from 
each publisher with the appropriate Reserve Bank.
    (iii) If the Board does not accept the application for conversion 
under Sec.  239.55(g) and requires the mutual holding company to file a 
new application, the mutual holding company must publish and post a new 
notice and allow an additional 30 days for comment.
    (2) Public comments. Commenters may submit comments on the 
application in accordance with the procedures in Sec.  238.14 of this 
chapter. A commenter must file any comments with the appropriate 
Reserve Bank.
    (g) Board review of the application for conversion.
    (1) Board action on a conversion application. The Board may approve 
an application for conversion only if:
    (i) The conversion complies with this subpart;
    (ii) The mutual holding company will meet all applicable regulatory 
capital requirements after the conversion; and
    (iii) The conversion will not result in a taxable reorganization 
under the Internal Revenue Code of 1986, as amended.
    (2) Board review of appraisal. The Board will review the appraisal 
required by paragraph (b)(1)(ii) of this section in determining whether 
to approve the application. The Board will review the appraisal under 
the following requirements.
    (i) Independent persons experienced and expert in corporate 
appraisal, and acceptable to the Board, must prepare the appraisal 
report.
    (ii) An affiliate of the appraiser may serve as an underwriter or 
selling agent, if the mutual holding company ensures that the appraiser 
is separate from the underwriter or selling agent affiliate and the 
underwriter or selling agent affiliate does not make recommendations or 
affect the appraisal.
    (iii) The appraiser may not receive any fee in connection with the 
conversion other than for appraisal services.
    (iv) The appraisal report must include a complete and detailed 
description of the elements of the appraisal, a justification for the 
appraisal methodology, and sufficient support for the conclusions.
    (v) If the appraisal is based on a capitalization of the pro forma 
income, it must indicate the basis for determining the income to be 
derived from the sale of shares, and demonstrate that the earnings 
multiple used is appropriate, including future earnings growth 
assumptions.
    (vi) If the appraisal is based on a comparison of the shares with 
outstanding shares of existing stock associations, the existing stock 
associations must be reasonably comparable in size, market area, 
competitive conditions, risk profile, profit history, and expected 
future earnings.
    (vii) The Board may decline to process the application for 
conversion and deem it materially deficient or substantially incomplete 
if the initial appraisal report is materially deficient or 
substantially incomplete.
    (viii) The mutual holding company may not represent or imply that 
the Board has approved the appraisal.
    (3) Board review of compliance record. The Board will review the 
compliance record of the subsidiary savings association under the 
regulations applicable to the savings association and the business plan 
to determine how the conversion will affect the convenience and needs 
of its communities.
    (i) Based on this review, the Board may approve the application, 
deny the application, or approve the application on the condition that 
the resulting stock holding company will improve the CRA performance or 
will address the particular credit or lending needs of the communities 
that it will serve.
    (ii) The Board may deny the application if the business plan does 
not demonstrate that the proposed use of conversion proceeds will help 
the resulting stock holding company to meet the credit and lending 
needs of the communities that the resulting stock holding company will 
serve.
    (4) The Board may request that the mutual holding company amend the 
application if further explanation is necessary, material is missing, 
or material must be corrected.
    (5) The Board will deny the application if the application does not 
meet the requirements of this subpart, unless the Board waives the 
requirement under Sec.  239.50(c).
    (h) Judicial review.
    (1) Any person aggrieved by the Board's final action on the 
application for conversion may ask the court of appeals of the United 
States for the circuit in which the principal office or residence of 
such person is located, or the U.S. Court of Appeals for the District 
of Columbia Circuit, to review the action under 12 U.S.C. 1467a(j), 
which provisions shall apply in all respects as if such final action 
were an order, subject to paragraph (h)(2) of this section.
    (2) To obtain court review of the action, the aggrieved person must 
file a written petition requesting that the court modify, terminate, or 
set aside the final Board action. The aggrieved person must file the 
petition with the court within the later of 30 days after the Board 
publishes notice of its final action in the Federal Register or 30 days 
after the mutual holding company mails the proxy statement to its 
members under Sec.  239.56(c).


Sec.  239.56  Vote by members.

    (a) Mutual member approval of the plan of conversion
    (1) After the Board approves the plan of conversion, the mutual 
holding company must submit the plan of conversion to its members for 
approval. The mutual holding company must obtain this approval at a 
meeting of its members.
    (2) The members must approve the plan of conversion by a majority 
of the total outstanding votes.
    (3) The members may vote in person or by proxy.

[[Page 56584]]

    (4) The mutual holding company may notify eligible account holders 
or supplemental eligible account holders who are not voting members of 
the proposed conversion. The mutual holding company may include only 
the information in Sec.  239.54(c) in the notice.
    (b) Eligibility to vote for the plan of conversion. The mutual 
holding company determines members' eligibility to vote by setting a 
voting record date. The mutual holding company must set a voting record 
date that is not more than 60 days nor less than 20 days before the 
meeting.
    (c) Notifying members of the meeting.
    (1) The mutual holding company must notify the members of the 
meeting to consider the conversion by sending the members a proxy 
statement.
    (2) The mutual holding company must notify its members 20 to 45 
days before the meeting.
    (3) The mutual holding company must also notify each beneficial 
holder of an account at any subsidiary savings association held in a 
fiduciary capacity:
    (i) If the subsidiary savings association is a federal association 
and the name of the beneficial holder is disclosed on the records of 
the subsidiary savings association; or
    (ii) If the subsidiary savings association is a state-chartered 
association and the beneficial holder possesses voting rights under 
state law.
    (d) Submissions to the Board after the members' meeting.
    (1) Promptly after the members' meeting, the mutual holding company 
must file all of the following information with the appropriate Reserve 
Bank:
    (i) A certified copy of each adopted resolution on the conversion.
    (ii) The total votes eligible to be cast.
    (iii) The total votes represented in person or by proxy.
    (iv) The total votes cast in favor of and against each matter.
    (v) The percentage of votes necessary to approve each matter.
    (vi) An opinion of counsel that the mutual holding company 
conducted the members' meeting in compliance with all applicable state 
or federal laws and regulations.
    (2) Promptly after completion of the conversion, the mutual holding 
company must submit to the appropriate Reserve Bank an opinion of 
counsel that the mutual holding company has complied with all laws 
applicable to the conversion.


Sec.  239.57  Proxy solicitation.

    (a) Applicability of proxy solicitation provisions.
    (1) The mutual holding company must comply with these proxy 
solicitation provisions when the mutual holding company provides proxy 
solicitation material to members for the meeting to vote on the plan of 
conversion.
    (2) Members of the mutual holding company must comply with these 
proxy solicitation provisions when they provide proxy solicitation 
materials to members for the meeting to vote on the conversion, 
pursuant to paragraph (f) of this section except where:
    (i) The member solicits 50 people or fewer and does not solicit 
proxies on behalf of the mutual holding company; or
    (ii) The member solicits proxies through newspaper advertisements 
after the board of directors adopts the plan of conversion. Any 
newspaper advertisements may include only the following information:
    (A) The name of the mutual holding company;
    (B) The reason for the advertisement;
    (C) The proposal or proposals to be voted upon;
    (D) Where a member may obtain a copy of the proxy solicitation 
material; and
    (E) A request for the members of the mutual holding company to vote 
at the meeting.
    (b) Form of proxy. The form of proxy must include all of the 
following:
    (1) A statement in bold face type stating that management is 
soliciting the proxy.
    (2) Blank spaces where the member must date and sign the proxy.
    (3) Clear and impartial identification of each matter or group of 
related matters that members will vote upon. It must include any 
proposed charitable contribution as an item to be voted on separately.
    (4) The phrase ``Revocable Proxy'' in bold face type (at least 18 
point).
    (5) A description of any charter or state law requirement that 
restricts or conditions votes by proxy.
    (6) An acknowledgment that the member received a proxy statement 
before he or she signed the form of proxy.
    (7) The date, time, and the place of the meeting, when available.
    (8) A way for the member to specify by ballot whether he or she 
approves or disapproves of each matter that members will vote upon.
    (9) A statement that management will vote the proxy in accordance 
with the member's specifications.
    (10) A statement in bold face type indicating how management will 
vote the proxy if the member does not specify a choice for a matter.
    (c) Permissible use of proxies.
    (1) The mutual holding company may not use previously executed 
proxies for the plan of conversion vote. If members consider the plan 
of conversion at an annual meeting, the mutual holding company may vote 
proxies obtained through other proxy solicitations only on matters not 
related to the plan of conversion.
    (2) The mutual holding company may vote a proxy obtained under this 
subpart on matters that are incidental to the conduct of the meeting. 
The mutual holding company or its management may not vote a proxy 
obtained under this subpart at any meeting other than the meeting (or 
any adjournment of the meeting) to vote on the plan of conversion.
    (d) Proxy statement requirements.
    (1) Content requirements. The mutual holding company must prepare 
the proxy statement in compliance with this subpart and Form PS. The 
mutual holding company may obtain Form PS from the appropriate Reserve 
Bank and the Board's Web site (http://www.federalreserve.gov).
    (2) Other requirements.
    (i) The Board will review the proxy solicitation material in its 
review of the application for conversion.
    (ii) The mutual holding company must provide a written proxy 
statement to the members before or at the same time the mutual holding 
company provides any other soliciting material. The mutual holding 
company must mail proxy solicitation material to the members no later 
than ten days after the Board approves the conversion.
    (e) Filing revised proxy materials.
    (1) The mutual holding company must file revised proxy materials as 
an amendment to the application for conversion.
    (2) To revise the proxy solicitation materials, the mutual holding 
company must file:
    (i) Revised proxy materials as required by Form PS;
    (ii) Revised form of proxy, if applicable; and
    (iii) Any additional proxy solicitation material subject to 
paragraph (d) of this section.
    (3) The mutual holding company must clearly indicate changes from 
the prior filing.
    (4) The mutual holding company must file a definitive copy of all 
proxy solicitation material, in the form in which the mutual holding 
company furnishes the material to the members. The mutual holding 
company must file no later than the date that it sends or gives the 
proxy solicitation material to the members. The mutual holding

[[Page 56585]]

company must indicate the date that it plans to release the materials.
    (5) Unless the Board requests the mutual holding company to do so, 
the mutual holding company does not have to file copies of replies to 
inquiries from the members or copies of communications that merely 
request members to sign and return proxy forms.
    (f) Mailing proxy solicitation material.
    (1) The mutual holding company must mail the member's proxy 
solicitation material if:
    (i) The board of directors adopted a plan of conversion;
    (ii) A member requests in writing that the mutual holding company 
mail the proxy solicitation material; and
    (iii) The member agrees to defray reasonable expenses of the mutual 
holding company.
    (2) As soon as practicable after the mutual holding company 
receives a request under paragraph (f)(1) of this section, the mutual 
holding company must mail or otherwise furnish the following 
information to the member:
    (i) The approximate number of members that the mutual holding 
company solicited or will solicit, or the approximate number of members 
of any group of account holders that the member designates; and
    (ii) The estimated cost of mailing the proxy solicitation material 
for the member.
    (3) The mutual holding company must mail proxy solicitation 
material to the designated members promptly after the member furnishes 
the materials, envelopes (or other containers), and postage (or payment 
for postage) to the mutual holding company.
    (4) The mutual holding company is not responsible for the content 
of a member's proxy solicitation material.
    (5) A member may furnish other members its own proxy solicitation 
material, subject to the rules in this section.
    (g) Prohibited solicitations.
    (1) False or misleading statements.
    (i) No one may use proxy solicitation material for the members' 
meeting if the material contains any statement which, considering the 
time and the circumstances of the statement:
    (A) Is false or misleading with respect to any material fact;
    (B) Omits any material fact that is necessary to make the 
statements not false or misleading; or
    (C) Omits any material fact that is necessary to correct a 
statement in an earlier communication that has become false or 
misleading.
    (ii) No one may represent or imply that the Board determined that 
the proxy solicitation material is accurate, complete, not false or not 
misleading, or passed upon the merits of or approved any proposal.
    (2) Other prohibited solicitations. No person may solicit:
    (i) An undated or post-dated proxy;
    (ii) A proxy that states it will be dated after the date it is 
signed by a member;
    (iii) A proxy that is not revocable at will by the member; or
    (iv) A proxy that is part of another document or instrument.
    (3) If a solicitation violates this section, the Board may require 
remedial measures, including:
    (i) Correction of the violation by a retraction and a new 
solicitation;
    (ii) Rescheduling the members' meeting; or
    (iii) Any other actions necessary to ensure a fair vote.
    (4) The Board may also bring an enforcement action against the 
violator for violations of this section.
    (h) Re-soliciting proxies. If the mutual holding company amends its 
application for conversion, the Board may require it to re-solicit 
proxies for the members' meeting as a condition of approval of the 
amendment.


Sec.  239.58  Offering circular.

    (a) Filing requirements.
    (1) The mutual holding company must prepare and file the offering 
circular with the appropriate Reserve Bank in compliance with this 
subpart and Form OC. The mutual holding company may obtain Form OC from 
the Reserve Bank and the Board's Web site (http://www.federalreserve.gov).
    (2) The mutual holding company must condition the stock offering 
upon member approval of the plan of conversion.
    (3) The Board will review the Form OC and may comment on the 
included disclosures and financial statements.
    (4) The mutual holding company must file a revised offering 
circular, final offering circular, and any post-effective amendment to 
the final offering circular.
    (5) The Board will not approve the adequacy or accuracy of the 
offering circular or the disclosures.
    (b) Distribution of the offering circular.
    (1) The mutual holding company may distribute a preliminary 
offering circular at the same time as or after the mutual holding 
company mails the proxy statement to its members.
    (2) The mutual holding company must distribute the offering 
circular in accordance with this subpart and with all applicable 
securities laws.
    (3) The mutual holding company must distribute the offering 
circular to persons listed in the plan of conversion no later than ten 
days after the Board approves the conversion.
    (c) Post-effective amendments to the offering circular.
    (1) The mutual holding company must file a post-effective amendment 
to the offering circular with the Board when a material event or change 
of circumstance occurs.
    (2) After the Securities and Exchange Commission declares the post-
effective amendment effective, the mutual holding company must 
immediately deliver the amendment to each person who subscribed for or 
ordered shares in the offering.
    (3) The post-effective amendment must indicate that each person may 
increase, decrease, or rescind their subscription or order.
    (4) The post-effective offering period must remain open no less 
than 10 days nor more than 20 days, unless the Board approves a longer 
rescission period.


Sec.  239.59  Offers and sales of stock.

    (a) Purchase priorities. The mutual holding company must offer to 
sell the conversion shares in the following order:
    (1) Eligible account holders.
    (2) Tax-qualified employee stock ownership plans.
    (3) Supplemental eligible account holders.
    (4) Other voting members who have subscription rights.
    (5) The community, the community and the general public, or the 
general public.
    (b) Offering conversion shares.
    (1) The mutual holding company may offer to sell the conversion 
shares if the Board approves the conversion, subject to compliance with 
requirements of the Securities and Exchange Commission.
    (2) The offer may commence at the same time as the proxy 
solicitation of the members begins.
    (c) Pricing conversion shares.
    (1) The conversion shares must be sold at a uniform price per share 
and at a total price that is equal to the estimated pro forma market 
value of the shares after conversion.
    (2) The maximum price must be no more than 15 percent above the 
midpoint of the estimated price range in the offering circular.
    (3) The minimum price must be no more than 15 percent below the 
midpoint of the estimated price range in the offering circular.
    (4) If the Board permits, the maximum price of conversion shares 
sold may be increased. The maximum price, as adjusted, must be no more 
than 15 percent above the maximum price

[[Page 56586]]

computed under paragraph (c)(2) of this section.
    (5) The maximum price must be between $5 and $50 per share.
    (6) The mutual holding company must include the estimated price in 
any preliminary offering circular.
    (d) Selling conversion shares.
    (1) The mutual holding company must distribute order forms to all 
eligible account holders, supplemental eligible account holders, and 
other voting members to enable them to subscribe for the conversion 
shares they are permitted under the plan of conversion. The mutual 
holding company may either send the order forms with the offering 
circular or after it distributes the offering circular.
    (2) The mutual holding company may sell the conversion shares in a 
community offering, a public offering, or both. The mutual holding 
company may begin the community offering, the public offering, or both 
at any time during the subscription offering or upon conclusion of the 
subscription offering.
    (3) The mutual holding company may pay underwriting commissions 
(including underwriting discounts). The Board may object to the payment 
of unreasonable commissions. The mutual holding company may reimburse 
an underwriter for accountable expenses in a subscription offering if 
the public offering is limited. If no public offering occurs, the 
mutual holding company may pay an underwriter a consulting fee. The 
Board may object to the payment of unreasonable consulting fees.
    (4) If the mutual holding company conducts the community offering, 
the public offering, or both at the same time as the subscription 
offering, it must fill all subscription orders first.
    (5) The mutual holding company must prepare the order form in 
compliance with this subpart and Form OF. The mutual holding company 
may obtain Form OF from the Reserve Bank and from the Board's Web site 
(www.federalreserve.gov).
    (e) Prohibited sales practices.
    (1) In connection with offers, sales, or purchases of conversion 
shares under this subpart, the mutual holding company and its 
directors, officers, agents, or employees may not:
    (i) Employ any device, scheme, or artifice to defraud;
    (ii) Obtain money or property by means of any untrue statement of a 
material fact or any omission of a material fact necessary to make the 
statements, in light of the circumstances under which they were made, 
not misleading; or
    (iii) Engage in any act, transaction, practice, or course of 
business that operates or would operate as a fraud or deceit upon a 
purchaser or seller.
    (2) During the conversion, no person may:
    (i) Transfer, or enter into any agreement or understanding to 
transfer, the legal or beneficial ownership of subscription rights for 
the conversion shares or the underlying securities to the account of 
another;
    (ii) Make any offer, or any announcement of an offer, to purchase 
any of the conversion shares from anyone but the mutual holding 
company; or
    (iii) Knowingly acquire more than the maximum purchase allowable 
under the plan of conversion.
    (3) The restrictions in paragraphs (e)(2)(i) and (e)(2)(ii) of this 
section do not apply to offers for more than 10 percent of any class of 
conversion shares by:
    (i) An underwriter or a selling group, acting on behalf of the 
mutual holding company or resulting stock holding company, that makes 
the offer with a view toward public resale; or
    (ii) One or more of the tax-qualified employee stock ownership 
plans so long as the plan or plans do not beneficially own more than 25 
percent of any class of the equity securities in the aggregate.
    (4) Any person that violates the restrictions in paragraphs 
(e)(2)(i) and (e)(2)(ii) of this section may face prosecution or other 
legal action.
    (f) Payment for conversion shares.
    (1) A subscriber may purchase conversion shares with cash, by a 
withdrawal from a savings account, or a withdrawal from a certificate 
of deposit. If a subscriber purchases conversion shares by a withdrawal 
from a certificate of deposit, the mutual holding company or its 
subsidiary savings association may not assess a penalty for the 
withdrawal.
    (2) The mutual holding company may not extend credit to any person 
to purchase the conversion shares.
    (g) Interest on payments for conversion shares.
    (1) The mutual holding company or its subsidiary savings 
association must pay interest from the date it receives a payment for 
conversion shares until the date it completes or terminates the 
conversion. The mutual holding company or its subsidiary savings 
association must pay interest at no less than the passbook rate for 
amounts paid in cash, check, or money order.
    (2) If a subscriber withdraws money from a savings account to 
purchase conversion shares, the mutual holding company or its 
subsidiary savings association must pay interest on the payment until 
the mutual holding company completes or terminates the conversion as if 
the withdrawn amount remained in the account.
    (3) If a depositor fails to maintain the applicable minimum balance 
requirement because he or she withdraws money from a certificate of 
deposit to purchase conversion shares, the mutual holding company or 
its subsidiary savings association may cancel the certificate and pay 
interest at no less than the passbook rate on any remaining balance.
    (h) Subscription rights for each eligible account holder and each 
supplemental eligible account holder.
    (1) The mutual holding company must give each eligible account 
holder subscription rights to purchase conversion shares in an amount 
equal to the greater of:
    (i) The maximum purchase limitation established for the community 
offering or the public offering under paragraph (p) of this section;
    (ii) One-tenth of one percent of the total stock offering; or
    (iii) Fifteen times the following number: The total number of 
conversion shares that the mutual holding company will issue, 
multiplied by the following fraction: the numerator is the total 
qualifying deposit of the eligible account holder, and the denominator 
is the total qualifying deposits of all eligible account holders. The 
mutual holding company must round down the product of this multiplied 
fraction to the next whole number.
    (2) The mutual holding company must give subscription rights to 
purchase shares to each supplemental eligible account holder in the 
same amount as described in paragraph (h)(1) of this section, except 
that the mutual holding company must compute the fraction described in 
paragraph (h)(1)(iii) of this section as follows: the numerator is the 
total qualifying deposit of the supplemental eligible account holder, 
and the denominator is the total qualifying deposits of all 
supplemental eligible account holders.
    (i) Officers, directors, and their associates as eligible account 
holders. The officers, directors, and their associates of the mutual 
holding company and subsidiary savings association may be eligible 
account holders. However, if an officer, director, or his or her 
associate receives subscription rights based on increased deposits in 
the year before the eligibility record date, the mutual holding company 
must subordinate subscription rights for these deposits to subscription 
rights exercised by other eligible account holders.

[[Page 56587]]

    (j) Other voting members eligible to purchase conversion shares.
    (1) The mutual holding company must give rights to purchase the 
conversion shares in the conversion to voting members who are neither 
eligible account holders nor supplemental eligible account holders. The 
mutual holding company must allocate rights to each voting member that 
are equal to the greater of:
    (i) The maximum purchase limitation established for the community 
offering and the public offering under paragraph (p) of this section; 
or
    (ii) One-tenth of one percent of the total stock offering.
    (2) The mutual holding company must subordinate the voting members' 
rights to the rights of eligible account holders, tax-qualified 
employee stock ownership plans, and supplemental eligible account 
holders.
    (k) Purchase limitations for officers, directors, and their 
associates.
    (1) When the mutual holding company converts, the officers, 
directors, and their associates of the mutual holding company and 
subsidiary savings association may not purchase, in the aggregate, more 
than the following percentage of the total stock offering:

------------------------------------------------------------------------
                                                            Officer and
                                                             director
                    Institution size                         purchases
                                                             (percent)
------------------------------------------------------------------------
$50,000,000 or less.....................................              35
$50,000,001-100,000,000.................................              34
$100,000,001-150,000,000................................              33
$150,000,001-200,000,000................................              32
$200,000,001-250,000,000................................              31
$250,000,001-300,000,000................................              30
$300,000,001-350,000,000................................              29
$350,000,001-400,000,000................................              28
$400,000,001-450,000,000................................              27
$450,000,001-500,000,000................................              26
Over $500,000,000.......................................              25
------------------------------------------------------------------------

    (2) The purchase limitations in this section do not apply to shares 
held in tax-qualified employee stock benefit plans that are 
attributable to the officers, directors, and their associates.
    (l) Allocating conversion shares in the event of oversubscription.
    (1) If the conversion shares are oversubscribed by the eligible 
account holders, the mutual holding company must allocate shares among 
the eligible account holders so that each, to the extent possible, may 
purchase 100 shares.
    (2) If the conversion shares are oversubscribed by the supplemental 
eligible account holders, the mutual holding company must allocate 
shares among the supplemental eligible account holders so that each, to 
the extent possible, may purchase 100 shares.
    (3) If a person is an eligible account holder and a supplemental 
eligible account holder, the mutual holding company must include the 
eligible account holder's allocation in determining the number of 
conversion shares that the mutual holding company may allocate to the 
person as a supplemental eligible account holder.
    (4) For conversion shares that the mutual holding company does not 
allocate under paragraphs (l)(1) and (l)(2) of this section, the mutual 
holding company must allocate the shares among the eligible or 
supplemental eligible account holders equitably, based on the amounts 
of qualifying deposits. The mutual holding company must describe this 
method of allocation in its plan of conversion.
    (5) If shares remain after the mutual holding company has allocated 
shares as provided in paragraphs (l)(1) and (l)(2) of this section, and 
if the voting members oversubscribe, the mutual holding company must 
allocate the conversion shares among those members equitably. The 
mutual holding company must describe the method of allocation in its 
plan of conversion.
    (m) Employee stock ownership plan purchase of conversion shares.
    (1) The tax-qualified employee stock ownership plan of the mutual 
holding company may purchase up to 10 percent of the total offering of 
the conversion shares.
    (2) If the Board approves a revised stock valuation range as 
described in paragraph (c)(5) of this section, and the final conversion 
stock valuation range exceeds the former maximum stock offering range, 
the mutual holding company may allocate conversion shares to the tax-
qualified employee stock ownership plan, up to the 10 percent limit in 
paragraph (m)(1) of this section.
    (3) If the tax-qualified employee stock ownership plan is not able 
to or chooses not to purchase stock in the offering, it may, with prior 
Board approval and appropriate disclosure in the offering circular, 
purchase stock in the open market, or purchase authorized but unissued 
conversion shares.
    (4) The mutual holding company may include stock contributed to a 
charitable organization in the conversion in the calculation of the 
total offering of conversion shares under paragraphs (m)(1) and (m)(2) 
of this section, unless the Board objects on supervisory grounds.
    (n) Purchase limitations.
    (1) The mutual holding company may limit the number of shares that 
any person, group of associated persons, or persons otherwise acting in 
concert, may subscribe to up to five percent of the total stock sold.
    (2) If the mutual holding company sets a limit of five percent 
under paragraph (n)(1) of this section, it may modify that limit with 
Board approval to provide that any person, group of associated persons, 
or persons otherwise acting in concert subscribing for five percent, 
may purchase between five and ten percent as long as the aggregate 
amount that the subscribers purchase does not exceed 10 percent of the 
total stock offering.
    (3) The mutual holding company may require persons exercising 
subscription rights to purchase a minimum number of conversion shares. 
The minimum number of shares must equal the lesser of the number of 
shares obtained by a $500 subscription or 25 shares.
    (4) In setting purchase limitations under this section, the mutual 
holding company may not aggregate conversion shares attributed to a 
person in the tax-qualified employee stock ownership plan with shares 
purchased directly by, or otherwise attributable to, that person.
    (o) Purchase preference for persons in the local community.
    (1) In the subscription offering, subject to the purchase 
priorities set forth in paragraph (a) of this section, the mutual 
holding company may give a purchase preference to eligible account 
holders, supplemental eligible account holders, and voting members 
residing in the local community.
    (2) In the community offering, the mutual holding company must give 
a purchase preference to natural persons residing in the local 
community.
    (p) Conditions on community offerings and public offerings.
    (1) If the mutual holding company offers conversion shares in a 
community offering, a public offering, or both, it must offer and sell 
the stock to achieve a widespread distribution of the stock.
    (2) If the mutual holding company offers shares in a community 
offering, a public offering, or both, it must first fill orders for the 
stock up to a maximum of two percent of the conversion stock on a basis 
that will promote a widespread distribution of stock. The mutual 
holding company must allocate any remaining shares on an equal number 
of shares per order basis until it fills all orders.


Sec.  239.60  Completion of the offering.

    (a) Deadline for completing the sale of stock. The mutual holding 
company must complete all sales of the stock within 45 calendar days 
after the last day of the subscription period, unless

[[Page 56588]]

the offering is extended under paragraph (b) of this section.
    (b) Offering period extension.
    (1) The mutual holding company must request, in writing, an 
extension of any offering period.
    (2) The Board may grant extensions of time to sell the shares. The 
Board will not grant any single extension of more than 90 days.
    (3) If the Board grants the request for an extension of time, the 
mutual holding company must provide a post-effective amendment to the 
offering circular under Sec.  239.58(c) to each person who subscribed 
for or ordered stock. The amendment must indicate that the Board 
extended the offering period and that each person who subscribed for or 
ordered stock may increase, decrease, or rescind their subscription or 
order within the time remaining in the extension period.


Sec.  239.61  Completion of the conversion.

    (a) Completion of the conversion.
    (1) In the plan of conversion, the mutual holding company must set 
a date by which the conversion must be completed. This date must not be 
more than 24 months from the date that the members approve the plan of 
conversion. The date, once set, may not be extended by the mutual 
holding company or by the Board. The mutual holding company must 
terminate the conversion if it is not completed by that date.
    (2) The conversion is complete on the date that the mutual holding 
company accepts the offers for stock of the resulting stock holding 
company.
    (b) Termination of the conversion.
    (1) The members may terminate the conversion by failing to approve 
the conversion at the members' meeting.
    (2) The mutual holding company may terminate the conversion before 
the members' meeting.
    (3) The mutual holding company may terminate the conversion after 
the members' meeting only if the Board concurs.
    (c) Voting rights for stockholders following conversion. The 
resulting stock holding company must provide the stockholders with 
exclusive voting rights.
    (d) Rights of savings account holders. The resulting stock holding 
company must provide a liquidation account for each eligible and 
supplemental eligible account holder under Sec.  239.62(a)(1)-(3).


Sec.  239.62  Liquidation accounts.

    (a) Liquidation account.
    (1) A liquidation account represents the potential interest of 
eligible account holders and supplemental eligible account holders in 
the mutual holding company's net worth at the time of conversion. The 
resulting stock holding company must maintain a sub-account to reflect 
the interest of each account holder.
    (2) Before the resulting stock holding company may provide a 
liquidation distribution to common stockholders, the resulting stock 
holding company must give a liquidation distribution to those eligible 
account holders and supplemental eligible account holders who hold 
savings accounts from the time of conversion until liquidation.
    (3) The resulting stock holding company may not record the 
liquidation account in the financial statements. The resulting stock 
holding company must disclose the liquidation account in the footnotes 
to the financial statements.
    (4) The initial balance of the liquidation account is the net worth 
in the statement of financial condition included in the final offering 
circular.
    (b) Liquidation sub-accounts.
    (1)(i) The resulting stock holding company determines the initial 
sub-account balance for a savings account held by an eligible account 
holder by multiplying the initial balance of the liquidation account by 
the following fraction: The numerator is the qualifying deposit in the 
savings account on the eligibility record date. The denominator is 
total qualifying deposits of all eligible account holders on that date.
    (ii) The resulting stock holding company determines the initial 
sub-account balance for a savings account held by a supplemental 
eligible account holder by multiplying the initial balance of the 
liquidation account by the following fraction: The numerator is the 
qualifying deposit in the savings account on the supplemental 
eligibility record date. The denominator is total qualifying deposits 
of all supplemental eligible account holders on that date.
    (iii) If an account holder holds a savings account on the 
eligibility record date and a separate savings account on the 
supplemental eligibility record date, the resulting stock holding 
company must compute separate sub-accounts for the qualifying deposits 
in the savings account on each record date.
    (2) The resulting stock holding company may not increase the 
initial sub-account balances. The resulting stock holding company must 
decrease the initial balance under Sec.  239.62(d) as depositors reduce 
or close their accounts.
    (c) Retention of voting rights based on liquidation sub-accounts. 
Eligible account holders or supplemental eligible account holders do 
not retain any voting rights based on their liquidation sub-accounts.
    (d) Adjusting liquidation sub-accounts.
    (1)(i) The resulting stock holding company must reduce the balance 
of an eligible account holder's or supplemental eligible account 
holder's sub-account if the deposit balance in the account holder's 
savings account at the close of business on any annual closing date, 
which for purposes of this section is the fiscal year end, after the 
relevant eligibility record dates is less than:
    (A) The deposit balance in the account holder's savings account at 
the close of business on any other annual closing date after the 
relevant eligibility record date; or
    (B) The qualifying deposits in the account holder's savings account 
on the relevant eligibility record date.
    (ii) The reduction must be proportionate to the reduction in the 
deposit balance.
    (2) If the resulting stock holding company reduces the balance of a 
liquidation sub-account, the resulting stock holding company may not 
subsequently increase it if the deposit balance increases.
    (3) The resulting stock holding company is not required to adjust 
the liquidation account and sub-account balances at each annual closing 
date if it maintains sufficient records to make the computations if a 
liquidation subsequently occurs.
    (4) The resulting stock holding company must maintain the 
liquidation sub-account for each account holder as long as the account 
holder maintains an account with the same social security number or tax 
identification number, as applicable.
    (5) If there is a complete liquidation, the resulting stock holding 
company must provide each account holder with a liquidation 
distribution in the amount of the sub-account balance.
    (e) Liquidation defined.
    (1) For purposes of this subpart, a liquidation is a sale of the 
assets and settlement of the liabilities with the intent to cease 
operations and close. Upon liquidation, the resulting stock holding 
company must return the charter to the governmental agency that issued 
it. The government agency must cancel the charter.
    (2) A merger, consolidation, or similar combination or transaction 
with another depository institution, is not a liquidation. If the 
resulting stock holding company is involved in such a transaction, the 
surviving institution must assume the liquidation account.

[[Page 56589]]

    (f) Effect of liquidation on net worth. The liquidation account 
does not affect the net worth.


Sec.  239.63  Post-conversion.

    (a) Management stock benefit plans.
    (1) During the 12 months after the conversion, the resulting stock 
holding company may implement a stock option plan (Option Plan), an 
employee stock ownership plan or other tax-qualified employee stock 
benefit plan (collectively, ESOP), and a management recognition plan 
(MRP), provided the resulting stock holding company meets all of the 
following requirements.
    (i) The resulting stock holding company discloses the plans in the 
proxy statement and offering circular and indicates in the offering 
circular that there will be a separate shareholder vote on the Option 
Plan and the MRP at least six months after the conversion. No 
shareholder vote is required to implement the ESOP. The ESOP must be 
tax-qualified.
    (ii) The Option Plan does not exceed more than ten percent of the 
number of shares that the resulting stock holding company issued in the 
conversion.
    (iii)(A) The ESOP and MRP do not exceed, in the aggregate, more 
than ten percent of the number of shares that the resulting stock 
holding company issued in the conversion. If the resulting stock 
holding company has tangible capital of ten percent or more following 
the conversion, the Board may permit the ESOP and MRP to represent, in 
the aggregate, up to 12 percent of the number of shares issued in the 
conversion; and
    (B) The MRP does not exceed more than three percent of the number 
of shares that the resulting stock holding company issued in the 
conversion. If the resulting stock holding company has tangible capital 
of ten percent or more after the conversion, the Board may permit the 
MRP to represent up to four percent of the number of shares that the 
resulting stock holding company issued in the conversion.
    (iv) No individual receives more than 25 percent of the shares 
under any plan.
    (v) The directors who are not the officers do not receive more than 
five percent of the shares of the MRP or Option Plan individually, or 
30 percent of any such plan in the aggregate.
    (vi) The shareholders approve each of the Option Plan and the MRP 
by a majority of the total votes eligible to be cast at a duly called 
meeting before the resulting stock holding company establishes or 
implements the plan. The resulting stock holding company may not hold 
this meeting until six months after the conversion.
    (vii) When the resulting stock holding company distributes proxies 
or related material to shareholders in connection with the vote on a 
plan, the resulting stock holding company states that the plan complies 
with Board regulations and that the Board does not endorse or approve 
the plan in any way. The resulting stock holding company may not make 
any written or oral representations to the contrary.
    (viii) The resulting stock holding company does not grant stock 
options at less than the market price at the time of grant.
    (ix) The resulting stock holding company does not fund the Option 
Plan or the MRP at the time of the conversion.
    (x) The plan does not begin to vest earlier than one year after 
shareholders approve the plan, and does not vest at a rate exceeding 20 
percent per year.
    (xi) The plan permits accelerated vesting only for disability or 
death, or if the resulting stock holding company undergoes a change of 
control.
    (xii) The plan provides that the executive officers or directors 
must exercise or forfeit their options in the event the institution 
becomes critically undercapitalized under the applicable regulatory 
capital requirements, is subject to Board enforcement action, or 
receives a capital directive under Sec.  263.83 of this chapter.
    (xiii) The resulting stock holding company files a copy of the 
proposed Option Plan or MRP with the Board and certifies to the Board 
that the plan approved by the shareholders is the same plan that the 
resulting stock holding company filed with, and disclosed in, the proxy 
materials distributed to shareholders in connection with the vote on 
the plan.
    (xiv) The resulting stock holding company files the plan and the 
certification with the Board within five calendar days after the 
shareholders approve the plan.
    (2) The resulting stock holding company may provide dividend 
equivalent rights or dividend adjustment rights to allow for stock 
splits or other adjustments to the stock in the ESOP, MRP, and Option 
Plan.
    (3) The restrictions in paragraph (a)(1) of this section do not 
apply to plans implemented more than 12 months after the conversion, 
provided that materials pertaining to any shareholder vote regarding 
such plans are not distributed within the 12 months after the 
conversion. If a plan adopted in conformity with paragraph (a)(1) of 
this section is amended more than 12 months following the conversion, 
the shareholders must ratify any material deviations to the 
requirements in paragraph (a)(1) of this section.
    (b) Restrictions on the sale of conversion shares by directors, 
officers, and their associates.
    (1) Directors and officers who purchase conversion shares may not 
sell the shares for one year after the date of purchase, except that in 
the event of the death of the officer or director, the successor in 
interest may sell the shares.
    (2) The resulting stock holding company must include notice of the 
restriction described in paragraph (b)(1) of this section on each 
certificate of stock that a director or officer purchases during the 
conversion or receives in connection with a stock dividend, stock 
split, or otherwise with respect to such restricted shares.
    (3) The resulting stock holding company must instruct the stock 
transfer agent about the transfer restrictions in this section.
    (4) For three years after the resulting stock holding company 
converts, the officers, directors, and their associates may purchase 
stock of the resulting stock holding company only from a broker or 
dealer registered with the Securities and Exchange Commission. However, 
the officers, directors, and their associates may engage in a 
negotiated transaction involving more than one percent of the 
outstanding stock, and may purchase stock through any of the management 
or employee stock benefit plans.
    (c) Repurchase of conversion shares.
    (1) The resulting stock holding company may not repurchase its 
shares in the first year after the conversion except:
    (i) In extraordinary circumstances, the resulting stock holding 
company may make open market repurchases of up to five percent of the 
outstanding stock in the first year after the conversion if the 
resulting stock holding company files a notice under paragraph (d)(1) 
of this section and the Board does not disapprove the repurchase. The 
Board will not approve such repurchases unless the repurchase meets the 
standards in paragraph (d)(3) of this section, and the repurchase is 
consistent with paragraph (c)(3) of this section.
    (ii) The resulting stock holding company may repurchase qualifying 
shares of a director or conduct a Board approved repurchase pursuant to 
an offer made to all shareholders of the stock holding company.
    (iii) Repurchases to fund management recognition plans that have 
been ratified by shareholders do not count toward the repurchase 
limitations in this section. Repurchases in the first year to fund

[[Page 56590]]

such plans require prior written notification to the Board.
    (iv) Purchases to fund tax qualified employee stock benefit plans 
do not count toward the repurchase limitations in this section.
    (2) After the first year, the resulting stock holding company may 
repurchase the shares, subject to all other applicable regulatory and 
supervisory restrictions and paragraph (c)(3) of this section.
    (3) All stock repurchases are subject to the following 
restrictions.
    (i) The resulting stock holding company may not repurchase the 
shares if the repurchase will reduce its applicable capital levels 
below the amount required for the liquidation account under Sec.  
239.62(a). The resulting stock holding company must comply with the 
capital distribution requirements of this subpart.
    (ii) The restrictions on share repurchases apply to a charitable 
organization under Sec.  239.64(b). The resulting stock holding company 
must aggregate purchases of shares by the charitable organization with 
the repurchases.
    (d) Board review of repurchase of conversion shares.
    (1) To repurchase stock in the first year following conversion, 
other than repurchases under paragraphs (c)(1)(iii) or (c)(1)(iv) of 
this section, the resulting stock holding company must file a written 
notice with the appropriate Reserve Bank. The resulting stock holding 
company must provide the following information:
    (i) The proposed repurchase program;
    (ii) The effect of the repurchases on the regulatory capital and 
other capital levels; and
    (iii) The purpose of the repurchases and, if applicable, an 
explanation of the extraordinary circumstances necessitating the 
repurchases.
    (2) The resulting stock holding company must file the notice with 
the appropriate Reserve Bank at least thirty days before the resulting 
stock holding company begins the repurchase program. The Board may 
extend its review of the notice for an additional sixty days.
    (3) The resulting stock holding company may not repurchase the 
shares if the Board objects to the repurchase program. The Board will 
not object to the repurchase program if:
    (i) The repurchase program will not adversely affect the financial 
condition of the resulting savings association;
    (ii) The resulting stock holding company submits sufficient 
information to evaluate the proposed repurchases;
    (iii) The resulting stock holding company demonstrate extraordinary 
circumstances and a compelling and valid business purpose for the share 
repurchases; and
    (iv) The repurchase program would not be contrary to other 
applicable regulations.
    (e) Declaring and paying dividends following conversion. The 
resulting stock holding company may declare or pay a dividend on its 
shares after it converts if:
    (1) The dividend will not reduce the regulatory capital below the 
amount required for the liquidation account under Sec.  239.62(a);
    (2) The resulting stock holding company complies with all 
applicable regulatory capital requirements after it declares or pays 
dividends;
    (3) The resulting stock holding company complies with the capital 
distribution requirements under this subpart; and
    (4) The resulting stock holding company does not return any 
capital, other than ordinary dividends, to purchasers during the term 
of the business plan submitted with the conversion.
    (f) Eligibility to acquire shares after conversion.
    (1) For three years after the resulting stock holding company 
converts, no person may, directly or indirectly, acquire or offer to 
acquire the beneficial ownership of more than ten percent of any class 
of the equity securities without the Board's prior written approval. If 
a person violates this prohibition, the resulting stock holding company 
may not permit the person to vote shares in excess of ten percent, and 
may not count the shares in excess of ten percent in any shareholder 
vote.
    (2) A person acquires beneficial ownership of more than ten percent 
of a class of shares when he or she holds any combination of the stock 
or revocable or irrevocable proxies under circumstances that give rise 
to a conclusive control determination or rebuttable control 
determination under Sec. Sec.  238.21(a) and (d) of this chapter. The 
Board will presume that a person has acquired shares if the acquiror 
entered into a binding written agreement for the transfer of shares. 
For purposes of this section, an offer is made when it is communicated. 
An offer does not include non-binding expressions of understanding or 
letters of intent regarding the terms of a potential acquisition.
    (3) Notwithstanding the restrictions in this section:
    (i) Paragraphs (f)(1) and (f)(2) of this section do not apply to 
any offer with a view toward public resale made exclusively to the 
resulting stock holding company, to the underwriters, or to a selling 
group acting on behalf of the resulting savings association.
    (ii) Unless the Board objects in writing, any person may offer or 
announce an offer to acquire up to one percent of any class of shares. 
In computing the one percent limit, the person must include all of his 
or her acquisitions of the same class of shares during the prior 12 
months.
    (iii) A corporation whose ownership is, or will be, substantially 
the same as the ownership may acquire or offer to acquire more than ten 
percent of the common stock, if it makes the offer or acquisition more 
than one year after the resulting stock holding company converts.
    (iv) One or more of the tax-qualified employee stock benefit plans 
may acquire the shares, if the plan or plans do not beneficially own 
more than 25 percent of any class of shares of the resulting savings 
association in the aggregate.
    (v) An acquiror does not have to file a separate application to 
obtain Board approval under paragraph (f)(1) of this section, if the 
acquiror files an application under part 238 of this chapter that 
specifically addresses the criteria listed under paragraph (f)(4) of 
this section and the resulting stock holding company does not oppose 
the proposed acquisition.
    (4) The Board may deny an application under paragraph (f)(1) of 
this section if the proposed acquisition:
    (i) Is contrary to the purposes of this subpart;
    (ii) Is manipulative or deceptive;
    (iii) Subverts the fairness of the conversion;
    (iv) Is likely to injure the resulting stock holding company;
    (v) Is inconsistent with the plan to meet the credit and lending 
needs of the proposed market area;
    (vi) Otherwise violates laws or regulations; or
    (vii) Does not prudently deploy the conversion proceeds.
    (g) Additional requirements that apply following conversion. After 
conversion, the resulting stock holding company must:
    (1) Promptly register the shares under the Securities Exchange Act 
of 1934 (15 U.S.C. 78a-78jj, as amended). The resulting stock holding 
company may not deregister the shares for three years.
    (2) Encourage and assist a market maker to establish and to 
maintain a market for the shares. A market maker for a security is a 
dealer who:
    (i) Regularly publishes bona fide competitive bid and offer 
quotations for

[[Page 56591]]

the security in a recognized inter-dealer quotation system;
    (ii) Furnishes bona fide competitive bid and offer quotations for 
the security on request; or
    (iii) May effect transactions for the security in reasonable 
quantities at quoted prices with other brokers or dealers.
    (3) Use the best efforts to list the shares on a national or 
regional securities exchange or on the National Association of 
Securities Dealers Automated Quotation system.
    (4) File all post-conversion reports that the Board requires.


Sec.  239.64  Contributions to charitable organizations.

    (a) Forming a charitable organization as part of a conversion. When 
a mutual holding company converts to the stock form, it may form a 
charitable organization. Its contributions to the charitable 
organization are governed by the requirements of paragraphs (b) through 
(f) of this section.
    (b) Donating conversion shares or conversion proceeds to a 
charitable organization. Some of the conversion shares or proceeds may 
be contributed to a charitable organization if:
    (1) The plan of conversion provides for the proposed contribution;
    (2) The members approve the proposed contribution; and
    (3) The IRS either has approved, or approves within two years after 
formation, the charitable organization as a tax-exempt charitable 
organization under the Internal Revenue Code.
    (c) Member approval of charitable contributions. At the meeting to 
consider conversion of the mutual holding company, the members must 
separately approve by at least a majority of the total eligible votes, 
a contribution of conversion shares or proceeds. If the mutual holding 
company has a subsidiary holding company with minority shareholders, or 
if the subsidiary savings association has minority shareholders, and 
the mutual holding company is adding a charitable contribution as part 
of a second step stock conversion, it must also have the minority 
shareholders separately approve the charitable contribution by a 
majority of their total eligible votes.
    (d) Charitable organization contribution limits. A reasonable 
amount of conversion shares or proceeds may be contributed to a 
charitable organization, if the contribution will not exceed limits for 
charitable deductions under the Internal Revenue Code and the Board 
does not object on supervisory grounds. If the mutual holding company 
or resulting stock holding company is well-capitalized pursuant to 
Sec.  238.62 of this chapter, the Board generally will not object if it 
contributes an aggregate amount of eight percent or less of the 
conversion shares or proceeds.
    (e) Charitable organization requirements. The charitable 
organization's charter (or trust agreement) and gift instrument must 
provide that:
    (1) The charitable organization's primary purpose is to serve and 
make grants in the local community;
    (2) As long as the charitable organization controls shares, it must 
vote those shares in the same ratio as all other shares voted on each 
proposal considered by the shareholders;
    (3) For at least five years after its organization, one seat on the 
charitable organization's board of directors (or board of trustees) is 
reserved for an independent director (or trustee) from the local 
community. This director may not be the officer, director, or employee, 
or the affiliate's officer, director, or employee, and should have 
experience with local community charitable organizations and grant 
making; and
    (4) For at least five years after its organization, one seat on the 
charitable organization's board of directors (or board of trustees) is 
reserved for a director from the board of directors or the board of 
directors of an acquiror or resulting institution in the event of a 
merger or acquisition of the organization.
    (5) The Board may examine the charitable organization at the 
charitable organization's expense;
    (6) The charitable organization must comply with all supervisory 
directives that the Board imposes;
    (7) The charitable organization must annually provide the Board 
with a copy of the annual report that the charitable organization 
submitted to the IRS;
    (8) The charitable organization must operate according to written 
policies adopted by its board of directors (or board of trustees), 
including a conflict of interest policy; and
    (9) The charitable organization may not engage in self-dealing, and 
must comply with all laws necessary to maintain its tax-exempt status 
under the Internal Revenue Code.
    (f) Conflicts of interest involving the directors of the mutual 
holding company or resulting stock holding company.
    (1) An individual who is the director, officer, or employee, or a 
person who has the power to direct the management or policies, or 
otherwise owes a fiduciary duty to the mutual holding company or 
resulting stock holding company and who will serve as an officer, 
director, or employee of the charitable organization, is subject to the 
following obligations:
    (i) The individual must not advance their own personal or business 
interests, or those of others with whom the individual has a personal 
or business relationship, at the expense of the mutual holding company 
or resulting stock holding company;
    (ii) If the individual has an interest in a matter or transaction 
before the board of directors, the individual must:
    (A) Disclose to the board all material nonprivileged information 
relevant to the board's decision on the matter or transaction, 
including the existence, nature and extent of the individual's 
interests, and the facts known to the individual as to the matter or 
transaction under consideration;
    (B) Refrain from participating in the board's discussion of the 
matter or transaction; and
    (C) Recuse themselves from voting on the matter or transaction (if 
the individual is a director). See Form AC, which provides further 
information or operating plans and conflict of interest plans. The 
mutual holding company may obtain Form AC from the appropriate Reserve 
Bank and the Board's Web site at http://www.federalreserve.gov.
    (2) Before the board of directors may adopt a plan of conversion 
that includes a charitable organization, the mutual holding company 
must identify the directors that will serve on the charitable 
organization's board. These directors may not participate in the 
board's discussions concerning contributions to the charitable 
organization, and may not vote on the matter.
    (3) The stock certificates of shares contributed to the charitable 
organization or that the charitable organization otherwise acquires 
must bear the following legend: ``The board of directors must consider 
the shares that this stock certificate represents as voted in the same 
ratio as all other shares voted on each proposal considered by the 
shareholders, as long as the shares are controlled by the charitable 
organization.''
    (4) As long as the charitable organization controls shares, the 
resulting stock holding company must consider those shares as voted in 
the same ratio as all of the shares voted on each proposal considered 
by the shareholders.
    (5) After the stock offering is complete, the resulting stock 
holding company must submit an executed copy of the following documents 
to the

[[Page 56592]]

appropriate Reserve Bank: the charitable organization's charter and 
bylaws (or trust agreement), operating plan (within six months after 
the stock offering), conflict of interest policy, and the gift 
instrument for the contributions of either stock or cash to the 
charitable organization.


Sec.  239.65  Voluntary supervisory conversions.

    (a) Voluntary supervisory conversion.
    (1) The mutual holding company must comply with this section and 
Sec.  239.66 to engage in a voluntary supervisory conversion. This 
subpart applies to all voluntary supervisory conversions under sections 
10(o)(7) and 10(p) of the Home Owners' Loan Act (12 U.S.C. 1467a(o) and 
(p)).
    (2) Sections 239.50 through 239.64 also apply to a voluntary 
supervisory conversion, unless a requirement is clearly inapplicable.
    (b) Conducting a voluntary supervisory conversion. In conducting a 
voluntary supervisory conversion, the mutual holding company may:
    (1) Sell its shares to the public;
    (2) Convert into stock form by merging into a state-chartered 
corporation; or
    (3) Sell its shares directly to an acquiror, who may be an 
individual, company, depository institution, or depository institution 
holding company.
    (c) Member rights in a voluntary supervisory conversion. Members of 
the mutual holding company do not have the right to approve or 
participate in a voluntary supervisory conversion, and will not have 
any legal or beneficial ownership interests in the converted 
association, unless the Board provides otherwise. The members may have 
interests in a liquidation account, if one is established.
    (d) Eligibility for a voluntary supervisory conversion. A mutual 
holding company may be eligible to engage in a voluntary supervisory 
conversion if:
    (1) Either the mutual holding company or its subsidiary savings 
association is significantly undercapitalized under applicable 
regulatory capital requirements (or the mutual holding company or its 
subsidiary savings association is undercapitalized under applicable 
regulatory capital requirements and a standard conversion that would 
make it adequately capitalized is not feasible) and will be a viable 
entity following the conversion;
    (2) Severe financial conditions threaten stability of the mutual 
holding company, and a conversion is likely to improve its financial 
condition.
    (e) A mutual holding company or its subsidiary savings association 
will be a viable entity following the conversion if it satisfies all of 
the following:
    (1) It will be adequately capitalized as a result of the 
conversion;
    (2) It, the proposed conversion, and its acquiror(s) comply with 
applicable supervisory policies;
    (3) The transaction is in the best interest of the mutual holding 
company and its subsidiary savings associations, and the best interest 
of the Deposit Insurance Fund and the public; and
    (4) The transaction will not injure or be detrimental to the mutual 
holding company and its subsidiary savings associations, the Deposit 
Insurance Fund, or the public interest.
    (f) Plan of voluntary supervisory conversion. A majority of the 
board of directors of the mutual holding company must approve a plan of 
voluntary supervisory conversion. The mutual holding company must 
include all of the following information in the plan of voluntary 
supervisory conversion.
    (1) The name and address of the mutual holding company.
    (2) The name, address, date and place of birth, and social security 
number or tax identification number, as applicable, of each proposed 
purchaser of conversion shares and a description of that purchaser's 
relationship to the mutual holding company.
    (3) The title, per-unit par value, number, and per-unit and 
aggregate offering price of shares that the mutual holding company will 
issue.
    (4) The number and percentage of shares that each investor will 
purchase.
    (5) The aggregate number and percentage of shares that each 
director, officer, and any affiliates or associates of the director or 
officer will purchase.
    (6) A description of any liquidation account.
    (7) Certified copies of all resolutions of the board of directors 
relating to the conversion.
    (g) Voluntary supervisory conversion application. The mutual 
holding company must include all of the following information and 
documents in a voluntary supervisory conversion application to the 
Board under this subpart:
    (1) Eligibility.
    (i) Evidence establishing that the mutual holding company meets the 
eligibility requirements under paragraph (d) of this section.
    (ii) An opinion of qualified, independent counsel or an 
independent, certified public accountant regarding the tax consequences 
of the conversion, or an IRS ruling indicating that the transaction 
qualifies as a tax-free reorganization.
    (2) Plan of conversion. A plan of voluntary supervisory conversion 
that complies with paragraph (e) of this section.
    (3) Business plan. A business plan that complies with Sec.  
239.53(b), when required by the Board.
    (4) Financial data. (i) The most recent audited financial 
statements and Thrift Financial Report. The mutual holding company must 
explain how its current capital levels or the capital levels of its 
subsidiary savings associations make it eligible to engage in a 
voluntary supervisory conversion under paragraph (d) of this section.
    (ii) A description of the estimated conversion expenses.
    (iii) Evidence supporting the value of any non-cash asset 
contributions. Appraisals must be acceptable to the Board and the non-
cash asset must meet all other Board policy guidelines.
    (iv) Pro forma financial statements that reflect the effects of the 
transaction. The mutual holding company must identify the tangible, 
core, and risk-based capital levels and show the adjustments necessary 
to compute the capital levels. The mutual holding company must prepare 
the pro forma statements in conformance with Board regulations and 
policy.
    (5) Proposed documents. (i) The proposed charter and bylaws.
    (ii) The proposed stock certificate form.
    (6) Agreements. (i) A copy of any agreements between the mutual 
holding company and proposed purchasers.
    (ii) A copy and description of all existing and proposed employment 
contracts. The mutual holding company must describe the term, salary, 
and severance provisions of the contract, the identity and background 
of the officer or employee to be employed, and the amount of any 
conversion shares to be purchased by the officer or employee or his or 
her affiliates or associates.
    (7) Related applications. (i) All filings required under the 
securities offering rules of subpart E of this part.
    (ii) Any required Holding Company Act application or Control Act 
notice under part 238 of this chapter.
    (iii) A subordinated debt application, if applicable.
    (iv) Applications for permission to organize a stock savings and 
loan holding company and for approval of a merger.
    (v) A statement describing any other applications required under 
federal or state banking laws for all transactions related to the 
conversion, copies of all dispositive documents issued by

[[Page 56593]]

regulatory authorities relating to the applications, and, if requested 
by the Board, copies of the applications and related documents.
    (8) Waiver request. A description of any of the features of the 
application that do not conform to the requirements of this subpart, 
including any request for waiver of any of these requirements.
    (h) Offers and sales of stock. If the mutual holding company 
converts under this subpart, the conversion shares must be offered and 
sold in compliance with Sec.  239.59.
    (i) Post-conversion acquisition of shares. For three years after 
the completion of a voluntary supervisory conversion, neither the 
resulting stock holding company nor the principal shareholder(s) may 
acquire shares from minority shareholders without the Board's prior 
approval.


Sec.  239.66  Board review of the voluntary supervisory conversion 
application.

    (a) Board review of a voluntary supervisory conversion application. 
The Board will generally approve the application to engage in a 
voluntary supervisory conversion unless it determines:
    (1) The mutual holding company does not meet the eligibility 
requirements for a voluntary supervisory conversion under Sec. Sec.  
239.65(d) or because the proceeds from the sale of the conversion 
stock, less the expenses of the conversion, would be insufficient to 
satisfy any applicable viability requirement;
    (2) The transaction is detrimental to or would cause potential 
injury to the mutual holding company, its subsidiary savings 
association, or the Deposit Insurance Fund or is contrary to the public 
interest;
    (3) The mutual holding company or the acquiror, or the controlling 
parties or directors and officers of the mutual holding company or the 
acquiror, have engaged in unsafe or unsound practices in connection 
with the voluntary supervisory conversion; or
    (4) The mutual holding company fails to justify an employment 
contract incidental to the conversion, or the employment contract will 
be an unsafe or unsound practice or represent a sale of control. In a 
voluntary supervisory conversion, the Board generally will not approve 
employment contracts of more than one year for the existing management.
    (b) Conditions the Board may impose on an approval.
    (1) The Board will condition approval of a voluntary supervisory 
conversion application on all of the following.
    (i) The conversion stock sale must be complete within three months 
after the Board approves the application. The Board may grant an 
extension for good cause.
    (ii) The mutual holding company and the resulting stock holding 
company must comply with all filing requirements of subpart E of this 
part.
    (iii) The mutual holding company must submit an opinion of 
independent legal counsel indicating that the sale of the shares 
complies with all applicable state securities law requirements.
    (iv) The mutual holding company and the resulting stock holding 
company must comply with all applicable laws, rules, and regulations.
    (v) The mutual holding company and the resulting stock holding 
company must satisfy any other requirements or conditions the Board may 
impose.
    (2) The Board may condition approval of a voluntary supervisory 
conversion application on either of the following:
    (i) The mutual holding company and the resulting stock holding 
company must satisfy any conditions and restrictions the Board imposes 
to prevent unsafe or unsound practices, to protect the Deposit 
Insurance Fund and the public interest, and to prevent potential injury 
or detriment to the mutual holding company before and after the 
conversion. The Board may impose these conditions and restrictions on 
the mutual holding company and the resulting stock holding company 
(before and after the conversion), the acquiror, controlling parties, 
or directors and officers of the mutual holding company or the 
acquiror; or
    (ii) The mutual holding company or the resulting stock holding 
company must infuse a larger amount of capital, if necessary, for 
safety and soundness reasons.

Appendix A to Part 239--Mutual Holding Company Model Charter

FEDERAL MUTUAL HOLDING COMPANY CHARTER

    Section 1: Corporate title. The name of the mutual holding 
company is ----(the ``Mutual Holding Company'').
    Section 2: Duration. The duration of the Mutual Holding Company 
is perpetual.
    Section 3: Purpose and powers. The purpose of the Mutual Holding 
Company is to pursue any or all of the lawful objectives of a 
federal mutual savings and loan holding company chartered under 
section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and 
to exercise all of the express, implied, and incidental powers 
conferred thereby and all acts amendatory thereof and supplemental 
thereto, subject to the Constitution and the 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 Federal Reserve Board (``Board'').
    Section 4: Capital. The Mutual Holding Company shall have no 
capital stock.
    Section 5: Members. [The content of this section 5 shall be 
identical to the content of the parallel section in the charter of 
the reorganizing association, with the following exceptions: (A) Any 
provisions conferring membership rights upon borrowers of the 
reorganizing association shall be eliminated and replaced with 
provisions grandfathering those rights in accordance with 12 CFR 
239.5; and (B) appropriate changes shall be made to indicate that 
membership rights in the mutual holding company derive from deposit 
accounts in and, to the extent of any grandfather provisions, 
borrowings from the resulting association. Set forth below is an 
example of how section 5 should appear in the charter of a mutual 
holding company formed by a reorganizing association whose charter 
conforms to the model charter prescribed for federal mutual savings 
associations for calendar year 1989. Additional changes to this 
section 5 may be required whenever a mutual holding company 
reorganization involves an acquiree association, or a mutual holding 
company makes a post-reorganization acquisition of a mutual savings 
association, so as to preserve the membership rights of the members 
of the acquired association consistent with 12 CFR 239.5.]
    All holders of the savings, demand, or other authorized accounts 
of ----[insert the name of the resulting association] (the 
``Association'') are members of the Mutual Holding Company. With 
respect to all questions requiring action by the members of the 
Mutual Holding Company, each holder of an account in the Association 
shall be permitted to cast one vote for each $100, or fraction 
thereof, of the withdrawal value of the member's account. In 
addition, borrowers from the Association as of ----[insert the date 
of the reorganization or any earlier date as of which new borrowings 
ceased to result in membership rights] shall be entitled to one vote 
for the period of time during which such borrowings are in 
existence. [The foregoing sentence should be included only if the 
charter of the reorganizing association confers voting rights on any 
borrowers.] No member, however, shall cast more than one thousand 
votes. All accounts shall be nonassessable.
    Section 6. Directors. The Mutual Holding Company 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, as 
fixed in the Mutual Holding Company'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 Board.
    Section 7: Capital, surplus, and distribution of earnings. [The 
content of this section 7 shall be identical to the content of the 
parallel section in the charter of the reorganizing association, 
except for changes made to indicate that distribution rights in the 
mutual holding company derive from deposit accounts in the resulting 
association, any changes required to provide that the

[[Page 56594]]

Board shall be the approving authority in instances where the 
charter requires regulatory approval of distributions, and any other 
changes necessary to accommodate the mutual holding company format. 
Set forth below is an example of how section 7 should appear in the 
charter of a mutual holding company formed by a reorganizing 
association whose charter conforms to the model charter prescribed 
for federal mutual savings associations for calendar year 1989. 
Additional changes to this section 7 may be required whenever a 
mutual holding company reorganization involves an acquiree 
association, or a mutual holding company makes a post-reorganization 
acquisition of a mutual savings association, so as to preserve the 
membership rights of the members of the acquired association 
consistent with 12 CFR 239.5].
    The Mutual Holding Company shall distribute net earnings to 
account holders of the Association on such basis and in accordance 
with such terms and conditions as may from time to time be 
authorized by the Board, provided that the Mutual Holding Company 
may establish minimum account balance requirements for account 
holders to be eligible for distributions of earnings.
    All holders of accounts of the Association shall be entitled to 
equal distribution of the assets of the Mutual Holding Company, pro 
rata to the value of their accounts in the Association, in the event 
of voluntary or involuntary liquidation, dissolution, or winding up 
of the Mutual Holding Company.
    Section 8. Amendment. 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 Board prior to approval by the members at a legal 
meeting and shall be effective upon filing with the Board in 
accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
By:--------------------------------------------------------------------
Secretary of the Board of Governors of the Federal Reserve System
Effective Date:--------------------------------------------------------

Appendix B to Part 239--Subsidiary Holding Company of a Mutual Holding 
Company Model Charter

FEDERAL MHC SUBSIDIARY HOLDING COMPANY CHARTER

    Section 1. Corporate title. The full corporate title of the 
mutual holding company (``MHC'') subsidiary holding company is XXX.
    Section 2. Domicile. The domicile of the MHC subsidiary holding 
company shall be in the city of --, in the State of --.
    Section 3. Duration. The duration of the MHC subsidiary holding 
company is perpetual.
    Section 4. Purpose and powers. The purpose of the MHC subsidiary 
holding company is to pursue any or all of the lawful objectives of 
a federal mutual holding company chartered under section 10(o) of 
the Home Owners' Loan Act, 12 U.S.C. 1467a(o), 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 Board of 
Governors of the Federal Reserve System (``Board'').
    Section 5. Capital stock. The total number of shares of all 
classes of the capital stock that the MHC subsidiary holding company 
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 MHC subsidiary holding company. 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 MHC 
subsidiary holding company), labor, or services actually performed 
for the MHC subsidiary holding company, 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 MHC subsidiary holding company, 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 MHC subsidiary 
holding company 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 MHC 
subsidiary holding company, 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 (except for shares issued to the 
parent mutual holding company) of the MHC subsidiary holding company 
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 MHC subsidiary 
holding company, the holders of the common stock shall be entitled, 
after payment or provision for payment of all debts and liabilities 
of the MHC subsidiary holding company, to receive the remaining 
assets of the MHC subsidiary holding company 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 MHC subsidiary holding company shall not be entitled to 
preemptive rights with respect to any shares of the MHC subsidiary 
holding company which may be issued.
    Section 7. Directors. The MHC subsidiary holding company shall 
be under the direction of a board of directors. The authorized 
number of directors, as stated in the MHC subsidiary holding 
company's bylaws, shall not be fewer than five nor more than fifteen 
except when a greater or lesser number is approved by the Board, 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 MHC subsidiary holding company, 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 Board.

Attest:----------------------------------------------------------------
Secretary of the Subsidiary Holding Company
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Subsidiary Holding 
Company
By:--------------------------------------------------------------------
Secretary of the Board of Governors of the Federal Reserve System
Effective Date:--------------------------------------------------------

Appendix C to Part 239--Mutual Holding Company Model Bylaws

MODEL BYLAWS FOR MUTUAL HOLDING COMPANIES

    The term ``trustees'' may be substituted for the term 
``directors.''
    1. Annual meeting of members. The annual meeting of the members 
of the mutual holding company for the election of directors and for 
the transaction of any other business of the mutual holding company 
shall be held, as designated by the board of directors, at a 
location within the state that constitutes the principal place of 
business of the mutual holding company, or at any other convenient 
place the board of directors may designate, at (insert date and time 
within 150 days after the end of the mutual holding company's fiscal 
year, if not a legal holiday, or if a legal holiday then on the next 
succeeding day not a legal holiday). At each annual meeting, the 
officers shall make a full report of the financial condition of the 
mutual holding company and of its progress for the preceding year 
and shall outline a program for the succeeding year.

[[Page 56595]]

    2. Special meetings of members. Special meetings of the members 
of the mutual holding company may be called at any time by the 
president or the board of directors and shall be called by the 
president, a vice president, or the secretary upon the written 
request of members of record, holding in the aggregate at least one-
tenth of the voting capital of the mutual holding company. Such 
written request shall state the purpose of the meeting and shall be 
delivered at the principal place of business of the mutual holding 
company addressed to the president. For purposes of this section, 
``voting capital'' means FDIC-insured deposits as of the voting 
record date. Annual and special meetings shall be conducted in 
accordance with the most current edition of Robert's Rules of Order 
or any other set of written procedures agreed to by the board of 
directors.
    3. Notice of meeting of members. Notice of each meeting shall be 
either published once a week for the two successive calendar weeks 
(in each instance on any day of the week) immediately prior to the 
week in which such meeting shall convene, in a newspaper printed in 
the English language and of general circulation in the city or 
county in which the principal place of business of the mutual 
holding company is located, or mailed postage prepaid at least 
(insert number no less than 15) days and not more than (insert 
number 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 mutual holding company. Such 
notice shall state the name of the mutual holding company, the place 
of the meeting, the date and time when it shall convene, and the 
matters to be considered. A similar notice shall be posted in a 
conspicuous place in each of the offices of the mutual holding 
company during the 14 days immediately preceding the date on which 
such meeting shall convene. If any member, in person or by 
authorized attorney, shall waive in writing notice of any meeting of 
members, notice thereof need not be given to such member. 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 board of directors shall fix in 
advance a record date for any such determination of members. 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 member entitled to participate in any 
such action shall be the member of record on the books of the mutual 
holding company on such record date. The number of votes which each 
member shall be entitled to cast at any meeting of the members shall 
be determined from the books of the mutual holding company as of 
such record date. Any member of such record date who ceases to be a 
member prior to such meeting shall not be entitled to vote at that 
meeting. 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. Directors, however, are 
elected by a plurality of the votes cast at an election of 
directors. At any adjourned meeting any business may be transacted 
which 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. Voting at any annual or special meeting of 
the members may be by proxy pursuant to the rules and regulations of 
the Board of Governors of the Federal Reserve System (Board), 
provided, that no proxies shall be voted at any meeting unless such 
proxies shall have been placed on file with the secretary of the 
mutual holding company, 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 mutual holding company must run to 
the board of directors as a whole, or to a committee appointed by a 
majority of such board. Accounts held by an administrator, executor, 
guardian, conservator or receiver may be voted in person or by proxy 
by such person. Accounts held by a trustee may be voted by such 
trustee either in person or by proxy, in accordance with the terms 
of the trust agreement, but no trustee shall be entitled to vote 
accounts without a transfer of such accounts into the trustee name. 
Accounts held in trust in an IRA or Keogh Account, however, may be 
voted by the mutual holding company if no other instructions are 
received. Joint accounts shall be entitled to no more than 1000 
votes, and any owner may cast all the votes unless the mutual 
holding company has otherwise been notified in writing.
    7. Communication between members. Communication between members 
shall be subject to any applicable rules or regulations of the 
Board. No member, however, shall have the right to inspect or copy 
any portion of any books or records of a mutual holding company 
containing: (i) a list of depositors in or borrowers from such 
mutual holding company; (ii) their addresses; (iii) individual 
deposit or loan balances or records; or (iv) any data from which 
such information could reasonably be constructed.
    8. Number of directors, membership. The number of directors 
shall be ----[not fewer than five nor more than fifteen], except 
where authorized by the Board. Each director shall be a member of 
the mutual holding company. Directors shall 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.
    9. Meetings of the board. The board of directors shall meet 
regularly without notice at the principal place of business of the 
mutual holding company at least once each month at an hour and date 
fixed by resolution of the board, provided that the place of meeting 
may be changed by the directors. Special meetings of the board may 
be held at any place specified in a notice of such meeting and shall 
be called by the secretary upon the written request of the chairman 
or of three directors. All special meetings shall be held upon at 
least 24 hours written notice to each director unless notice is 
waived in writing before or after such meeting. Such notice shall 
state the place, date, time, and purposes of such meeting. 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. Action may be taken without a meeting if unanimous 
written consent is obtained for such action. The board may also 
permit telephonic participation at 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.
    10. Officers, employees, and agents. Annually at the meeting of 
the board of directors of the mutual holding company following the 
annual meeting of the members of the mutual holding company, the 
board shall elect a president, one or more vice presidents, a 
secretary, and a treasurer or comptroller: Provided, that the 
offices of president and secretary may not be held by the same 
person and a vice president may also be the treasurer or 
comptroller. The board may appoint such additional officers, 
employees, and agents as it may from time to time determine. The 
term of office of all officers shall be one year or until their 
respective successors are elected and qualified. Any officer may be 
removed at any time by the board 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. In the absence 
of designation from time to time of powers and duties by the board, 
the officers shall have such powers and duties as generally pertain 
to their respective offices. Any indemnification by the mutual 
holding company of the mutual holding company's personnel is subject 
to any applicable rules or regulations of the Board.
    11. Vacancies, resignation or removal of directors. Members of 
the mutual holding company shall elect directors by ballot: 
Provided, that in the event of a vacancy on the board between 
meetings of members, 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. Any director may resign at any time by sending a 
written notice of such resignation to the mutual holding company 
delivered to the secretary. Unless otherwise specified therein such 
resignation shall take effect upon receipt by the secretary. More 
than three consecutive absences from regular meetings of the board,

[[Page 56596]]

unless excused by resolution of the board, shall automatically 
constitute a resignation, effective when such resignation is 
accepted by the board. At a meeting of members called expressly for 
that purpose, directors or the entire board may be removed, only 
with cause, 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: (a) By resolution, to appoint from among its members and 
remove an executive committee, which committee shall have and may 
exercise the powers of the board between the meetings of 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 mutual holding company. Such 
committee shall not operate to relieve the board, or any member 
thereof, of any responsibility imposed by law; (b) To appoint and 
remove by resolution the members of such other committees as may be 
deemed necessary and prescribe the duties thereof; (c) To fix the 
compensation of directors, officers, and employees; and to remove 
any officer or employee at any time with or without cause; (d) To 
limit payments on capital which may be accepted; and (e) To exercise 
any and all of the powers of the mutual holding company not 
expressly reserved by the charter to the members.
    13. Execution of instruments, generally. All documents and 
instruments or writings of any nature shall be signed, executed, 
verified, acknowledged, and delivered by such officers, agents, or 
employees of the mutual holding company or any one of them and in 
such manner as from time to time may be determined by resolution of 
the board. All notes, drafts, acceptances, checks, endorsements, and 
all evidences of indebtedness of the mutual holding company 
whatsoever shall be signed by such officer or officers or such agent 
or agents of the mutual holding company and in such manner as the 
board may from time to time determine. Endorsements for deposit to 
the credit of the mutual holding company in any of its duly 
authorized depositories shall be made in such manner as the board 
may from time to time determine. Proxies to vote with respect to 
shares or accounts of other mutual holding companies or stock of 
other corporations owned by, or standing in the name of, the mutual 
holding company may be executed and delivered from time to time on 
behalf of the mutual holding company by the president or a vice 
president and the secretary or an assistant secretary of the mutual 
holding company or by any other persons so authorized by the board.
    14. Nominating committee. The chairman, at least 30 days prior 
to the date of each annual meeting, shall appoint a nominating 
committee of three individuals who are members of the mutual holding 
company. Such committee shall make nominations for directors in 
writing and deliver to the secretary such written nominations at 
least 15 days prior to the date of the annual meeting, which 
nominations shall then be posted in a prominent place in the 
principal place of business for the 15-day period prior to the date 
of the annual meeting, except in the case of a nominee substituted 
as a result of death or other incapacity. Provided such committee is 
appointed and makes such nominations, no nominations for directors 
except those made by the nominating committee shall be voted upon at 
the annual meeting unless other nominations by members are made in 
writing and delivered to the secretary of the mutual holding company 
at least 10 days prior to the date of the annual meeting, which 
nominations shall then be posted in a prominent place in the 
principal place of business for the 10-day period prior to the date 
of the annual meeting, except in the case of a nominee substituted 
as a result of death or other incapacity. Ballots bearing the names 
of all individuals nominated by the nominating committee and by 
other members prior to the annual meeting shall be provided for use 
by the members at the annual meeting. If at any time the chairman 
shall fail to appoint such nominating committee, or the nominating 
committee shall fail or refuse to act at least 15 days prior to the 
annual meeting, nominations for directors may be made at the annual 
meeting by any member and shall be voted upon.
    15. New business. Any new business to be taken up at the annual 
meeting, including any proposal to increase or decrease the number 
of directors of the mutual holding company, shall be stated in 
writing and filed with the secretary of the mutual holding company 
at least 30 days before the date of the annual meeting, and all 
business so stated, proposed, and filed shall be considered at the 
annual meeting; but no other proposal shall be acted upon at the 
annual meeting. Any member may make any other proposal at the annual 
meeting and the same may be discussed and considered; but unless 
stated in writing and filed with the secretary 30 days before the 
meeting, such proposal shall be laid over for action at an 
adjourned, special, or regular meeting of the members taking place 
at least 30 days thereafter. This provision shall not prevent the 
consideration and approval or disapproval at the annual meeting of 
the reports of officers and committees, but in connection with such 
reports no new business shall be acted upon at such annual meeting 
unless stated and filed as herein provided.
    16. Seal. The seal shall be two concentric circles between which 
shall be the name of the mutual holding company. The year of 
incorporation, the word ``Incorporated'' or an emblem may appear in 
the center.
    17. Amendment. Adoption of any bylaw amendment pursuant to Sec.  
239.15 of the Board's regulations, as long as consistent with 
applicable law, rules and regulations, and which adequately 
addresses the subject and purpose of the stated by law section, 
shall be effective after (i) approval of the amendment by a majority 
vote of the authorized board, or by a vote of the members of the 
mutual holding company at a legal meeting; and (ii) receipt of any 
applicable regulatory approval. When a mutual holding company 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.
    18. Age limitations. [Bylaws on age limitations must comply with 
all Federal laws, such as the Age Discrimination in Employment Act 
and the Employee Retirement Income Security Act.]
    (a) Directors. No individual ---- years of age shall be eligible 
for election, reelection, appointment, or reappointment to the board 
of the mutual holding company. No director shall serve as such 
beyond the annual meeting of the mutual holding company immediately 
following the director becoming ----(fill in age used above), except 
that a director serving on ----(fill in bylaw adoption date) may 
complete the term as director. This age limitation does not apply to 
an advisory director.
    (b) Officers. No individual ---- years of age shall be eligible 
for election, reelection, appointment, or reappointment as an 
officer of the mutual holding company. No officer shall serve beyond 
the annual meeting of the mutual holding company immediately 
following the officer becoming ----(fill in age used above), except 
that an officer serving on ----(fill in bylaw adoption date) may 
complete the term. However, an officer shall, at the option of the 
board, retire at age ---- if the officer has served in an executive 
or high policy-making post for at least two years immediately prior 
to retirement and is immediately entitled to nonforfeitable annual 
retirement benefits of at least ----.

Appendix D to Part 239--Subsidiary Holding Company of a Mutual Holding 
Company Model Bylaws

MHC Subsidiary Holding Company Bylaws

Article I--Home Office

    The home office of the Subsidiary Holding Company shall be at --
-------------- . [set forth the full address] in the County of ----
------------ , in the State of ---------------- .

Article II--Shareholders

    Section 1. Place of Meetings. All annual and special meetings of 
shareholders shall be held at the home office of the Subsidiary 
Holding Company or at such other convenient place as the board of 
directors may determine.
    Section 2. Annual Meeting. A meeting of the shareholders of the 
Subsidiary Holding Company for the election of directors and for the 
transaction of any other business of the Subsidiary Holding Company 
shall be held annually within 150 days after the end of the 
Subsidiary Holding Company's fiscal year on the ----of ---- if not a 
legal holiday, and if a legal holiday, then on the next day 
following which is not a legal holiday, at ----, or at such other 
date and time within such 150-day period as the board of directors 
may determine.
    Section 3. Special Meetings. Special meetings of the 
shareholders for any purpose or purposes, unless otherwise 
prescribed by the regulations of the Board of Governors of the 
Federal Reserve System (``Board''), may be called at any time by the 
chairman of the

[[Page 56597]]

board, the president, or a majority of the board of directors, and 
shall be called by the chairman of the board, the president, or the 
secretary upon the written request of the holders of not less than 
one-tenth of all of the outstanding capital stock of the Subsidiary 
Holding Company entitled to vote at the meeting. Such written 
request shall state the purpose or purposes of the meeting and shall 
be delivered to the home office of the Subsidiary Holding Company 
addressed to the chairman of the board, the president, or the 
secretary.
    Section 4. Conduct of Meetings. Annual and special meetings 
shall be conducted in accordance with the most current edition of 
Robert's Rules of Order unless otherwise prescribed by regulations 
of the Board or these bylaws or the board of directors adopts 
another written procedure for the conduct of meetings. The board of 
directors shall designate, when present, either the chairman of the 
board or president to preside at such meetings.
    Section 5. Notice of Meetings. Written notice stating the place, 
day, and hour of the meeting and the purpose(s) 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, or the secretary, or the directors 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 as it 
appears on the stock transfer books or records of the Subsidiary 
Holding Company as of the record date prescribed in section 6 of 
this article II with postage 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. It shall not be necessary to give any notice of 
the time and place of any meeting adjourned for less than 30 days or 
of the business to be transacted at the meeting, other than an 
announcement at the meeting at which such adjournment is taken.
    Section 6. 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, 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 
fewer 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.
    Section 7. Voting Lists. At least 20 days before each meeting of 
the shareholders, the officer or agent having charge of the stock 
transfer books for shares of the Subsidiary Holding Company shall 
make a complete list of the shareholders of record entitled to vote 
at such meeting, or any adjournment 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 Subsidiary Holding Company and shall be subject to 
inspection by any shareholder of record or the shareholder's agent 
at any time during usual business hours for a period of 20 days 
prior to such meeting. Such list shall also be produced and kept 
open at the time and place of the meeting and shall be subject to 
inspection by any shareholder of record or any shareholder's agent 
during the entire time of the meeting. The original stock transfer 
book shall constitute prima facie evidence of the shareholders 
entitled to examine such list or transfer books or to vote at any 
meeting of shareholders. In lieu of making the shareholder list 
available for inspection by shareholders as provided in the 
preceding paragraph, the board of directors may elect to follow the 
procedures prescribed in Sec.  239.26(d) of the Board's regulations 
as now or hereafter in effect.
    Section 8. Quorum. A majority of the outstanding shares of the 
Subsidiary Holding Company entitled to vote, represented in person 
or by proxy, shall constitute a quorum at a meeting of shareholders. 
If less than a majority of the outstanding shares is represented at 
a meeting, a majority of the shares so represented may adjourn the 
meeting from time to time without further notice. At such adjourned 
meeting at which a quorum shall be present or represented, any 
business may be transacted which might have been transacted at the 
meeting as originally notified. The shareholders present at a duly 
organized meeting may continue to transact business until 
adjournment, notwithstanding the withdrawal of enough shareholders 
to constitute 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 shareholders, unless the vote of a greater number of 
shareholders 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.
    Section 9. Proxies. At all meetings of shareholders, a 
shareholder may vote by proxy executed in writing by the shareholder 
or by his or her 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. 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.
    Section 10. Voting of Shares in the Name of Two or More Persons. 
When ownership stands in the name of two or more persons, in the 
absence of written directions to the Subsidiary Holding Company to 
the contrary, at any meeting of the shareholders of the Subsidiary 
Holding Company any one or more of such shareholders may cast, in 
person or by proxy, all votes to which such ownership is entitled. 
In the event an attempt is made to cast conflicting votes, in person 
or by proxy, by the several persons in whose names shares of stock 
stand, the vote or votes to which those persons are entitled shall 
be cast as directed by a majority of those holding such and present 
in person or by proxy at such meeting, but no votes shall be cast 
for such stock if a majority cannot agree.
    Section 11. Voting of Shares by Certain Holders. Shares standing 
in the name of another corporation may be voted by any officer, 
agent, or proxy as the bylaws of such corporation may prescribe, or, 
in the absence of such provision, as the board of directors of such 
corporation may determine. Shares held by an administrator, 
executor, guardian, or conservator may be voted by him or her, 
either in person or by proxy, without a transfer of such shares into 
his or her name. Shares standing in the name of a trustee may be 
voted by him or her, either in person or by proxy, but no trustee 
shall be entitled to vote shares held by him or her without a 
transfer of such shares into his or her name. Shares held in trust 
in an IRA or Keogh Account, however, may by voted by the Subsidiary 
Holding Company if no other instructions are received. Shares 
standing in the name of a receiver may be voted by such receiver, 
and shares held by or under the control of a receiver may be voted 
by such receiver without the transfer into his or her name if 
authority to do so is contained in an appropriate order of the court 
or other public authority by which such receiver was appointed. A 
shareholder whose shares are pledged shall be entitled to vote such 
shares until the shares have been transferred into the name of the 
pledgee, and thereafter the pledgee shall be entitled to vote the 
shares so transferred. Neither treasury shares of its own stock held 
by the Subsidiary Holding Company 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 
Subsidiary Holding Company, 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. [If charter authorizes cumulative 
voting, the following Section 12 shall apply, otherwise renumber 
Sections 13-16 as Sections 12-15.]
    Section 12. Cumulative Voting. Every shareholder entitled to 
vote at an election for directors shall have the right to vote, in 
person or by proxy, the number of shares owned by the shareholder 
for as many persons as there are directors to be elected and for 
whose election the shareholder has a right to vote, or to cumulate 
the votes by giving one candidate as many votes as the number of 
such directors to be elected multiplied by the number of shares 
shall equal or by distributing such votes on the same principle 
among any number of candidates.
    Section 13. Inspectors of Election. In advance of any meeting of 
shareholders, the board of directors may appoint any individual 
other than nominees for office as inspectors of election to act at 
such meeting

[[Page 56598]]

or any adjournment. The number of inspectors shall be either one or 
three. Any such appointment shall not be altered at the meeting. If 
inspectors of election are not so appointed, the chairman of the 
board or the president may, or on the request of not fewer than 10 
percent of the votes represented at the meeting shall, make such 
appointment at the meeting. If appointed at the meeting, the 
majority of the votes present shall determine whether one or three 
inspectors are to be appointed. In case any individual appointed as 
inspector fails to appear or fails or refuses to act, the vacancy 
may be filled by appointment by the board of directors in advance of 
the meeting or at the meeting by the chairman of the board or the 
president. Unless otherwise prescribed by regulations of the Board, 
the duties of such inspectors shall include: determining the number 
of shares and the voting power of each share, the shares represented 
at the meeting, the existence of a quorum, and the authenticity, 
validity and effect of proxies; receiving votes, ballots, or 
consents; hearing and determining all challenges and questions in 
any way arising in connection with the rights to vote; counting and 
tabulating all votes or consents; determining the result; and such 
acts as may be proper to conduct the election or vote with fairness 
to all shareholders.
    Section 14. Nominating Committee. The board of directors shall 
act as a nominating committee for selecting the management nominees 
for election as directors. Except in the case of a nominee 
substituted as a result of the death or other incapacity of a 
management nominee, the nominating committee shall deliver written 
nominations to the secretary at least 20 days prior to the date of 
the annual meeting. Upon delivery, such nominations shall be posted 
in a conspicuous place in each office of the Subsidiary Holding 
Company. No nominations for directors except those made by the 
nominating committee shall be voted upon at the annual meeting 
unless other nominations by shareholders are made in writing and 
delivered to the secretary of the Subsidiary Holding Company at 
least five days prior to the date of the annual meeting. Upon 
delivery, such nominations shall be posted in a conspicuous place in 
each office of the Subsidiary Holding Company. Ballots bearing the 
names of all persons nominated by the nominating committee and by 
shareholders shall be provided for use at the annual meeting. 
However, if the nominating committee shall fail or refuse to act at 
least 20 days prior to the annual meeting, nominations for directors 
may be made at the annual meeting by any shareholder entitled to 
vote and shall be voted upon.
    Section 15. New Business. Any new business to be taken up at the 
annual meeting shall be stated in writing and filed with the 
secretary of the Subsidiary Holding Company at least five days 
before the date of the annual meeting, and all business so stated, 
proposed, and filed shall be considered at the annual meeting; but 
no other proposal shall be acted upon at the annual meeting. Any 
shareholder may make any other proposal at the annual meeting and 
the same may be discussed and considered, but unless stated in 
writing and filed with the secretary at least five days before the 
meeting, such proposal shall be laid over for action at an 
adjourned, special, or annual meeting of the shareholders taking 
place 30 days or more thereafter. This provision shall not prevent 
the consideration and approval or disapproval at the annual meeting 
of reports of officers, directors, and committees; but in connection 
with such reports, no new business shall be acted upon at such 
annual meeting unless stated and filed as herein provided.
    Section 16. Informal Action by Shareholders. Any action required 
to be taken at a meeting of the shareholders, or any other action 
which may be taken at a meeting of shareholders, may be taken 
without a meeting if consent in writing, setting forth the action so 
taken, shall be given by all of the shareholders entitled to vote 
with respect to the subject matter.

Article III--Board of Directors

    Section 1. General Powers. The business and affairs of the 
Subsidiary Holding Company shall be under the direction of its board 
of directors. The board of directors shall annually elect a chairman 
of the board and a president from among its members and shall 
designate, when present, either the chairman of the board or the 
president to preside at its meetings.
    Section 2. Number and Term. The board of directors shall consist 
of ---- [not fewer than five nor more than fifteen] members, and 
shall be divided into three classes as nearly equal in number as 
possible. The members of each class shall be elected for a term of 
three years and until their successors are elected and qualified. 
One class shall be elected by ballot annually.
    Section 3. Regular Meetings. A regular meeting of the board of 
directors shall be held without other notice than this bylaw 
following the annual meeting of shareholders. The board of directors 
may provide, by resolution, the time and place, for the holding of 
additional regular meetings without other notice than such 
resolution. Directors may participate in a meeting by means of a 
conference telephone or similar communications device through which 
all individuals participating can hear each other at the same time. 
Participation by such means shall constitute presence in person for 
all purposes.
    Section 4. Qualification. Each director shall at all times be 
the beneficial owner of not less than 100 shares of capital stock of 
the Subsidiary Holding Company unless the Subsidiary Holding Company 
is a wholly owned subsidiary of a holding company.
    Section 5. Special Meetings. Special meetings of the board of 
directors may be called by or at the request of the chairman of the 
board, the president, or one-third of the directors. The persons 
authorized to call special meetings of the board of directors may 
fix any place, within the Subsidiary Holding Company's normal 
lending territory, as the place for holding any special meeting of 
the board of directors called by such persons. Members of the board 
of directors may participate in special meetings by means of 
conference telephone or similar communications equipment by which 
all persons participating in the meeting can hear each other. Such 
participation shall constitute presence in person for all purposes.
    Section 6. Notice. Written notice of any special meeting shall 
be given to each director at least 24 hours prior thereto when 
delivered personally or by telegram or at least five days prior 
thereto when delivered by mail at the address at which the director 
is most likely to be reached. Such notice shall be deemed to be 
delivered when deposited in the mail so addressed, with postage 
prepaid if mailed, when delivered to the telegraph company if sent 
by telegram, or when the Subsidiary Holding Company receives notice 
of delivery if electronically transmitted. Any director may waive 
notice of any meeting by a writing filed with the secretary. 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 of the board of directors need be specified in the notice of 
waiver of notice of such meeting.
    Section 7. Quorum. A majority of the number of directors fixed 
by section 2 of this article III shall constitute a quorum for the 
transaction of business at any meeting of the board of directors; 
but if less than such majority is present at a meeting, a majority 
of the directors present may adjourn the meeting from time to time. 
Notice of any adjourned meeting shall be given in the same manner as 
prescribed by section 5 of this article III.
    Section 8. Manner of Acting. 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 Board or by these bylaws.
    Section 9. 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 
action so taken, shall be signed by all of the directors.
    Section 10. Resignation. Any director may resign at any time by 
sending a written notice of such resignation to the home office of 
the Subsidiary Holding Company addressed to the chairman of the 
board or the president. Unless otherwise specified, such resignation 
shall take effect upon receipt by the chairman of the board or the 
president. More than three consecutive absences from regular 
meetings of the board of directors, unless excused by resolution of 
the board of directors, shall automatically constitute a 
resignation, effective when such resignation is accepted by the 
board of directors.
    Section 11. Vacancies. Any vacancy occurring on the board of 
directors may be filled by the affirmative vote of a majority of 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

[[Page 56599]]

continuing only until the next election of directors by the 
shareholders.
    Section 12. Compensation. Directors, as such, may receive a 
stated salary for their services. By resolution of the board of 
directors, a reasonable fixed sum, and reasonable expenses of 
attendance, if any, may be allowed for attendance at each regular or 
special meeting of the board of directors. Members of either 
standing or special committees may be allowed such compensation for 
attendance at committee meetings as the board of directors may 
determine.
    Section 13. Presumption of Assent. A director of the Subsidiary 
Holding Company who is present at a meeting of the board of 
directors at which action on any Subsidiary Holding Company 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 he or she shall file a written 
dissent to such action with the individual acting as the secretary 
of the meeting before the adjournment thereof or shall forward such 
dissent by registered mail to the secretary of the Subsidiary 
Holding Company within five days after the date a copy of the 
minutes of the meeting is received. Such right to dissent shall not 
apply to a director who voted in favor of such action.
    Section 14. Removal of Directors. At a meeting of shareholders 
called expressly for that purpose, any director may be removed only 
for cause by a vote of the holders of a majority of the shares then 
entitled to vote at an election of directors. 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. [If cumulative 
voting has been deleted, the preceding sentence should be deleted.] 
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.

Article IV--Executive and Other Committees

    Section 1. Appointment. The board of directors, by resolution 
adopted by a majority of the full board, may designate the chief 
executive officer and two or more of the other directors to 
constitute an executive committee. The designation of any committee 
pursuant to this Article IV and the delegation of authority shall 
not operate to relieve the board of directors, or any director, of 
any responsibility imposed by law or regulation.
    Section 2. Authority. The executive committee, when the board of 
directors is not in session, shall have and may exercise all of the 
authority of the board of directors except to the extent, if any, 
that such authority shall be limited by the resolution appointing 
the executive committee; and except also that the executive 
committee shall not have the authority of the board of directors 
with reference to: the declaration of dividends; the amendment of 
the charter or bylaws of the Subsidiary Holding Company, or 
recommending to the shareholders 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 Subsidiary 
Holding Company otherwise than in the usual and regular course of 
its business; a voluntary dissolution of the Subsidiary Holding 
Company; 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.
    Section 3. Tenure. Subject to the provisions of section 8 of 
this article IV, each member of the executive committee shall hold 
office until the next regular annual meeting of the board of 
directors following his or her designation and until a successor is 
designated as a member of the executive committee.
    Section 4. Meetings. Regular meetings of the executive committee 
may be held without notice at such times and places as the executive 
committee may fix from time to time by resolution. Special meetings 
of the executive committee may be called by any member thereof upon 
not less than one day's notice stating the place, date, and hour of 
the meeting, which notice may be written or oral. Any member of the 
executive committee may waive notice of any meeting and no notice of 
any meeting need be given to any member thereof who attends in 
person. The notice of a meeting of the executive committee need not 
state the business proposed to be transacted at the meeting.
    Section 5. Quorum. A majority of the members of the executive 
committee shall constitute a quorum for the transaction of business 
at any meeting thereof, and action of the executive committee must 
be authorized by the affirmative vote of a majority of the members 
present at a meeting at which a quorum is present.
    Section 6. Action Without a Meeting. Any action required or 
permitted to be taken by the executive committee at a meeting may be 
taken without a meeting if a consent in writing, setting forth the 
action so taken, shall be signed by all of the members of the 
executive committee.
    Section 7. Vacancies. Any vacancy in the executive committee may 
be filled by a resolution adopted by a majority of the full board of 
directors.
    Section 8. Resignations and Removal. Any member of the executive 
committee may be removed at any time with or without cause by 
resolution adopted by a majority of the full board of directors. Any 
member of the executive committee may resign from the executive 
committee at any time by giving written notice to the president or 
secretary of the Subsidiary Holding Company. Unless otherwise 
specified, such resignation shall take effect upon its receipt; the 
acceptance of such resignation shall not be necessary to make it 
effective. No notice of any meeting need be given to any member 
thereof who attends in person. The notice of a meeting of the 
executive committee need not state the business proposed to be 
transacted at the meeting.
    Section 9. Procedure. The executive committee shall elect a 
presiding officer from its members and may fix its own rules of 
procedure, which shall not be inconsistent with these bylaws. It 
shall keep regular minutes of its proceedings and report the same to 
the board of directors for its information at the meeting held next 
after the proceedings shall have occurred.
    Section 10. Other Committees. The board of directors may by 
resolution establish an audit, loan, or other committee composed of 
directors as they may determine to be necessary or appropriate for 
the conduct of the business of the Subsidiary Holding Company and 
may prescribe the duties, constitution, and procedures thereof.

Article V--Officers

    Section 1. Positions. The officers of the Subsidiary Holding 
Company 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 
individual and a 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 
Subsidiary Holding Company 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.
    Section 2. Election and Term of Office. The officers of the 
Subsidiary Holding Company shall be elected annually at the first 
meeting of the board of directors held after each annual meeting of 
the shareholders. If the election of officers is not held at such 
meeting, such election shall be held as soon thereafter as possible. 
Each officer shall hold office until a successor has been duly 
elected and qualified or until the officer's death, resignation, or 
removal in the manner hereinafter provided. Election or appointment 
of an officer, employee, or agent shall not of itself create 
contractual rights. The board of directors may authorize the 
Subsidiary Holding Company to enter into an employment contract with 
any officer in accordance with regulations of the Board; but no such 
contract shall impair the right of the board of directors to remove 
any officer at any time in accordance with section 3 of this article 
V.
    Section 3. Removal. Any officer may be removed by the board of 
directors whenever in its judgment the best interests of the 
Subsidiary Holding Company will be served thereby, but such removal, 
other than for cause, shall be without prejudice to the contractual 
rights, if any, of the officer so removed.
    Section 4. Vacancies. A vacancy in any office because of death, 
resignation, removal,

[[Page 56600]]

disqualification, or otherwise may be filled by the board of 
directors for the unexpired portion of the term.
    Section 5. Remuneration. The remuneration of the officers shall 
be fixed from time to time by the board of directors.

Article VI--Contracts, Loans, Checks, and Deposits

    Section 1. Contracts. To the extent permitted by regulations of 
the Board, and except as otherwise prescribed by these bylaws with 
respect to certificates for shares, the board of directors may 
authorize any officer, employee, or agent of the Subsidiary Holding 
Company to enter into any contract or execute and deliver any 
instrument in the name of and on behalf of the Subsidiary Holding 
Company. Such authority may be general or confined to specific 
instances.
    Section 2. Loans. No loans shall be contracted on behalf of the 
Subsidiary Holding Company and no evidence of indebtedness shall be 
issued in its name unless authorized by the board of directors. Such 
authority may be general or confined to specific instances.
    Section 3. Checks; Drafts. etc. All checks, drafts, or other 
orders for the payment of money, notes, or other evidences of 
indebtedness issued in the name of the Subsidiary Holding Company 
shall be signed by one or more officers, employees or agents of the 
Subsidiary Holding Company in such manner as shall from time to time 
be determined by the board of directors.
    Section 4. Deposits. All funds of the Subsidiary Holding Company 
not otherwise employed shall be deposited from time to time to the 
credit of the Subsidiary Holding Company in any duly authorized 
depositories as the board of directors may select.

Article VII--Certificates for Shares and Their Transfer

    Section 1. Certificates for Shares. Certificates representing 
shares of capital stock of the Subsidiary Holding Company shall be 
in such form as shall be determined by the board of directors and 
approved by the Board. Such certificates shall be signed by the 
chief executive officer or by any other officer of the Subsidiary 
Holding Company 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 Subsidiary Holding Company 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 
Subsidiary Holding Company. All certificates surrendered to the 
Subsidiary Holding Company for transfer shall be canceled and no new 
certificate shall be issued until the former certificate for a like 
number of shares has been surrendered and canceled, except that in 
the case of a lost or destroyed certificate, a new certificate may 
be issued upon such terms and indemnity to the Subsidiary Holding 
Company as the board of directors may prescribe.
    Section 2. Transfer of Shares. Transfer of shares of capital 
stock of the Subsidiary Holding Company shall be made only on its 
stock transfer books. Authority for such transfer shall be given 
only by the holder of record or by his or her legal representative, 
who shall furnish proper evidence of such authority, or by his or 
her attorney authorized by a duly executed power of attorney and 
filed with the Subsidiary Holding Company. Such transfer shall be 
made only on surrender for cancellation of the certificate for such 
shares. The person in whose name shares of capital stock stand on 
the books of the Subsidiary Holding Company shall be deemed by the 
Subsidiary Holding Company to be the owner for all purposes.

Article VIII--Fiscal Year

    The fiscal year of the Subsidiary Holding Company shall end on 
the ----------------of----------------each year. The appointment of 
accountants shall be subject to annual ratification by the 
shareholders.

Article IX--Dividends

    Subject to the terms of the Subsidiary Holding Company's charter 
and the regulations and orders of the Board, the board of directors 
may, from time to time, declare, and the Subsidiary Holding Company 
may pay, dividends on its outstanding shares of capital stock.

Article X--Corporate Seal

    The board of directors shall provide a Subsidiary Holding 
Company seal, which shall be two concentric circles between which 
shall be the name of the Subsidiary Holding Company. The year of 
incorporation or an emblem may appear in the center.

Article XI--Amendments

    These bylaws may be amended in a manner consistent with 
regulations of the Board and shall be effective after: (i) approval 
of the amendment by a majority vote of the authorized board of 
directors, or by a majority vote of the votes cast by the 
shareholders of the Subsidiary Holding Company at any legal meeting, 
and (ii) receipt of any applicable regulatory approval. When a 
Subsidiary Holding Company fails to meet its quorum requirements, 
solely due to vacancies on the board, then the affirmative vote of a 
majority of the sitting board will be required to amend the bylaws.

PART 261--RULES REGARDING AVAILABILITY OF INFORMATION

0
15. The authority citation for part 261 is revised to read as follows:

    Authority: 5 U.S.C. 552; 12 U.S.C. 248(i) and (k), 321 et seq., 
611 et seq., 1442, 1467a, 1817(a)(2)(A), 1817(a)(8), 1818(u) and 
(v), 1821(o), 1821(t), 1830, 1844, 1951 et seq., 2601, 2801 et seq., 
2901 et seq., 3101 et seq., 3401 et seq.; 15 U.S.C. 77uuu(b), 
78q(c)(3); 29 U.S.C. 1204; 31 U.S.C. 5301 et seq.; 42 U.S.C. 3601; 
44 U.S.C. 3510.

Subpart A--General Provisions

0
16. Revise Sec.  261.1(a)(1) and (a)(2) to read as follows:


Sec.  261.1  Authority, purpose, and scope.

* * * * *
    (a) Authority. (1) This part is issued by the Board of Governors of 
the Federal Reserve System (the Board) pursuant to the Freedom of 
Information Act, 5 U.S.C. 552; Sections 9, 11, and 25A of the Federal 
Reserve Act, 12 U.S.C. 248(i) and (k), 321 et seq., (including 326), 
611 et seq.; Section 22 of the Federal Home Loan Bank Act, 12 U.S.C 
1442; section 10 of the Home Owners' Loan Act, 12 U.S.C. 1467a; the 
Federal Deposit Insurance Act, 12 U.S.C. 1817(a)(2)(A), 1817(a)(8), 
1818(u) and (v), 1821(o); section 5 of the Bank Holding Company Act, 12 
U.S.C. 1844; the Bank Secrecy Act, 12 U.S.C. 1951 et seq., and Chapter 
53 of Title 31; the Home Mortgage Disclosure Act, 12 U.S.C. 2801 et 
seq.; the Community Reinvestment Act, 12 U.S.C. 2901 et seq.; the 
International Banking Act, 12 U.S.C. 3101 et seq.; the Right to 
Financial Privacy Act, 12 U.S.C. 3401 et seq.; the Securities and 
Exchange Commission Authorization Act, 15 U.S.C. 77uuu(b), 78q(c)(3); 
the Employee Retirement Income Security Act, 29 U.S.C. 1204; the Money 
Laundering Suppression Act, 31 U.S.C. 5301, the Fair Housing Act, 42 
U.S.C. 3601; the Paperwork Reduction Act, 44 U.S.C. 3510; and any other 
applicable law that establishes a basis for the exercise of 
governmental authority by the Board.
    (2) This part establishes mechanisms for carrying out the Board's 
statutory responsibilities under statutes in paragraph (a)(1) of this 
section to the extent those responsibilities require the disclosure, 
production, or withholding of information. In this regard, the Board 
has determined that the Board, or its delegees, may disclose exempt 
information of the Board, in accordance with the procedures set forth 
in this part, whenever it is necessary or appropriate to do so in the 
exercise of any of the Board's supervisory or regulatory authorities, 
including but not limited to, authority granted to the Board in the 
Federal Reserve Act, 12 U.S.C. 221 et seq., the Bank Holding Company 
Act, 12 U.S.C. 1841 et seq., the Home Owners' Loan Act, 12 U.S.C. 1461 
et seq., and the International Banking Act, 12 U.S.C. 3101 et seq. The 
Board has determined that all such disclosures, made in accordance with 
the rules and procedures specified in this part, are authorized by law.
* * * * *

[[Page 56601]]


0
17. In Sec.  261.2, revise paragraphs (c)(1)(ii), paragraphs (k) and 
(o) to read as follows:


Sec.  261.2  Definitions.

* * * * *
    (c)(1) * * *
    (ii) Information gathered by the Board in the course of any 
investigation, suspicious activity report, cease-and-desist orders, 
civil money penalty enforcement orders, suspension, removal or 
prohibition orders, or other orders or actions under the Financial 
Institutions Supervisory Act of 1966, Public Law 89-695, 80 Stat. 1028 
(codified as amended in scattered sections of 12 U.S.C.), the Bank 
Holding Company Act of 1956, 12 U.S.C. 1841 et seq., the Home Owners' 
Loan Act, 12 U.S.C. 1461 et seq., the Federal Reserve Act, 12 U.S.C. 
221 et seq., the International Banking Act of 1978, Public Law 95-369, 
92 Stat. 607 (codified as amended in scattered sections of 12 U.S.C.), 
and the International Lending Supervision Act of 1983, 12 U.S.C. 3901 
et seq.; except--
* * * * *
    (k) Report of inspection means a report prepared by the Board 
concerning its inspection of a bank holding company and its bank and 
nonbank subsidiaries or other supervised financial institution.
* * * * *
    (o) Supervised financial institution includes a bank, bank holding 
company (including subsidiaries), savings and loan holding company 
(including non-depository subsidiaries), U.S. branch or agency of a 
foreign bank, or any other institution that is supervised by the Board.

Subpart B--Published Information and Records Available to Public; 
Procedures for Requests

0
18. Revise Sec.  261.10(a)(7) to read as follows:


Sec.  261.10  Published information.

    (a) * * *
    (7) Notices of applications received under the Bank Holding Company 
Act of 1956 (12 U.S.C. 1841 et seq.), the Home Owners' Loan Act (12 
U.S.C. 1461 et seq.), and the Change in Bank Control Act (12 U.S.C. 
1817);
* * * * *

0
19. Revise Sec.  261.14(a)(5)(iii) to read as follows:


Sec.  261.14  Exemptions from disclosure.

    (a) * * *
    (5) * * *
    (iii) Other documents prepared by the staffs of the Board, Federal 
Reserve Banks, or the Office of Thrift Supervision (including documents 
transferred to the Board pursuant to section 323(b)(2) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5433)); 
and
* * * * *

Subpart C--Confidential Information Made Available to Institutions, 
Financial Institution Supervisory Agencies, Law Enforcement 
Agencies, and Others in Certain Circumstances

0
20. In Sec.  261.20, revise paragraphs (a), (b)(1), (c) and (d) to read 
as follows:


Sec.  261.20  Confidential supervisory information made available to 
supervised financial institutions and financial institution supervisory 
agencies.

    (a) Disclosure of confidential supervisory information to 
supervised financial institutions. Confidential supervisory information 
concerning a supervised bank, bank holding company (including 
subsidiaries), U.S. branch or agency of a foreign bank, savings and 
loan holding company (including subsidiaries), or other institution 
examined by the Federal Reserve System (``supervised financial 
institution'') may be made available by the Board or the appropriate 
Federal Reserve Bank to the supervised financial institution.
    (b) * * *
    (1) Parent bank holding company, parent savings and loan holding 
company, directors, officers, and employees. Any supervised financial 
institution lawfully in possession of confidential supervisory 
information of the Board pursuant to this section may disclose such 
information, or portions thereof, to its directors, officers, and 
employees, and to its parent bank holding company or parent savings and 
loan holding company and its directors, officers, and employees.
* * * * *
    (c) Disclosure upon request to Federal financial institution 
supervisory agencies. Upon requests, the Director of the Division of 
Banking Supervision and Regulation or the appropriate Federal Reserve 
Bank, may make available to the Comptroller of the Currency, the 
Federal Deposit Insurance Corporation, and the Federal Home Loan Bank 
Board and their regional offices and representatives, confidential 
supervisory information and other appropriate information (such as 
confidential operating and condition reports) relating to a bank, bank 
holding company (including subsidiaries), savings and loan holding 
company (including subsidiaries), U.S. branch or agency of a foreign 
bank, or other supervised financial institution.
    (d) Disclosure upon request to state financial institution 
supervisory agencies. Upon requests, the Director of the Division of 
Banking Supervision and Regulation or the appropriate Federal Reserve 
Bank may make available confidential supervisory information and other 
appropriate information (such as confidential operating and condition 
reports) relating to a bank, bank holding company (including 
subsidiaries), savings and loan holding company (including 
subsidiaries), U.S. branch or agency of a foreign bank, or other 
supervised financial institution to:
* * * * *

0
21. Revise Sec.  261.21(a) to read as follows:


Sec.  261.21  Confidential information made available to law 
enforcement agencies and other nonfinancial institution supervisory 
agencies.

    (a) Disclosure upon request. Upon written request, the Board may 
make available to appropriate law enforcement agencies and to other 
nonfinancial institution supervisory agencies for use where necessary 
in the performance of official duties, reports of examination and 
inspection, confidential supervisory information, and other 
confidential documents and information of the Board concerning banks, 
bank holding companies and their subsidiaries, U.S. branches and 
agencies of foreign banks, savings and loan holding companies and their 
subsidiaries, and other examined institutions.
* * * * *

PART 261b--RULE REGARDING PUBLIC OBSERVATION OF MEETINGS

0
22a. The authority citation for part 261b continues to read as follows:

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


0
22b. Revise Sec.  261b.7(a) to read as follows:


Sec.  261b.7  Meetings closed to public observation under expedited 
procedures.

    (a) Since the Board and the Committee qualifies for the use of 
expedited procedures under subsection (d)(4) of the Act, meetings or 
portions thereof exempt under paragraph (a)(4), (a)(8), (a)(9)(i) or 
(a)(10) of Sec.  261b.5 of this part, will be closed to public 
observation under the expedited procedures of this section. Following 
are examples of types of items that, absent compelling contrary 
circumstances, will qualify for these exemptions: Matters relating to a

[[Page 56602]]

specific bank or bank holding company, such as bank branches or 
mergers, bank holding company formations, or acquisition of an 
additional bank or acquisition or de novo undertaking of a permissible 
nonbanking activity; matters relating to a specific savings and loan 
holding company or its subsidiaries, such as acquisitions, 
reorganizations, savings and loan holding company formations, 
conversions, or acquisition or de novo undertaking of a permissible 
activity; bank regulatory matters, such as applications for membership, 
issuance of capital notes and investment in bank premises; foreign 
banking matters; bank supervisory and enforcement matters, such as 
cease-and-desist and officer removal proceedings; monetary policy 
matters, such as discount rates, use of the discount window, changes in 
the limitations on payment of interest on time and savings accounts, 
and changes in reserve requirements or margin regulations.
* * * * *

PART 262--RULES OF PROCEDURE

0
23. The authority citation for part 262 is revised to read as follows:

    Authority: 5 U.S.C. 552, 12 U.S.C. 321, 1467a, 1828(c), and 
1842.


0
24. In Sec.  262.3:
0
A. Revise paragraphs (b)(1)(i)(B) and (b)(1)(i)(C);
0
B. Remove the undesignated paragraph following paragraph (b)(1)(i)(C);
0
C. Add paragraphs (b)(1)(i)(D) and (b)(1)(i)(E);
0
D. Revise paragraphs (b)(1)(ii)(D) and (b)(1)(ii)(E), and add 
paragraphs (b)(1)(ii)(F);
0
E. Revise paragraphs (i) introductory text, (i)(1), and (i)(5); and
0
F. Add paragraph (j)(3).
    The revisions and additions read as follows:


Sec.  262.3  Applications.

* * * * *
    (b) * * *
    (1)(i) * * *
    (B) To become a bank holding company (except as provided in Sec.  
225.15 of this chapter),
    (C) By a bank holding company to acquire ownership or control of 
shares or assets of a bank, or to merge or consolidate with any other 
bank holding company,
    (D) To become a savings and loan holding company (except as 
provided in Sec.  238.14 of this chapter), and
    (E) By a savings and loan holding company to acquire ownership or 
control of shares or assets of a savings association, or to merge or 
consolidate with any other savings and loan holding company, the 
applicant shall cause to be published a notice in the form prescribed 
by the Board.
    (ii) * * *
    (D) The community or communities in which the head office of each 
of the banks to be party to the merger, consolidation, or acquisition 
of assets or assumption of liabilities are located in the case of an 
application by a bank for merger, consolidation, or acquisition of 
assets or assumption of liabilities,
    (E) The community or communities in which the head offices of the 
largest subsidiary bank, if any, or an applicant and of each bank, 
shares of which are to be directly or indirectly acquired, are located 
in the case of applications under section 3 of the Bank Holding Company 
Act, or
    (F) The community or communities in which the head offices of the 
largest subsidiary savings association, if any, or an applicant and of 
each savings association, shares of which are to be directly or 
indirectly acquired, are located in the case of applications under 
section 10 of the Home Owners' Loan Act.
* * * * *
    (i) General procedures for bank holding company, savings and loan 
holding company, and merger applications. In addition to procedures 
applicable under other provisions of this part, the following 
procedures are applicable in connection with the Board's consideration 
of applications under sections 3 and 4 of the Bank Holding Company Act 
of 1956 (12 U.S.C. 1842 and 1843), hereafter referred to as ``section 3 
applications'' or ``section 4 applications,'' applications under 
section 10(c), (e), and (o) of the Home Owners' Loan Act (12 U.S.C. 
1467a), hereafter referred to as ``section 10 applications,'' and of 
applications under section 18(c) of the Federal Deposit Insurance Act 
(12 U.S.C. 1823), hereafter called ``merger applications.'' Except as 
otherwise indicated, the following procedures apply to all such 
applications.
    (1) The Board issues each week a list that identifies section 3, 
section 4, section 10, and merger applications received and acted upon 
during the preceding week by the Board or the Reserve Banks pursuant to 
delegated authority. Notice of receipt of all section 3 section 
4(c)(8), and section 10 applications acted on by the Board is published 
in the Federal Register.
* * * * *
    (5) Unless the Board shall otherwise direct, each section 3, 
section 4, section 10, and merger application is made available for 
inspection by the public except for portions thereof as to which the 
Board determines that nondisclosure is warranted under section 552(b) 
of title 5 of the United States Code.
    (j) * * *
    (3) Special rules pertaining to applications filed pursuant to 
section 10(e) and (o) of HOLA follow:
    (i) Each order or each letter of notification approving an 
application also includes, as a condition of approval, a requirement 
that the transaction approved shall be consummated within 3 months and, 
in the case of acquisition by a holding company of stock of a newly 
organized savings association, a requirement that such savings 
association shall be opened for business within 6 months, but such 
periods may be extended for good cause by the Board (or by the 
appropriate Federal Reserve Bank where authority to grant such 
extensions is delegated to the Reserve Bank).
    (ii) [Reserved]
* * * * *

0
25. In Sec.  262.25 revise paragraphs (a) introductory text, (a)(2), 
(a)(3), and (a)(4) to read as follows:


Sec.  262.25  Policy statement regarding notice of applications; 
timeliness of comments; informal meetings.

    (a) Notice of applications. A bank or company applying to the Board 
for a deposit-taking facility must first publish notice of its 
application in local newspapers. This requirement, found in Sec.  
262.3(b)(1) of the Board's Rules of Procedure covers applications under 
the Bank Holding Company Act, Bank Merger Act, and Home Owners' Loan 
Act, as well as applications for membership in the Federal Reserve 
System and for new branches of State member banks. Notices of these 
applications are published in newspapers of general circulation in the 
communities where the applicant intends to do business as well as in 
the community where the applicant's head office is located. These 
notices are important in calling the public's attention to an 
applicant's plans and giving the public a chance to comment on these 
plans. To improve the effectiveness of the notices, the Board has 
supplemented its notice procedures as follows.
* * * * *
    (2) The Board also publishes notice of bank holding company 
applications for bank acquisitions (but not for bank mergers or 
branches) and savings and

[[Page 56603]]

loan holding company applications for savings association acquisitions 
(but not for savings association mergers or branches) in the Federal 
Register after the application is received and the Community Affairs 
Officer can provide the exact date on which this comment period ends. 
(The Federal Register comment period will generally end after the date 
specified in the newspaper notice.)
    (3) In addition to the formal newspaper and Federal Register 
notices discussed above, each Reserve Bank publishes a weekly list of 
applications submitted to the Reserve Bank for which newspaper notices 
have been published. Any person or organization may arrange to have the 
list mailed to them regularly, or may request particular lists, by 
contacting the Reserve Bank's Community Affairs Officer. Each Reserve 
Bank's list includes only applications submitted to that particular 
Reserve Bank, and persons or groups should request lists from each 
Reserve Bank having jurisdiction over applications in which they may be 
interested. Since the lists are prepared as a courtesy by the Reserve 
Bank, and are not intended to replace any formal notice required by 
statute or regulation, the Reserve Banks and the Board do not assume 
responsibility for errors or omissions. In addition, the weekly lists 
prepared by Reserve Banks include certain applications by bank holding 
companies and savings and loan holding companies for nonbank and non-
depository institution acquisitions, respectively, filed with the 
Reserve Bank.
    (4) With respect to applications by bank holding companies and 
savings and loan holding companies to engage de novo in nonbank 
activities or make acquisitions of nonbank firms, the Board publishes 
notice of most of these applications in the Federal Register when the 
applications are filed. Notice of certain small acquisitions may be 
published in a newspaper of general circulation in the area(s) to be 
served. While applications for nonbanking activities are not covered by 
the provisions of the Community Reinvestment Act or the notice 
provisions of Sec.  262.3 of the Board's Rules of Procedure, the 
provisions of this Statement apply to such applications.
* * * * *

PART 263--RULES OF PRACTICE FOR HEARINGS

0
26. The authority citation for Part 263 is revised to read as follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 248, 324, 504, 505, 
1464, 1467, 1467a, 1468, 1817(j), 1818, 1820(k), 1828(c), 1829(e), 
1831o, 1831p-1, 1847(b), 1847(d), 1884(b), 1972(2)(F), 3105, 3107, 
3108, 3349, 3907, 3909, 4717; 15 U.S.C. 21, 78(l), 78o-4, 78o-5, 
78u-2; and 28 U.S.C. 2461 note.; 31 U.S.C. 5321; 42 U.S.C. 4012a.

Subpart A--Uniform Rules of Practice and Procedure

0
27. In Sec.  263.1:
0
A. Revise paragraph (c); paragraphs (e)(2), (e)(11); and
0
B. Add paragraphs (e)(13) through (e)(15).
    The additions and revisions read as follows:


Sec.  263.1  Scope.

* * * * *
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Board of Governors of 
the Federal Reserve System (``Board'') should issue an order to approve 
or disapprove a person's proposed acquisition of a state member bank, 
bank holding company, or savings and loan holding company;
* * * * *
    (e) * * *
    (2) Sections 19, 22, 23, 23A and 23B of the Federal Reserve Act 
(``FRA''), or any regulation or order issued thereunder and certain 
unsafe or unsound practices or breaches of fiduciary duty, pursuant to 
12 U.S.C. 504 and 505;
* * * * *
    (11) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder;
* * * * *
    (13) 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);
    (14) Section 9 of the HOLA or any regulation or order issued 
thereunder, pursuant to 12 U.S.C. 1467(d); and
    (15) Section 10 of the HOLA, pursuant to 12 U.S.C. 1467a (i) and 
(r);
* * * * *

0
28. In Sec.  263.3:
0
A. Revise paragraphs (f)(4), (f)(5);
0
B. Add paragraph (f)(6);
0
C. Revise paragraphs (i) and (m).
    The additions and revisions read as follows:


Sec.  263.3  Definitions.

* * * * *
    (f) * * *
    (4) Any foreign bank or company to which section 8 of the IBA (12 
U.S.C. 3106), applies or any subsidiary (other than a bank) thereof;
    (5) Any Federal agency as that term is defined in section 1(b) of 
the IBA (12 U.S.C. 3101(5)); and
    (6) Any savings and loan holding company or any subsidiary (other 
than a savings association) of a savings and loan holding company as 
those terms are defined in the HOLA (12 U.S.C. 1461 et seq.).
* * * * *
    (i) OFIA means the Office of Financial Institution Adjudication, 
the executive body charged with overseeing the administration of 
administrative enforcement proceedings for the Board, the Office of 
Comptroller of the Currency (the OCC), the Federal Deposit Insurance 
Corporation (the FDIC), and the National Credit Union Administration 
(the NCUA).
* * * * *
    (m) Uniform Rules means those rules in subpart A of this part that 
are common to the Board, the OCC, the FDIC, and the NCUA.
* * * * *

Subpart B--Board Local Rules Supplementing the Uniform Rules

0
29. Section 263.50(b)(13) and (b)(14) are revised and paragraph (b)(15) 
is added to read as follows:


Sec.  263.50  Purpose and scope.

* * * * *
    (b) * * *
    (13) Reclassification of a member bank on grounds of unsafe and 
unsound practice under section 38(g)(1) of the FDI Act (12 U.S.C. 
1831o(g)(1));
    (14) Issuance of an order requiring a member bank to dismiss a 
director or senior executive officer under section 38 (e)(5) and 
38(f)(2) (F)(ii) of the FDI Act (12 U.S.C. 1831o(e)(5) and 1831o(f)(2) 
(F)(ii));
    (15) Adjudications under section 10 of the HOLA (12 U.S.C. 1467a).

0
30. Revise Sec.  263.56 to read as follows:


Sec.  263.56  Initial licensing proceedings.

    Proceedings with respect to applications for initial licenses shall 
include, but not be limited to, applications for Board approval under 
section 3 of the BHC Act and section 10 of HOLA and such proceedings as 
may be ordered by the Board with respect to applications under section 
18(c) of the FDIA. In such initial licensing proceedings, the 
procedures set forth in subpart A of this part shall apply, except that 
the Board may designate a Board Counsel to represent the Board in a 
nonadversary capacity for the purpose of developing for the record 
information

[[Page 56604]]

relevant to the issues to be determined by the Presiding Officer and 
the Board. In such proceedings, Board Counsel shall be considered to be 
a decisional employee for purposes of Sec. Sec.  263.9 and 263.40 of 
subpart A.

Subpart C--Rules and Procedures for Assessment and Collection of 
Civil Money Penalties

0
31. In Sec.  263.65, revise paragraph (a) and add new paragraphs (b) 
(11) and (b)(12) to read as follows:


Sec.  263.65  Civil penalty inflation adjustments.

    (a) Inflation adjustments. In accordance with the Federal Civil 
Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), the 
Board has set forth in paragraph (b) of this section adjusted maximum 
penalty amounts for each civil money penalty provided by law within its 
jurisdiction. The adjusted civil penalty amounts provided in paragraphs 
(b)(1) through (10) of this section replace only the amounts published 
in the statutes authorizing the assessment of penalties and the 
previously-adjusted amounts adopted as of October 12, 2004, October 12, 
2000, and October 24, 1996.The adjusted civil penalty amounts provided 
in paragraphs (b)(11) and (12) of this section replace only the amounts 
published in the statutes authorizing the assessment of penalties and 
were adjusted by the Office of Thrift Supervision as of October 27, 
2008. The authorizing statutes contain the complete provisions under 
which the Board may seek a civil money penalty. The increased penalty 
amounts apply only to violations occurring after September 13, 2011.
* * * * *
    (b) * * *
    (11) 12 U.S.C. 1467a(i):
    (i) 12 U.S.C. 1467a(i)(2)-$32,500.
    (ii) 12 U.S.C. 1467a(i)(3)-$32,500.
    (12) 12 U.S.C. 1467a(r):
    (i) 12 U.S.C. 1467a(r)(1)-$ 2,200.
    (ii) 12 U.S.C. 1467a(r)(2)-$32,500.
    (iii) 12 U.S.C. 1467a(r)(3)-$1,375,000.

Subpart E--Procedures for Issuance and Enforcement of Directives To 
Maintain Adequate Capital

0
32. Revise Sec.  263.80 to read as follows:


Sec.  263.80  Purpose and scope.

    This subpart establishes procedures under which the Board may issue 
a directive or take other action to require a state member bank, bank 
holding company, or a savings and loan holding company to achieve and 
maintain adequate capital.

0
33. In Sec.  263.81, revise paragraph (c) and add new paragraph (e) to 
read as follows:


Sec.  263.81  Definitions.

* * * * *
    (c) Directive means a final order issued by the Board:
    (1) Pursuant to ILSA (12 U.S.C. 3907(b)(2)) requiring a state 
member bank or bank holding company to increase capital to or maintain 
capital at the minimum level set forth in the Board's Capital Adequacy 
Guidelines or as otherwise established under procedures described in 
Sec.  263.85; or
    (2) Pursuant to HOLA (12 U.S.C. 1467a(g)(1)) requiring a savings 
and loan holding company to increase capital to or maintain capital at 
a certain level.
* * * * *
    (e) Savings and loan holding company means any company that 
controls a savings association as defined in section 10 of the HOLA, 12 
U.S.C. 1467a, and in the Board's Regulation LL (12 CFR 238.2) or any 
direct or indirect subsidiary thereof other than a savings association 
subsidiary as defined in section 10 of the HOLA, 12 U.S.C. 1467a, and 
in the Board's Regulation LL (12 CFR 238.2).

0
34. In Sec.  263.83 revise paragraph (a) to read as follows:


Sec.  263.83  Issuance of capital directives.

    (a) Notice of intent to issue directive. If a state member bank or 
bank holding company is operating with less than the minimum level of 
capital established in the Board's Capital Adequacy Guidelines, or as 
otherwise established under the procedures described in Sec.  263.85, 
or if the Board has determined that the current capital level of a 
savings and loan holding company is not adequate, the Board may issue 
and serve upon such state member bank, bank holding company, or savings 
and loan holding company written notice of the Board's intent to issue 
a directive to require the bank, bank holding company, or savings and 
loan holding company to achieve and maintain adequate capital within a 
specified time period.
* * * * *

0
35. In Sec.  263.84, revise paragraphs (a) and (c) to read as follows:


Sec.  263.84  Enforcement of directive.

    (a) Judicial and administrative remedies. (1) Whenever a bank or 
bank holding company fails to follow a directive issued under this 
subpart, or to submit or adhere to a capital adequacy plan as required 
by such directive, the Board may seek enforcement of the directive, 
including the capital adequacy plan, in the appropriate United States 
district court, pursuant to section 908 (b)(2)(B)(ii) of ILSA (12 
U.S.C. 3907(b)(2)(B)(ii)) and to section 8(i) of the FDIA (12 U.S.C. 
1818(i)), in the same manner and to the same extent as if the directive 
were a final cease-and-desist order. Whenever a savings and loan 
holding company fails to follow a directive issued under this subpart, 
or to submit or adhere to a capital adequacy plan as required by such 
directive, the Board may seek enforcement of the directive, including 
the capital adequacy plan, in the proper United States district court, 
or the United States court of any territory or other place subject to 
the jurisdiction of the United States, pursuant to section 10(g)(4) of 
HOLA (12 U.S.C. 1567a(g)(4)).
    (2) The Board, pursuant to section 910(d) of ILSA (12 U.S.C. 
3909(d)), may also assess civil money penalties for violation of the 
directive against any bank or bank holding company and any institution-
affiliated party of the bank or bank holding company, in the same 
manner and to the same extent as if the directive were a final cease-
and-desist order. The Board, pursuant to section 10(i) (12 U.S.C. 
1467a(i)), may also assess civil money penalties for violation of the 
directive against any savings and loan holding company and any 
institution-affiliated party of the savings and loan holding company, 
in the same manner and to the same extent as if the directive were a 
final cease-and-desist order.
* * * * *
    (c) Consideration in application proceedings. In acting upon any 
application or notice submitted to the Board pursuant to any statute 
administered by the Board, the Board may consider the progress of a 
state member bank, bank holding company, or savings and loan holding 
company or any subsidiary thereof in adhering to any directive or 
capital adequacy plan required by the Board pursuant to this subpart, 
or by any other appropriate banking supervisory agency pursuant to 
ILSA. The Board shall consider whether approval or a notice of intent 
not to disapprove would divert earnings, diminish capital, or otherwise 
impede the bank, bank holding company, or savings and loan holding 
company in achieving its required minimum capital level or complying 
with its capital adequacy plan.

0
36. In Sec.  263.85, revise paragraphs (b)(1), (b)(2), and (b)(3) to 
read as follows:

[[Page 56605]]

Sec.  263.85  Establishment of increased capital level for specific 
institutions.

* * * * *
    (b) Procedure to establish higher capital requirement --(1) Notice. 
When the Board determines that capital levels above those in the 
Board's Capital Adequacy Guidelines may be necessary and appropriate 
for a particular bank or bank holding company under the circumstances, 
or when the Board determines that the current capital level of a 
savings and loan holding company is not adequate, the Board shall give 
the bank or bank holding company notice of the proposed higher capital 
requirement and shall permit the bank, bank holding company, or savings 
and loan holding company an opportunity to comment upon the proposed 
capital level, whether it should be required and, if so, under what 
time schedule. The notice shall contain the Board's reasons for 
proposing a higher level of capital.
    (2) Response. The bank, bank holding company, or savings and loan 
holding company shall be allowed at least 14 days to respond, unless 
the Board determines that a shorter period is necessary because of the 
financial condition of the bank, bank holding company, or savings and 
loan holding company. Failure by the bank, bank holding company, or 
savings and loan holding company to file a written response to the 
notice within the time set by the Board shall constitute a waiver of 
the opportunity to respond and shall constitute consent to issuance of 
a directive containing the required minimum capital level.
    (3) Board decision. After considering the response of the 
institution, the Board may issue a written directive to the bank, bank 
holding company, or savings and loan holding company setting an 
appropriate capital level and the date on which this capital level will 
become effective. The Board may require the bank, bank holding company, 
or savings and loan holding company to submit and adhere to a plan for 
achieving such higher capital level as the Board may set.
* * * * *

Subpart F--Practice Before the Board

0
37. Revise Sec.  263.94(g) to read as follows:


Sec.  263.94  Conduct warranting sanctions.

* * * * *
    (g) Suspension or debarment from practice before the OCC, the FDIC, 
the Office of Thrift Supervision, the Securities and Exchange 
Commission, the NCUA, or any other Federal agency based on matters 
relating to the supervisory responsibilities of the Board;
* * * * *

Subpart G--Rules Regarding Claims Under the Equal Access to Justice 
Act

0
38. Revise Sec.  263.103(c)(3) to read as follows:


Sec.  263.103  Eligibility of applicants.

* * * * *
    (c) * * *
    (3) The net worth of a financial institution shall be established 
by the net worth information reported in conformity with applicable 
instructions and guidelines on the financial institution's financial 
report to its supervisory agency for the last reporting date before the 
initiation of the adversary proceeding. A bank holding company's and a 
savings and loan holding company's net worth will be considered on a 
consolidated basis even if the bank holding company or the savings and 
loan holding company is not required to file its regulatory reports to 
the Board on a consolidated basis.
* * * * *

0
39. Revise Sec.  263.105(b)(2) and (b)(3) to read as follows:


Sec.  263.105  Statement of net worth.

* * * * *
    (b) * * *
    (2) In the case of applicants or affiliates that are not banks, net 
worth shall be considered for the purposes of this subpart to be the 
excess of total assets over total liabilities, as of the date the 
underlying proceeding was initiated, except as adjusted under Sec.  
263.103(c)(5). The net worth of a bank holding company or a savings and 
loan holding company shall be considered on a consolidated basis. 
Assets and liabilities of individuals shall include those beneficially 
owned.
    (3) If the applicant or any of its affiliates is a bank or a 
savings association, the portion of the statement of net worth which 
relates to the bank or the savings association shall consist of a copy 
of the bank's or a savings association's last Consolidated Report of 
Condition and Income filed before the initiation of the adversary 
adjudication. Net worth shall be considered for the purposes of this 
subpart to be the total equity capital (or, in the case of mutual 
savings banks or mutual savings associations, the total surplus 
accounts) as reported, in conformity with applicable instructions and 
guidelines, on the bank's or the savings association's Consolidated 
Report of Condition and Income filed for the last reporting date before 
the initiation of the proceeding.
* * * * *

Subpart J--Removal, Suspension, and Debarment of Accountants From 
Performing Audit Services

0
40. Revise Sec.  263.400 to read as follows:


Sec.  263.400  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 for insured state member 
banks, bank holding companies, and savings and loan holding companies 
required by section 36 of the FDIA (12 U.S.C. 1831m).

0
41. Revise Sec.  263.401(c) to read as follows:


Sec.  263.401  Definitions.

* * * * *
    (c) Banking organization means an insured state member bank, bank 
holding company, or savings and loan holding company that obtains audit 
services that are used to satisfy requirements imposed by section 36 or 
part 363 on an insured subsidiary bank or insured savings association 
of that holding company.
* * * * *

PART 264a--POST-EMPLOYMENT RESTRICTIONS FOR SENIOR EXAMINERS

0
42. The authority citation for Part 264a continues to read as follows:

    Authority: 12 U.S.C. 1820(k).


0
43 Revise Sec.  264a.2 to read as follows:


Sec.  264a.2  Who is considered a senior examiner of the Federal 
Reserve?

    For purposes of this part, an officer or employee of the Federal 
Reserve is considered to be the ``senior examiner'' for a particular 
state member bank, bank holding company, savings and loan holding 
company, or foreign bank if--
    (a) The officer or employee has been authorized by the Board to 
conduct examinations or inspections on behalf of the Board;
    (b) The officer or employee has been assigned continuing, broad and 
lead responsibility for examining or inspecting the state member bank, 
bank holding company, savings and loan holding company, or foreign 
bank; and

[[Page 56606]]

    (c) The officer's or employee's responsibilities for examining, 
inspecting and supervising the state member bank, bank holding company, 
savings and loan holding company, or foreign bank--
    (1) Represent a substantial portion of the officer's or employee's 
assigned responsibilities; and
    (2) Require the officer or employee to interact routinely with 
officers or employees of the state member bank, bank holding company, 
savings and loan holding company, or foreign bank or its affiliates.

0
44. In Sec.  264a.3, add paragraph (d) to read as follows:


Sec.  264a.3  What special post-employment restrictions apply to senior 
examiners?

* * * * *
    (d) Senior Examiners of Savings and Loan Holding Companies. An 
officer or employee of the Federal Reserve who serves as the senior 
examiner of a savings and loan holding company for two or more months 
during the last twelve months of such individual's employment with the 
Federal Reserve may not, within one year of leaving the employment of 
the Federal Reserve, knowingly accept compensation as an employee, 
officer, director or consultant from--
    (1) The savings and loan holding company; or
    (2) Any depository institution that is controlled by the savings 
and loan holding company.

0
45. Revise Sec.  264a.5(a)(1)(i) to read as follows:


Sec.  264a.5  What are the penalties for violating these special post-
employment restrictions?

    (a) * * *
    (1) * * *
    (i) Removing the individual from office or prohibiting the 
individual from further participation in the affairs of the relevant 
state member bank, bank holding company, savings and loan holding 
company, foreign bank or other depository institution or company for a 
period of up to five years; and
* * * * *

0
46. Section 264a.6(c) is revised and paragraph (h) is added to read as 
follows:


Sec.  264a.6  What other definitions and rules of construction apply 
for purposes of this part?

* * * * *
    (c) Control has the meaning given in section 2 of the Bank Holding 
Company Act, with respect to banking holding companies, and has the 
meaning given in section 10 of the Home Owners' Loan Act, with respect 
to savings and loan holding companies.
* * * * *
    (h) Savings and loan holding company means any company that 
controls a savings association (as provided in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461 et seq.)).

    By order of the Board of Governors of the Federal Reserve 
System, September 1, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-22854 Filed 9-12-11; 8:45 am]
BILLING CODE 6210-01-P