[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 1998 Edition]
[From the U.S. Government Printing Office]


[[Page 1]]

          12



          Banks and Banking



          PARTS 300 TO 499

                         Revised as of January 1, 1998

          CONTAINING
          A CODIFICATION OF DOCUMENTS
          OF GENERAL APPLICABILITY
          AND FUTURE EFFECT
          AS OF JANUARY 1, 1998

          With Ancillaries
          Published by
          the Office of the Federal Register
          National Archives and Records
          Administration
          as a Special Edition of
          the Federal Register



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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 1998



               For sale by U.S. Government Printing Office
 Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328

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                            Table of Contents



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

  Title 12:
    Chapter III--Federal Deposit Insurance Corporation........       3
    Chapter IV--Export-Import Bank of the United States.......     397
  Finding Aids:
    Table of CFR Titles and Chapters..........................     449
    Alphabetical List of Agencies Appearing in the CFR........     465
    Redesignation Tables......................................     475
    List of CFR Sections Affected--Transferred Regulations 
        Formerly Appearing in Title 12 CFR, Chapter V.........     481
    List of CFR Sections Affected.............................     483

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   Cite this Code:  CFR

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

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                               EXPLANATION

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

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

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

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 1998), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

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

OMB CONTROL NUMBERS

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

[[Page vi]]

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

OBSOLETE PROVISIONS

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

CFR INDEXES AND TABULAR GUIDES

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

REPUBLICATION OF MATERIAL

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

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
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ELECTRONIC SERVICES

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

January 1, 1998.

[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of six volumes. The parts in 
these volumes are arranged in the following order: parts 1-199, 200-219, 
220-299, 300-499, 500-599, and part 600-end. The first volume containing 
parts 1-199 is comprised of chapter I--Comptroller of the Currency, 
Department of the Treasury. The second and third volumes containing 
parts 200-299 are comprised of chapter II--Federal Reserve System. The 
fourth volume containing parts 300-499 is comprised of chapter III--
Federal Deposit Insurance Corporation and chapter IV--Export-Import Bank 
of the United States. The fifth volume containing parts 500-599 is 
comprised of chapter V--Office of Thrift Supervision, Department of the 
Treasury. The sixth volume containing part 600-end is comprised of 
chapter VI--Farm Credit Administration, chapter VII--National Credit 
Union Administration, chapter VIII--Federal Financing Bank, chapter IX--
Federal Housing Finance Board, chapter XI--Federal Financial 
Institutions Examination Council, chapter XIV--Farm Credit System 
Insurance Corporation, chapter XV--Thrift Depositor Protection Oversight 
Board, chapter XVII--Office of Federal Housing Enterprise Oversight, 
Department of Housing and Urban Development and chapter XVIII--Community 
Development Financial Institutions Fund, Department of the Treasury. The 
contents of these volumes represent all of the current regulations 
codified under this title of the CFR as of January 1, 1998.

    Redesignation tables appear in the volumes containing parts 1-199, 
parts 300-499, parts 500-599, and part 600-end.

    For this volume, Gregory R. Walton was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

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[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                  (This book contains parts 300 to 499)

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                                                                    Part

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


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

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           CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION




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

              SUBCHAPTER A--PROCEDURE AND RULES OF PRACTICE
Part                                                                Page
300-302

[Reserved]

303             Applications, requests, submittals, 
                    delegations of authority, and notices 
                    required to be filed by statute or 
                    regulation..............................           5
304             Forms, instructions, and reports............          50
305-306

[Reserved]

307             Notification of changes of insured status...          54
308             Rules of practice and procedure.............          54
309             Disclosure of information...................         115
310             Privacy Act regulations.....................         127
311             Rules governing public observation of 
                    meetings of the Corporation's Board of 
                    Directors...............................         132
312             Assessment of fees upon entrance to or exit 
                    from the Bank Insurance Fund or the 
                    Savings Association Insurance Fund......         137
       SUBCHAPTER B--REGULATIONS AND STATEMENTS OF GENERAL POLICY
323             Appraisals..................................         143
324             Agricultural loan loss amortization.........         147
325             Capital maintenance.........................         149
326             Minimum security devices and procedures and 
                    Bank Secrecy Act compliance.............         194
327             Assessments.................................         196
328             Advertisement of membership.................         214
329             Interest on deposits........................         218
330             Deposit insurance coverage..................         221
331-332

[Reserved]

333             Extension of corporate powers...............         235
334

[Reserved]

335             Securities of nonmember insured banks.......         237
336             FDIC employees..............................         243
337             Unsafe and unsound banking practices........         247
338             Fair housing................................         259
339             Loans in areas having special flood hazards.         263

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340

[Reserved]

341             Registration of securities transfer agents..         267
342

[Reserved]

343             Insured State nonmember banks which are 
                    municipal securities dealers............         269
344             Recordkeeping and confirmation requirements 
                    for securities transactions.............         271
345             Community reinvestment......................         278
346             Foreign banks...............................         297
347             Foreign activities of insured State 
                    nonmember banks.........................         308
348             Management official interlocks..............         312
349             Reports and public disclosure of 
                    indebtedness of executive officers and 
                    principal shareholders to a State 
                    nonmember bank and its correspondent 
                    banks...................................         317
350             Disclosure of financial and other 
                    information by FDIC-insured State 
                    nonmember banks.........................         320
351             International operations....................         322
352             Nondiscrimination on the basis of handicap..         325
353             Suspicious activity reports.................         330
357             Determination of economically depressed 
                    regions.................................         332
359             Golden parachute and indemnification 
                    payments................................         332
360             Resolution and receivership rules...........         340
361             Minority and Women Outreach Program--
                    Contracting.............................         344
362             Activities and Investments of Insured State 
                    Banks...................................         346
363             Annual Independent Audits and Reporting 
                    Requirements............................         359
364             Standards for Safety and Soundness..........         368
365             Real Estate Lending Standards...............         371
366             Contractor Conflicts of Interest............         376
367             Suspension and Exclusion of Contractor and 
                    Termination of Contracts................         382
368             Government securities sales practices.......         391
369             Prohibition against use of interstate 
                    branches primarily for deposit 
                    production..............................         394

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              SUBCHAPTER A--PROCEDURE AND RULES OF PRACTICE





PARTS 300-302  [RESERVED]--Table of Contents






PART 303--APPLICATIONS, REQUESTS, SUBMITTALS, DELEGATIONS OF AUTHORITY, AND NOTICES REQUIRED TO BE FILED BY STATUTE OR REGULATION--Table of Contents




Sec.
303.0  Scope and definitions.
303.1  Application by nonmember bank, state savings association, and 
          Federal savings association for deposit insurance.
303.2  Applications by insured state nonmember bank to establish a 
          branch, move its main office or relocate a branch.
303.3  Application for conversion, merger, consolidation, assumption and 
          sale of asset transactions.
303.4  Change in bank control.
303.5  Applications concerning insurance fund conversions, prompt 
          corrective action, and other applications.
303.6  Application procedures.
303.7  Delegation of authority to the Director (DOS) and to the 
          associate directors, regional directors and deputy regional 
          directors to act on certain applications, requests, and 
          notices of acquisition of control.
303.8  Other delegations of authority.
303.9  Delegation of authority to act on certain enforcement matters.
303.10  Applications and enforcement matters where authority is not 
          delegated.
303.11  Confirmation, limitations, rescissions and special cases.
303.12  OMB control number assigned pursuant to the Paperwork Reduction 
          Act.
303.13  Applications and notices by savings associations.
303.14  Change in senior executive officer or board of directors.
303.15  Mutual-to-stock conversions of mutually owned state-chartered 
          savings banks.
    Authority:  12 U.S.C. 378, 1813, 1815, 1816, 1817(j), 1818, 1819 
(Seventh and Tenth), 1828, 1831e, 1831o, 1831p-1; 15 U.S.C. 1607.



Sec. 303.0  Scope and definitions.

    (a) Scope. This part prescribes:
    (1) Where applications, requests, and notices required to be filed 
by statute or regulation (hereinafter, collectively, applications) 
should be filed;
    (2) The contents of the application when the application is to be 
made by letter;
    (3) The location where forms and instructions may be obtained when 
the application is to be made on a form. This part also prescribes 
procedures to be followed by both the FDIC and applicants during the 
process of consideration of an application; and
    (4) Finally, this part sets forth delegations of authority by the 
FDIC's Board of Directors to the Director of the Division of Supervision 
and the Director of the Division of Compliance and Consumer Affairs, to 
their associate directors, to the regional directors and deputy regional 
directors of the Division of Supervision, and to the regional managers 
of the Division of Compliance and Consumer Affairs to act on certain 
applications and other matters pursuant to the conditions, where 
applicable, that limit such delegations.
    (b) Definitions. For purposes of this part:
    (1) Corporation or FDIC. The terms Corporation or FDIC shall mean 
the Federal Deposit Insurance Corporation.
    (2) Division or DOS. The terms division or DOS shall mean the 
Division of Supervision, or in the event the Division of Supervision is 
reorganized, such successor division.
    (3) DCA. The term DCA shall mean the Division of Compliance and 
Consumer Affairs, or in the event the Division of Compliance and 
Consumer Affairs is reorganized, such successor division.
    (4) Director (DOS). The term Director (DOS) shall mean the Director 
of the Division of Supervision, or in the event the title of Director of 
the Division of Supervision becomes obsolete, any official of equivalent 
or higher authority.
    (5) Director (DCA). The term Director (DCA) shall mean the Director 
of the Division of Compliance and Consumer Affairs, or in the event the 
title of Director of the Division of Compliance and Consumer Affairs 
becomes obsolete, any official of equivalent or higher authority.

[[Page 6]]

    (6) Associate director. The term associate director shall mean any 
associate director of the Division of Supervision or the Division of 
Compliance and Consumer Affairs, as appropriate, or in the event the 
title of associate director becomes obsolete, any official of equivalent 
authority within the respective divisions.
    (7) Regional director. The term regional director shall mean any 
regional director of the Division of Supervision, or in the event the 
title of regional director becomes obsolete, any official of equivalent 
authority within the Division of Supervision.
    (8) Deputy regional director. The term deputy regional director 
shall mean any deputy regional director of the Division of Supervision, 
or in those FDIC regions where there is no deputy regional director, an 
assistant regional director. In the event the title of deputy regional 
director or assistant regional director becomes obsolete, the term 
deputy regional director shall mean any official of equivalent authority 
within the same FDIC region of the Division of Supervision.
    (9) Regional manager. The term regional manager shall mean any 
regional manager in the Division of Compliance and Consumer Affairs, or 
in the event the title of regional manager becomes obsolete, any 
official of equivalent authority within the Division of Compliance and 
Consumer Affairs.
    (10) Associate General Counsel for Compliance and Enforcement. The 
term Associate General Counsel for Compliance and Enforcement shall mean 
the head of the Compliance and Enforcement Section of the Legal Division 
of the FDIC, or in the event the title of Associate General Counsel for 
Compliance and Enforcement becomes obsolete, any official of equivalent 
authority within the Legal Division. The authority delegated to the 
Associate General Counsel for Compliance and Enforcement may be 
exercised by the Deputy General Counsel for Supervision and Legislation 
or a counsel in the Compliance and Enforcement Section in the 
Washington, DC office.
    (11) Regional counsel. The term regional counsel shall mean a 
regional counsel of the Legal Division, or in the event the title of 
regional counsel becomes obsolete, any official of equivalent authority 
within the Legal Division. The authority delegated to a regional counsel 
may be exercised by a deputy regional counsel, a counsel, or any 
official of equivalent or higher authority in the Compliance and 
Enforcement Section of the Legal Division.
    (12) Appropriate FDIC region, appropriate FDIC regional office, 
appropriate regional director, appropriate deputy regional director, and 
appropriate regional counsel shall refer to the FDIC region, and the 
FDIC regional office, regional director, deputy regional director, and 
regional counsel, of the FDIC region, which the FDIC designates as 
follows:
    (i) When an institution or proposed institution that is the subject 
of an application, request, submittal, notice, or administrative action 
is not or will not be part of a group of related institutions, the 
appropriate region for the institution and any individual associated 
with the institution is the FDIC region in which the institution or 
proposed institution is or will be located; or
    (ii) When an institution or proposed institution that is the subject 
of an application, request, submittal, notice, or administrative action 
is or will be part of a group of related institutions, the appropriate 
region for the institution and any individual associated with the 
institution is the FDIC region in which the group's major policy and 
decision makers are located, or any other region the FDIC designates on 
a case-by-case basis.
    (13) Act. The term the Act shall mean the Federal Deposit Insurance 
Act (12 U.S.C. 1811 et seq.).
    (14) Institution-affiliated party. The term institution-affiliated 
party shall have the same meaning as provided in section 3(u) of the Act 
(12 U.S.C. 1813(u)).
    (15) Notification to primary regulator. The term notification to 
primary regulator shall mean a notice required under section 8(a)(2)(A) 
of the Act (12 U.S.C. 1818(a)(2)(A)).
    (16) Section 8(a) order. The term section 8(a) order shall mean an 
order terminating the insured status of a depository institution under 
section 8(a) of the Act (12 U.S.C. 1818(a)).
    (17) Notice of charges. The term notice of charges shall mean a 
notice of

[[Page 7]]

charges and of hearing setting forth the allegations of unsafe or 
unsound practices and/or violations and fixing the time and place of the 
hearing issued under section 8(b) of the Act (12 U.S.C. 1818(b)).
    (18) Section 8(b) order and cease-and-desist order. The terms 
section 8(b) order and cease-and-desist order shall mean a final order 
to cease and desist issued under section 8(b) of the Act (12 U.S.C. 
1818(b)).
    (19) Section 8(c) order and temporary cease-and-desist order. The 
terms section 8(c) order and temporary cease-and-desist order shall mean 
a temporary order to cease and desist issued under section 8(c) of the 
Act (12 U.S.C. 1818(c)).
    (20) Section 8(e) order. The term section 8(e) order shall mean a 
final order of removal or prohibition issued under section 8(e) of the 
Act (12 U.S.C. 1818(e)).
    (21) Section 8(e)(3) order and temporary order of suspension. The 
terms section 8(e)(3) order and temporary order of suspension shall mean 
a temporary order of suspension or prohibition issued under section 
8(e)(3) of the Act (12 U.S.C. 1818(e)(3)).
    (22) Section 8(g) order. The term section 8(g) order shall mean an 
order of suspension or prohibition issued under section 8(g) of the Act 
(12 U.S.C. 1818(g)).
    (23) Remote service facility. The term remote service facility shall 
mean an automated teller machine, cash dispensing machine, point-of-sale 
terminal, or other remote electronic facility where deposits are 
received, checks paid, or money lent.
    (24) Notice of assessment of civil money penalties. The term notice 
of assessment of civil money penalties shall mean a notice of assessment 
of civil penalties, findings of fact and conclusions of law, and order 
to pay issued pursuant to sections 7(a)(1), 7(j)(15), 8(i) or 18(j) of 
the Act (12 U.S.C. 1817(a)(1), 1817(j)(15), 1818(i), or 1828(j)), 
section 106(b) of the Bank Holding Company Act (12 U.S.C. 1972), section 
910(d) of the International Lending Supervision Act of 1983 (12 U.S.C. 
3909), or any other provision of law providing for the assessment of 
civil money penalties by the FDIC.
    (25) Amended order to pay. The term amended order to pay shall mean 
an order to forfeit and pay civil money penalties, the amount of which 
has been changed from that assessed in the original notice of assessment 
of civil money penalties.
    (26) Book capital. The term book capital shall mean total equity 
capital which is comprised of perpetual preferred stock, common stock, 
surplus, undivided profits and capital reserves, as those items are 
defined in the instructions of the Federal Financial Institutions 
Examination Council (FFIEC) for the preparation of Consolidated Reports 
of Condition and Income for insured banks.
    (27) Tier 1 capital. The term Tier 1 capital shall have the same 
meaning as provided in Sec. 325.2(m) of this chapter (12 CFR 325.2(m)).
    (28) Total assets. The term total assets shall have the same meaning 
as provided in Sec. 325.2(n) of this chapter (12 CFR 325.2(n)).
    (29) Adjusted Part 325 total assets. The term adjusted Part 325 
total assets shall mean adjusted 12 CFR part 325 total assets as 
calculated and reflected in the FDIC's Reports of Examination.
    (30) Protest. The term protest shall include any comment from the 
public which raises a negative issue relative to the Community 
Reinvestment Act (12 U.S.C. 2901 et seq.), whether or not it is labeled 
a protest and whether or not a hearing is requested; however, the term 
protest shall not include any such comment which the appropriate 
regional manager determines to be frivolous, or to have been filed for 
competitive reasons by a financial institution, or to have been filed 
primarily as a means of delaying action on the application, or any 
comment which raises negative Community Reinvestment Act issues between 
the commenter and the applicant that have been resolved.
    (31) Standard conditions. The term standard conditions refers to 
conditions that any delegate may include as a matter of routine in an 
order approving an application, whether or not the applicant has agreed 
to their inclusion. The following conditions, or variations thereof, are 
standard conditions:
    (i) That the applicant has obtained all necessary and final 
approvals from the appropriate state authority or other applicable 
authority;

[[Page 8]]

    (ii) That if the transaction does not take effect within a specified 
time limit, or unless, in the meantime, a request for an extension of 
time has been approved, the consent granted shall expire at the end of 
the said time period;
    (iii) That until the conditional commitment of the FDIC becomes 
effective, the FDIC retains the right to alter, suspend or withdraw its 
commitment should any interim development be deemed to warrant such 
action; and
    (iv) In the case of a merger transaction (as defined in 
Sec. 303.7(b)(1)), including a phantom merger or reorganization, that 
the proposed transaction not be consummated before the thirtieth 
calendar day after the date of the order approving the merger.
    (c) Authority delegated to regional manager. For purposes of this 
part, and where confirmed in writing, any authority delegated to the 
regional manager may also be exercised by his or her principal 
assistant.
    (d) Construction. Any singular term includes the plural, and the 
plural includes the singular, if such use would be appropriate. Any use 
of the masculine, feminine, or neuter gender shall encompass all three, 
if such use would be appropriate.
[59 FR 52660, Oct. 19, 1994, as amended at 60 FR 31384, June 15, 1995; 
62 FR 16664, Apr. 8, 1997]



Sec. 303.1  Application by nonmember bank, state savings association, and Federal savings association for deposit insurance.

    Application for deposit insurance by an existing or proposed 
nonmember bank,\1\ state savings association or Federal savings 
association should be filed with the appropriate regional director. The 
relevant application forms and instructions may be obtained from the 
appropriate FDIC regional office.
---------------------------------------------------------------------------

    \1\ A nonmember bank is a bank which is not a member of the Federal 
Reserve System.
---------------------------------------------------------------------------

[54 FR 53556, Dec. 29, 1989]



Sec. 303.2  Applications by insured state nonmember bank to establish a branch, move its main office or relocate a branch.

    (a) Application by an insured state nonmember bank (except a 
District bank) to establish and operate a new branch 2, to 
move its main office, or relocate a branch should be filed with the 
appropriate regional director. For purposes of this requirement, a 
branch relocation is a move within the same immediate neighborhood that 
does not substantially affect the nature of the business of the branch 
or the customers of the branch. Under this paragraph, situations where 
an insured state nonmember bank closes a branch in one location and 
opens a branch in another location outside the immediate neighborhood of 
the closed branch are considered the establishment of a new branch and 
the closing of an existing branch. Applications filed under this 
paragraph shall indicate whether they are to establish and operate a new 
branch, move a main office, or relocate a branch office. The application 
shall be mailed or delivered to the regional director on the date on 
which the notice required in Sec. 303.6(f)(1) is published or not more 
than 30 days subsequent to the first required publication of notice. The 
application shall be in letter form and shall contain the following 
information:
---------------------------------------------------------------------------

    \2\  The term branch includes any domestic branch or foreign branch 
as those terms are defined in section 3(o) of the Act, as amended (12 
U.S.C. 1813(o)).
---------------------------------------------------------------------------

    (1) The exact location of the proposed site, including street 
address (unless one has not been assigned to the location);
    (2) Details concerning any involvement in the proposal by an insider 
(a director, an officer, or a shareholder who directly or indirectly 
controls 5 or more percent of any class of the applicant's outstanding 
voting stock, or the associates and interests of any such person) of the 
bank, including any financial arrangements relating to fees, the 
acquisition of property, leasing of property, and construction 
contracts;
    (3) The impact of the proposal on the human environment, 
specifically, information on compliance with local zoning laws and 
regulations and the effect on traffic patterns;
    (4) A statement as to whether or not the site is included in or is 
eligible for inclusion in the National Register of Historic Places, 
including evidence

[[Page 9]]

that clearance has been obtained from the State Historic Preservation 
Officer;
    (5) Comments on any changes in services to be offered, the community 
to be served, or any other effect the proposal may have on the 
applicant's compliance with the Community Reinvestment Act; and
    (6) The name and address of and the date of publication in the 
newspaper in which notice required by Sec. 303.6(f)(1) is published.
In cases in which additional information is necessary for evaluation of 
the application, the applicant may be required to furnish specific 
information on an individual basis. Procedures regarding applications to 
establish or acquire a branch pursuant to section 38 of the Act, 12 
U.S.C. 1831o, are set forth at Sec. 303.5(e) of this part.
    (b) The appropriate regional director may delay processing, 
including extending the comment period, for good cause.
    (c) Special procedures for remote service facilities. (1) For 
purposes of this section, establishing means owning or leasing a remote 
service facility either individually or jointly.
    (2) An insured state nonmember bank or an insured state-licensed 
branch of a foreign bank whose most recent Community Reinvestment Act 
rating is Satisfactory or better and who desires to establish and 
operate or relocate a remote service facility (RSF) shall file a letter 
with the appropriate regional director. The letter shall contain the 
exact location of the proposed or relocated RSF, including street 
address (unless one has not been assigned to the location), and either a 
representation that the site of the proposed or relocated RSF is not 
included in or eligible for inclusion in the National Register of 
Historic Places or written verification that in the opinion of the 
appropriate state historic preservation officer the establishment or 
relocation of the RSF will have no adverse effect on a historic site. 
Unless the institution is notified otherwise by the FDIC within seven 
days of receipt of the letter, the institution may establish and operate 
or relocate the RSF. In the event that the institution cannot represent 
in good faith that the site of the proposed or relocated RSF is not 
included in or eligible for inclusion in the National Register of 
Historic Places or evidence that written verification has been obtained 
from the appropriate state historic preservation officer, the 
institution shall proceed pursuant to paragraph (c)(3) of this section.
    (3) An insured state nonmember bank or an insured state-licensed 
branch of a foreign bank whose most recent Community Reinvestment Act 
rating is not Satisfactory or better and who desires to establish and 
operate or relocate an RSF shall file the letter described in paragraph 
(c)(2) of this section and comply with the notice provisions of 
Sec. 303.6(f). Unless the institution is notified otherwise by the FDIC 
within 15 days after completion of processing of the letter, the 
institution may establish and operate or relocate the RSF; provided 
however, that in the event that a protest is filed with the FDIC or 
other objection is taken prior to completion of processing the letter, 
the institution shall not establish and operate or relocate the RSF 
until the FDIC provides written notice of its approval.
[54 FR 53556, Dec. 29, 1989, as amended at 58 FR 8216, Feb. 12, 1993; 59 
FR 4250, Jan. 31, 1994; 59 FR 43282, Aug. 23, 1994]



Sec. 303.3  Application for conversion, merger, consolidation, assumption and sale of asset transactions.

    (a) Merger, consolidation, asset acquisition or assumption 
transaction between insured depository institutions. Application by an 
insured depository institution for the consent of the Corporation to 
merge or consolidate with, acquire the assets of, or assume the 
liability to pay any deposits made in, another insured depository 
institution--when the resulting or assuming depository institution is to 
be an insured state nonmember bank (except a District bank or a savings 
bank supervised by the Director of the Office of Thrift Supervision), 
together with copies of all agreements or proposed agreements relating 
thereto, including the charter or articles of incorporation of the 
resulting or assuming depository institution, should be filed with the 
appropriate regional director. Procedures regarding applications to 
acquire an interest in

[[Page 10]]

any company or insured depository institution pursuant to section 38 of 
the Act, 12 U.S.C. 1831o, are set forth at Sec. 303.5(e) of this part.
    (b) Merger of Insured depository institution with noninsured bank or 
institution. Application by an insured depository institution for the 
consent of the Corporation to merge or consolidate with a noninsured 
bank or institution, or to convert into a noninsured institution, or to 
assume liability to pay any deposits made in, or similar liabilities of, 
any noninsured bank or institution, or to transfer assets to any 
noninsured bank or institution in consideration of the assumption of 
liability for any portion of the deposits made in such insured 
depository institution, together with copies of all agreements or 
proposed agreements relating thereto, should be filed with the 
appropriate regional director.
    (c) Conversion with diminution of capital or surplus. Application 
for the consent of the Corporation to convert into an insured state 
nonmember bank (except a District bank), when the conversion will result 
in the converted bank's having less capital stock or surplus than the 
converted bank at the time of the shareholders' meeting approving such 
conversion, together with copies of the charter and/or articles of 
association of the converted bank, should be filed with the appropriate 
regional director.
    (d) Applications for approval of transactions under section 5(d)(3) 
of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)). Application 
by an insured state nonmember bank for consent of the Corporation to 
enter into a transaction under section 5(d)(3) of the Federal Deposit 
Insurance Act shall be made by submitting a letter accompanying the 
merger application certifying:
    (1) That the application for approval is for a transaction under 
section 5(d)(3), and
    (2) That the transaction will not result in the transfer of any 
insured depository institution's Federal deposit insurance from one 
federal deposit insurance fund to the other federal deposit insurance 
fund.
    (e) The appropriate application forms and instructions, as well as 
instructions concerning notice to depositors, may be obtained upon 
request from the office of said regional director.
[54 FR 53556, Dec. 29, 1989, as amended at 57 FR 5815, Feb. 18, 1992; 58 
FR 8216, Feb. 12, 1993]



Sec. 303.4  Change in bank control.

    (a) Acquisition of control.\3\ Under the Change in Bank Control Act 
of 1978, acquisitions by a person \4\ or persons acting in concert with 
the power to vote 25 percent or more of a class of voting securities of 
an insured depository institution, unless exempted, require prior notice 
to the Corporation. In addition, a purchase, assignment, transfer, 
pledge, or other disposition of voting stock through which any person 
will acquire ownership, control, or the power to vote ten percent or 
more of a class of voting securities of an insured depository 
institution will be presumed to be an acquisition by such person of the 
power to direct that institution's management or policies if:
---------------------------------------------------------------------------

    \3\ Control is defined in section 7(j)(8)(B) of the Act as ``the 
power, directly or indirectly, to direct the management or policies of 
an insured bank or to vote over 25 percent or more of any class of 
voting securities of an insured bank.'' 12 U.S.C. 1817(j)(8)(B).
    \4\ Person is defined in section 7(j)(8)(A) of the Act as ``an 
individual or a corporation, partnership, trust, association, joint 
venture, pool, syndicate, sole proprietorship, unincorporated 
organization, or any other form of entity not specifically listed 
herein.'' 12 U.S.C. 1817(j)(8)(A).
---------------------------------------------------------------------------

    (1) The institution has issued any class of securities subject to 
the registration requirements of section 12 of the Securities Exchange 
Act of 1944 (15 U.S.C. 781); or
    (2) Immediately after the transaction, no other person will own a 
greater proportion of that class of voting securities.
Other transactions resulting in a person's control of less than 25 
percent of a class of voting shares of an insured depository institution 
would not result in control for purposes of the Act. An acquiring person 
may request an opportunity to contest any presumption established by 
this paragraph (a) of this section with respect to a proposed 
transaction. The Corporation will afford the person an opportunity to

[[Page 11]]

present views in writing, or, where appropriate, orally before its 
designated representatives either at informal conference discussions or 
at informal presentations of evidence.
    (b) Notices. (1) Notice of a proposed acquisition of control should 
be filed with the regional director of the FDIC region in which the 
depository institution in which stock is being acquired is located. The 
FDIC will not accept a notice unless the information provided is 
responsive to every item specified in paragraph 6 of the Change in Bank 
Control Act of 1978 (12 U.S.C. 1817(j)(6)) and every item prescribed in 
the appropriate FDIC forms. With respect to personal financial 
statements required by paragraph 6(b) of the Change in Bank Control Act 
of 1978, an acquiring person may include a current statement of assets 
and liabilities, as of a date not more than ninety days prior to the 
date the notice is filed, a brief income summary, and a statement of 
material changes since the date of the statement. The appropriate 
regional director, the Director (DOS), or the Board of Directors may 
require additional information with respect to personal financial 
statements.
    (2)(i) Except as otherwise provided in paragraph (b)(2)(ii) or 
(b)(2)(iii) of this section, within ten days after receiving 
confirmation that the appropriate FDIC regional office has accepted the 
notice, the acquiring person(s) shall publish an announcement of such 
acceptance in the business section of a newspaper having general 
circulation in the community in which the home office of the depository 
institution whose stock is sought to be acquired is located. Promptly 
thereafter, the acquiring person(s) shall send a copy of the newspaper 
announcement and the publisher's affidavit of publication to the 
regional director of the FDIC region in which the subject depository 
institution is located. The newspaper announcement shall contain the 
name(s) of the proposed acquirer(s), the name of the depository 
institution whose stock is sought to be acquired, and the date of 
acceptance by the FDIC of the notice of acquisition of control. The 
announcement shall also state that any person wishing to comment on the 
proposed change in control may do so by submitting written comments to 
the regional director of the FDIC at (give address of the regional 
office) within twenty days following the required newspaper publication 
or, if the FDIC has shortened the public comment period pursuant to 
paragraph (b)(3) of this section, within such shorter period.
    (ii) In a community in which there is no daily or weekly community 
newspaper, the acquiring person(s) may satisfy the publication 
requirement contained in paragraph (b)(2)(i) of this section by 
publishing the required newspaper announcement in either a county-wide 
newspaper (in the county in which the bank's home office is located) or, 
if there is no county-wide newspaper, in a state-wide newspaper.
    (iii) In the case of a notice filed in contemplation of a public 
tender offer subject to the requirements of the Securities Exchange Act 
of 1934 (15 U.S.C. 78m and 78n) and the FDIC's regulations governing 
tender offers (12 CFR 335.501 through 335.530), the acquiring person(s) 
shall publish the required newspaper announcement not later than the 
earliest of:
    (A) The commencement of the tender offer under Sec. 335.502 of the 
FDIC's regulations (12 CFR 335.502);
    (B) Other public announcement of the tender offer; or
    (C) Thirty-four days after the FDIC's acceptance of the notice of 
acquisition of control.
    (3)(i) In acting upon a proposed change in control, the FDIC shall 
consider all public comments received within twenty days following the 
required newspaper publication. At the FDIC's option, comments received 
after this twenty-day period may be, but need not be, considered.
    (ii) If the FDIC determines in writing that the newspaper 
publication or comment solicitation requirements of this paragraph would 
seriously threaten the safety or soundness of the depository institution 
to be acquired, including situations where the FDIC must act immediately 
in order to prevent the probable failure of the bank to be acquired, 
then the FDIC may:
    (A) Waive the publication requirement;

[[Page 12]]

    (B) Waive the public comment solicitation requirement; or
    (C) Act on the proposed change in control prior to the expiration of 
the public comment period.
    (iii) In other circumstances, for good cause, the FDIC may shorten 
the public comment period to a period of not less than ten days. Such 
good cause will exist only if the FDIC determines that circumstances 
beyond the control of the acquiring person or persons warrant a shorter 
period.
    (4) A notice of acquisition of control that is filed in 
contemplation of a public tender offer subject to sections 13(d) and 
14(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m and 78n) and 
the FDIC's regulations governing tender offers (12 CFR 335.501 through 
335.530) may be given confidential treatment for up to thirty-four days 
after the notice is accepted if:
    (i) The filing party requests confidential treatment under this rule 
and represents that a public announcement of the tender offer and the 
filing of appropriate forms with the FDIC will occur within thirty-four 
days from the acceptance of the notice; and
    (ii) The FDIC determines, in its discretion, that it is in the 
public interest to grant confidential treatment. In its discretion, the 
FDIC may grant confidential treatment under other circumstances when 
consistent with the purposes of the Change in Bank Control Act of 1978.
    (5) Nothing in this regulation shall affect any obligation which the 
acquiring person(s) may have to comply with the Federal securities laws 
or any other laws.
    (6)(i) Whenever a notice of a proposed acquisition of control is not 
filed in accordance with the Change in Bank Control Act of 1978 and 
these regulations, the acquiring person(s) shall, within ten days of 
being so directed by the FDIC, publish an announcement of the 
acquisition of control in the business section of a newspaper having 
general circulation in the community in which the home office of the 
depository institution involved is located. In a community in which 
there is no daily or weekly community newspaper, the required newspaper 
announcement may be published in a county-wide newspaper (in the county 
in which the depository institution's home office is located) or, if 
there is no county-wide newspaper, in a statewide newspaper.
    (ii) The newspaper announcement shall contain the name(s) of the 
acquire(s), the name of the depository institution involved, and the 
date of the acquisition of the stock. The announcement shall also 
contain a statement indicating that the FDIC is currently reviewing the 
acquisition of control. The announcement shall also state that any 
person wishing to comment on the change in control may do so by 
submitting written comments to the regional director of the FDIC at 
(give address of the regional office) within twenty days following the 
required newspaper publication.
    (c) Exempt transactions. The following transactions are not subject 
to the prior notice requirements of the Change in Bank Control Act of 
1978:
    (1) The acquisition of additional shares of an insured depository 
institution by a person who continuously since March 9, 1979, held power 
to vote 25 percent or more of the voting shares of that institution, or 
by a person who has acquired and maintained control of that institution 
after complying with the procedures of the Change in Bank Control Act;
    (2) The acquisition of additional shares of an insured depository 
institution by a person who under paragraph (a) of this section would be 
presumed to have controlled that institution continuously since March 9, 
1979, if:
    (i) The transaction will not result in that person's direct or 
indirect ownership or power to vote 25 percent or more of any class of 
voting securities of the institution; or
    (ii) In other cases, the Corporation determines that the person has 
controlled the institution since March 9, 1979;
    (3) The acquisition of shares in satisfaction of a debt previously 
contracted in good faith or through testate or intestate succession or 
bona fide gift; Provided, The acquirer advises the appropriate regional 
director within thirty days after the acquisition and provides such of 
the information specified in paragraph 6 of the Change in Bank

[[Page 13]]

Control Act as the regional director requests;
    (4) A transaction subject to approval under section 3 of the Bank 
Holding Company Act, section 18 of the Act or section 10 of the Home 
Owners' Loan Act;
    (5) A transaction described in sections 2(a)(5) or (3)(a)(5)(A) or 
(B) of the Bank Holding Company Act, (12 U.S.C. 1841(a)(5) or 1842 
(a)(5)) by a person there described;
    (6) A customary one-time proxy solicitation and receipt of pro-rata 
stock dividends; and
    (7) The acquisition of shares in foreign banks which have an insured 
branch or branches in the United States; Provided, however, That this 
exemption does not extend to the reports and information required under 
sections 7(j)(9), (10), and (12) of the Act.
[54 FR 53557, Dec. 29, 1989, as amended at 59 FR 52662, Oct. 19, 1994]



Sec. 303.5  Applications concerning insurance fund conversions, prompt corrective action, and other applications.

    (a) Conversion involving transfer of deposits between the Savings 
Association Insurance Fund (SAIF) and the Bank Insurance Fund (BIF). 
Application by any depository institutions to participate in a 
conversion transaction involving the transfer of deposits from the SAIF 
Fund to the BIF Fund or vice versa should be filed with the appropriate 
regional director. The application shall be in letter form, signed by 
representatives of each institution participating in the transaction, 
and shall contain the following information:
    (1) A description of the transaction;
    (2) A statement of condition of each institution as of the date of 
application;
    (3) A statement of condition of each institution as of May 1, 1989, 
with a notation as to the amount of net interest credited to total 
deposits during the period beginning May 1, 1989, and ending on the 
expected date of transfer;
    (4) The amount of deposits involved in the conversion transaction;
    (5) A pro forma balance sheet and income statement for each 
institution upon consummation of the transaction;
    (6) A listing of any other conversion in which either institution 
has participated since August 9, 1989, or any other conversion 
transaction in process at the time of filing; and
    (7) Any other information that the regional director may from time 
to time require.
    (b) Except as otherwise provided by rule or regulation, all 
applications, requests, and submittals for which no form of application 
has been prescribed by the Corporation should:
    (1) Be in writing;
    (2) (i) Be signed by the president, cashier, or managing officer of 
the depository institution in the case of:
    (A) An application by a depository institution whose insured status 
has been terminated under section 8 of the Federal Deposit Insurance Act 
(12 U.S.C. 1818) for permission to continue or resume its status as an 
insured depository institution; or
    (B) An application made by an insured depository institution under 
part 328 of this title; or
    (ii) Be signed by the applicant or a duly authorized agent in all 
other cases;
    (3) Contain a statement of the applicant's interest therein, a 
complete and concise statement of the action requested, and the reasons 
and facts relied upon as the basis for such requested action; and
    (4) (i) Be addressed to the appropriate regional director in the 
case of an application, request, or notice of acquisition of control 
from or relating to a particular bank or institution; or
    (ii) The Executive Secretary of the Corporation at the Corporation's 
Washington, DC headquarters in all other cases.
The applicant shall furnish such other pertinent information as may be 
required by the Corporation. Forms to be executed in conjunction with an 
application for consent to exercise trust powers may be obtained from 
the appropriate FDIC regional office.
    (c) In addition to the foregoing, an application by a depository 
institution whose insured status has been terminated under section 8 of 
the Act for permission to continue or resume its status as an insured 
depository institution should:

[[Page 14]]

    (1) Be accompanied by a certified copy of the resolution of its 
board of directors; and
    (2) Contain a statement that the depository institution's insured 
status has been terminated (including the date thereof and the basis 
therefor) and that the insurance of its deposits has not ceased.
    (d) Applications under Sec. 347.4 of this chapter to acquire or hold 
stock or other evidence of ownership in a foreign bank or other 
financial entity shall be submitted to the appropriate regional director 
in letter form and, unless otherwise directed by the Corporation, shall 
contain full information concerning the foreign bank or other financial 
entity including (unless previously furnished):
    (1) The cost, number, class of shares to be acquired, and the 
proposed carrying value of such shares on the books of the insured state 
nonmember bank;
    (2) A recent balance sheet and income statement of the foreign bank 
or other financial entity;
    (3) A brief description of the foreign bank's or other financial 
entity's business (including full information concerning any direct or 
indirect business transacted in the United States);
    (4) Lists of directors and principal officers (with address and 
principal business affiliation of each) and of all shareholders known to 
the issuing bank holding 10 percent or more of any class of the foreign 
bank's or other financial entity's stock or other evidence of ownership, 
and the amount held by each; and
    (5) Information concerning the rights and privileges of the various 
classes of shares outstanding.
    (e) Applications pursuant to section 38 of the Act and subpart B of 
part 325 of the FDIC's regulations (prompt corrective action). An 
application by any insured depository institution pursuant to section 38 
of the Act, 12 U.S.C. 1831o, and subpart B of part 325 of the FDIC's 
regulations, 12 CFR part 325, should be filed with the DOS regional 
director of the FDIC region in which the insured depository institution 
is located. The application shall be in letter form, except as otherwise 
provided in paragraphs (e)(1) through (5) of this section. Such letter 
shall be signed by the president, senior officer or a duly authorized 
agent of the insured depository institution and be accompanied by a 
certified copy of a resolution adopted by the institution's board of 
directors or trustees authorizing the application. Each application 
shall contain the information specified in paragraphs (e)(1) through (5) 
of this section and any other information requested by the Corporation.
    (1) Capital distributions. An application to repurchase, redeem, 
retire or otherwise acquire shares or ownership interests of the insured 
depository institution shall describe the proposal, the shares or 
obligations which are the subject thereof, and the additional shares or 
obligations of the institution which will be issued in at least an 
amount equivalent to the distribution. The application shall also 
explain how the proposal will reduce the institution's financial 
obligations or otherwise improve its financial condition. Where the 
proposed action also requires an application pursuant to section 18(i) 
of the Act (12 U.S.C. 1828 (i)), such application should be filed 
concurrently with or made a part of the application pursuant to section 
38 of the Act.
    (2) Acquisitions, branching, and new lines of business. Applications 
shall describe the proposal, state the date institution's capital 
restoration plan was accepted by its primary Federal regulator, describe 
the institution's status toward implementing the plan, and explain how 
the proposed action is consistent with and will further the achievement 
of the plan or otherwise further the purposes of section 38 of the FDI 
Act. Where the FDIC is not the applicant's primary Federal regulator, 
the application should also state whether approval has been requested 
from the applicant's primary Federal regulator, the date of such request 
and the disposition of the request, if any. Where the proposed action 
also requires applications pursuant to section 18 (c) or (d) of the FDI 
Act (12 U.S.C. 1828 (c) or (d) of the FDI Act (12 U.S.C. 1828 (c) or 
(d)), such applications should be filed concurrently with, or made a 
part of, the application filed pursuant to section 38 of the Act.

[[Page 15]]

    (3) Bonuses and increased compensation for senior executive 
officers. Applications shall list each proposed bonus or increase in 
compensation, and for the latter shall identify compensation for each of 
the twelve calendar months preceding the calendar month in which the 
institution became undercapitalized. Applications shall also state the 
date the institution's capital restoration plan was accepted by the 
FDIC, and describe any progress made in implementing the plan.
    (4) Payment of principal or interest on subordinated debt. 
Applications shall describe the proposed payment and provide an 
explanation of action taken under section 38(h)(3)(A)(ii) of the Act. 
The application shall also explain how such payments would further the 
purposes of section 38 of the Act. Existing approvals pursuant to 
requests filed under 18(i)(1) shall not be deemed to be the permission 
needed pursuant to section 38.
    (5) Restricted activities of Critically Undercapitalized 
Institutions. Applications to engage in any of the following activities 
shall describe the proposed activity and explain how the activity would 
further the purposes of section 38 of the Act:
    (i) Enter into any material transaction other than in the usual 
course of business including any action with respect to which the 
institution is required to provide notice to the appropriate Federal 
banking agency;
    (ii) Extend credit for any highly leverage transaction;
    (iii) Amend the institution's charter or bylaws, except to the 
extent necessary to carry out any other requirement of any law, 
regulation, or order;
    (iv) Make any material change in accounting methods;
    (v) Engage in any covered transaction (as defined in section 23A(b) 
of the Federal Reserve Act (12 U.S.C. 371A(b))); or
    (vi) Pay excessive compensation of bonuses.
[54 FR 53558, Dec. 29, 1989, as amended at 58 FR 8217, Feb. 12, 1993; 59 
FR 52662, Oct. 19, 1994]



Sec. 303.6  Application procedures.

    (a) Scope of section. Paragraphs (f) through (n) of this section 
apply to:
    (1) Applications for deposit insurance by proposed new depository 
institutions or operating non-insured institutions;
    (2) Applications by insured state nonmember banks to establish 
branches, including applications to establish remote service facilities 
by banks whose most recent Community Reinvestment Act rating is not 
Satisfactory or better or who cannot represent compliance with the 
National Historic Preservation Act;
    (3) Applications by insured state nonmember banks to move their main 
office or relocate their branch offices, including applications to 
relocate remote service facilities by banks whose most recent Community 
Reinvestment Act rating is not Satisfactory or better or who cannot 
represent compliance with the National Historic Preservation Act;
    (4) Applications to merge or to consolidate with, acquire the assets 
of, or assume the liability to pay any deposits made in, a bank or 
institution, when the resulting or assuming depository institution is to 
be an insured state nonmember bank, and all other applications to merge 
or to consolidate with, or to assume liabilities, which require the 
Corporation's prior approval under the Bank Merger Act (12 U.S.C. 
1828(c)); \6\ and
---------------------------------------------------------------------------

    \5\ [Reserved]
    \6\ Except as otherwise provided in paragraph (f)(1) of this 
section, the provisions of this Sec. 303.6 shall not be applicable to 
any proposed merger or assumption transaction which the Board of 
Directors of the Corporation determines must be acted upon immediately 
to prevent the probable default of one of the institutions involved or 
must be handled with expeditious action due to an existing emergency 
condition, as permitted by the Bank Merger Act (12 U.S.C. 1828(C)(6)).
---------------------------------------------------------------------------

    (5) Any other applications, requests or submittals which the Board 
of Directors of the FDIC in its sole discretion deems appropriate.

In the case of applications, requests, or submittals which come within 
Sec. 303.6(a)(5), the applicant will be notified at the time its 
application is accepted for filing that the procedures set forth in this 
section shall be followed in connection therewith.

[[Page 16]]

    (b) Investigations and examinations. With respect to all 
applications, requests, or submittals, the Board of Directors, or the 
Director (DOS) or the Director (DCA), or their associate directors, or 
the appropriate regional director, or the appropriate deputy regional 
director, or the appropriate regional manager acting under delegated 
authority may require any investigation or examination, or both, to be 
performed as deemed appropriate. Upon receipt of the report of any 
investigation or examination and any recommendations based on the 
report, the Board of Directors, or either director, or their associate 
directors, or the regional director, or the deputy regional director, or 
the regional manager acting within the scope of delegated authority will 
take any action determined necessary or appropriate under the 
circumstances.
    (c) Opportunity to present views. With respect to any application, 
the Corporation may afford the applicant or other properly interested 
persons, including government agencies, an opportunity to present views 
orally or in writing before or to its designated representative or 
representatives, either at informal conference discussions or at 
informal presentations of evidence.
    (d) Notice of disposition of applications. Prompt notice will be 
given of the grant or denial, in whole or in part, of any written 
application, petition, or other request of any interested person made in 
connection with any agency proceeding. In the case of a denial of an 
application by a federal savings association for deposit insurance, such 
notice will be sent to the Director of the Office of Thrift Supervision, 
and will be accompanied by a written statement giving specific reasons 
for the Corporation's determination with reference to the factors 
described in paragraphs (1), (2), (3), (4) and (5) of section 6 of the 
Act (12 U.S.C. 1816). In the case of any other denial, except in 
affirming a prior denial, or where the same is self-explanatory, such 
notice will be accompanied by a simple statement of the reasons 
therefor.
    (e) Opportunity to petition for reconsideration of a denied 
application, petition, or other request. (1) Within 15 days of its 
receipt of notice that its application, petition, or request has been 
denied, any applicant may petition the FDIC for reconsideration of such 
application, petition, or request (except an application, petition or 
request already previously denied upon reconsideration). The petition 
must be in writing and should:
    (i) Specify reasons why the FDIC should reconsider its action
    (ii) Set forth relevant, substantive information that for good cause 
was not previously set forth in the application, petition, or request to 
be reconsidered; and
    (iii) A petition or request relating to a safety and soundness 
matter should be filed with the appropriate regional director. A 
petition or request relating to compliance with consumer protection, 
fair lending, community reinvestment or civil rights laws should be 
filed with the appropriate regional manager. If a particular insured 
depository institution or insured branch of a foreign bank was not the 
subject of the application, petition, or request on which 
reconsideration is sought, the petition should be filed with the 
Executive Secretary of the FDIC at the FDIC's Washington, DC office.
    (2) (i) The Director (DOS) or the Director (DCA) or, where confirmed 
in writing by the appropriate Director, an associate director, or the 
appropriate regional director or deputy regional director, or the 
appropriate regional manager, or, in the case of a petition for 
reconsideration filed with the Executive Secretary, the General Counsel 
or his or her designee, shall determine whether the petition for 
reconsideration satisfies paragraphs (e)(1)(i) and (ii) of this section 
and shall promptly notify the petitioner of such determination.
    (ii) If, pursuant to paragraph (e)(2)(i) of this section, a petition 
for reconsideration is determined not to satisfy paragraphs (e)(1)(i) 
and (ii) of this section, an applicant may appeal such decision to the 
appropriate Director, and where confirmed in writing by that Director, 
to an associate director, or, in the case of a petition for 
reconsideration filed with the Executive Secretary, to the Chairperson 
of the FDIC or his or her designee. An applicant may not submit 
additional information

[[Page 17]]

or evidence with the appeal and the determination by the appropriate 
Director or associate director, or the Chairperson of the FDIC or his or 
her designee whether the petition satisfies paragraphs (e)(1)(i) and 
(ii) of this section is final, and not appealable to the Board of 
Directors.
    (iii) If a petition for reconsideration is determined to satisfy 
paragraphs (e)(1)(i) and (ii) of this section, then the previously 
denied application, petition, or request will be reconsidered:
    (A) By the Board of Directors if originally denied by the Board of 
Directors; or
    (B) By the appropriate director, or where confirmed in writing by 
the director, by an associate director, if originally denied by the 
director, associate director, regional director, deputy regional 
director, or regional manager.
    (iv) Decisions by either director or their associate directors on 
petitions for reconsideration are final and not appealable to the Board 
of Directors.
    (f) Notice of filing of application--(1) Notice by publication. (i) 
In the case of applications in connection with a merger transaction (as 
defined by the Bank Merger Act, 12 U.S.C. 1828(c)(3)), unless the 
Corporation determines it must act immediately in order to prevent the 
probable failure of one of the depository institutions involved, the 
applicant must publish notice of the proposed transaction on at least 
three occasions at approximately two week intervals in a newspaper of 
general circulation in the community or communities where the main 
offices of the banks or institutions involved are located, or if there 
is no such newspaper in the community, then in the newspaper of general 
circulation published nearest thereto. The last publication of the 
notice shall appear on the 30th day or the newspaper's publication date 
closest to 30 days after the first publication. The public shall have a 
minimum of 30 days from the date of first publication to comment on the 
application. Where the Corporation determines that an emergency exists 
which requires expeditious action, then notice shall be published twice 
during a 10 day period, first, as soon as possible after the Corporation 
notifies the applicant that the merger will be processed as an emergency 
requiring expeditious action and, second, on the 10th day or the 
newspaper's publication date closest to 10 days after the date of first 
publication. The public shall have a minimum of 10 days from the date of 
first publication to comment on the application. The published notice 
shall include the name and main office location of all banks or 
institutions involved in the transactions and the subject matter of the 
application. If it is contemplated that the continuing bank will operate 
the offices of the other depository institution(s) as branches, the 
following statement shall be added to the notice:
    It is contemplated that all of the offices of the above named 
institutions will continue to be operated (with the exception of 
[identity and location of each office which will not be operated]).
    (ii) In the case of all other applications described in paragraph 
(a) of this section, on the date the deposit insurance application form 
or the letter application required in Sec. 303.2 is mailed or delivered 
to the regional director or not more than 30 days prior to that date, 
the applicant shall publish notice or begin publication of notice if 
more than one notice is required, of the proposed transaction. Provided 
however, That no publication shall be required in connection with the 
granting of insurance to a new depository institution established 
pursuant to the resolution of a failed institution situation. 
Publication of notice shall be made at least once each week on the same 
day for two consecutive weeks for applications to move a main office or 
relocate a remote service facility and once for other applications 
described in paragraph (a) of this section and shall be in a newspaper 
of general circulation in the communities referred to below:
    (A) Applications to establish a branch, including a remote service 
facility. In the communities in which the home office and the domestic 
branch to be established are located; Foreign Branch: In the community 
in which the home office is located.
    (B) Applications to move a main office and relocate a branch 
(including a remote service facility). In the communities in which the 
home office, office to be

[[Page 18]]

closed, and office to be opened are located, provided that a foreign 
bank having an insured branch need only publish such notice in the 
communities in which the insured branch is located and is to be 
relocated.
    (C) Applications for deposit insurance. In the community in which 
the home bank office is or will be located, provided that a foreign bank 
making application for an insured branch need only publish such notice 
in the community in which the insured branch is to be located.

The published notice required by (f)(1) of this section shall include 
the name of the applicant, the subject matter of the application, and 
the location or locations at which the applicant proposes to engage in 
business.
    (iii) In all instances, immediately after final publication, the 
applicant shall advise the appropriate regional director that the 
publication requirements have been met.
    (2) Notice by posting. In the case of applications to move a main 
office or relocate a branch, in addition to the notice by publication 
described in paragraph (f)(1) of this section, notice of the publication 
shall be posted in the public lobby of the office(s) to be moved or 
relocated, if such public lobby exists, for at least 21 days beginning 
with the date of the last published notice required by paragraph (f)(1) 
of this section for applications to move a main office; and for at least 
15 days beginning with the date of the publication notice required by 
paragraph (f)(1) of this section for applications to relocate a branch.
    (3) Comments. Anyone who wishes to comment on an application may do 
so by filing comments in writing with the appropriate regional director 
at any time before the Corporation has completed processing the 
application. Processing will be completed, for applications other than 
applications to move a main office, to relocate a remote service 
facility and to merge, not less than 15 days after the publication of 
the notice required by paragraph (f)(1) of this section or 15 days after 
the Corporation's receipt of the application, whichever is later; for 
applications to move a main office or relocate a remote service 
facility, not less than 21 days after the last publication or 21 days 
after the Corporation's receipt of the application, whichever is later; 
for merger applications for which the Corporation has not determined it 
must act immediately in order to prevent the probable failure of one of 
the depository institutions involved, not less than 30 days after the 
first publication or, if the Corporation has determined that an 
emergency exists which requires expeditious action, not less than 10 
days after the first publication. This time period may be extended by 
the appropriate regional director for good cause. Such regional director 
shall report the reasons for such action to the Board of Directors.
    (4) Notice of right to comment. In order to fully apprise the public 
of its rights under paragraph (f)(3) of this section, the notice 
described in paragraph (f)(1) of this section shall include a statement 
describing the right to comment upon, or protest the granting of, the 
application. This notice shall consist of the following statement:
    Any person wishing to comment on this application may file his or 
her comments in writing with the regional director of the Federal 
Deposit Insurance Corporation at its regional office (address of the 
regional office) before processing of the application has been 
completed. Processing will be completed no earlier than the (main office 
moves and remote service facility relocations--21st; non-emergency 
mergers--30th; emergency mergers--10th; other applications described in 
paragraph (a) of this section--15th) day following (mergers--the first 
required publication; all other applications described in paragraph (a) 
of this section--either the date of the last required publication or the 
date of receipt of the application by the FDIC, whichever is later). The 
period may be extended by the regional director for good cause. The 
nonconfidential portion of the application file is available for 
inspection within one day following the request for such file. It may be 
inspected in the Corporation's regional office during regular business 
hours. Photocopies of information in the nonconfidential portion of the 
application file will be made available upon request. A schedule of 
charges for such copies can be obtained from the regional office.
    (5) Solicitation of comments by regional director. Whenever he deems 
it appropriate, the regional director may solicit comments from any 
person or institution which, in his opinion, might

[[Page 19]]

have an interest in or be affected by the pending application.
    (g) Public access to application file--(1) Inspection of application 
file. Any person may inspect the nonconfidential portions of an 
application file. For a period extending until 180 days after final 
disposition of an application, the nonconfidential portions of the file 
will be available for inspection in the regional office of the FDIC in 
which an application has been filed. During this period, the 
nonconfidential portion of the file will be produced for review not more 
than one working day after receipt by the regional office of the request 
(either written or oral) to see the file. Photocopies of the 
nonconfidential portions of the file will be available, upon request, to 
any person. A charge for making copies will be made in accordance with 
the fee schedule contained in Sec. 309.5(b) of this chapter. No charge 
will be imposed for the search for, and review of, the application file. 
One hundred and eighty (180) days after the final disposition of an 
application, the nonconfidential portions of an application file will be 
made available in accordance with the provisions of Sec. 309.5 of this 
chapter.
    (2) Nonconfidential portions of application file. Subject to the 
provisions of paragraph (g)(3) of this section, the following 
information in an application file will be available for public 
inspection:
    (i) The application with supporting data and supplementary 
information.
    (ii) Data, comments, and other information submitted by interested 
persons in favor of, or in opposition to, such application.
    (iii) Those portions of the investigation report prepared by the 
Corporation's field examiner in connection with the application which 
cover the convenience and needs of the community to be served by the 
applicant or applicants and either the future earnings prospects or the 
future prospects of the applicant or applicants.
    (iv) A summary assessment of the applicant or applicants, based on 
their Community Reinvestment Act examination.
    (v) Where a hearing has been held pursuant to paragraph (i) of this 
section, any evidence submitted pursuant to paragraph (j)(3) of this 
section and the hearing transcript described in paragraph (j)(5) of this 
section.
    (3) Withholding of confidential information. No material described 
in paragraph (g)(2) of this section shall be available if it is 
determined to be confidential under the provisions of 5 U.S.C. 552. The 
following information generally is considered confidential:
    (i) Personal information, the release of which would constitute a 
clearly unwarranted invasion of privacy.
    (ii) Commercial or financial information, the disclosure of which 
would result in substantial competitive harm to the submitter.
    (iii) Information the disclosure of which could seriously affect the 
financial condition of any financial institution.
    (h) Proceedings--(1) Requests for hearing or other proceeding. 
Anyone who has made a formal comment within the period specified in 
paragraph (f)(3) of this section may request a hearing or an oral 
presentation at the time of making the formal comment. If a hearing or 
an oral presentation is requested, the request must be accompanied by a 
brief statement by the person requesting the hearing or presentation of 
his or her interest in the application and of the matters which he or 
she wishes to discuss. If the Corporation determines that a hearing or 
other form of oral presentation should be allowed, the person making the 
request will be advised of the date, time, and location of the hearing 
or oral presentation.
    (2) Form of proceeding. The Corporation may, at its discretion, 
decide to hold a hearing on the application in accordance with paragraph 
(i) of this section; it may decide to hold an informal proceeding in 
accordance with paragraph (h)(3) of this section; or it may decide not 
to hold a hearing or an informal proceeding in which case, where there 
has been a request for an opportunity to be heard pursuant to paragraph 
(h)(1) of this section, it will so advise the applicant and all persons 
who requested an opportunity to be heard. A decision as to the form of 
proceeding to be held will be made not more than 30 days after a request 
for a hearing or oral presentation has been

[[Page 20]]

made pursuant to paragraph (h)(1) of this section.
    (3) Informal proceedings. If the Corporation decides to hold an 
informal proceeding, the regional director shall, not less than 10 days 
prior thereto, notify the applicant and each person who requested a 
hearing, or oral presentation in accordance with paragraph (h)(1) of 
this section, of the date, time, and place of the proceeding. The 
regional director may, if he deems it advisable, notify other persons 
who have expressed an interest in the application and invite them to 
attend. The proceeding may assume any form, including a meeting with 
Corporation representatives, at which the participants will be asked to 
present their views orally. The regional director shall also have the 
discretion to hold separate meetings with each of the participants where 
he deems it desirable.
    (i) Hearings. Hearings of the kind provided for in this paragraph 
will not generally be afforded the participants if they have had the 
opportunity to participate in prior hearings before the appropriate 
State authority which covered essentially the same issues or if the 
regional director determines that less formal proceedings would be 
adequate.
    (1) Notice of hearing--(i) Contents. If the Corporation determines 
that a hearing on the application is warranted, the regional director 
shall, not less than 10 days prior thereto, give notice of the 
scheduling of the hearing, and shall set forth in the notice the subject 
matter of the application, the significant issues to be presented, and 
the date, time, and place at which the hearing shall be held.
    (ii) To whom sent. The above notice shall be sent by registered or 
certified mail to the applicant and to each person who requested a 
hearing in accordance with paragraph (h)(1) of this section. The 
regional director may also notify other persons who have expressed an 
interest in the application and invite them to participate in the 
hearing.
    (2) Attendance at hearing. Each interested person who wishes to 
attend the hearing shall notify the regional director accordingly with 5 
days after the date upon which he receives the above notice. Unless he 
has already done so, he shall submit a brief written summary of the 
matters which he wishes to cover at the hearing, together with the 
number and names of witnesses he wishes to present. The applicant and 
other interested persons attending the hearing may be represented by 
counsel.
    (3) Presiding officer. The presiding officer at the hearing shall be 
the regional director, his designee, or such other person as may be 
named by the Board of Directors or the Director (DOS). The presiding 
officer shall have the authority to appoint a panel to assist him.
    (j) Hearing rules--(1) Order of presentation. The following schedule 
is intended to serve as a general guide to the conduct of the hearing. 
It is not fixed and may be varied at the discretion of the presiding 
officer. The presiding officer shall determine the order of opening and 
closing statements and presentations to be followed by all participants 
other than the applicant who in each instance shall have the opportunity 
to speak first.
    (i) Opening statements. The applicant and each other participant may 
make opening statements which should concisely state what the 
participant intends to show.
    (ii) Applicant's presentation. Following the opening statement(s), 
the applicant shall present its data and materials orally or in writing.
    (iii) Requester's presentation. Following the applicant's 
presentation, each person who requested the hearing shall present his 
data and materials orally or in writing. Those who requested the hearing 
may agree, with the approval of the presiding officer, to have one of 
their number make their presentation.
    (iv) Other interested persons. Following the evidence of the 
applicant and the requesters, the presiding officer will recognize other 
interested persons who may present their views with respect to the 
application under consideration.
    (v) Summary statement. After all the above presentations have been 
concluded, the applicant and each other participant may make a short 
concise rebuttal.

[[Page 21]]

    (2) Witnesses. Each participant is responsible for providing his own 
witnesses, including the payment of all expenses associated with their 
appearance at the hearing. All witnesses will be present on their own 
volition, but any person appearing as a witness may be subject to 
questioning by any participant, by the presiding officer, or by any 
member of the panel. The refusal of a witness to answer questions may be 
considered by the Corporation in determining the weight to be accorded 
the testimony of that witness. Witnesses shall not be sworn.
    (3) Evidence. The presiding officer shall have the authority to 
exclude data or materials which he deems to be improper, irrelevant, or 
repetitive. Formal rules of evidence shall not be applicable to these 
hearings. Documentary material submitted as evidence must be of a size 
consistent with ease of handling, transportation, and filing. Three 
copies of all such documentary material shall be furnished to the 
regional director, and any participant who specifically requests the 
same shall be furnished a copy at his own expense. While large exhibits 
may be used during the hearing, copies of such exhibits must be provided 
by the person in reduced size for submission as evidence.
    (4) Procedural questions. The presiding officer, or any designated 
member of the panel, shall determine all procedural questions not 
governed by this section. The presiding officer shall have the authority 
to limit the number of witnesses to be used by any person and to impose 
reasonable time limitations.
    (5) Transcript. A transcript of each hearing will be arranged for by 
the Corporation. The person or persons who requested the hearing will be 
expected to pay all the expenses of such service, including the 
furnishing of one copy of the transcript to the regional director. 
Provided, however, That the Corporation may, for good cause, waive this 
requirement in individual cases. Where a hearing is held at the 
Corporation's initiative, the Corporation shall bear the expense of such 
service. Copies of the transcript will be furnished to any interested 
person requesting the same at that person's expense.
    (6) The hearing record--(i) Contents. The nonconfidential portions 
of the application, as described in paragraph (c) of this section, shall 
automatically be a part of the hearing record.
    (ii) Closing the hearing record--additional statements. Any person 
who participates in the hearing may request that the hearing record 
remain open for 10 days following receipt of the transcript by the 
regional director during which time the person may submit corrected 
copies of the transcript, or additional written statements or materials 
which he agreed to furnish at the hearing, to the regional director. 
Such person shall simultaneously mail or have delivered copies of the 
corrected transcript or additional statements or materials to all other 
persons who participated in the hearing.
    (k) Disposition and notice thereof. (1) The final disposition of any 
application or other matter under this section need not be determined 
exclusively by, or be limited to, the information contained in the 
public file established by paragraph (g) of this section.
    (2) The applicant, and any other person who so requests in writing, 
shall be notified by the Board of Directors of the final disposition of 
the application or other matter. The Board of Directors shall also 
provide a statement of the reasons for the final disposition made.\7\
---------------------------------------------------------------------------

    \7\ Where final authority to dispose of an application or other 
matter has been delegated to the Director (DOS), an associate director, 
the regional directors and the deputy regional directors pursuant to 
Sec. 303.7, the delegate will provide the notice and statement described 
in this paragraph (k)(2).
---------------------------------------------------------------------------

    (l) Computation of time. Section 308.22 shall govern the computation 
of any period of time prescribed or allowed by this section.
    (m) Retained authority. In acting upon any particular application, 
the Board of Directors may by resolution adopt procedures which differ 
from this section when it deems it necessary and in the public interest 
to do so. Such resolution shall be made available for public inspection 
and copying in the Office

[[Page 22]]

of the Executive Secretary of the Corporation in accordance with the 
requirements of 5 U.S.C. 552(a)(2).
[54 FR 53559, Dec. 29, 1989, as amended by 59 FR 4250, Jan. 31, 1994; 59 
FR 43282, Aug. 23, 1994; 59 FR 52662, Oct. 19, 1994; 59 FR 66655, Dec. 
28, 1994]



Sec. 303.7  Delegation of authority to the Director (DOS) and to the associate directors, regional directors and deputy regional directors to act on certain 
          applications, requests, and notices of acquisition of control.

    The Board of Directors of the FDIC has delegated to officials in the 
Division of Supervision and other employees of the FDIC the authority on 
behalf of the Board of Directors to act (subject to the provisions of 
Sec. 303.10 of this part) on the following applications, requests, and 
notices of acquisition of control.
    (a) Applications for branches (including remote service facilities, 
courier services, foreign branches of domestic banks), relocations, and 
for trust and other banking powers--(1) Branch and relocation 
applications. (i) Authority is delegated to the Director (DOS), and 
where confirmed in writing by the director, to an associate director, or 
to the appropriate regional director or deputy regional director, to 
approve applications for consent to establish branch facilities 
(including remote service facilities, courier services and foreign 
branches of domestic banks) or relocations where the applicant satisfies 
the requisites listed in paragraph (a)(1)(iii) of this section and 
agrees in writing to comply with any condition imposed by the delegate 
other than those standard conditions listed in Sec. 303.0(b)(31).
    (ii) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director:
    (A) To deny applications for consent to establish branch facilities 
(including remote service facilities, courier services and foreign 
branches of domestic banks) or relocations; and
    (B) To approve such applications where the applicant satisfies the 
requisites listed in paragraph (a)(1)(iii) of this section but does not 
agree in writing to comply with any condition imposed by the delegate.
    (iii) The requisites which must be satisfied before the authority 
delegated by paragraphs (a)(1)(i) and (ii)(B) of this section to approve 
applications for consent to establish branch facilities or relocations 
may be exercised are:
    (A) The seven factors set forth in section 6 of the Act (12 U.S.C. 
1816) have been considered and favorably resolved (except that this 
requisite does not apply to applications to establish courier services);
    (B) The applicant meets the capital requirements set forth in 12 CFR 
part 325 and the FDIC's ``Statement of Policy on Capital'' or agrees in 
writing to increase capital so as to be in compliance with the 
requirements of 12 CFR part 325 before or at the consummation of the 
transaction which is the subject of the application, except that this 
requisite does not apply to applications to establish courier services, 
remote service facilities, and relocations of branches or main offices;
    (C) Any financial arrangements which have been made in connection 
with the proposed branch or relocation and which involve the applicant's 
directors, officers, major shareholders, or their interests, are fair 
and reasonable in comparison to similar arrangements that could have 
been made with independent third parties; and
    (D) The requirements of the National Historic Preservation Act (16 
U.S.C. 470), the National Environmental Policy Act (42 U.S.C. 4321), and 
the Community Reinvestment Act of 1977 (12 U.S.C. 2901 through 2905) and 
its applicable implementing regulation (12 CFR part 345) have been 
considered and favorably resolved (except that this requisite does not 
apply to applications to establish foreign branches): Provided, however, 
That the authority to approve an application may not be subdelegated to 
a regional director or deputy regional director where a protest (as that 
term is defined in Sec. 303.0(b)(30)) under the Community Reinvestment 
Act is filed.
    (2) Applications for consent to exercise trust and other banking 
powers. (i) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, or to 
the appropriate regional director or deputy regional director, to

[[Page 23]]

approve applications for the FDIC's consent to exercise trust or other 
banking powers where the applicant satisfies the requisites listed in 
paragraph (a)(2)(iii) of this section and agrees in writing to comply 
with any other conditions imposed by the delegate other than those 
standard conditions listed in Sec. 303.0(b)(31).
    (ii) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director:
    (A) To deny applications for trust or other banking powers; and
    (B) To approve such applications where the applicant satisfies the 
requisites listed in paragraph (a)(2)(iii) of this section but does not 
agree in writing to comply with any condition required by the delegate 
other than those standard conditions listed in Sec. 303.0(b)(31).
    (iii) The requisites which must be satisfied before the authority 
delegated by paragraphs (a)(2)(i) and (ii)(B) of this section to approve 
applications for trust or other banking powers may be exercised are:
    (A) The seven factors set forth in section 6 of the Act (12 U.S.C. 
1816) have been considered and favorably resolved;
    (B) The proposed management of the trust or other banking business 
is determined capable of satisfactorily handling the anticipated 
business; and
    (C) In regards to trust applications only, the applicant's board of 
directors has formally adopted Form 114--
    Statement of Principles of Trust Department Management.
    (b) Merger transactions. (1) Except as provided in paragraphs (b)(4) 
and (5) of this section and in Sec. 303.10(b) of this part, authority is 
delegated to the Director (DOS), and where confirmed in writing by the 
director, to an associate director, or the appropriate regional director 
or deputy regional director, to approve any application for permission 
to merge or consolidate with any other bank or institution or, either 
directly or indirectly, to acquire the assets of, or assume the 
liability to pay any deposits made in any other bank, institution, or 
branch of a foreign bank (hereafter merger transaction) where the 
applicant satisfies the requisites listed in paragraph (b)(7) of this 
section and (subject to paragraph (b)(6) of this section) where:
    (i) The resulting institution, upon consummation of the merger 
transaction, would not have more than 15% of the individual, partnership 
and corporate deposits held by commercial banks and/or thrift 
institutions, as may be appropriate, in the relevant market(s); or
    (ii) The resulting institution, upon consummation of the merger 
transaction, would not have more than 25% of the individual, partnership 
and corporate deposits held by commercial banks and/or thrift 
institutions, as may be appropriate, in the relevant market(s), and the 
Attorney General has determined that the proposed merger transaction 
would not have a significantly adverse effect on competition.
    (2) Except as provided in paragraph (b)(4) of this section, 
authority is delegated to the Director (DOS), and where confirmed in 
writing by the director, to an associate director, to approve 
applications for merger transactions where the resulting institution, 
upon consummation of the merger transaction, would not have more than 
35% of the individual, partnership and corporate deposits held by 
commercial banks and/or thrift institutions, as may be appropriate, in 
the relevant market(s), and the Attorney General has determined that the 
proposed merger transaction would not have a significantly adverse 
effect on competition.
    (3) In cases where applicable, the delegate will review any reports 
on the competitive factors involved in the merger transaction that the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, the Director OTS and the Attorney General may have 
provided in response to a request for such reports by the FDIC. In the 
absence of a formal written opinion by the Attorney General, the 
delegate may also request the FDIC's General Counsel or designee to 
provide a formal written opinion on the question whether the merger 
transaction may have a significantly adverse effect on competition. 
However, the authority delegated under paragraphs (b)(1)(ii) and (2) of 
this section

[[Page 24]]

may not be exercised in the absence of a formal written opinion by the 
Attorney General where the resulting bank, upon consummation of the 
merger transaction, would have more than 15% of the individual, 
partnership, and corporate deposits held by commercial banks and/or 
thrift institutions, as may be appropriate, in the relevant market(s).
    (4) The delegations contained in paragraphs (b)(1) and (2) of this 
section to approve applications for merger transactions do not extend to 
such applications:
    (i) Falling within the scope of the probable failure or emergency 
provisions of 12 U.S.C. 1828(c)(6); or
    (ii) Where the resulting institution, upon consummation of the 
merger transaction, does not meet the capital requirements set forth in 
12 CFR part 325 and the FDIC's ``Statement of Policy on Capital.'' (If 
the applicant is a foreign bank, the delegated authority to approve does 
not extend to instances where, upon consummation of the merger 
transaction, the foreign bank's insured branch is not in compliance with 
12 CFR part 346.)
    (5) The authority to approve an application may not be subdelegated 
to a regional director or deputy regional director where a protest (as 
that term is defined in Sec. 303.0(b)(30)) under the Community 
Reinvestment Act is filed.
    (6) Where the merging institutions operate in different relevant 
market areas, then the limitations relative to market share percentages 
set forth in paragraphs (b)(1) and (2) of this section do not apply.
    (7) The requisites which must be satisfied before the authority 
delegated by paragraphs (b)(1) and (2) of this section to approve 
applications for merger transactions may be exercised are:
    (i) That the statutory factors contained in section 18(c)(5) (12 
U.S.C. 1828(c)(5) of the Act have been considered and favorably 
resolved; and
    (ii) Compliance with the National Environmental Policy Act (42 
U.S.C. 4321), the Community Reinvestment Act (12 U.S.C. 2901 through 
2905) and the applicable implementing regulation (12 CFR part 345 or any 
other applicable implementing regulation) have been considered and 
favorably resolved.
    (8) In approving an application for a merger transaction under this 
section, a delegate may impose any of the standard conditions listed in 
Sec. 303.0(b)(31), or any other condition to which the applicant has 
agreed in writing.
    (9) Notwithstanding any limitation or condition imposed by this 
section, the Director (DOS), and where confirmed in writing by the 
director, an associate director, or the appropriate regional director or 
deputy regional director is authorized to approve any transaction 
involving a merger facilitated by the Resolution Trust Corporation under 
its authority to assist savings associations in default or in danger of 
default, provided that the resulting entity from the merger is a state-
chartered insured non-member bank.
    (c) Notices of acquisition of control. (1) Authority is delegated to 
the Director (DOS), and where confirmed in writing by the director, to 
an associate director, or to the appropriate regional director or deputy 
regional director, to issue a written notice of the FDIC's intent not to 
disapprove an acquisition of control of an insured depository 
institution.
    (2) The authority delegated by paragraph (c)(1) of this section 
shall include the power:
    (i) To act in situations where information is submitted on 
acquisitions arising out of testate or intestate succession, bona fide 
gifts, or foreclosure;
    (ii) To extend notice periods;
    (iii) To determine the informational adequacy of a notice;
    (iv) To determine whether a notice should be filed under section 
7(j) of the Act (12 U.S.C. 1817(j)) by a person acquiring less than 25 
percent of any class of voting securities of an insured depository 
institution; and
    (v) To waive publication, waive or shorten the public comment 
period, or act on a proposed acquisition of control prior to the 
expiration of the public comment period, as provided in 12 CFR 
303.4(b)(3).
    (3) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, to 
disapprove an acquisition of control of an insured state depository 
institution.

[[Page 25]]

    (d) Deposit insurance applications--(1) Proposed or newly organized 
depository institutions. (i) Authority is delegated to the Director 
(DOS), and where confirmed in writing by the director, to an associate 
director, or subject to the limitations set forth in paragraph 
(d)(1)(iii) of this section, to the appropriate regional director or 
deputy regional director, to approve applications for deposit insurance 
by proposed or newly organized depository institutions, where the 
applicant satisfies the requisites listed in paragraph (d)(1)(ii) of 
this section, and agrees in writing to comply with any condition imposed 
by the delegate, other than those listed in paragraph (d)(4) of this 
section. Provided however; That the requisites listed in paragraph 
(d)(1)(ii) of this section do not apply to any transaction facilitated 
by the Resolution Trust Corporation under its authority to assist 
savings associations in default or in danger of default.
    (ii) The requisites which must be satisfied before the authority 
delegated by paragraph (d)(1)(i) of this section to approve applications 
for deposit insurance by proposed or newly organized depository 
institutions may be exercised are:
    (A) (1) As to Federal savings associations, factors (1) through (5) 
of the seven factors set forth in section 6 of the Act (12 U.S.C. 1816) 
have each been considered and favorably resolved, and the FDIC has 
received from the Director of the Office of Thrift Supervision the 
certificate required under section 5 of the Act (12 U.S.C. 1815);
    (2) As to all other depository institutions, each of the seven 
factors set forth in section 6 of the Act (12 U.S.C. 1816) has been 
considered and favorably resolved; and
    (B) The requirements set forth below are met:
    (1) Equity capital is not less than $1,000,000;
    (2) Legal fees and other expenses incurred in connection with the 
proposal are determined to be reasonable;
    (3) No unresolved management interlocks, as prohibited by the 
Depository Institution Management Interlocks Act (12 U.S.C. 3201 et 
seq.), part 348 of this chapter (12 CFR part 348) or any other 
applicable implementing regulation, exist;
    (4) The projected ratio of equity capital and reserves to assets, 
including projected profits and losses, is at least 10 percent at the 
end of the third year of operations;
    (5) Profitable operations are projected at least for the third year 
of operations;
    (6) The proposed aggregate direct and indirect investment in fixed 
assets is determined to be reasonable relative to the applicant's 
proposed equity capitalization, projected earnings capacity, and other 
pertinent bases of consideration;
    (7) Any financial arrangements made or proposed in connection with 
the proposed depository institution involving the applicant's directors, 
officers, 5 percent shareholders or their interests are determined to be 
fair and made on substantially the same terms as those prevailing at the 
time for comparable transactions with noninsiders and do not involve 
more than normal risk or present other unfavorable features. The 
applicant also must have fully disclosed, or agreed to disclose fully, 
any such arrangement to all of its proposed directors and shareholders 
prior to the opening of the depository institution;
    (8) Stock financing arrangements, fidelity coverage and accrual 
accounting conform to the guidelines established in the FDIC's policy 
statement on ``Applications for Deposit Insurance;'' and
    (9) Compliance with the National Historic Preservation Act (16 
U.S.C. 470), the National Environmental Policy Act (42 U.S.C. 4321), and 
the Community Reinvestment Act of 1977 (12 U.S.C. 2901 through 2905) and 
the applicable implementing regulation (12 CFR part 345 or any other 
implementing regulation) is adequate and favorably resolved.
    (iii) The authority to approve an application may not be 
subdelegated to a regional director or deputy regional director where:
    (A) A protest (as that term is defined in Sec. 303.0(b)(30)) under 
the Community Reinvestment Act is filed; or

[[Page 26]]

    (B) (1) There is direct or indirect financing, by proposed directors 
and officers and 5 percent or more shareholders, of more than 75 percent 
of the purchase price of the stock subscribed to by any one shareholder;
    (2) There is aggregate financing of stock subscriptions in excess of 
50 percent of the total capital offered, or
    (3) Warehoused or trusteed stock exceeds 10 percent of initial 
capital funds.
    (2) Operating noninsured depository institutions and state or 
privately insured institutions. (i) Authority is delegated to the 
Director (DOS), and where confirmed in writing by the director, to an 
associate director, or, for applicant institutions with total assets of 
less than $250,000,000, to the appropriate regional director or deputy 
regional director, to approve applications for deposit insurance by 
operating noninsured depository institutions, or state-insured or 
privately insured institutions where the applicant satisfies the 
requisites listed in paragraph (d)(2)(ii) of this section and agrees in 
writing to comply with any condition imposed by the delegate other than 
those listed in paragraph (d)(4) of this section.
    (ii) The requisites which must be satisfied before the authority 
delegated by paragraph (d)(2)(i) of this section to approve applications 
for deposit insurance by operating noninsured depository institutions 
may be exercised are:
    (A) The applicant is determined to be eligible for federal deposit 
insurance for the class of institution to which the applicant belongs in 
the state (as defined in 12 U.S.C. 1813(a)) in which the applicant is 
located;
    (B) The seven factors set forth in section 6 of the Act (12 U.S.C. 
1816) have been considered and favorably resolved;
    (C) The applicant meets the minimum capital requirements as set 
forth in part 325 of this chapter (12 CFR part 325) and the FDIC's 
``Statement of Policy on Capital'' or agrees in writing to increase 
capital so as to be in compliance with the requirements of 12 CFR part 
325 before or at the time deposit insurance becomes effective;
    (D) All management interlocks as prohibited by part 348 of this 
chapter (12 CFR part 348) or any other applicable implementing 
regulation have been resolved; and
    (E) The applicant has no fewer than five directors.
    (3) Banks withdrawing from Federal Reserve System. Authority is 
delegated to the Director (DOS), and where confirmed in writing by the 
director, to an associate director, or to the appropriate regional 
director and deputy regional director, to approve applications for 
deposit insurance by state nonmember banks that have withdrawn from 
membership in the Federal Reserve System where the applicant agrees in 
writing to comply with any condition imposed by the delegate other than 
those listed in paragraph (d)(4) of this section and satisfies the 
following requisites;
    (i) The seven factors set forth in section 6 of the Act (12 U.S.C. 
1816) have been considered and favorably resolved; and
    (ii) The bank has agreed to continue any corrective program imposed 
by the Board of Governors of the Federal Reserve System or previously 
agreed to by the bank where the bank is not in material compliance with 
that corrective program.
    (4) Conditions for exercise of delegated authority. The conditions 
which may be imposed by a delegate in approving applications for deposit 
insurance without affecting the authority granted under paragraphs 
(d)(1), (2), and (3) of this section are:
    (i) The applicant has provided a specific amount and a specific 
allocation of beginning paid-in capital;
    (ii) Any changes in proposed management or proposed ownership to the 
extent of 5 or more percent of stock, including new acquisitions of or 
subscriptions to 5 or more percent of stock shall be approved by the 
FDIC prior to the opening of the depository institution;
    (iii) The applicant adopts an accrual accounting system for 
maintaining the books of the depository institution;
    (iv) Where applicable, Federal deposit insurance will not become 
effective until the applicant has been established as a state bank (not 
a member of the Federal Reserve System), has authority to conduct a 
banking business, and its establishment and operation as

[[Page 27]]

a bank have been fully approved by the state banking authority;
    (v) Where applicable, federal deposit insurance will not become 
effective until the applicant has been established as a state savings 
association, has authority to conduct a savings association business, 
and its establishment and operation as a savings association have been 
fully approved by the appropriate state supervisory authority;
    (vi) Where applicable, a registered or proposed bank holding 
company, or a registered or proposed thrift holding company, has 
obtained approval of the Board of Governors of the Federal Reserve 
System to acquire voting stock control of the proposed bank prior to its 
opening;
    (vii) Where applicable, the applicant, has submitted any proposed 
contracts, leases, or ageements relating to construction or rental of 
permanent quarters to the appropriate regional director for review and 
comment;
    (viii) Where applicable, full disclosure has been made to all 
proposed directors and stockholders of the facts concerning the interest 
of any insider (one who is or stands to be a director, an officer, or an 
incorporator of an applicant or shareholder who directly or indirectly 
controls 5 or more percent of any class of the applicant's outstanding 
voting stock, or the associates and interests of any such person) in any 
transactions being effected or then contemplated, including the identity 
of the parties to the transaction and the terms and costs involved;
    (ix) The person(s) selected to serve as the principal operating 
officer(s) shall be acceptable to the regional director;
    (x) The applicant has obtained adequate blanket bond coverage;
    (xi) That the depository institution obtain an audit of its 
financial statements by an independent public accountant annually for at 
least the first three years after deposit insurance is effective, 
furnish a copy of any reports by the independent auditor (including any 
management letters) to the appropriate FDIC regional office within 15 
days after their receipt by the depository institution and notify the 
appropriate FDIC regional office within 15 days when a change in its 
independent auditor occurs; and
    (xii) Any standard condition (as defined in Sec. 303.0(b)(31)).
    (e) Applications pursuant to section 19 of the Act. (1) Authority is 
delegated to the Director (DOS), or where confirmed in writing by the 
director, to an associate director, or to the appropriate regional 
director or deputy regional director, to approve applications made by 
insured depository institutions pursuant to section 19 of the Act (12 
U.S.C. 1829) for participation, directly or indirectly, in any manner in 
the conduct of the affairs of an insured depository institution by any 
person who has been convicted or is hereafter convicted of any criminal 
offense involving dishonesty or a breach of trust; Provided however, 
That authority may not be delegated to the regional director or deputy 
regional director where the applicant depository institution's primary 
supervisory authority interposes any objection to such application.
    (2)(i) Authority is delegated to the Director (DOS), and where 
confirmed by writing by the director, to an associate director, to deny 
applications made by insured depository institutions pursuant to section 
19 of the Act.
    (ii) The authority delegated under paragraph (e)(2)(i) of this 
section shall be exercised only upon the concurrent certification by the 
Deputy General Counsel Supervision and Legislation, or the Associate 
General Counsel for Compliance and Enforcement that the action taken is 
not inconsistent with section 19 of the Act.
    (iii) An applicant may still request a hearing following a denial of 
the application under this paragraph in accordance with the provisions 
of part 308 of this chapter (12 CFR part 308).
    (3) The conditions which may be imposed by a delegate in approving 
applications pursuant to section 19, without affecting the authority 
granted under paragraph (e)(1) of this section are:
    (i) That an employee shall be bonded to the same extent as others in 
similar positions; and
    (ii) That, when deemed necessary, the prior consent of the 
appropriate regional director shall be required for

[[Page 28]]

any proposed significant changes in duties and/or responsibilities of 
the individual occurring within 12 months subsequent to the approval of 
the application.
    (f) Insurance fund conversions, applications pursuant to section 38 
of the Act (prompt corrective action), and other applications. (1) 
Authority is delegated to the Director (DOS), and where confirmed in 
writing by the director, to an associate director, or to the appropriate 
regional director or deputy regional director, to approve or to deny the 
following applications, requests or petitions:
    (i) Applications to establish and operate any new teller's window, 
drive-in facility, or any like office, as an adjunct to a main office or 
a branch office (including offices not considered branches under state 
law);
    (ii) Applications to operate temporary banking facilities as a 
public service for a period not to exceed ninety days during 
conventions, state and local fairs, college registration periods, and 
similar occasions, as well as during emergencies;
    (iii) Applications filed pursuant to section 18(i)(1) of the Act to 
reduce the amount or retire any part of common or preferred capital 
stock, or retire any part of capital notes or debentures;
    (iv) Requests for approval of any deviations from requirements 
prescribed by prior delegated action (to be acted upon by the delegate 
who acted previously in the matter);
    (v) Except as provided in Sec. 303.10(b)(1)(iii) of this part, 
applications for phantom mergers \8\ and other mergers which are 
corporate reorganizations, i.e., transactions involving institutions 
controlled by the same holding company or transactions involving 
institutions and their subsidiaries which would have no effect on 
competition or otherwise have significance under relevant statutory 
standards as set forth in 12 U.S.C. 1828(c);
---------------------------------------------------------------------------

    \8\ As used in this part 303, the term phantom merger applies to any 
merger or other transaction involving an existing operating institution 
and a newly chartered institution or corporation which is for the 
purpose of corporate reorganization and which would have no effect on 
competition or otherwise have significance under the relevant statutory 
standards as set forth in 12 U.S.C. 1828(c).
---------------------------------------------------------------------------

    (vi) Applications for deposit insurance filed by proposed state 
nonmember banks or savings associations which are formed in connection 
with a phantom merger;
    (vii) Requests to establish management official interlocks pursuant 
to 12 CFR 348.4(b) of this chapter or section 205(8) of the Depository 
Institutions Management Interlocks Act (except that a regional director 
or deputy regional director may deny such a request only if the request 
was made pursuant to 12 CFR 348.4(b)(3)); and
    (viii) Applications pursuant to section 29 of the Act (12 U.S.C. 
1831) for waiver of the prohibition on the acceptance or renewal of 
brokered deposits by troubled insured depository institutions.
    (ix) Applications filed pursuant to section 38 of the Act (prompt 
corrective action), including applications to make a capital 
distribution; applications for acquisitions, branching, and new lines of 
business (except that the delegation is limited to the authority as 
delegated to approve or deny any concurrent application filed pursuant 
to 18 (c) or (d)); applications to pay a bonus or increase compensation; 
applications for an exception to pay principal or interest on 
subordinated debt; and applications to engage in any restricted activity 
listed in Sec. 303.5(e)(5).
    (2) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director:
    (i) To deny a request to establish a management official interlock 
pursuant to any provision of either 12 CFR 348.4(b) of this chapter, or 
section 205(8) of the Depository Institutions Management Interlocks Act; 
and
    (ii) To approve or to deny applications for the acquisition and 
holding of stock or other evidences of ownership in a foreign bank or 
other financial entity that results in less than 25 percent ownership 
interest in such bank or entity.
    (3)(i) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, to 
approve an application

[[Page 29]]

made by an applicant pursuant to section 8(j) of the Act 12 U.S.C. 
1818(j)) for the termination or modification of a removal or prohibition 
order, which was issued by the Board after a hearing, on default, or by 
consent.
    (ii) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, to 
consent to an application pursuant to section 8(j) of the Act (12 U.S.C. 
1818(j)) to obtain the prior written approval of the FDIC to participate 
in the conduct of the affairs of a bank filed by an individual subject 
to a removal or prohibition order.
    (iii) Authority is delegated to the Director (DOS), or where 
confirmed in writing by the director, to an associate director, to deny 
an application made by an applicant pursuant to section 8(j) of the Act.
    (iv) The authority delegated under paragraphs (f)(3)(i), (ii), and 
(iii) of this section shall be exercised only upon the concurrent 
certification by the Deputy General Counsel for Supervision and 
Legislation, or the Associate General Counsel for Compliance and 
Enforcement that the action taken is not inconsistent with section 8(j) 
of the Act.
    (4)(i) Authority is delegated to the Director (DOS) and, where 
confirmed in writing by the director, to an associate director, or to 
the appropriate regional director or deputy regional director to approve 
or deny conversions involving transfers of deposits between the SAIF and 
BIF funds; Provided however, That where the basis for the conversion is 
that the transaction affects an insubstantial portion of the deposits of 
each institution, authority is not delegated to the regional director or 
deputy regional director where the total deposits transferred to or from 
either institution, accumulated with all other insurance fund transfers 
involving that institution since August 9, 1989, exceeds the lesser of 
35 percent of total deposits of either institution on May 1, 1989, plus 
net interest credited to the expected date of transfer, or the amount 
equal to total deposits of either institution on the expected date of 
transfer.
    (ii) The conditions that may be imposed in approving applications 
for insurance fund conversions without affecting the authority granted 
in Sec. 303.7(f)(4) of this section are:
    (A) That, upon consummation, the deposits involved in the 
transaction do not exceed 35%, on a cumulative basis with other deposits 
transferred between the SAIF and BIF funds, for either of the 
institutions involved, of the lesser of (1) total deposits as of May 1, 
1989, plus net interest credited during the period from May 1, 1989, to 
the date of transfer of the deposits, or (2) total deposits of the 
institution as of the date of transfer of the deposits; and
    (B) That applicable entrance and exit fees be paid pursuant to FDIC 
regulations.
    (5) Authority is delegated to the Director (DOS) and, where 
confirmed in writing by the director, to an associate director, or to 
the appropriate regional director or deputy regional director to:
    (i) Determine whether applicants requesting approval under section 
5(d)(3)(A)(i) of the Federal Deposit Insurance Act (12 U.S.C. 
1815(d)(3)(A)(i)) meet all minimum capital requirements contained in 12 
CFR part 325;
    (ii) Approve applications where the applicant satisfies the 
requirements specified in paragraph (f)(5)(i) of this section and the 
requirements of section 18(c) of the Federal Deposit Insurance Act (12 
U.S.C. 1828(c)); and
    (iii) Deny such applications if the requirements specified in 
paragraph (f)(5)(i) of this section are not met.
    (6) In approving an application, request or petition under any 
provision of this paragraph, a delegate may impose any of the standard 
conditions listed in Sec. 303.0(b)(31), or any other condition to which 
the applicant has agreed in writing.
    (g) Requests pursuant to section 18(k) of the Act. Authority is 
delegated to the Director, and where confirmed in writing by the 
Director, to an associate director, or to the appropriate regional 
director or deputy regional director, to approve or deny requests 
pursuant to section 18(k) of the Act to make:
    (1) Excess nondiscriminatory severance plan payments as provided by 
12 CFR 359.1(f)(2)(v); and

[[Page 30]]

    (2) Golden parachute payments permitted by 12 CFR 359.4.
[54 FR 53562, Dec. 29, 1989, as amended at 57 FR 5815, Feb. 18, 1992; 58 
FR 8217, Feb. 12, 1993; 59 FR 52663, Oct. 19, 1994; 61 FR 5930, Feb. 15, 
1996]



Sec. 303.8  Other delegations of authority.

    (a) Extensions of time. (1) Except as provided in paragraph (a)(2) 
of this section, authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, or to 
the appropriate regional director or deputy regional director, to 
approve and to deny requests for extensions of time, not to exceed one 
year on any one request relating to the same application, within which 
to perform acts or conditions required by prior FDIC action on 
depository institution applications.
    (2) Notwithstanding the delegations in paragraph (a)(1) of this 
section, no delegate shall have the authority to deny an extension of 
time request unless that delegate had authority to deny the original 
application upon which the extension of time is predicated.
    (b) Disclosure laws and regulations. (1) Except as provided in 
paragraph (b)(2) of this section, authority is delegated to the Director 
(DOS), and where confirmed in writing by the director, to an associate 
director, or to the appropriate regional director or deputy regional 
director, to act on disclosure matters under and pursuant to sections 
12, 13, 14, 17 and 17A of the Securities Exchange Act of 1934 (15 U.S.C. 
78) or parts 335 and 341 of this chapter (12 CFR parts 335 and 341).
    (2) Authority to act on disclosure matters is retained by the Board 
of Directors when such matters involve:
    (i) Exemption from disclosure requirements pursuant to section 12(h) 
of the Securities Exchange Act of 1934 (15 U.S.C. 781(h));
    (ii) Exemption from tender offer requirements pursuant to section 
14(d)(8) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(d)(8)); 
or
    (iii) Exemption from registration requirements pursuant to section 
17A(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78q-
1(c)(1)).
    (c) Security devices and procedures and bank service arrangements. 
Authority is delegated to the Director (DOS) and where confirmed in 
writing by the director, to an associate director, or to the appropriate 
regional director or deputy regional director, to administer the 
provisions of part 326 of this chapter (12 CFR part 326).
    (d) In emergencies. For the purpose of assuring performance of, and 
continuity in the management functions and activities of the FDIC, the 
Board of Directors has delegated, to the extent deemed necessary, 
authority with respect to the management of the FDIC's affairs, to 
certain designated offices, such authority to be exercised only in the 
event of an emergency involving an enemy attack on the continental 
United States or other warlike occurrence which renders the Board of 
Directors unable to perform the management functions and activities 
normally performed by it.
    (e) Competitive factor reports. Authority is delegated to the 
Director (DOS), and where confirmed in writing by the director, to an 
associate director, or to the regional director or deputy regional 
director in the appropriate FDIC region in which the applicant 
depository institution \9\ is located, to furnish required reports to 
the Board of Governors of the Federal Reserve System, or the Comptroller 
of the Currency on the competitive factors involved in any merger 
required to be approved by one of those agencies, if the delegate is of 
the view that the proposed merger would not have a substantially adverse 
effect on competition.
---------------------------------------------------------------------------

    \9\ As used in paragraph (e) of this section, the term applicant 
depository institution means the institution which is applying for 
merger approval to the Board of Governors of the Federal Reserve System 
the Comptroller of the Currency, or the Director of OTS, whichever is 
appliable.
---------------------------------------------------------------------------

    (f) Agreements for pledge of assets by foreign banks. (1) Authority 
is delegated to the Director (DOS), and where confirmed in writing by 
the director, to an associate director, or to the appropriate regional 
director or deputy regional director, to enter into pledge agreements 
with foreign banks and depositories in connection with the pledge of 
asset requirements pursuant

[[Page 31]]

to 12 CFR 346.19. This authority shall also extend to the power to 
revoke such approval and require the dismissal of the depository.
    (2) Authority is delegated to the General Counsel or designee to 
modify the terms of the model deposit agreement used for such deposit 
agreements.
    (g) National Historic Preservation Act. (1) Authority is delegated 
to the Director (DOS), and where confirmed in writing by the director, 
to an associate director, or to the appropriate regional director or 
deputy regional director, to enter into memoranda of agreement pursuant 
to regulations of the Advisory Council of Historic Preservation which 
implement the National Historic Preservation Act (16 U.S.C. 470).
    (2) The Director (DOS) may limit the delegation of authority to the 
associate director, the regional director or deputy regional director to 
applications wherein the applicant has agreed in writing to conditions 
relating to the National Preservation Act which may be imposed by the 
FDIC.
    (h) Applications or notices for membership or resumption of 
business. Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, or to 
the appropriate regional director or deputy regional director, to 
provide comments on applications or notices for membership or 
commencement or resumption of business to the appropriate Federal 
banking agency pursuant to section 4 of the Act (12 U.S.C. 1814). Such 
comments, if provided, shall be provided within a reasonable time, not 
to exceed 30 days from the time such application or notice is received 
by the delegate. In the event that circumstances preclude comment within 
30 days, the delegate shall so notify the appropriate Federal banking 
agency within 30 days, giving an estimate of when comments may 
reasonably be expected.
    (i) Depository Institutions Disaster Relief Act of 1992 (DIDRA). (1) 
Authority is delegated to the Director (DOS), and where confirmed in 
writing by the director, to an associate director, or to the appropriate 
regional director or deputy regional director, to accept requests and 
issue orders permitting an insured depository institution to subtract 
from total assets the qualifying amount attributable to insurance 
proceeds for purposes of calculating compliance with the leverage limit 
prescribed under section 38 of the Act.
    (2) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, to act 
on requests for reconsideration of an order of denial issued pursuant to 
paragraph (i)(1) of this section.
    (3) The requisites which must be satisfied before the authority 
delegated in paragraphs (i)(1) and (i)(2) of this section may be 
exercised, provide that the insured depository institution:
    (i) Had its principal place of business within an area in which the 
President, pursuant to section 401 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5170), has determined 
that a major disaster exists;
    (ii) Derives more than 60 percent of its total deposits from persons 
who normally reside within, or whose principal place of business is 
normally within, areas of intense devastation caused by the major 
disaster;
    (iii) Was adequately capitalized, pursuant to section 38 of the Act, 
prior to the major disaster; and
    (iv) Has an acceptable plan for managing the increase in its total 
assets and total deposits.
    (4) The authority delegated under paragraphs (i)(1) and (i)(2) of 
this section shall be exercised only upon the concurrent certification 
of the Associate General Counsel for Compliance and Enforcement, or in 
cases where the regional director or deputy regional director issues the 
order, by the appropriate regional counsel, that the order is not 
inconsistent with section 38 of the Act.
[54 FR 53567, Dec. 29, 1989, as amended at 58 FR 8217, Feb. 12, 1993; 59 
FR 52663, Oct. 19, 1994]



Sec. 303.9  Delegation of authority to act on certain enforcement matters.

    (a) Actions pursuant to section 8(a) of the Act (12 U.S.C. 1818(a)). 
(1) Authority is delegated to the Director (DOS), and where confirmed in 
writing by the director, to an associate director, or to the appropriate 
regional director or

[[Page 32]]

deputy regional director, to issue notifications to primary regulator 
when the respondent bank's book capital is less than 2% of total assets; 
Provided however, That authority may not be delegated to the regional 
director or deputy regional director whenever the respondent bank has 
issued any mandatory convertible debt or any form of Tier 2 capital 
(such as limited life preferred stock/subordinated notes and 
debentures).
    (2) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, to issue 
notifications to primary regulator when the respondent bank's adjusted 
Tier 1 capital is less than 2% of adjusted part 325 total assets.
    (3) The authority delegated under paragraphs (a)(1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement, or, in cases 
where a regional director or deputy regional director issues 
notifications to primary regulator, by the appropriate regional counsel, 
that the allegations contained in the findings of unsafe or unsound 
practices or conditions, if proven, constitute a basis for the issuance 
of a notification to primary regulator pursuant to section 8(a) of the 
Act (12 U.S.C. 1818(a)).
    (b) Actions pursuant to section 8(b) of the Act (12 U.S.C. 1818(b)). 
(1) Authority is delegated to the Director (DOS), to the Director (DCA), 
and where confirmed in writing by either director, to an associate 
director, or to the appropriate regional director, deputy regional 
director or regional manager to issue:
    (i) Notices of charges; and
    (ii) Cease-and-desist orders (with or without a prior notice of 
charges) where the respondent bank or individual respondent consents to 
the issuance of the cease-and-desist order prior to the filing by an 
administrative law judge of proposed findings of fact, conclusions of 
law and recommended decision with the Executive Secretary of the FDIC.
    (2) The Director (DOS) and the Director (DCA) may issue a joint 
notice of charges or cease-and-desist order under paragraph (b)(1) of 
this section, where such notice or order addresses both safety and 
soundness and consumer compliance matters. A joint notice or order will 
require the signatures of both directors or, alternatively, the 
signatures of the appropriate regional director or deputy regional 
director and regional manager.
    (3) The authority delegated under paragraphs (b)(1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement or, in cases 
where a regional director, deputy regional director or regional manager 
issues the notice of charges or the stipulated cease-and-desist order, 
by the appropriate regional counsel, that the allegations contained in 
the notice of charges, if proven, constitute a basis for the issuance of 
a section 8(b) order, or that the stipulated cease-and-desist order is 
authorized under section 8(b) of the Act, and, upon its effective date, 
shall be a cease-and-desist order which has become final for purposes of 
enforcement pursuant to the Act.
    (c) Actions pursuant to section 8(c) of the Act (12 U.S.C. 1818(c)). 
(1) Authority is delegated to the Director (DOS), to the Director (DCA), 
and where confirmed in writing by either director, to an associate 
director, to issue temporary cease-and-desist orders.
    (2) The Director (DOS) and the Director (DCA) may issue a joint 
temporary cease-and-desist order where such order addresses both safety 
and soundness and consumer compliance matters. A joint notice or order 
will require the signatures of both directors or, alternatively, the 
signatures of the appropriate regional director or deputy regional 
director and regional manager.
    (3) The authority delegated under paragraphs (c)(1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the action 
is not inconsistent with section 8(c) of the Act (12 U.S.C. 1818(c)) and 
the temporary cease-and-desist order is enforceable in a United States 
District Court.
    (d) Actions pursuant to section 8(e) of the Act (12 U.S.C. 1818(e)). 
(1) Authority is delegated to the Director (DOS) or

[[Page 33]]

the Director (DCA), and where confirmed in writing by the director, to 
an associate director, to issue:
    (i) Notices of intention to remove an institution-affiliated party 
from office or to prohibit an institution-affiliated party from further 
participation in the conduct of the affairs of an insured depository 
institution pursuant to sections 8(e)(1) and (2) of the Act (12 U.S.C. 
1818(e)(1) and (2)), and temporary orders of suspension pursuant to 
section 8(e)(3) of the Act (12 U.S.C. 1818(e)(3)); and
    (ii) Orders of removal, suspension or prohibition from participation 
in the conduct of the affairs of an insured depository institution where 
the institution-affiliated party consents to the issuance of such orders 
prior to the filing by an administrative law judge of proposed findings 
of fact, conclusions of law and a recommended decision with the 
Executive Secretary of the FDIC.
    (2) The Director (DOS) and the Director (DCA) may issue joint 
notices and orders pursuant to paragraph (d)(1) of this section where 
such notice or order addresses both safety and soundness and consumer 
compliance matters. A joint notice or order will require the signatures 
of both directors or their associate directors.
    (3) The authority delegated under paragraphs (d)(1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the 
allegations contained in the notice of intent, if proven, constitute a 
basis for the issuance of a notice of intent pursuant to section 8(e) of 
the Act, or that the stipulated section 8(e) order is not inconsistent 
with section 8(e) of the Act, and, upon issuance, shall be an order 
which has become final for purposes of enforcement pursuant to the Act.
    (e) Actions pursuant to section 8(g) of the Act (12 U.S.C. 1818(g)). 
(1) Authority is delegated to the Director (DOS), to the Director (DCA), 
and where confirmed in writing by either director, to an associate 
director, to issue orders of suspension or prohibition to an 
institution-affiliated party who is charged in any information, 
indictment, or complaint as set forth in section 8(g) of the Act when 
such institution-affiliated party consents to the suspension or 
prohibition.
    (2) The Director (DOS) and the Director (DCA) may issue joint orders 
pursuant to paragraph (e)(1) of this section where such order addresses 
both safety and soundness and consumer compliance matters. A joint order 
will require the signatures of both directors or their associate 
directors.
    (3) The authority delegated under paragraphs (e)(1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the action 
taken is not inconsistent with section 8(g) of the Act (12 U.S.C. 
1818(g)) and the order is enforceable in a United States District Court 
pursuant to sections 8(i) and 8(j) of the Act (12 U.S.C. 1818 (i) and 
(j)).
    (f) Actions pursuant to section 8(p) of the Act (12 U.S.C. 1818(p)). 
(1) Authority is delegated to the Executive Secretary to issue consent 
orders terminating the insured status of insured depository institutions 
that have ceased to engage in the business of receiving deposits other 
than trust funds pursuant to section 8(p) of the Act (12 U.S.C. 
1818(p)).
    (2) The authority delegated under paragraph (f)(1) of this section 
shall be exercised only upon the recommendation and concurrence of the 
Director (DOS) or associate director and the Associate General Counsel 
for Compliance and Enforcement that the action taken is not inconsistent 
with section 8(p) of the Act.
    (g) Civil money penalties. (1)(i) Except as provided for in 
paragraph (g)(3) of this section, authority is delegated to the Director 
(DOS), to the Director (DCA), and where confirmed in writing by either 
director, to an associate director, to issue notices of assessment of 
civil money penalties.
    (ii) The authority delegated under paragraph (g)(1)((i) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the 
allegations contained in the notice of assessment, if proven, constitute 
a basis for assessment of civil money penalties.

[[Page 34]]

    (2) The Director (DOS) and the Director (DCA) may issue joint 
notices pursuant to paragraph (g)(1) of this section where such notice 
addresses both safety and soundness and consumer compliance matters. A 
joint notice will require the signatures of both directors or their 
associate directors.
    (3) Authority is delegated to the General Counsel or designee for 
the levying and enforcement of civil money penalties under section 
7(a)(1) of the Act (12 U.S.C. 1817(a)(1)) for the late, inaccurate, 
false or misleading filing of Reports of Condition and Report of Income, 
and such other reports as the Board of Directors may require under the 
authority of that section. In the exercise of the delegated authority, 
the General Counsel or designee shall consult with the appropriate 
Director or associate director before imposing any penalty.
    (h) Directives and capital plans under section 38 of the Act (prompt 
corrective action) and part 325 of this chapter. (1) Authority is 
delegated to the Director (DOS), and where confirmed in writing by the 
director, to an associate director, or to the appropriate regional 
director or deputy regional director, to accept, to reject, to require 
new or revised capital restoration plans or to make any other 
determinations with respect to the implementation of capital restoration 
plans and, in accordance with subpart Q of part 308 of this chapter, to 
issue:
    (i) Notices of intent to issue capital directives;
    (ii) Directives to insured state nonmember banks that fail to 
maintain capital in accordance with the requirements contained in part 
325 of this chapter;
    (iii) Notices of intent to issue prompt corrective action 
directives, except directives issued pursuant to section 38(f)(2)(F)(ii) 
of the Act (12 U.S.C. 1831o(f)(2)(F)(ii));
    (iv) Directives to insured depository institutions pursuant to 
section 38 of the Act (12 U.S.C. 1831o), with or without the consent of 
the respondent bank to the issuance of the directive, except directives 
issued pursuant to section 38(f)(2)(F)(ii) of the Act (12 U.S.C. 
1831o(f)(2)(F)(ii));
    (v) Directives to insured depository institutions requiring 
immediate action or imposing proscriptions pursuant to section 38 of the 
Act (12 U.S.C. 1831o) and part 325 of this chapter, and in accordance 
with the requirements contained in Sec. 308.201(a)(2) of this chapter;
    (vi) Notices of intent to reclassify insured banks pursuant to 
Secs. 325.103(d) and 308.202 of this chapter;
    (vii) Directives to reclassify insured banks pursuant to 
Secs. 325.103(d) and 308.202 of this chapter with the consent of the 
respondent bank to the issuance of the directive; and
    (viii) Orders on request for informal hearings to reconsider 
reclassifications and designate the presiding officer at the hearing 
pursuant to Sec. 308.202 of this chapter.
    (2) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an Associate Director, to:
    (i) Issue notices of intent to issue a prompt corrective action 
directive ordering the dismissal from office of a director or senior 
executive officer pursuant to section 38(f)(2)(F)(ii) of the Act, (12 
U.S.C. 1831o(f)(2)(F)(ii)), and in accordance with the requirements 
contained in Sec. 308.203 of this chapter;
    (ii) Issue directives ordering the dismissal from office of a 
director or senior executive officer pursuant to section 38(f)(2)(F)(ii) 
of the Act, (12 U.S.C. 1831o(f)(2)(F)(ii));
    (iii) Issue orders of dismissal from office of a director or senior 
executive officer pursuant to section 38(f)(2)(F)(ii) of the Act, 12 
U.S.C. 1831o(f)(2)(F)(ii) where the individual consents to the issuance 
of such order prior to the filing of a recommendation by the presiding 
officer with the FDIC;
    (iv) Act on recommended decisions of presiding officers pursuant to 
a request for reconsideration of a reclassification in accordance with 
the requirements contained in Sec. 308.202 of this chapter;
    (v) Act on requests for rescission of a reclassification; and
    (vi) Act on appeals from immediately effective directives issued 
pursuant to section 38 of the Act, (12 U.S.C. 1831o) and Sec. 308.201 of 
this chapter.
    (3) Authority is delegated to the Executive Secretary of the FDIC to 
issue

[[Page 35]]

orders for informal hearings and designate presiding officers on 
directives issued pursuant to section 38(f)(2)(F)(ii) of the Act, 12 
U.S.C. 1831o(f)(2)(F)(ii).
    (4) The authority delegated under paragraphs (h)(1)(i) and (ii) of 
this section shall be exercised only upon the concurrent certification 
by the Associate General Counsel for Compliance and Enforcement, or in 
cases where a regional director or deputy regional director issues the 
notice of intent to issue a capital directive or capital directives, by 
the appropriate regional counsel, that the action taken is not 
inconsistent with the Act and part 325 of this chapter.
    (5) The authority delegated under paragraphs (h)(1) (iii), (iv), 
(v), (vi) and (vii) of this section shall be exercised only upon the 
concurrent certification by the Associate General Counsel for Compliance 
and Enforcement, or in cases where a regional director or deputy 
regional director issues the notice of intent to issue a prompt 
corrective action directive or prompt corrective action directives, or 
the notice of intent to reclassify or reclassification directive, by the 
appropriate regional counsel, that the allegations contained in the 
notice of intent, if proven, constitute a basis for the issuance of a 
final directive pursuant to section 38 of the Act, or that the issuance 
of a final directive is not inconsistent with section 38 of the Act.
    (6) The authority delegated under paragraph (h)(2) of this section 
shall be exercised only upon the concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the 
allegations contained in the notice of intent, if proven, constitute a 
basis for the issuance of a final directive pursuant to section 38 of 
the Act or that the issuance of a final directive is not inconsistent 
with section 38 of the Act or that the stipulated section 38 order is 
not inconsistent with section 38 and is an order which has become final 
for purposes of enforcement pursuant to the Act.
    (i) Investigations pursuant to section 10(c) of the Act (12 U.S.C. 
1820(c)). (1) Authority is delegated to the Director (DOS), to the 
Director (DCA), to the Director of the Division of Depositor and Asset 
Services, and where confirmed in writing by the director, to an 
associate director, or to the appropriate regional director, deputy 
regional director or regional manager, to issue an order of 
investigation pursuant to section 10(c) of the Act (12 U.S.C. 1820(c)) 
and subpart K of Part 308 (12 CFR 308.144 through 308.150).
    (2) Authority is delegated to the General Counsel, and where 
confirmed in writing by the General Counsel, to his designee, to issue 
an order of investigation pursuant to section 10(c) of the Act (12 
U.S.C. 1820(c)) and subpart K of Part 308 (12 CFR 308.144 through 
308.150).
    (3) In issuing an order of investigation that pertains to an open 
insured depository institution or an institution making application to 
become an insured depository institution, the authority delegated under 
paragraphs (i)(1) and (2) of this section shall be exercised only upon 
the concurrent execution of the order of investigation by the Director 
(DOS) or the Director (DCA), or their associate directors, or the 
appropriate regional director, deputy regional director or regional 
manager, and the General Counsel or designee. In the case of a joint 
order of investigation, such authority shall be exercised only upon the 
concurrent execution of the order of investigation by both directors, or 
their associate directors, or the appropriate regional director, deputy 
regional director and regional manager, and the General Counsel or 
designee.
    (j) Truth in Lending Act. (1) Authority is delegated to the Director 
(DCA), and where confirmed in writing by the director, to the associate 
director, or to the appropriate regional manager, to deny requests for 
relief from the requirements for reimbursement under section 608(a)(2) 
of the Truth in Lending Simplification and Reform Act (15 U.S.C. 
1607(e)(2)); Provided however, that a regional manager is not authorized 
to deny any request where the estimated amount of reimbursement is 
greater than $25,000.
    (2) Authority is delegated to the Director (DCA), and where 
confirmed in writing by the director, to an associate director:
    (i) To grant request for relief from the requirements for 
reimbursement

[[Page 36]]

under section 608(a)(2) of the Truth in Lending Simplification and 
Reform Act (15 U.S.C. 1670(a)(2)); and
    (ii) To act on applications for reconsideration of any action taken 
under paragraphs (j) (1) and (2) of this section.
    (3) The authority delegated under paragraphs (j) (1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement, or, in cases 
where a regional manager denies requests for relief, by the appropriate 
regional counsel, that the action taken is not inconsistent with the 
Truth in Lending Simplification and Reform Act.
    (k) Unilateral settlement offers. (1) Authority is delegated to the 
Director (DOS), to the Director (DCA), and where confirmed in writing by 
either director, to an associate director, to accept, deny or enter into 
negotiations for unilateral settlement offers with insured depository 
institutions, or with an institution-affiliated party, pertaining to a 
proceeding under 12 CFR part 308. In cases where a proceeding under 12 
CFR part 308 was issued jointly by DOS and DCA, both directors, or their 
associate directors, must agree to accept, deny or enter into 
negotiations for unilateral settlement offers with insured depository 
institutions or with an institution-affiliated party.
    (2) The authority delegated under paragraph (k)(1) of this section 
shall be exercised only upon concurrent certification by the Associate 
General Counsel for Compliance and Enforcement that the action taken is 
not inconsistent with the Act.
    (l) Acceptance of written agreements. (1) Authority is delegated to 
the Director (DOS), and where confirmed in writing by the director, to 
an associate director, to accept or enter into any written agreements 
with insured depository institutions, or any institution-affiliated 
party pertaining to any matter which may be addressed by the FDIC 
pursuant to section 8(a) of the Act (12 U.S.C. 1818(a)).
    (2) Authority is delegated to the Director (DOS), to the Director 
(DCA), and where confirmed in writing by either director, to an 
associate director, to accept or enter into any written agreements with 
insured depository institutions, or any institution-affiliated party 
pertaining to any safety and soundness or consumer compliance matter 
which may be addressed by the FDIC pursuant to section 8(b) of the Act 
(12 U.S.C. 1818(b)) or any other provision of the Act which addresses 
safety and soundness or consumer compliance matters. In cases which 
would address both safety and soundness and consumer compliance matters, 
the Directors, or their designees, may accept or enter into joint 
written agreements with insured depository institutions or institution-
affiliated parties.
    (3) The authority delegated under paragraphs (l) (1) and (2) of this 
section shall be exercised only upon concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the action 
taken is not inconsistent with sections 8 (a) and (b) of the Act.
    (m) Modifications and terminations of enforcement actions--(1) 
Sections 8(a), 8(b) and 8(c) (12 U.S.C. 1818 (a), (b) and (c)) actions 
upon failure or merger of a depository institution. (i) Authority is 
delegated to the Director (DOS), and where confirmed in writing by the 
director, to an associate director, or to the appropriate regional 
director or deputy regional director, to terminate outstanding section 
8(a) orders and agreements and to terminate actions and agreements which 
are pending pursuant to section 8(a) of the Act when the depository 
institution is closed by a Federal or state authority or merges into 
another institution.
    (ii) Authority is delegated to the Director (DOS), to the Director 
(DCA), and where confirmed in writing by either director, to an 
associate director, or to the appropriate regional director, deputy 
regional director or regional manager, to terminate outstanding section 
8(b) and section 8(c) orders and agreements and to terminate actions and 
agreements which are pending pursuant to sections 8(b) and 8(c) of the 
Act when the depository institution is closed by a Federal or state 
authority or merges into another institution. In cases where a joint 
order was issued by DOS and DCA, both directors, or their associate 
directors, or the appropriate

[[Page 37]]

regional director or deputy regional director and regional manager, must 
agree prior to the termination of outstanding 8(b) and 8(c) orders.
    (2) Section 8(a) (12 U.S.C. 1818(a)) actions issued by the Board of 
Directors. (i) Authority is delegated to the Director (DOS), and where 
confirmed in writing by the director, to an associate director, or to 
the appropriate regional director or deputy regional director, to modify 
or terminate notifications to primary regulator issued by the Board of 
Directors pursuant to section 8(a) of the Act where the respondent 
depository institution is in material compliance with such notification 
or for good cause shown.
    (ii) In cases where the Board of Directors has issued a notice of 
intent to terminate insured status pursuant to section 8(a) of the Act, 
authority is delegated to the Director (DOS), and where confirmed in 
writing by the director, to an associate director, or to the appropriate 
regional director or deputy regional director, to terminate the actions 
pending pursuant to such notice of intent to terminate insured status 
where the respondent depository institution is in material compliance 
with the applicable notification to primary regulator or for good cause 
shown.
    (3) Section 8(b) (12 U.S.C. 1818(b)) orders issued by the Board of 
Directors. Authority is delegated to the Director (DOS) or the Director 
(DCA), and where confirmed in writing by the director, to an associate 
director, or to the appropriate regional director, deputy regional 
director or regional manager, to terminate outstanding section 8(b) 
orders issued by the Board of Directors where either material compliance 
with the section 8(b) order has been achieved by the respondent 
depository institution or individual respondent or for good cause shown. 
In cases where an order issued by the Board addresses both safety and 
soundness and consumer compliance matters, both directors, or their 
designees, must agree prior to the termination of outstanding 8(b) 
orders.
    (4) Section 8(g) orders issued by the Board of Directors. Authority 
is delegated to the Director (DOS) or the Director (DCA), and where 
confirmed in writing by the director, to an associate director, to 
approve requests for modifications or terminations of section 8(g) 
orders issued by the Board of Directors.
    (5) Other matters not specifically addressed. For all other 
outstanding orders or pending actions not specifically addressed in 
paragraphs (m)(1), (m)(2), (m)(3) and (m)(4) of this section, the 
delegations of authority contained in paragraphs (a)(1), (a)(2), (b)(1), 
(c)(1), (d)(1), (e)(1), (g)(1), (g)(2), (h)(1), (h)(2), (l)(1), (l)(2), 
and (n) of this section shall be construed to include the authority to 
modify or terminate any outstanding notice, order, directive or 
agreement, as may be appropriate, issued pursuant to delegated authority 
and to terminate any pending action initiated pursuant to delegated 
authority.
    (6) Certification. Any modifications or terminations pursuant to 
paragraphs (m)(1), (m)(2), (m)(3), (m)(4), and (m)(5) of this section 
shall be exercised only upon concurrent certification by the Associate 
General Counsel for Compliance and Enforcement, or in cases where a 
regional director, deputy regional director or regional manager acts 
under delegated authority, by the appropriate regional counsel, that the 
action taken is not consistent with the Act.
    (n) Enforcement of outstanding orders. After consultation with the 
Director (DOS) or the Director (DCA), or an associate director, or the 
appropriate regional director, deputy regional director or regional 
manager, as may be appropriate, the General Counsel or designee is 
authorized to initiate and prosecute any action to enforce any effective 
and outstanding order or temporary order issued under 12 U.S.C. 1817, 
1818, 1820, 1828, 1829, 1831l, 1831o, 1972, or 3909, or any provision 
thereof, in the appropriate United States District Court.
    (o) Compliance plans under section 39 of the Act (standards for 
safety and soundness) and part 308 of this chapter. (1) Authority is 
delegated to the Director, and where confirmed in writing by the 
Director, to an associate director, or to the appropriate regional 
director or deputy regional director, to accept, to reject, to require 
new or revised compliance plans or to make any other

[[Page 38]]

determinations with respect to the implementation of compliance plans 
pursuant to subpart R of part 308 of this chapter.
    (2) Authority is delegated to the Director, and where confirmed in 
writing by the Director, to an associate director, to:
    (i) Issue notices of intent to issue an order requiring the bank to 
correct a safety and soundness deficiency or to take or refrain from 
taking other actions pursuant to section 39 of the Act (12 U.S.C. 1831p-
1) and in accordance with the requirements contained in 
Sec. 308.304(a)(1) of this chapter;
    (ii) Issue an order requiring the bank immediately to correct a 
safety and soundness deficiency or to take or refrain from taking other 
actions pursuant to section 39 of the Act (12 U.S.C. 1831p-1) and in 
accordance with the requirements contained in Sec. 308.304(a)(2) of this 
chapter; and
    (iii) Act on requests for modification or rescission of an order.
    (3) The authority delegated under paragraph (o)(1) of this section 
shall be exercised only upon the concurrent certification by the 
Associate General Counsel for Compliance and Enforcement, or in cases 
where a regional director or deputy regional director accepts, rejects 
or requires new or revised compliance plans or makes any other 
determinations with respect to compliance plans, by the appropriate 
regional counsel, that the action taken is not inconsistent with the 
Act.
    (4) The authority delegated under paragraph (o)(2) of this section 
shall be exercised only upon the concurrent certification by the 
Associate General Counsel for Compliance and Enforcement that the 
allegations contained in the notice of intent, if proven, constitute a 
basis for the issuance of a final order pursuant to section 39 of the 
Act or that the issuance of a final order is not inconsistent with 
section 39 of the Act or that the stipulated section 39 order is not 
inconsistent with section 39 and is an order which has become final for 
purposes of enforcement pursuant to the Act.
[59 FR 52663, Oct. 19, 1994, as amended at 60 FR 35683, July 10, 1995]



Sec. 303.10  Applications and enforcement matters where authority is not delegated.

    (a) Authority not specifically delegated is retained by the Board of 
Directors. (1) Except as otherwise provided in this part, or with 
respect to matters which generally involve conditions or circumstances 
requiring prompt action in the field for the better protection of the 
interests of the FDIC and to achieve flexibility and expedition in its 
operations and in the exercise of its functions in connection with the 
FDIC's litigation and liquidation matters and with the payment of claims 
for insured deposits, the Board of Directors does not delegate its 
authority and no delegations of final authority are made by the Board of 
Directors. Any person having a proper and direct concern therein may 
ascertain the scope of authority of any officer, agent or employee of 
the FDIC by communicating with the Executive Secretary of the FDIC.
    (2) In all cases where authority to act on applications, requests or 
enforcement matters listed in this part is not delegated to a Director, 
or to an associate director, or to a regional director, deputy regional 
director or regional manager''; the authority to act on such 
applications, requests, or enforcement matters remains vested in the 
Board of Directors of the FDIC. In addition, the Board of Directors 
retains the authority to act on any application, request or enforcement 
matter upon which any member of the Board of Directors wishes to act 
even if the authority to act on such application, request or enforcement 
matter has been delegated.
    (b) Applications and requests. Without limiting the Board of 
Directors' authority, the Board of Directors has retained the authority 
to act upon the following applications and requests:
    (1) Except as provided in Sec. 303.7(b)(9) of this part to deny 
applications for merger transactions, and to approve applications for 
merger transactions where:
    (i) The applicant does not agree in writing to comply with any 
conditions imposed by the FDIC (other than the standard condition listed 
in Sec. 303.0(b)(26) which may be imposed

[[Page 39]]

without the applicant's written agreement); or
    (ii) The resulting bank, upon consummation of the merger 
transaction, would have more than 35% of the individual, partnership and 
corporate deposits held by commercial banks and/or thrift institutions, 
as may be appropriate, in the relevant market(s); or
    (iii) Irrespective of the resulting market share, the Attorney 
General has determined that the proposed merger transaction may have a 
significantly adverse effect on competition; or
    (iv) The application (including an application for phantom bank 
merger or reorganization) falls within the probable failure or emergency 
provisions of section 18(c)(6) of the FDI Act, or the resultant bank 
does not meet the minimum capital requirements of part 325.
    (2) To deny applications for deposit insurance, and to approve 
applications for deposit insurance where:
    (i) The applicant does not agree in writing to comply with any 
condition imposed by the FDIC (other than the standard conditions listed 
in Secs. 303.0(b)(31), and 303.7(d)(4), which may be imposed without the 
applicant's written agreement), or
    (ii) The applicant depository institution is a United States branch 
of a foreign bank; and
    (3) To consider an application made by an insured depository 
institution pursuant to section 19 of the Act (12 U.S.C. 1829) for 
participation, directly or indirectly, in any manner in the conduct of 
the affairs of an insured depository institution or any person who has 
been convicted or is hereafter convicted of any criminal offense 
involving dishonesty or a breach of trust following a hearing held in 
accordance with the provisions of part 308 of this chapter (12 CFR part 
308).
    (c) Enforcement matters. Without limiting the Board of Directors' 
authority, the Board of Directors has retained the authority to act upon 
the following enforcement matters:
    (1) To issue: (i) Notifications to primary regulator when the 
respondent bank's book capital is at or above 2% of total assets and 
adjusted Tier 1 capital is at or above 2% of adjusted part 325 total 
assets;
    (ii) Notices of intent to terminate insured status; and
    (iii) Orders terminating insured status, pursuant to section 8(a) of 
the Act (12 U.S.C. 1818(a));
    (2) To issue cease-and-desist orders pursuant to section 8(b) of the 
Act (12 U.S.C. 1818(b)) when the respondent depository institution or 
individual does not consent to the issuance of such orders;
    (3) To issue: (i) Temporary orders of suspension and prohibition 
pursuant to section 8(e) of the Act (12 U.S.C. 1818(e)); and
    (ii) Orders of removal, suspension or prohibition from participation 
in the conduct of the affairs of an insured depository institution 
pursuant to section 8(e) of the Act (12 U.S.C. 1818(e)) when the 
individual does not consent to the issuance of such orders;
    (4) To issue orders of suspension or prohibition to an indicted 
director, officer or person participating in the conduct of the affairs 
of an insured depository institution and orders of removal or 
prohibition to a convicted director, officer or person participating in 
the conduct of the affairs of an insured depository institution pursuant 
to section 8(g) of the Act (12 U.S.C. 1818(g)) when such director, 
officer or person does not consent to the suspension or removal;
    (5) To issue final orders to pay civil money penalties where 
respondents do not consent to the assessment of civil money penalties 
and hearings have been held;
    (6) To deny requests for modifications or terminations of orders 
issued pursuant to section 8(g) of the Act (12 U.S.C. 1818(g)); and
    (7) To grant or deny requests for reinstatement to office, whether 
or not an informal hearing has been requested, pursuant to Sec. 308.203 
of this chapter.
[54 FR 53570, Dec. 29, 1989, as amended at 56 FR 23011, May 20, 1991; 58 
FR 8219, Feb. 12, 1993; 59 FR 52667, Oct. 19, 1994]



Sec. 303.11  Confirmation, limitations, rescissions and special cases.

    (a) Written confirmation, limitations or subsequent rescission. (1) 
The authority delegated in Secs. 303.7, 303.8 and 303.9 of this part by 
the Board of Directors to the associate director, the appropriate

[[Page 40]]

regional director or deputy regional director is subject, as to each 
associate director, regional director and deputy regional director, to 
written confirmation, limitations, or subsequent rescission of any 
confirmation, by the Director. Such written confirmation, limitations or 
rescissions shall be filed with the Executive Secretary of the FDIC at 
its offices in Washington, DC, and at the office of the regional 
director or deputy regional director concerned, and shall be available 
for public inspection by interested parties.
    (2) The conditions set forth in this part to which the exercise of 
delegated authority is subject are procedural in nature only, and shall 
not be construed as standards or criteria which will be used in 
determining the merits of a specific application, petition, request or 
enforcement matter.
    (b) Action under delegated authority not mandated. (1) The Director 
(DOS) or the Director (DCA) may, in writing, rescind the authority of an 
associate director, regional director, deputy regional director or 
regional manager to act on an application, request, notice of 
acquisition of control or enforcement matter, and may himself act on the 
same.
    (2)(i) An associate director, regional director, deputy regional 
director or regional manager may, in writing, recommend that the 
authority to act on an application, request, notice of acquisition of 
control or enforcement matter not be exercised by him; in such cases, 
the authority to act on such application, request, notice of acquisition 
of control or enforcement matter may be exercised by the Director (DOS) 
or the Director (DCA). The Director may, in writing, recommend that the 
authority to act on an application, request, notice of acquisition of 
control or enforcement matter may not be exercised by him; in such cases 
the Board of Directors will act on the application, request, notice of 
acquisition of control or enforcement matter.
    (ii) A regional counsel may, in writing, recommend that the 
authority to act on an application made by insured depository 
institutions pursuant to section 19 of the Act (12 U.S.C. 1829) or an 
enforcement matter not be exercised by him; in such cases the authority 
to act in such enforcement matters may be exercised by the Associate 
General Counsel for Compliance and Enforcement. The Associate General 
Counsel for Compliance and Enforcement may, in writing, recommend that 
the authority to act on an application pursuant to section 19 of the Act 
or enforcement matter not be exercised by him; in such cases, the Board 
of Directors will act on the application or enforcement matter.
    (iii) Upon determining not to act upon the application, request, 
notice of acquisition of control or enforcement matter under delegated 
authority, the regional manager, deputy regional director, regional 
director, associate director, or the Director (DOS) or the Director 
(DCA), and/or the regional counsel, or the Associate General Counsel for 
Compliance and Enforcement, as the case may be, shall forward the 
application, request, notice of acquisition of control or enforcement 
matter, together with his recommendations as to the disposition of such 
application, request, notice of acquisition of control or enforcement 
matter to the appropriate authority as determined by the rules set forth 
in paragraphs (b)(2) (i) and/or (ii) of this section.
    (c) Request for review. Any aggrieved party or person may request 
the Board of Directors to review any action taken under authority 
delegated in Secs. 303.7, 303.8 and 303.9 of this part.
[54 FR 53570, Dec. 29, 1989, as amended by 59 FR 52667, Oct. 19, 1994]



Sec. 303.12  OMB control number assigned pursuant to the Paperwork Reduction Act.

    (a) Purpose. This section collects and displays the control numbers 
assigned to information collection requirements of this part by the 
Office of Management and Budget pursuant to the Paperwork Reduction Act 
of 1980 (44 U.S.C. 3501 through 3520). The FDIC intends that this 
section comply with section 3507(f) of the Paperwork Reduction Act (44 
U.S.C. 3507(f)), which requires that agencies display a current control 
number assigned by the Director of the Office of Management and Budget 
for each agency information collection requirement.
    (b) Display.

[[Page 41]]



------------------------------------------------------------------------
    Section of 12 CFR part 303 where identified and        Current OMB  
                       described                           control No.  
------------------------------------------------------------------------
303.1..................................................        3064.0001
303.1..................................................        3064.0069
303.2..................................................        3064.0070
303.3..................................................        3064.0016
303.4(b)...............................................        3064.0019
------------------------------------------------------------------------

[54 FR 53571, Dec. 29, 1989]



Sec. 303.13  Applications and notices by savings associations.

    (a) Definitions. For the purposes of this section, the following 
definitions apply:
    (1) As used in paragraphs (b) and (c) of this section, the term 
activity includes acquiring or retaining any investment other than an 
equity investment.
    (2) Control means the power to vote, directly or indirectly, 25 per 
centum or more of any class of the voting stock of a company, the 
ability to control in any manner the election of a majority of a 
company's directors or trustees, or the ability to exercise a 
controlling influence over the management and policies of a company.
    (3) Corporate debt securities not of investment grade refers to any 
corporate debt security that when acquired was not rated among the four 
highest rating categories by at least one nationally recognized 
statistical rating organization. The term shall not include any 
obligation issued or guaranteed by a corporation that may be held by a 
federal savings association without limitation as to percentage of 
assets under subparagraphs (D), (E), or (F) of section 5(c)(1) of the 
Home Owners' Loan Act (12 U.S.C. 1464(c)(1)).
    (4) Equity investment means any equity security as defined herein; 
any partnership interest; any equity interest in real estate as defined 
herein; and any transaction which in substance falls into any of these 
categories, even though it may be structured as some other form of 
business transaction.
    (5) Equity interest in real estate means any form of direct or 
indirect ownership of any interest in real property (whether in the form 
of an equity interest, partnership, joint venture or other form) which 
is accounted for as an investment in real estate or real estate joint 
ventures under generally accepted accounting principles or is otherwise 
determined to be an investment in a real estate venture under Federal 
Financial Institutions Examination Council instructions for the 
preparation of reports of condition. The term equity interest in real 
estate shall not include:
    (i) An interest in real property that is primarily used or intended 
to be used for future expansion by a savings association, its 
subsidiaries, or its affiliates as offices or related facilities for the 
conduct of its business;
    (ii) An interest in real property that is acquired in satisfaction 
of a debt previously contracted in good faith, acquired by way of deed 
in lieu of foreclosure, or acquired in sales under judgments, decrees, 
or mortgages held by a savings association, provided that the property 
is not intended to be held for real estate investment purposes but is 
expected to be disposed of in a timely fashion as permitted by 
applicable law; and
    (iii) Interests in real property that are primarily in the nature of 
charitable contributions to community development.
    (6) Equity security means any stock, (other than adjustable rate 
preferred stock and money market (auction rate) preferred stock) 
certificate of interest or participation in any profit-sharing 
agreement, collateral-trust certificate, preorganization certificate or 
subscription, transferable share, investment contract, or voting-trust 
certificate; any security immediately convertible at the option of the 
holder without payment of substantial additional consideration into such 
a security; any security carrying any warrant or right to subscribe to 
or purchase any such security; and any certificate of interest or 
participation in, temporary or interim certificate for, or receipt for 
any of the foregoing. The term equity security does not include any of 
the foregoing if it is acquired through foreclosure or settlement in 
lieu of foreclosure.
    (7) Qualified affiliate means, in the case of a stock savings 
association, an affiliate other than a subsidiary or an insured 
depository institution; and, in the case of a mutual savings 
association, a subsidiary other than an insured depository institution, 
so long as

[[Page 42]]

all of the savings association's investments in, and extensions of 
credit to, the subsidiary are deducted from the savings association's 
capital.
    (8) The term service corporation means any corporation the capital 
stock of which is available for purchase only by savings associations.
    (9) A significant risk is understood to be present whenever there is 
a high probability that any insurance fund administered by the FDIC may 
suffer a loss.
    (10) Subsidiary means any corporation, partnership, business trust, 
association, joint venture, pool, syndicate or other similar business 
organization directly or indirectly controlled by a savings association. 
For the purposes of Sec. 303.13(f), the term does not include an insured 
depository institution as that term is defined in section 3(c)(2) of the 
Federal Deposit Insurance Act, (FDI Act, 12 U.S.C. 1813(c)(2)).
    (b) Engaging other than as agent on behalf of customers in 
activities not permissible for Federal savings associations--(1) After 
January 1, 1990, no state savings association may directly engage, other 
than as agent on behalf of its customers, in an activity that is not 
expressly authorized for federal savings associations by the Home 
Owners' Loan Act (12 U.S.C. 1461 et seq.) or any other statute, 
regulations issued by the Office of Thrift Supervision (OTS), official 
OTS Regulatory or Thrift Bulletins, or any order or interpretation 
issued in writing by OTS unless the state savings association obtains 
the approval of the FDIC. Any state savings association that wishes to 
obtain approval to initiate or continue such an activity, as well as any 
state savings association that wishes to make, or already has, 
nonresidential real property loans in an amount exceeding that described 
in section 5(c)(2)(B) of the HOLA (12 U.S.C. 1464(c)(2)(B)) must file a 
letter application with the DOS regional director for the region in 
which the state savings association's principal office is located. The 
letter application should contain the following information:
    (i) A brief description of the activity and the manner in which it 
is (or will be) conducted;
    (ii) A copy, if available, of any feasibility study, management 
plan, financial projections, business plan, or similar document 
concerning the conduct of the activity;
    (iii) An estimate of the present or expected dollar volume of the 
activity;
    (iv) Resolutions by the board of directors (or the board of trustees 
in a mutual association) of the savings association authorizing the 
conduct of such activity and the filing of this submission;
    (v) A current statement of the association's assets, liabilities, 
and capital on both a consolidated and a non-consolidated basis, 
respectively;
    (vi) A discussion by management of its analysis regarding the impact 
of the proposed activity on the association's earnings, capital 
adequacy, and general condition;
    (vii) A statement by the savings association of whether or not it is 
in compliance with the fully phased-in capital standards prescribed 
under section 5(t) of HOLA (12 U.S.C. 1464(t)), including a calculation 
of the relevant capital ratio; and
    (viii) A statement of the authority the savings association is 
relying upon for the conduct of the activity in the amount set forth in 
the letter application.

The regional director may request that the state savings association 
provide such other information as the director deems appropriate. 
Approval will not be granted if it is determined by the FDIC that 
engaging in the activity poses a significant risk to the affected 
deposit insurance fund. Furthermore, no savings association will be 
granted approval unless it is in compliance with the fully phased-in 
capital standards prescribed in section 5(t) of HOLA. Consequently, no 
application to engage in an activity after January 1, 1990 should be 
filed if a state association is not in compliance with the fully phased-
in capital requirements.
    (2) Paragraph (b)(1) of this section shall not be read to require 
the divestiture by a state savings association of any asset (including a 
nonresidential real estate loan) it had on its books prior to August 9, 
1989 despite the fact that such asset may be held in connection with the 
conduct of an activity for

[[Page 43]]

which the state savings association must obtain the FDIC's approval 
under Sec. 303.13(b)(1). A notice describing the activities and those 
assets is nevertheless required by this section.
    (c) Engaging other than as agent on behalf of customers in 
activities authorized for Federal savings associations but to an extent 
not so authorized--(1) Activities conducted as of December 29, 1989. (i) 
Any state savings association which as of December 29, 1989 is directly 
engaging, other than as agent on behalf of its customers, in an activity 
expressly authorized to all federal savings associations by statute or 
regulation adoped by OTS, or an official OTS Regulatory or Thrift 
Bulletin interpreting such statutes or regulations, in an amount in 
excess of that permitted to federal savings associations and intends to 
continue to do so after January 1, 1990, must file a notice, return 
receipt requested, with the DOS regional director for the region in 
which the state savings association's principal office is located. The 
notice must contain the same information that is required to be included 
in a letter application filed pursuant to Sec. 303.13(b)(1). The 
regional director may request such other information as the regional 
director deems appropriate. The notice must be received by the regional 
director no later than January 29, 1990.
    (ii) A state savings association which is, and continues to be, in 
compliance with the fully phased-in capital standards prescribed under 
section 5(t) of HOLA and which has filed notice with the FDIC pursuant 
to paragraph (c)(1)(i) of this section may continue the activities that 
are the subject of the 30-day notice in the amount set forth in the 
notice unless the FDIC notifies the state savings association to the 
contrary. No state savings association will be permitted to continue the 
activities at the level described in a notice filed pursuant to this 
section if it is determined that to do so poses a significant risk to 
the affected deposit insurance fund. A state savings association which 
is not in compliance with the fully phased-in capital standards as of 
December 29, 1989 must decrease the level of the activity to that 
allowed to a federal savings association in order for continuation of 
the activity to be permissible.
    (iii) Paragraph (c)(1) of this section shall not be read to require 
the divestiture by a state savings association of any asset it had on 
its books before August 9, 1989. A notice describing those assets is 
nevertheless required by this section if the assets are held in 
connection with the conduct of an activity in an amount that triggers 
notice under Sec. 303.13(c)(1)(i).
    (2) Initiation of activities after December 29, 1989. Any state 
savings association that intends to initiate activities of a type and in 
an amount described in paragraph (c)(1)(i) of this section must file a 
notice, return receipt requested, with the (DOS) regional director for 
the region in which the state savings association's principal office is 
located at least 60 days prior to the initiation of the level of the 
activity described in the notice. The notice must contain the same 
information required by Sec. 303.13(b)(1). The regional director may 
request such other information as the regional director deems 
appropriate. A state savings association that files a 60-day notice may 
initiate the level of activity as described in its notice 60 days after 
the FDIC accepts the notice as complete, or 60 days after the FDIC 
accepts as complete the additional information, if any, that has been 
requested provided that the association is in compliance with the fully 
phased-in capital standards prescribed in section 5(t) of HOLA and 
provided that the FDIC does not, prior to that date, pose an objection 
to the association doing so. A state savings association may inititate 
the level of activity described in its notice prior to the expiration of 
the 60-day period if so notified. The continued conduct of the 
activities as described in the notice is conditioned upon the 
association's continued compliance with the fully phased-in capital 
standards and the FDIC's continued non-objection to those activities.

The 60-day period may be extended upon notice to the state savings 
association if the notice as received is incomplete or the notice raises 
issues that require additional information or time for analysis. If the 
60-day period

[[Page 44]]

is extended, the state savings association may begin the conduct of the 
activities only upon receipt of written notification to that effect. No 
state savings association will be permitted to initiate activities 
subject to this paragraph if it is determined that to do so would pose a 
significant risk to the affected deposit insurance fund.
    (d) Equity investments--(1) General. No state savings association 
may directly acquire or retain any equity investment after August 9, 
1989 of a type or in an amount that is not expressly authorized for 
federal savings associations by HOLA, regulations issued by OTS, 
official OTS Regulatory or Thrift Bulletins, or any order or 
interpretation issued in writing by OTS. Any state savings association 
which, as of August 9, 1989, had one or more such equity investments 
must file an application, return receipt requested, with the DOS 
regional director for the region in which the state savings 
association's principal office is located no later than 30 days from 
December 29, 1989. The application shall:
    (i) Describe the obligor, type, amount, and book and market values 
of the equity investment;
    (ii) Set forth the association's plans to comply with the 
requirements of section 28(c) of the FDI Act to divest the investment as 
quickly as prudently possible, but in any event not later than July 1, 
1994;
    (iii) Describe the anticipated gain or loss (anticipated or 
realized) from the sale of the investment and the impact thereof on the 
association's capital (including capital ratios before and after their 
sale);
    (iv) Include a copy of a resolution by the board of directors, or 
board of trustees in the case of a mutual association, authorizing the 
filing of this submission; and
    (v) Request the FDIC's permission to accomplish divestiture in 
accordance with said plans.

The regional director may request such additional information as the 
regional director deems appropriate. Upon review of the application and 
such additional information as requested, and at any time during the 
divestiture period thereafter, the FDIC may impose such conditions and 
requirements as it deems appropriate in its sole discretion with regard 
to the divestiture of the equity investment, including requiring 
completion of divestiture in advance of July 1, 1994.
    (2) Service corporations--(i) General. Section 303.13(d)(1) 
notwithstanding, a state savings association may acquire or retain an 
equity investment in a service corporation, provided that the service 
corporation's activities are limited solely to those expressly 
authorized by HOLA or any other statute, regulations issued by OTS, 
official OTS Regulatory or Thrift Bulletins, or any order or 
interpretation issued in writing by OTS for all service corporations 
owned by federal savings associations and provided that the investment 
in such service corporation does not exceed that permissible for a 
federal savings association pursuant to statute or regulation of OTS. If 
either of these two conditions does not exist, the state association 
must file a letter application under paragraph (d)(2)(ii) of this 
section with the DOS regional director for the region in which the state 
savings association's principal office is located requesting permission 
to acquire or retain the equity investment in the service corporation in 
question.
    (ii) Content and filing of application. An application requesting 
permission to retain an equity investment in a service corporation in 
which a federal association could not invest that was held as of August 
9, 1989 must be filed with the regional office no later than January 29, 
1990. Approval of the acquisition or retention of an equity investment 
in a service corporation in which a federal association could not invest 
will not be granted if the state association is not in compliance with 
the fully phased-in capital standards prescribed by section 5(t) of 
HOLA. Consequently, no application to acquire or retain an equity 
investment in such a service corporation should be filed if a state 
association is not in compliance with these capital requirements. In 
addition, approval of the retention or acquisition of such investments 
will not be granted if the acquisition or retention is determined to 
pose a significant risk to the affected deposit insurance

[[Page 45]]

fund. If an application to retain an investment is denied, the state 
association must file a divestiture plan with the regional director 
requesting the FDIC's permission to accomplish divestiture in accordance 
with said plan.

The letter application required hereby should contain the information 
required by Sec. 303.13(b)(1), as it relates both to the service 
corporation and to its parent state savings association. In addition, 
the application should contain: A listing of the officers (contemplated 
officers) of the service corporation, a listing of any other 
shareholders of the service corporation (existing or prospective) and 
their respective holdings, and a listing of the locations (expected 
locations) of all of the offices of the service corporation. The 
regional director may request such other information as the regional 
director deems appropriate.
    (e) Corporate debt securities not of investment grade. 
Notwithstanding anything to the contrary in Sec. 303.13, no state or 
federal savings association may, directly or through a subsidiary (other 
than a subsidiary that is a qualified affiliate), acquire or retain 
after August 9, 1989 any corporate debt security that is not of 
investment grade. Any state or federal savings association which, as of 
August 9, 1989, held corporate debt securities not of investment grade 
must divest those securities as quickly as can prudently be done, but in 
no event later than July 1, 1994. Any state or federal savings 
association that must divest corporate debt securities shall file an 
application with the DOS regional director for the region in which the 
state or Federal savings association's principal office is located not 
later than 30 days from December 29, 1990. The application shall:
    (1) Describe the obligor, type, amount, and book and market values 
of the corporate debt securities;
    (2) Set forth the state or federal association's plans to comply 
with the requirements of section 28(d) of the FDI Act to divest the 
securities as quickly as prudently possible, but in any event not later 
than July 1, 1994;
    (3) Describe the gain or loss (anticipated or realized) from the 
sale of the securities and the impact thereof on the association's 
capital (including capital ratios before and after the sale);
    (4) Include a copy of the resolution by the board of directors, or 
the board of trustees in the case of a mutual association, authorizing 
the filing of this submission; and
    (5) Request the FDIC's permission to accomplish divestiture in 
accordance with said plans.

The regional director may request such additional information as the 
regional director deems appropriate. Upon review of the application and 
such additional information as requested, and at any time during the 
divestiture period thereafter, the FDIC may impose such conditions and 
requirements as it deems appropriate in its sole discretion with regard 
to the divestiture of the debt securities, including requiring 
completion of divestiture in advance of July 1, 1994.
    (f) Notice of acquisition or establishment of a subsidiary or the 
conduct of new activities through a subsidiary. (1) No insured savings 
association may establish or acquire a subsidiary, or conduct any new 
activity through a subsidiary, without providing the DOS regional 
director for the region in which the insured savings association's 
principal office is located prior notice of the association's intent to 
do so. Notice must be sent return receipt requested and be received by 
the regional director at least 30 days prior to the establishment or 
acquisition of the subsidiary or the commencement of the new activity. 
The notice shall contain the same information required to be in a letter 
application filed pursuant to Sec. 303.13(b)(1) plus the following:
    (i) A description of how the activities of the subsidiary will be 
funded;
    (ii) The amount of the insured savings association's investment in 
the subsidiary and the form of the investment;
    (iii) The percentage ownership the insured savings association will 
have in the subsidiary;
    (iv) A listing of the other owners of the subsidiary if any; and
    (v) In the case of the acquisition of an existing concern, the terms 
and conditions of the acquisition including an appraisal, assessment of 
value, or other substantiation of the purchase price

[[Page 46]]

and operating statements for the previous three years (if applicable).

If the insured savings association's filing with the OTS under section 
18(m)(1) of the FDI Act contains all of the information required, that 
filing may be submitted to the FDIC in satisfaction of this provision. 
In any case, the regional director may request such additional 
information as the regional director deems appropriate. In all such 
cases, the 30-day period will not begin to run until the response to the 
request for additional information is complete.
    (2) Any Federal savings bank that was chartered prior to October 15, 
1982 as a savings bank under state law, and any savings association that 
acquired its principal assets from such an institution, is not required 
to file prior notice in accordance with paragraph (f)(1) of this 
section.
    (3) Any insured savings association that had one or more 
subsidiaries prior to August 9, 1989 must file a notice with the DOS 
regional director for the region in which the insured savings 
association's principal office is located within 30 days from December 
29, 1989. The notice should set forth the name, location, and type of 
activity conducted by the subsidiary and the amount of the insured 
savings association's investment in the subsidiary.
    (4) Section 303.13(f)(1) notwithstanding, an insured savings 
assocaition may establish or acquire one or more subsidiaries whose sole 
purpose is to hold interests in real property acquired by the savings 
association that fit the description in Sec. 303.13(a)(5)(ii) provided 
that the savings association files a written notice, return receipt 
requested, with the DOS regional director for the region in which the 
savings association's principal office is located indicating that the 
association intends to establish or acquire one or more subsidiaries 
that will be engaged solely in the disposition of such property. Notice 
must be received by the regional director at least 30 days prior to the 
establishment or acquisition of any such subsidiary. An association that 
has filed a notice pursuant to this paragraph may thereafter establish 
or acquire additional such subsidiaries provided that each time within 
14 days after doing so the association notifies the regional director in 
writing. The notice shall identify the savings association, give the 
date of the initial notice, identify the new subsidiary, and state the 
value of the property at the time it was transferred to the subsidiary.
    (g) Notice by Federal savings associations conducting grandfathered 
activities. Any federal savings association authorized by section 
5(i)(4) of HOLA (12 U.S.C. 1464(i)(4)) to make any investment or engage 
in any activity not otherwise generally authorized to federal savings 
association by section 5 of HOLA must file a notice with the DOS 
regional director for the region in which the federal savings 
association's principal office is located within 30 days after December 
29, 1989 or within 30 days after the date the federal savings 
association is first able to rely upon section 5(i)(4) of HOLA as a 
result of the acquisition of an association that is covered by such 
section. The notice should briefly describe the activity or investment.
    (h) Delegations. The authority to act on applications and notices 
filed pursuant to Sec. 303.13, and to make any and all determinations 
called for in regard to the same, is delegated to the Director (DOS), 
and where confirmed in writing by the director, to an associate 
director, or to the regional director or deputy regional director.
(Approved by the Office of Management and Budget under control number 
3064-0104)
[54 FR 53548, Dec. 29, 1989, as amended at 55 FR 38042, Sept. 17, 1990; 
58 FR 64458, Dec. 8, 1993; 59 FR 52667, Oct. 19, 1994]



Sec. 303.14  Change in senior executive officer or board of directors.

    (a) Definitions. For the purposes of this section:
    (1) The term individual means any natural person, as well as any 
other entity and/or its employees substituted for such natural person.
    (2) The term insured nonmember bank means any bank, including any 
foreign bank having an insured branch the deposits of which are insured 
in accordance with the provisions of the Federal Deposit Insurance Act, 
which is not a

[[Page 47]]

member of the Federal Reserve System. The term does not include any 
institution chartered by the Comptroller of the Currency, any branch 
licensed by the Comptroller of the Currency, any District bank, or any 
federal savings bank.
    (3) The term senior executive officer means any individual who 
exercises significant influence over, or participates in, major 
policymaking decisions of an insured nonmember bank, without regard to 
title, salary, or compensation. The term includes, but is not limited 
to, the following positions: president, chief executive officer, chief 
managing official (in an insured state branch of a foreign bank), chief 
operating officer, chief financial officer, chief lending officer, or 
chief investment officer. The term also includes employees of entities 
retained by an insured nonmember bank to perform such functions in the 
insured nonmember bank, when such firm is hired in lieu of directly 
hiring the individuals.
    (4) The term troubled condition means any insured nonmember bank 
that:
    (i) Has been assigned a composite rating by the FDIC of 4 or 5 under 
the Uniform Financial Institutions Rating System, or, in the case of an 
insured state-licensed branch of a foreign bank (State branch), an 
equivalent rating;
    (ii) Is subject to a proceeding initiated by the FDIC for 
termination or suspension of deposit insurance;
    (iii) Is subject to a written agreement which requires action to 
improve or maintain the safety and soundness of the institution and 
which is issued by either the FDIC or by the appropriate state banking 
authority, a cease and desist order issued by either the FDIC or the 
appropriate state banking authority, a cease and desist order or 
proceeding initiated by either the FDIC or the appropriate state banking 
authority, or a capital directive issued by either the FDIC or the 
appropriate state banking authority; or
    (iv) Is informed in writing by the DOS regional director of the 
region in which the institution is located (appropriate regional 
director) or his or her designee, based on a visitation, examination, or 
report of condition, that it has been designated a troubled institution 
for the purposes of Sec. 303.14.
    (b) Prior Notice Requirement. An insured nonmember bank shall give 
the FDIC written notice at least 30 days prior to the effective date of 
any addition or replacement of a member of the board of directors (or a 
member of the board of trustees in an insured nonmember bank held in a 
mutual form of ownership) or the employment or change in 
responsibilities of any individual to a position as a senior executive 
officer if:
    (1) The bank has been chartered or the insured state branch has been 
licensed less than two years;
    (2) Within the two years preceding the proposed addition or 
employment;
    (i) The insured nonmember bank or any of its parents has undergone a 
change in control which required a notice under section 7(j) of the 
Federal Deposit Insurance Act or regulations issued pursuant to that 
statute; or
    (ii) The insured nonmember bank has undergone a transaction subject 
to section 3 of the Bank Holding Company Act or section 10 of the Home 
Owners Loan Act or regulations issued pursuant to either of those 
statutes;
    (3) The insured nonmember bank is not in compliance with the minimum 
capital requirements applicable to it and which are imposed by 12 CFR 
part 325 or by other regulatory action of the FDIC or the appropriate 
state banking authority; or
    (4) The insured nonmember bank is otherwise in a troubled condition.

In the case of the addition of a member of the board of directors or a 
change in senior executive officer in a foreign bank having an insured 
State branch, the notice requirement shall not apply to such additions 
and changes in the foreign bank parent, but only to changes in senior 
executive officers in the State branch. The notice requirement also does 
not apply in the case of an advisory director who is not elected by the 
shareholders of the bank or any of its parents, who is not authorized to 
vote on matters before the board of directors, and who provides solely 
general policy advice to the board of directors.
    (c) Procedures for notice of proposed change in Director or Senior 
Executive Officer--(1) Filing and acceptance. Notices shall be filed 
with the appropriate

[[Page 48]]

regional director and shall contain information pertaining to the 
competence, experience, character, or integrity of the individual with 
respect to whom the notice is submitted, as prescribed in the designated 
FDIC form, subject to the authority of the regional director or his or 
her designee to require additional information. Each individual on whose 
behalf the notice is filed must attest to the validity of the 
information filed which pertains to that individual. At the option of 
the individual, the information may be forwarded to the regional 
director by the individual; however, in such cases, the insured 
nonmember bank must file a notice to that effect. The 30-day notice 
period will begin to run on the date all required information is 
received by the appropriate regional director. The bank submitting the 
notice shall be notified of the date on which all such required 
information is received and the notice is accepted for processing.
    (2) Waiver of prior notice requirement--(i) Procedure for obtaining. 
Parties may petition the appropriate regional director for a waiver of 
the prior notice required under this section. Waiver may be granted if 
it is found that delay could harm the bank or the public interest. Any 
waiver shall not affect the authority of the FDIC to issue a notice of 
disapproval within 30 days of the waiver.
    (ii) Election of directors. In the case of the election of a new 
member of the board of directors at a meeting of the shareholders of an 
insured nonmember bank, such waiver is hereby granted, but a completed 
notice must be filed with the appropriate regional director within 48 
hours of the election.
    (3) Notice of intent not to disapprove. A proposed director or 
senior executive officer may begin service before the expiration of the 
30-day period if the FDIC notifies the bank and the individual in 
writing of the FDIC's intention not to disapprove the proposed addition 
or employment.
    (4) Commencement of service. A proposed senior executive officer or 
director may begin service upon the expiration of the 30-day period 
following acceptance of a complete notice, unless the FDIC issues a 
notice of disapproval before the end of the 30-day period.
    (d) Notice of disapproval. The FDIC may disapprove the individual's 
serving as a director or senior executive officer if it finds that the 
competence, experience, character, or integrity of the individual with 
respect to whom a notice under this section is submitted indicates that 
it would not be in the best interests of the depositors of the bank or 
in the best interests of the public to permit the individual to be 
employed by, or associated with, the bank. The notice of disapproval 
will advise the parties of their rights of appeal.
    (e) Delegations. The authority to issue notices of disapproval or 
notices of intent not to disapprove under this section; to grant waivers 
of the prior notice requirement; to determine the informational adequacy 
of a notice; to designate an insured nonmember bank as a troubled 
institution; and to determine when the 30-day period begins to run is 
delegated to the Director (DOS), and where confirmed in writing by the 
director, to an associate director, or to the regional director or 
deputy regional director.
[54 FR 53042, Dec. 27, 1989 as amended by 59 FR 52667, Oct. 19, 1994]



Sec. 303.15  Mutual-to-stock conversions of mutually owned state-chartered savings banks.

    (a) Prior notice requirement. In addition to complying with the 
substantive requirements in Sec. 333.4 of this chapter, an insured 
state-chartered mutually owned savings bank that proposes to convert 
from mutual to stock form shall file with the FDIC a notice of intent to 
convert to stock form and copies of all documents filed with state and 
federal banking and/or securities regulators in connection with the 
proposed conversion. An institution that is in the process of converting 
to stock form that has filed a proposed stock conversion application 
with the applicable state and federal regulators (or otherwise has 
initiated a stock conversion) prior to the effective date of this 
section shall file the required materials with the FDIC as soon as 
practicable. An insured mutual savings bank chartered by a state that 
does not

[[Page 49]]

require the filing of application materials to convert from mutual to 
stock form that proposes to convert to the stock form shall notify the 
FDIC of the proposed conversion and provide the materials requested by 
the FDIC.
    (b) Content and filing of notice--(1) Content of notice. The notice 
required to be filed under paragraph (a) of this section shall provide a 
description of the proposed conversion and include a copy of all notices 
or applications concerning the proposed conversion, including all 
attachments or appendices thereto, that have been filed with any state 
and federal banking and/or securities regulators. Copies of all 
agreements entered into as part of the mutual-to-stock conversion 
between the institution, its officers, directors/trustees and any other 
institution and/or its successors also must be provided.
    (2) Filing of notice. Notices shall be filed with the regional 
director (DOS) in the region in which the institution seeking to convert 
is headquartered at the same time as the conversion application 
materials are filed with the institution's primary state regulator.
    (c) Review by FDIC. (1) The FDIC shall review the materials 
submitted by the institution seeking to convert from mutual to stock 
form. The FDIC, in its discretion, may request any additional 
information it deems necessary to evaluate the proposed conversion and 
the institution shall provide such information to the FDIC 
expeditiously. Among the factors to be reviewed by the FDIC are:
    (i) The use of the proceeds from the sale of stock, as prescribed in 
the business plan;
    (ii) The adequacy of the disclosure materials;
    (iii) The participation of depositors in approving the transaction;
    (iv) The form of the proxy statement required for the vote of the 
depositors/members on the conversion;
    (v) Any increased compensation and other remuneration (including 
stock grants, stock option rights and other similar benefits) to be 
obtained by officers and directors/trustees of the bank in connection 
with the conversion;
    (vi) The adequacy and independence of the appraisal of the value of 
the mutual savings bank for purposes of determining the price of the 
shares of stock to be sold;
    (vii) The process by which the bank's trustees approved the 
appraisal, the pricing of the stock and the compensation arrangements 
for insiders;
    (viii) The nature and apportionment of stock subscription rights; 
and
    (ix) The bank's plans to fulfill its commitment to serving the 
convenience and needs of its community.
    (2) In reviewing the materials required to be submitted under this 
section, the FDIC will take into account the extent to which the 
proposed conversion conforms with the various provisions of the mutual-
to-stock conversion regulations of the Office of Thrift Supervision (12 
CFR Part 563b), as currently in effect at the time the FDIC reviews the 
required materials related to the proposed conversion. Any non-
conformity with those provisions will be closely scrutinized. Conformity 
with the OTS requirements, however, will not be sufficient for FDIC 
regulatory purposes if the FDIC determines that the proposed conversion 
would pose a risk to the institution's safety and soundness, violate any 
law or regulation or present a breach of fiduciary duty.
    (d) Notification of completed filing of materials. The FDIC shall 
notify the institution when all the required materials related to the 
proposed conversion have been filed with the FDIC and the notice is 
thereby complete for purposes of computing the time periods designated 
in paragraphs (e) and (g) of this section.
    (e) Notice of intent not to object. If the FDIC determines, in its 
discretion, that the proposed conversion would not pose a risk to the 
institution's safety and soundness, violate any law or regulation or 
present a breach of fiduciary duty, then the FDIC shall issue to the 
bank seeking to convert, within 60 days of receipt of a complete notice 
of proposed conversion or within 20 days after the last applicable state 
or other federal regulator has acted on the proposed conversion, 
whichever is later, a notice of intent not to object to the proposed 
conversion. The FDIC may, in its discretion, extend by written notice to 
the institution the initial 60-day period by an additional 60 days.

[[Page 50]]

    (f) Letter of objection. If the FDIC determines, in its discretion, 
that the proposed conversion poses a risk to the institution's safety 
and soundness, violates any law or regulation or presents a breach of 
fiduciary duty, then the FDIC shall issue a letter to the institution 
stating its objection(s) to the proposed conversion and advising the 
institution that the conversion shall not be consummated until such 
letter is rescinded. A copy of the letter of objection shall be 
furnished to the institution's primary state regulator and any other 
state or federal banking and/or securities regulator involved in the 
conversion. The letter of objection shall advise the institution of its 
right to petition the FDIC for reconsideration under Sec. 303.6(e). Such 
action shall not, in any way, prohibit the FDIC from taking any other 
action(s) that it may deem necessary.
    (g) Consummation of the conversion. An institution may consummate 
the proposed conversion upon either:
    (1) The receipt of a notice of intent not to object; or
    (2) The expiration of the 60-day period following acceptance of a 
complete notice by the FDIC or the 20-day period after the last 
applicable state or other federal regulator has acted on the proposed 
conversion, whichever is later, unless the FDIC issues a notice of 
objection before the end of that period and, in which case, the 
conversion shall not be consummated until such letter is rescinded. The 
FDIC may, in its discretion, extend by written notice to the institution 
the initial 60-day period by an additional 60 days.
[59 FR 61245, Nov. 30, 1994]



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




Sec.
304.1  Purpose and scope.
304.2  Forms and instructions--general.
304.3  Certified statements.
304.4  Reports of condition and income.
304.5  Other forms.
304.6  [Reserved]
304.7  Display of control numbers.
Appendix A to Part 304--List of Forms
    Authority:  5 U.S.C. 552; 12 U.S.C. 1817, 1818, 1819, 1820; Public 
Law 102-242, 105 Stat. 2251 (12 U.S.C. 1817 note).
    Source:  51 FR 36684, Oct. 15, 1986, unless otherwise noted.



Sec. 304.1  Purpose and scope.

    This part is issued under section 552 of title 5 of the United 
States Code (5 U.S.C. 552), which requires that each agency shall make 
available to the public information pertaining to the description of 
forms available or the places at which forms may be obtained, and 
instructions as to the scope and content of reports and other 
submittals. The forms mentioned in this part are limited to those which 
are not already mentioned elsewhere within the rules and regulations of 
the Federal Deposit Insurance Corporation. However, appendix A to this 
part lists forms required by the FDIC and identifies the sections of 
FDIC's regulations where the forms are referenced.
[51 FR 36684, Oct. 15, 1986, as amended at 62 FR 4896, Feb. 3, 1997]



Sec. 304.2  Forms and instructions--general.

    Necessary forms with their related instructions to be used in 
connection with applications, reports, and other submittals can be 
obtained from FDIC regional offices--Division of Supervision. The FDIC 
regional offices are listed in the directory of the FDIC Law, 
Regulations and Related Acts looseleaf service, published by the FDIC. A 
listing of FDIC forms can also be obtained by writing to the FDIC, 
Division of Supervision, 550 17th Street, NW, Washington, D.C. 20429. 
The forms are also available in the FDIC Public Information Center at 
801 17th Street, NW, Washington, D.C. 20429.
[62 FR 4896, Feb. 3, 1997]



Sec. 304.3  Certified statements.

    The certified statements required to be filed by insured 
institutions under the provisions of section 7 of the Federal Deposit 
Insurance Act (12 U.S.C. 1817), as amended, shall be filed in accordance 
with part 327 of this chapter. The applicable forms are Form 6420/07A--
Form 6420/07H which show the computation of the semiannual assessment 
due to the Corporation from an insured depository institution. As 
provided for in part 327 of this chapter, the

[[Page 51]]

forms will be furnished to insured depository institutions by the 
Corporation twice each calendar year and the completed statement must be 
returned to the Corporation by each institution.
[62 FR 4896, Feb. 3, 1997]



Sec. 304.4  Reports of condition and income.

    (a) Description. Forms FFIEC 031, 032, 033, and 034, Consolidated 
Reports of Condition and Income, are quarterly reports for insured state 
nonmember banks (except District banks) of different asset sizes or with 
foreign offices, as appropriate, that are required to be prepared as of 
the close of business on the following report dates: March 31, June 30, 
September 30, and December 31. These reports are also known as the 
``Call Report.'' The Call Report includes a balance sheet, an income 
statement, and a statement of changes in equity capital of the reporting 
bank. Supporting schedules request additional detail with respect to 
charge-offs and recoveries, income from international operations, 
specific asset and liability accounts, off-balance sheet items, past due 
and nonaccrual assets, information for assessment purposes, and 
regulatory capital. All assets and liabilities, including contingent 
assets and liabilities, must be reported in, or otherwise taken into 
account in the preparation of, the Call Report. Reporting banks must 
also submit annually such information on small business and small farm 
lending as the FDIC may need to assess the availability of credit to 
these sectors of the economy. Call Reports must be prepared in 
accordance with the appropriate instructions contained in the Federal 
Financial Institutions Examination Council booklet entitled 
``Instructions--Consolidated Reports of Condition and Income''. The 
report forms, the instructions for completing the reports, and the 
accompanying materials will be furnished to all insured state nonmember 
banks (except District banks) by, or may be obtained upon request from, 
the Call Reports Analysis Unit, Division of Supervision, FDIC, 
Washington, D.C. 20429.
    (b) Submission of reports. All insured state nonmember banks (except 
District banks) shall file their completed reports by the method and 
with the appropriate collection agent for the FDIC as designated in the 
materials accompanying the report forms each quarter. Completed reports 
must be received no more than 30 calendar days after the report date, 
subject to the timely filing provisions set forth in the 
``Instructions--Consolidated Reports of Condition and Income'' and in 
the materials accompanying the report forms each quarter. Any bank which 
has or has had more than one foreign office, other than a shell branch 
or an International Banking Facility, may take an additional 15 calendar 
days to submit its Call Reports. A bank using any of these additional 15 
calendar days to complete its reports is required to submit its reports 
electronically.
[62 FR 4896, Feb. 3, 1997]



Sec. 304.5  Other forms.

    The forms described in this section have been prepared for the use 
of banks.
    (a) Form 8020/05: Summary of Deposits. Form 8020/05 is a report on 
the amount of deposits for each authorized office of an insured bank 
with branches; unit banks do not report. Reports as of June 30 of each 
year must be submitted no later than the immediately succeeding July 31. 
The report is filed with the appropriate collection agent for the FDIC 
as designated in the materials accompanying the survey forms each year. 
The report forms and the instructions for completing the reports will be 
furnished to all such banks by, or may be obtained upon request from the 
Trust and Survey Group, Division of Supervision, FDIC, 550 17th Street, 
NW, Washington, D.C. 20429.
    (b) Form 6120/06: Notification of Performance of Bank Services. Form 
6120/06 may be used to satisfy the notice requirement for bank service 
arrangements that is contained in section 7 of the Bank Service 
Corporation Act (12 U.S.C. 1867), as amended. In lieu of the form, a 
bank may satisfy the requirement by submitting a letter stating: The 
name of the servicer; the address at which the service is performed; the 
service being performed; and the date the service commenced. Either the 
form or the letter containing the notice information must be submitted 
to

[[Page 52]]

the regional director--Division of Supervision of the region in which 
the bank's main office is located within 30 days of the making of the 
bank service contract or the performance of the bank service, whichever 
occurs first.
    (c) Form FFIEC 001: Annual Report of Trust Assets. This report must 
be filed by all insured state nonmember commercial and savings banks 
operating trust departments or banks granted consent by the Corporation 
to exercise trust powers, and their trust subsidiaries. The report must 
be filed no later than February 15th of each year. When circumstances 
necessitate, additional information may be required about certain 
operations of the trust department. The report must be prepared and 
submitted in accordance with the appropriate instructions. The report is 
filed with the appropriate collection agent for the FDIC as designated 
in the report form and instructions. The report forms and instructions 
for completing the report will be furnished automatically to all such 
banks by, or may be obtained upon request from the Trust and Survey 
Group, Division of Supervision, FDIC, 550 17th Street, NW, Washington, 
D.C. 20429.
    (d) Form FFIEC 002: Report of Assets and Liabilities of U.S. 
Branches and Agencies of Foreign Banks. Form FFIEC 002 is a report in 
the form of a statement of the assets and liabilities of U.S. branches 
and agencies of foreign banks together with supporting schedules that 
request additional detail with respect to selected assets and 
liabilities, off-balance sheet items, and, in the case of insured 
branches, information for assessment purposes. All assets and 
liabilities, including contingent assets and liabilities, must be 
reported in, or otherwise taken into account in the preparation of, this 
report. Insured branches must also submit annually such information on 
small business and small farm lending as the FDIC may need to assess the 
availability of credit to these sectors of the economy. The report must 
be prepared in accordance with the instructions contained in the 
instruction booklet for the report, copies of which are furnished to all 
U.S. branches and agencies of foreign banks by the Federal Reserve 
System. The Board of Governors of the Federal Reserve System collects 
and processes the report on behalf of FDIC-supervised branches. The 
report is submitted quarterly to the appropriate Federal Reserve 
district bank.
    (e) Form FFIEC 004: Report on Indebtedness of Executive Officers and 
Principal Shareholders and their Related Interests to Correspondent 
Banks. Form FFIEC 004 is a recommended form that may be used by the 
executive officers and principal shareholders of an insured state 
nonmember bank to report to the board of directors of their bank on 
their indebtedness (and that of their related interests) to 
correspondent banks, as required by part 349 of this chapter. The 
reports or any form containing identical information must be submitted 
to the bank's board of directors by January 31 of each year and cover 
indebtedness to correspondent banks during the preceding calendar year. 
Form FFIEC 004 is mailed annually by the FDIC to each insured state 
nonmember bank.
[62 FR 4897, Feb. 3, 1997]



Sec. 304.6  [Reserved]



Sec. 304.7  Display of control numbers.

    The following sections of this part of FDIC's regulations containing 
collection of information requirements are listed with the control 
numbers assigned by the Office of Management and Budget:

------------------------------------------------------------------------
                                                             Currently  
               Section of 12 CFR Part 304                  Assigned OMB 
                                                            Control No. 
------------------------------------------------------------------------
304.3...................................................       3064-0057
304.4(a)................................................       3064-0052
304.4(b)................................................       3064-0054
304.5(a)................................................       3064-0061
304.5(b)................................................       3064-0029
304.5(c)................................................       3064-0024
304.5(d)................................................       7100-0032
304.5(e)................................................       3064-0023
------------------------------------------------------------------------

                 Appendix A to Part 304-- List of Forms

    Note:  See footnotes at end of table.

[[Page 53]]



----------------------------------------------------------------------------------------------------------------
                                                                            Section of FDICs                    
                                                                           regulations (12 CFR                  
                 Form                                Title               chapter III) where the       OMB No.   
                                                                           form is referenced                   
----------------------------------------------------------------------------------------------------------------
FDIC 6112/01..........................  Initial Statement of            335.413.................       3064-0030
                                         Beneficial Ownership of                                                
                                         Equity Securities (Form F-7).                                          
FDIC 6112/02..........................  Statement of Changes in         335.414.................       3064-0030
                                         Beneficial Ownership of                                                
                                         Equity Securities (Form F-8).                                          
FDIC 6120/06..........................  Notification of Bank Services.  304.5(b)................       3064-0029
FDIC 6200/05..........................  Application for Federal         303.1...................       3064-0001
                                         Deposit Insurance (Commercial                                          
                                         Banks).                                                                
FDIC 6200/06..........................  Financial Report..............  (\1\)...................       3064-0006
FDIC 6200/07..........................  Application for Federal         303.1...................       3064-0069
                                         Deposit Insurance for                                                  
                                         Operating Noninsured                                                   
                                         Institutions.                                                          
FDIC 6200/09..........................  Application for Consent to      (\2\)...................       3064-0025
                                         Exercise Trust Powers.                                                 
FDIC 6220/01..........................  Application for a Merger or     303.3...................       3064-0016
                                         Other Transaction Pursuant to                                          
                                         Section 19(c) of the Federal                                           
                                         Deposit Insurance Act.                                                 
FDIC 6220/07..........................  Application for a Merger or     303.7(b)(1) and 303.3...       3064-0015
                                         Other Transaction Pursuant to                                          
                                         Section 18(c) of the Federal                                           
                                         Deposit Insurance Act                                                  
                                         (Phantom or Corporate                                                  
                                         Reorganization).                                                       
FDIC 6342/12..........................  Request for Deregistration      341.5...................       3064-0027
                                         Registered Transfer Agent.                                             
FDIC 6420/07..........................  Certified Statement...........  304.3(a)................       3064-0057
FDIC 6440/12..........................  Loan/Application Register.....  338.8(\3\)..............       7100-0247
FDIC 6710/06..........................  Suspicious Activity Report....  353.1...................       3064-0077
FDIC 6710/07..........................  Application Pursuant to         (\4\)...................       3064-0018
                                         Section 19 of the Federal                                              
                                         Deposit Insurance Act.                                                 
FDIC 6810/01..........................  Notification of Addition of a   333.2...................       3064-0097
                                         Director or Employment of a                                            
                                         Senior Executive Officer.                                              
FDIC 6822/01..........................  Notice of Acquisition of        303.4(b)................       3064-0019
                                         Control.                                                               
FDIC 8020/05..........................  Summary of Deposits...........  304.5(a)................       3064-0061
FFIEC 001.............................  Annual Report of Trust Assets.  304.5(c)................       3064-0024
FFIEC 002.............................  Report of Assets and            304.5(d)................       7100-0032
                                         Liabilities of U.S. Branches                                           
                                         and Agencies of Foreign Banks.                                         
FFIEC 004.............................  Report on Indebtedness of       304.5(e)................       3064-0023
                                         Executive Officers and                                                 
                                         Principal Shareholders and                                             
                                         their Related Interests to                                             
                                         Correspondent Banks.                                                   
FFIEC 009.............................  Country Exposure Report.......  351.3(b)................       3064-0017
FFIEC 009a............................  Country Exposure Information    351.3...................       3064-0017
                                         Report.                                                                
FFIEC 019.............................  Country Exposure Report for     (\5\)...................       3064-0017
                                         U.S. Branches and Agencies of                                          
                                         Foreign Banks.                                                         
FFIEC 030.............................  Foreign Branch Report of        347.6(b)................       3064-0011
                                         Condition.                                                             
FFIEC 031.............................  Consolidated Reports of         304.4...................       3064-0052
                                         Condition and Income for a                                             
                                         Bank with Domestic and                                                 
                                         Foreign Offices.                                                       
FFIEC 032.............................  Consolidated Reports of         304.4...................       3064-0052
                                         Condition and Income for a                                             
                                         Bank with Domestic Offices                                             
                                         Only and Total Assets of $300                                          
                                         Million or More.                                                       
FFIEC 033.............................  Consolidated Reports of         304.4...................       3064-0052
                                         Condition and Income for a                                             
                                         Bank with Domestic Offices                                             
                                         Only and Total Assets of $100                                          
                                         Million or More But Less Than                                          
                                         $300 Million.                                                          
FFIEC 034.............................  Consolidated Reports of         304.4...................       3064-0052
                                         Condition and Income for a                                             
                                         Bank with Domestic Offices                                             
                                         Only and Total Assets of Less                                          
                                         than $100 Million.                                                     
FFIEC 035.............................  Monthly Consolidated Foreign    (\6\)...................       1557-0156
                                         Currency Report of Banks in                                            
                                         the United States.                                                     
GFIN..................................  Notice of Government            (\7\)...................       1535-0089
                                         Securities Broker or                                                   
                                         Government Securities Dealer                                           
                                         Activities to be Filed by a                                            
                                         Financial Institution Under                                            
                                         Section 15C(a)(1)(B).                                                  
GFIN-W................................  Notice by Financial             (\7\)...................       7100-0224
                                         Institutions of Termination                                            
                                         of Activities as a Government                                          
                                         Securities Broker or                                                   
                                         Government Securities Dealer.                                          
GFIN-4................................  Disclosure Form for Person      (\7\)...................       1535-0089
                                         Associated With a Financial                                            
                                         Institution Government                                                 
                                         Securities Broker or Dealer.                                           
GFIN-5................................  Uniform Termination Notice for  (\7\)...................       1535-0089
                                         Person Associated With a                                               
                                         Financial Institution                                                  
                                         Government Securities Broker                                           
                                         or Dealer.                                                             
MSD 4.................................  Uniform Application for         343.3...................       3064-0022
                                         Municipal Securities                                                   
                                         Principal or Municipal                                                 
                                         Securities Representative                                              
                                         Associated With a Bank                                                 
                                         Municipal Securities Dealer.                                           
MSD 5.................................  Uniform Termination for         343.3...................       3064-0022
                                         Municipal Securities                                                   
                                         Principal or Municipal                                                 
                                         Securities Representative                                              
                                         Associated With a Bank                                                 
                                         Municipal Securities Dealer.                                           

[[Page 54]]

                                                                                                                
TA-1..................................  Transfer Agent Registration     341.6...................       3064-0026
                                         and Amendment Form.                                                    
----------------------------------------------------------------------------------------------------------------
Notes:                                                                                                          
\1\ Not referenced in 12 CFR chapter III. The report form is submitted by each individual director or officer of
  a proposed or operating bank applying to the FDIC for federal deposit insurance as a state nonmember bank, or 
  by a person proposing to acquire ownership or control of an insured state nonmember bank.                     
\2\ The report form can be obtained from the HMDA Assistance line by telephoning (202) 452-2016.                
\3\ Not referenced in 12 CFR chapter III. The application form is submitted by insured state nonmember banks    
  applying for FDIC consent to exercise trust powers.                                                           
\4\ Not referenced in 12 CFR chapter III. The application form is submitted by FDIC-insured banks applying for  
  FDIC consent to employ persons who have been convicted of crimes involving dishonesty or breach of trust.     
\5\ Not referenced in 12 CFR chapter III. The report form is submitted by state chartered and federally-licensed
  branches and agencies of foreign banks in the U.S. with $30 million or more in total direct claims on foreign 
  residents. The Federal Reserve Board collects and processes the report on behalf of FDIC-supervised branches. 
  The report is submitted quarterly to the appropriate Federal Reserve district bank.                           
\6\ Not referenced in 12 CFR chapter III. The report form is submitted by banks (other than savings banks) and  
  bank holding companies with a dollar equivalent of $100 million or more in assets, liabilities, foreign       
  exchange contracts bought and foreign exchange contracts sold in any six specific foreign currencies as of the
  end of a month. The Office of the Comptroller of the Currency collects and processes this monthly report on   
  behalf of insured state nonmember banks.                                                                      
\7\ Not referenced in 12 CFR chapter III. The report form is submitted by banks or persons associated with banks
  required to file under section 15C of the Securities and Exchange Act of 1934.                                

[62 FR 4897, Feb. 3, 1997]



PARTS 305-306  [RESERVED]--Table of Contents






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




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



Sec. 307.1  Certification of assumption of deposit liabilities.

    Whenever the deposit liabilities of an insured bank or insured 
branch of a foreign bank are assumed by another insured bank (whether by 
merger, consolidation, or other statutory assumption, or by contract), 
the assuming or resulting bank shall certify to the FDIC that it has 
agreed to assume the deposit liabilities of the bank whose deposits were 
assumed. The certification shall be made within 30 days after the 
assumption takes effect and shall state the date the assumption took 
effect. This certification shall be considered satisfactory evidence of 
the assumption.
[48 FR 24031, May 31, 1983]



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

    Any insured bank or insured branch of a foreign bank whose insured 
status is voluntarily terminated, but whose deposit liabilities are not 
assumed shall give notice to each of its depositors of the date of the 
termination of its insured status under the Federal Deposit Insurance 
Act. The notice to depositors shall be given in a form, in a manner and 
at a time approved by the appropriate FDIC Regional Director. The FDIC 
may require the bank to take other steps that it considers necessary for 
the protection of depositors.
[48 FR 24031, May 31, 1983]



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




           Subpart A--Uniform Rules of Practice and Procedure

Sec.
308.1  Scope.
308.2  Rules of construction.
308.3  Definitions.
308.4  Authority of Board of Directors.
308.5  Authority of the administrative law judge.
308.6  Appearance and practice in adjudicatory proceedings.
308.7  Good faith certification.
308.8  Conflicts of interest.
308.9  Ex parte communications.
308.10  Filing of papers.
308.11  Service of papers.
308.12  Construction of time limits.
308.13  Change of time limits.
308.14  Witness fees and expenses.
308.15  Opportunity for informal settlement.
308.16  FDIC's right to conduct examination.
308.17  Collateral attacks on adjudicatory proceeding.

[[Page 55]]

308.18  Commencement of proceeding and contents of notice.
308.19  Answer.
308.20  Amended pleadings.
308.21  Failure to appear.
308.22  Consolidation and severance of actions.
308.23  Motions.
308.24  Scope of document discovery.
308.25  Request for document discovery from parties.
308.26  Document subpoenas to nonparties.
308.27  Deposition of witness unavailable for hearing.
308.28  Interlocutory review.
308.29  Summary disposition.
308.30  Partial summary disposition.
308.31  Scheduling and prehearing conferences.
308.32  Prehearing submissions.
308.33  Public hearings.
308.34  Hearing subpoenas.
308.35  Conduct of hearings.
308.36  Evidence.
308.37  Post-hearing filings.
308.38  Recommended decision and filing of record.
308.39  Exceptions to recommended decision.
308.40  Review by Board of Directors.
308.41  Stays pending judicial review.

                  Subpart B--General Rules of Procedure

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

  Subpart C--Rules of Practice Before the FDIC and Standards of Conduct

308.108  Sanctions.
308.109  Suspension and disbarment.

 Subpart D--Rules and Procedures Applicable to Proceedings Relating to 
                  Disapproval of Acquisition of Control

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

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

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

     Subpart F--Rules and Procedures Applicable to Proceedings for 
                Involuntary Termination of Insured Status

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

 Subpart G--Rules and Procedures Applicable to Proceedings Relating to 
                         Cease-and-Desist Orders

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

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

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

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

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

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

308.138  Scope.
308.139  Application for exemption.
308.140  Newspaper notice.

[[Page 56]]

308.141  Notice of hearing.
308.142  Hearing.
308.143  Decision of Board of Directors.

 Subpart K--Procedures Applicable to Investigations Pursuant to Section 
                            10(c) of the FDIA

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

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

308.151  Scope.
308.152  Grounds for disapproval of notice.
308.153  Procedures where notice of disapproval issues pursuant to 
          Sec. 303.14 of this chapter.
308.154  Decision on review.
308.155  Hearing.

    Subpart M--Procedures and Standards Applicable to an Application 
                   Pursuant to Section 19 of the FDIA

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

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

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

   Subpart O--Liability of Commonly Controlled Depository Institutions

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

  Subpart P--Rules and Procedures Relating to the Recovery of Attorney 
                         Fees and Other Expenses

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

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

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

  Subpart R--Submission and Review of Safety and Soundness Compliance 
      Plans and Issuance of Orders To Correct Safety and Soundness 
                              Deficiencies

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

Subpart S--Applications for a Stay or Review of Actions of Bank Clearing 
                                Agencies

308.400  Scope.
308.401  Applications for stays of disciplinary sanctions or summary 
          suspensions by a bank clearing agency.
308.402  Applications for review of final disciplinary sanctions, 
          denials of participation, or prohibitions or limitations of 
          access to services imposed by bank clearing agencies.
    Authority:  5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 1817, 
1818, 1820, 1828, 1829, 1829b, 1831o, 1832(c), 1884(b), 1972, 3102, 
3108(a), 3349, 3909, 4717; 15 U.S.C. 78 (h) and (i), 78o-4(c), 78o-5, 
78q-1, 78s, 78u, 78u-2, 78u-3, and 78w; 28 U.S.C. 2461 note; 31 U.S.C. 
330, 5321; 42 U.S.C.

[[Page 57]]

4012a; sec. 31001(s), Pub. L. 104-134, 110 Stat. 1321-358.
    Source:  56 FR 37975, Aug. 9, 1991, unless otherwise noted.



           Subpart A--Uniform Rules of Practice and Procedure



Sec. 308.1  Scope.

    This subpart prescribes rules of practice and procedure applicable 
to adjudicatory proceedings as to which hearings on the record are 
provided for by the following statutory provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (``FDIA'') (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Federal Deposit 
Insurance Corporation (``FDIC''), should issue an order to approve or 
disapprove a person's proposed acquisition of an institution and/or 
institution holding company;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (``Exchange Act'') (15 U.S.C. 78o-5), to impose sanctions 
upon any government securities broker or dealer or upon any person 
associated or seeking to become associated with a government securities 
broker or dealer for which the FDIC is the appropriate regulatory 
agency;
    (e) Assessment of civil money penalties by the FDIC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate regulatory agency for any violation of:
    (1) Sections 22(h) and 23 of the Federal Reserve Act (``FRA''), or 
any regulation issued thereunder, and certain unsafe or unsound 
practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 1828(j);
    (2) Section 106(b) of the Bank Holding Company Act Amendments of 
1970 (``BHCA Amendments of 1970''), and certain unsafe or unsound 
practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 
1972(2)(F);
    (3) Any provision of the Change in Bank Control Act of 1978, as 
amended (the ``CBCA''), or any regulation or order issued thereunder, 
and certain unsafe or unsound practices, or breaches of fiduciary duty, 
pursuant to 12 U.S.C. 1817(j)(16);
    (4) Section 7(a)(1) of the FDIA, pursuant to 12 U.S.C. 1817(a)(1);
    (5) Any provision of the International Lending Supervision Act of 
1983 (``ILSA''), or any rule, regulation or order issued thereunder, 
pursuant to 12 U.S.C. 3909;
    (6) Any provision of the International Banking Act of 1978 
(``IBA''), or any rule, regulation or order issued thereunder, pursuant 
to 12 U.S.C. 3108;
    (7) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (8) Section 1120 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (9) The terms of any final or temporary order issued under section 8 
of the FDIA or of any written agreement executed by the FDIC, the terms 
of any condition imposed in writing by the FDIC in connection with the 
grant of an application or request, certain unsafe or unsound practices 
or breaches of fiduciary duty, or any law or regulation not otherwise 
provided herein pursuant to 12 U.S.C. 1818(i)(2);
    (10) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (11) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g)); and
    (g) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.2  Rules of construction.

    For purposes of this subpart:
    (a) Any term in the singular includes the plural, and the plural 
includes the

[[Page 58]]

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



Sec. 308.3  Definitions.

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

[[Page 59]]

an institution as defined in paragraph (j) of this section.
    (p) Respondent means any party other than the FDIC.
    (q) Uniform Rules means those rules in subpart A of this part that 
pertain to the types of formal administrative enforcement actions set 
forth at Sec. 308.01 and as specified in subparts B through P of this 
part.
    (r) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.



Sec. 308.4  Authority of Board of Directors.

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



Sec. 308.5  Authority of the administrative law judge.

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



Sec. 308.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the FDIC or an administrative law judge--(1) 
By attorneys. Any member in good standing of the bar of the highest 
court of any state, commonwealth, possession, territory of the United 
States, or the District of Columbia may represent others before the FDIC 
if such attorney is not currently suspended or debarred from practice 
before the FDIC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer; director, 
or employee is not currently suspended or debarred from practice before 
the FDIC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the FDIC, shall file a notice of appearance with 
OFIA at or before the time that individual submits papers or otherwise 
appears on behalf of a party in the adjudicatory proceeding. The notice 
of appearance must include a written declaration that the individual is 
currently qualified as provided in paragraph (a)(1) or (a)(2) of

[[Page 60]]

this section and is authorized to represent the particular party. By 
filing a notice of appearance on behalf of a party in an adjudicatory 
proceeding, the counsel agrees and represents that he or she is 
authorized to accept service on behalf of the represented party and 
that, in the event of withdrawal from representation, he or she will, if 
required by the administrative law judge, continue to accept service 
until new counsel has filed a notice of appearance or until the 
represented party indicates that he or she will proceed on a pro se 
basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.7  Good faith certification.

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



Sec. 308.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec. 308.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]

[[Page 61]]



Sec. 308.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the FDIC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Board of Directors, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the FDIC until the date that the Board of Directors issues 
its final decision pursuant to Sec. 308.40(c):
    (1) No interested person outside the FDIC shall make or knowingly 
cause to be made an ex parte communication to any member of the Board of 
Directors, the administrative law judge, or a decisional employee; and
    (2) No member of the Board of Directors, no administrative law 
judge, or decisional employee shall make or knowingly cause to be made 
to any interested person outside the FDIC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, any 
member of the Board of Directors or other person identified in paragraph 
(a) of this section, that person shall cause all such written 
communications (or, if the communication is oral, a memorandum stating 
the substance of the communication) to be placed on the record of the 
proceeding and served on all parties. All other parties to the 
proceeding shall have an opportunity, within ten days of receipt of 
service of the ex parte communication, to file responses thereto and to 
recommend any sanctions that they believe to be appropriate under the 
circumstances. The administrative law judge or the Board of Directors 
shall then determine whether any action should be taken concerning the 
ex parte communication in accordance with paragraph (d) of this section.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Board of Directors or the 
administrative law judge including, but not limited to, exclusion from 
the proceedings and an adverse ruling on the issue which is the subject 
of the prohibited communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the FDIC in a case may 
not, in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec. 308.40 except as witness or counsel in public 
proceedings.
[56 FR 37975, Aug. 9, 1991, as amended at 60 FR 24762, May 10, 1995]



Sec. 308.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Secs. 308.25 and 
308.26, shall be filed with the OFIA, except as otherwise provided.
    (b) Manner of filing. Unless otherwise specified by the Board of 
Directors or the administrative law judge, filing may be accomplished 
by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the Board of Directors or the 
administrative law judge. All papers filed by electronic media shall 
also concurrently be filed in accordance with paragraph (c) of this 
section.

[[Page 62]]

    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\ x 11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 308.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the FDIC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Board of 
Directors, or the administrative law judge, an original and one copy of 
all documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.



Sec. 308.11  Service of papers.

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

[[Page 63]]

service is made on a foreign bank in connection with an action or 
proceeding involving one or more of its branches or agencies located in 
any state, territory, possession of the United States, or the District 
of Columbia, service shall be made on at least one branch or agency so 
involved.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in paragraph (c) of this section, intermediate 
Saturdays, Sundays, and Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b) (1) of this section may be modified by the Board of Directors or 
administrative law judge in the case of filing or by agreement of the 
parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Board of Directors or the administrative law judge in the case of 
filing, or by agreement among the parties in the case of service.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.13  Change of time limits.

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



Sec. 308.14  Witness fees and expenses.

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

[[Page 64]]



Sec. 308.15  Opportunity for informal settlement.

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



Sec. 308.16  FDIC's right to conduct examination.

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



Sec. 308.17  Collateral attacks on adjudicatory proceeding.

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



Sec. 308.18  Commencement of proceeding and contents of notice.

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



Sec. 308.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding. A respondent is not required to respond to 
the portion of a notice that constitutes the prayer for relief or 
proposed order. The answer must set forth affirmative defenses, if any, 
asserted by the respondent.

[[Page 65]]

    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the Board of 
Directors a recommended decision containing the findings and the relief 
sought in the notice. Any final order issued by the Board of Directors 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.



Sec. 308.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Board of Directors or 
administrative law judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge that the admission 
of such evidence would unfairly prejudice that party's action or defense 
upon the merits. The administrative law judge may grant a continuance to 
enable the objecting party to meet such evidence.
[61 FR 20348, May 6, 1996]



Sec. 308.21  Failure to appear.

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



Sec. 308.22  Consolidation and severance of actions.

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



Sec. 308.23  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.

[[Page 66]]

    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, except that following the filing of the recommended decision, 
motions must be filed with the Executive Secretary for disposition by 
the Board of Directors.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Executive Secretary, any party may file a written response to a motion. 
The administrative law judge shall not rule on any oral or written 
motion before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Secs. 308.29 and 308.30.



Sec. 308.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic form, 
and other data compilations from which information can be obtained, or 
translated, if necessary, by the parties through detection devices into 
reasonably usable form, as well as written material of all kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec. 308.25.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative-process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing. No exceptions to this 
time limit shall be permitted, unless the administrative law judge finds 
on the record that good cause exists for waiving the requirements of 
this paragraph.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]

[[Page 67]]



Sec. 308.25  Request for document discovery from parties.

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

[[Page 68]]

justice may require. The pendency of a motion to strike or limit 
discovery or to compel production is not a basis for staying or 
continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative law 
judge against a party who fails to produce subpoenaed documents.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.26  Document subpoenas to nonparties.

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

[[Page 69]]



Sec. 308.27  Deposition of witness unavailable for hearing.

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

[[Page 70]]

under paragraph (b) or (c)(3) of this section, the subpoenaing party or 
other aggrieved party may, to the extent authorized by applicable law, 
apply to an appropriate United States district court for an order 
requiring compliance with the portions of the subpoena that the 
administrative law judge has ordered enforced. A party's right to seek 
court enforcement of a deposition subpoena in no way limits the 
sanctions that may be imposed by the administrative law judge on a party 
who fails to comply with, or procures a failure to comply with, a 
subpoena issued under this section.



Sec. 308.28  Interlocutory review.

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



Sec. 308.29  Summary disposition.

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

[[Page 71]]

contention that summary disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the Board of Directors. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.



Sec. 308.30  Partial summary disposition.

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



Sec. 308.31  Scheduling and prehearing conferences.

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



Sec. 308.32  Prehearing submissions.

    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and

[[Page 72]]

    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec. 308.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the FDIC, in its discretion, determines that holding an open hearing 
would be contrary to the public interest. Within 20 days of service of 
the notice or, in the case of change-in-control proceedings under 
section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), within 20 days from 
service of the hearing order, any respondent may file with the Executive 
Secretary a request for a private hearing, and any party may file a 
reply to such a request. A party must serve on the administrative law 
judge a copy of any request or reply the party files with the Executive 
Secretary. The form of, and procedure for, these requests and replies 
are governed by Sec. 308.23. A party's failure to file a request or a 
reply constitutes a waiver of any objections regarding whether the 
hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.34  Hearing subpoenas.

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

[[Page 73]]

enforcement of the subpoena pursuant to Sec. 308.26(c).
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.35  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree the administrative 
law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously agreed upon by 
the parties, and all documents, the admissibility of which have been 
previously stipulated, will be admitted into evidence upon commencement 
of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.36  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or Board of Directors shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by an appropriate Federal financial 
institution regulatory agency or state regulatory agency, is admissible 
either with or without a sponsoring witness.

[[Page 74]]

    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness, either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Board of Directors.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing, and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing, provided that if a witness refused to answer proper questions 
during the depositions, the administrative law judge may, on that basis, 
limit the admissibility of the deposition in any manner that justice 
requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec. 308.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party, that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply

[[Page 75]]

briefs under Sec. 308.37(b), the administrative law judge shall file 
with and certify to the Executive Secretary, for decision, the record of 
the proceeding. The record must include the administrative law judge's 
recommended decision, recommended findings of fact, recommended 
conclusions of law, and proposed order; all prehearing and hearing 
transcripts, exhibits, and rulings; and the motions, briefs, memoranda, 
and other supporting papers filed in connection with the hearing. The 
administrative law judge shall serve upon each party the recommended 
decision, findings, conclusions, and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Executive Secretary for final 
determination the record of the proceeding, the administrative law judge 
shall furnish to the Executive Secretary a certified index of the entire 
record of the proceeding. The certified index shall include, at a 
minimum, an entry for each paper, document or motion filed with the 
administrative law judge in the proceeding, the date of the filing, and 
the identity of the filer. The certified index shall also include an 
exhibit index containing, at a minimum, an entry consisting of exhibit 
number and title or description for: Each exhibit introduced and 
admitted into evidence at the hearing; each exhibit introduced but not 
admitted into evidence at the hearing; each exhibit introduced and 
admitted into evidence after the completion of the hearing; and each 
exhibit introduced but not admitted into evidence after the completion 
of the hearing.
[61 FR 20350, May 6, 1996]



Sec. 308.39  Exceptions to recommended decision.

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



Sec. 308.40  Review by Board of Directors.

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

[[Page 76]]

Board of Directors must be on the record.
    (c) Final decision. (1) Decisional employees may advise and assist 
the Board of Directors in the consideration and disposition of the case. 
The final decision of the Board of Directors will be based upon review 
of the entire record of the proceeding, except that the Board of 
Directors may limit the issues to be reviewed to those findings and 
conclusions to which opposing arguments or exceptions have been filed by 
the parties.
    (2) The Board of Directors shall render a final decision within 90 
days after notification of the parties that the case has been submitted 
for final decision, or 90 days after oral argument, whichever is later, 
unless the Board of Directors orders that the action or any aspect 
thereof be remanded to the administrative law judge for further 
proceedings. Copies of the final decision and order of the Board of 
Directors shall be served upon each party to the proceeding, upon other 
persons required by statute, and, if directed by the Board of Directors 
or required by statute, upon any appropriate state or Federal 
supervisory authority.



Sec. 308.41  Stays pending judicial review.

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



                  Subpart B--General Rules of Procedure



Sec. 308.101  Scope of Local Rules.

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



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

    (a) The Board of Directors. (1) The Board of Directors may, at any 
time during the pendency of a proceeding, perform, direct the 
performance of, or waive performance of, any act which could be done or 
ordered by the Executive Secretary.
    (2) Nothing contained in this part 308 shall be construed to limit 
the power of the Board of Directors granted by applicable statutes or 
regulations.
    (b) The Executive Secretary. When no administrative law judge has 
jurisdiction over a proceeding, the Executive Secretary may act in place 
of, and with the same authority as, an administrative law judge, except 
that the Executive Secretary may not hear a case on the merits or make a 
recommended decision on the merits to the Board of Directors.



Sec. 308.103  Appointment of administrative law judge.

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



Sec. 308.104  Filings with the Board of Directors.

    (a) General rule. All materials required to be filed with or 
referred to the Board of Directors in any proceedings under this part 
308 shall be filed with the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

[[Page 77]]

    (b) Scope. Filings to be made with the Executive Secretary include 
pleadings and motions filed during the proceeding; the record filed by 
the administrative law judge after the issuance of a recommended 
decision; the recommended decision filed by the administrative law judge 
following a motion for summary disposition; referrals by the 
administrative law judge of motions for interlocutory review; motions 
and responses to motions filed by the parties after the record has been 
certified to the Board of Directors; exceptions and requests for oral 
argument; and any other papers required to be filed with the Board of 
Directors under this part 308.



Sec. 308.105  Custodian of the record.

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



Sec. 308.106  Written testimony in lieu of oral hearing.

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



Sec. 308.107  Document discovery.

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

[[Page 78]]

made an adequate search for, and has produced, all subpoenaed documents.



  Subpart C--Rules of Practice Before the FDIC and Standards of Conduct



Sec. 308.108  Sanctions.

    (a) General rule. Appropriate sanctions may be imposed when any 
counsel or party has acted, or failed to act, in a manner required by 
applicable statute, regulations, or order, and that act or failure to 
act:
    (1) Constitutes contemptuous conduct;
    (2) Has in a material way injured or prejudiced some other party in 
terms of substantive injury, incurring additional expenses including 
attorney's fees, prejudicial delay, or otherwise;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Has unduly delayed the proceeding.
    (b) Sanctions. Sanctions which may be imposed include any one or 
more of the following:
    (1) Issuing an order against the party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just; and
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Limits on dismissal as a sanction. No recommendation of 
dismissal shall be made by the administrative law judge or granted by 
the Board of Directors based on the failure to hold a hearing within the 
time period called for in this part 308, or on the failure of an 
administrative law judge to render a recommended decision within the 
time period called for in this part 308, absent a finding:
    (1) That the delay resulted solely or principally from the conduct 
of the FDIC enforcement counsel;
    (2) That the conduct of the FDIC enforcement counsel is unexcused;
    (3) That the moving respondent took all reasonable steps to oppose 
and prevent the subject delay;
    (4) That the moving respondent has been materially prejudiced or 
injured; and
    (5) That no lesser or different sanction is adequate.
    (d) Procedure for imposition of sanctions. (1) The administrative 
law judge, upon the request of any party, or on his or her own motion, 
may impose sanctions in accordance with this section, provided that the 
administrative law judge may only recommend to the Board of Directors 
the sanction of entering a final order determining the case on the 
merits.
    (2) No sanction, other than refusing to accept late papers, 
authorized by this section shall be imposed without prior notice to all 
parties and an opportunity for any counsel or party against whom 
sanctions would be imposed to be heard. Such opportunity to be heard may 
be on such notice, and the response may be in such form, as the 
administrative law judge directs. The opportunity to be heard may be 
limited to an opportunity to respond orally immediately after the act or 
inaction covered by this section is noted by the administrative law 
judge.
    (3) Requests for the imposition of sanctions by any party, and the 
imposition of sanctions, shall be treated for interlocutory review 
purposes in the same manner as any other ruling by the administrative 
law judge.
    (4) Section not exclusive. Nothing in this section shall be read as 
precluding the administrative law judge or the Board of Directors from 
taking any other action, or imposing any restriction or sanction, 
authorized by applicable statute or regulation.



Sec. 308.109  Suspension and disbarment.

    (a) Discretionary suspension and disbarment. (1) The Board of 
Directors may suspend or revoke the privilege of any counsel to appear 
or practice before the FDIC if, after notice of and opportunity for 
hearing in the matter,

[[Page 79]]

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

[[Page 80]]

any proceeding to terminate an existing suspension or disbarment by the 
FDIC be limited to written submissions.
    (d) Summary suspension for contemptuous conduct. A finding by the 
administrative law judge of contemptuous conduct during the course of 
any proceeding shall be grounds for summary suspension by the 
administrative law judge of a counsel or other representative from any 
further participation in that proceeding for the duration of that 
proceeding.
    (e) Practice defined. Unless the Board of Directors orders 
otherwise, for the purposes of this section, practicing before the FDIC 
includes, but is not limited to, transacting any business with the FDIC 
as counsel or agent for any other person and the preparation of any 
statement, opinion, or other paper by a counsel, which statement, 
opinion, or paper is filed with the FDIC in any registration statement, 
notification, application, report, or other document, with the consent 
of such counsel.



 Subpart D--Rules and Procedures Applicable to Proceedings Relating to 
                  Disapproval of Acquisition of Control



Sec. 308.110  Scope.

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



Sec. 308.111  Grounds for disapproval.

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



Sec. 308.112  Notice of disapproval.

    (a) General rule. (1) Within three days of the decision by the Board 
of Directors or its designee to disapprove a proposed acquisition of 
control of an insured nonmember bank, a written notice of disapproval 
shall be mailed by first class mail to, or otherwise served upon, the 
party seeking acquire control.
    (2) The notice of disapproval shall:
    (i) Contain a statement of the basis for the disapproval; and
    (ii) Indicate that a hearing may be requested by filing a written 
request with the Executive Secretary within ten days after service of 
the notice of disapproval; and if a hearing is requested, that an answer 
to the notice of disapproval, as required by Sec. 308.113, must be filed 
within 20 days after service of the notice of disapproval.
    (b) Waiver of hearing. Failure to request a hearing pursuant to this 
section shall constitute a waiver of the

[[Page 81]]

opportunity for a hearing and the notice of disapproval shall constitute 
a final and unappealable order.
    (c) Section 308.18(b) of the Uniform Rules shall not apply to the 
content of the Notice of Disapproval.



Sec. 308.113  Answer to notice of disapproval.

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



Sec. 308.114  Burden of proof.

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



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



Sec. 308.115  Scope.

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



Sec. 308.116  Assessment of penalties.

    (a) In general. The civil money penalty shall be assessed upon the 
service of a Notice of Assessment which shall become final and 
unappealable unless the respondent requests a hearing pursuant to 
Sec. 308.19(c)(2).
    (b) Amount. (1) Any person who violates any provision of the Change 
in Bank Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto, shall forfeit and pay a civil money penalty of not 
more than $5,000 for each day the violation continues.
    (2) Any person who violates any provision of the Change in Bank 
Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto; or recklessly engages in any unsafe or unsound 
practice in conducting the affairs of a depository institution; or 
breaches any fiduciary duty; which violation, practice or breach is part 
of a pattern of misconduct; or causes or is likely to cause more than a 
minimal loss to such institution; or results in pecuniary gain or other 
benefit to such person, shall forfeit and pay a civil money penalty of 
not more than $25,000 for each day such violation, practice or breach 
continues.
    (3) Any person who knowingly violates any provision of the Change in

[[Page 82]]

Bank Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto; or engages in any unsafe or unsound practice in 
conducting the affairs of a depository institution; or breaches any 
fiduciary duty; and knowingly or recklessly causes a substantial loss to 
such institution or a substantial pecuniary gain or other benefit to 
such institution or a substantial pecuniary gain or other benefit to 
such person by reason of such violation, practice or breach, shall 
forfeit and pay a civil money penalty not to exceed:
    (i) In the case of a person other than a depository institution--
$1,000,000 per day for each day the violation, practice or breach 
continues; or
    (ii) In the case of a depository institution--an amount not to 
exceed the lesser of $1,000,000 or one percent of the total assets of 
such institution for each day the violation, practice or breach 
continues.
    (4) Adjustment of civil money penalties by the rate of inflation 
pursuant to section 31001(s) of the Debt Collection Improvement Act. 
After November 12, 1996:
    (i) Any person who engages in a violation as set forth in paragraph 
(b)(1) of this section shall forfeit and pay a civil money penalty of 
not more than $5,500 for each day the violation continues.
    (ii) Any person who engages in a violation, unsafe or unsound 
practice or breach of fiduciary duty, as set forth in paragraph (b)(2) 
of this section, shall forfeit and pay a civil money penalty of not more 
than $27,500 for each day such violation, practice or breach continues.
    (iii) Any person who knowingly engages in a violation, unsafe or 
unsound practice or breach of fiduciary duty, as set forth in paragraph 
(b)(3) of this section, shall forfeit and pay a civil money penalty not 
to exceed:
    (A) In the case of a person other than a depository institution--
$1,100,000 per day for each day the violation, practice or breach 
continues; or
    (B) In the case of a depository institution--an amount not to exceed 
the lesser of $1,100,000 or one percent of the total assets of such 
institution for each day the violation, practice or breach continues.
    (c) Mitigating factors. In assessing the amount of the penalty, the 
Board of Directors or its designee shall consider the gravity of the 
violation, the history of previous violations, respondent's financial 
resources, good faith, and any other matters as justice may require.
    (d) Failure to answer. Failure of a respondent to file an answer 
required by this section within the time provided constitutes a waiver 
of his or her right to appear and contest the allegations in the notice 
of disapproval. If no timely answer is filed, Enforcement Counsel may 
file a motion for entry of an order of default. Upon a finding that no 
good cause has been shown for the failure to file a timely answer, the 
administrative law judge shall file a recommended decision containing 
the findings and relief sought in the notice. A final order issued by 
the Board of Directors based upon a respondent's failure to answer is 
deemed to be an order issued upon consent.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 57990, Nov. 12, 1996]



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

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



Sec. 308.118  Collection of penalties.

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

[[Page 83]]



     Subpart F--Rules and Procedures Applicable to Proceedings for 
                Involuntary Termination of Insured Status



Sec. 308.119  Scope.

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



Sec. 308.120  Grounds for termination of insurance.

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



Sec. 308.121  Notification to primary regulator.

    (a) Service of notification. (1) Upon a determination by the Board 
of Directors or its designee pursuant to Sec. 308.120 of an unsafe or 
unsound practice or condition or of a violation, a notification shall be 
served upon the appropriate Federal banking agency of the insured 
depository institution, or the State banking supervisor if the FDIC is 
the appropriate Federal banking agency.
The notification shall be served not less than 30 days before the Notice 
of Intent to Terminate Insured Status required by section 8(a)(2)(B) of 
the FDIA (12 U.S.C. 1818(a)(2)(B)), and Sec. 308.122, except that this 
period for notification may be reduced or eliminated with the agreement 
of the appropriate Federal banking agency.

[[Page 84]]

    (2) Appropriate Federal banking agency shall have the meaning given 
that term in section 3(q) of the FDIA (12 U.S.C. 1813(q)), and shall be 
the OCC in the case of a national bank, a District bank or an insured 
Federal branch of a foreign bank; the FDIC in the case of an insured 
nonmember bank, including an insured State branch of a foreign bank; the 
Board of Governors in the case of a state member bank; or the OTS in the 
case of an insured Federal or state savings association.
    (3) In the case of a state nonmember bank, insured Federal branch of 
a foreign bank, or state member bank, in addition to service of the 
notification upon the appropriate Federal banking agency, a copy of the 
notification shall be sent to the appropriate State banking supervisor.
    (4) In instances in which a Temporary Order Suspending Insurance is 
issued pursuant to section 8(a)(8) of the FDIA (12 U.S.C. 1818(a)(8)), 
the notification may be served concurrently with such order.
    (b) Contents of notification. The notification shall contain the 
FDIC's determination, and the facts and circumstances upon which such 
determination is based, for the purpose of securing correction of such 
practice, condition, or violation.



Sec. 308.122  Notice of intent to terminate.

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



Sec. 308.123  Notice to depositors.

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

                                 Notice

    (Date)__________.
    1. The status of the __________, as an (insured depository 
institution) (insured branch) under the provisions of the Federal 
Deposit Insurance Act, will terminate as of the close of business on the 
________ day of____________, 19____.
    2. Any deposits made by you after that date, either new deposits or 
additions to existing deposits, will not be insured by the Federal 
Deposit Insurance Corporation.
    3. Insured deposits in the (depository institution) (branch) on the 
________ day of____________, 19____, will continue to be insured, as 
provided by Federal Deposit Insurance Act, for 2 years after the close 
of business on the ________ day of ____________, 19____. Provided, 
however, that any withdrawals after the close of business on the 
________ day of ____________, 19____, will reduce the insurance coverage 
by the amount of such withdrawals.
 _______________________________________________________________________
(Name of (depository institution or branch)
 _______________________________________________________________________
(Address)
The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



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

    (a) Notice to show cause. When the Board of Directors or its 
designee has evidence that an insured depository institution is not 
engaged in the business

[[Page 85]]

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

                                 Notice

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

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



Sec. 308.125  Temporary suspension of deposit insurance.

    (a) If, while an action is pending under section 8(a)(2) of the FDIA 
(12 U.S.C. 1818(a)(2)), the Board of Directors, after consultation with 
the appropriate Federal banking agency, finds that an insured depository 
institution (other than a special supervisory association to which 
Sec. 308.126 of this subpart applies) has no tangible capital under the 
capital guidelines or regulations of the appropriate Federal banking 
agency, the Board of Directors may issue a Temporary Order Suspending 
Deposit Insurance, pending completion of the proceedings under section 
8(a)(2) of the FDIA (12 U.S.C. 1818(a)(2)).
    (b) The temporary order shall be served upon the insured institution 
and a copy sent to the appropriate Federal banking agency and to the 
appropriate State banking supervisor.
    (c) The temporary order shall become effective ten days from the 
date of service upon the insured depository institution. Unless set 
aside, limited, or suspended in proceedings under section 8(a)(8)(D) of 
the FDIA (12 U.S.C. 1818 (a)(8)(D)), the temporary order shall remain 
effective and enforceable until an order terminating the insured status 
of the institution is entered by the Board of Directors and becomes 
final, or the Board of Directors dismisses the proceedings.
    (d) Notification to depositors of suspension of insured status. 
Within the time specified by the Board of Directors and prior to the 
suspension of insured status, the depository institution shall mail a 
notification of suspension of insured status to each depositor at the 
depositor's last address of record on the books of the depository 
institution. The depository institution shall also publish the 
notification in two issues of a local newspaper of general circulation 
and shall furnish the FDIC with

[[Page 86]]

proof of such publications. The notification to depositors shall include 
information provided in substantially the following form:

                                 Notice

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

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



Sec. 308.126  Special supervisory associations.

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



 Subpart G--Rules and Procedures Applicable to Proceedings Relating to 
                         Cease-and-Desist Orders



Sec. 308.127  Scope.

    (a) Cease-and-desist proceedings under section 8 of the FDIA. The 
rules and procedures of this subpart, subpart B of the Local Rules and 
the Uniform Rules shall apply to proceedings to order an insured 
nonmember bank or an institution-affiliated party to cease and desist 
from practices and violations described in section 8(b) of the FDIA, 12 
U.S.C. 1818(b); provided that the provisions of the Uniform Rules and 
subpart B of the Local Rules shall not apply to the issuance of 
temporary cease-and-desist orders pursuant to section 8(c) of the FDIA 
(12 U.S.C. 1818(c)).
    (b) Proceedings under the Securities Exchange Act of 1934. (1) The 
rules and procedures of this subpart, subpart B of the Local Rules and 
the Uniform Rules shall apply to proceedings by the Board of Directors 
to order a municipal securities dealer to cease and desist from any 
violation of law or regulation specified in section 15B(c)(5) of the 
Securities Exchange Act, as amended (15 U.S.C. 78o-4(c)(5)) where the 
municipal securities dealer is an insured nonmember bank or a subsidiary 
thereof.
    (2) The rules and procedures of this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings by the Board of 
Directors to order a clearing agency or transfer agent to cease and 
desist from failure to comply with the applicable provisions of section 
17, 17A and 19 of the Securities Exchange Act of 1934, as amended (15 
U.S.C. 78q, 78q-l, 78s), and the applicable rules and regulations 
thereunder, where the clearing agency or transfer agent is an insured 
nonmember bank or a subsidiary thereof.

[[Page 87]]



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

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



Sec. 308.129  Notice to state supervisory authority.

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



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

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



Sec. 308.131  Temporary cease-and-desist order.

    (a) Issuance. (1) When the Board of Directors or its designee 
determines that the violation, or the unsafe or unsound practice, as 
specified in the notice, or the continuation thereof, is likely to cause 
insolvency or significant dissipation of assets or earnings of the bank, 
or is likely to weaken the condition of the bank or otherwise prejudice 
the interests of its depositors prior to the completion of the 
proceedings under section 8(b) of the FDIA (12 U.S.C. 1818(b)) and 
Sec. 308.128 of this subpart, the Board of Directors or its designee may 
issue a temporary order requiring the bank or an institution-affiliated 
party to immediately cease and desist from any such violation, practice 
or to take affirmative action to prevent such insolvency, dissipation, 
condition or prejudice pending completion of the proceedings under 
section 8(b) of the FDIA (12 U.S.C. 1818(b)).
    (2) When the Board of Directors or its designee issues a Notice of 
charges pursuant to 12 U.S.C. 1818(b)(1) which specifies on the basis of 
particular facts and circumstances that a bank's books and records are 
so incomplete or inaccurate that the FDIC is unable, through the normal 
supervisory process, to determine the financial condition of the bank or 
the details or purpose of any transaction or transactions that may have 
a material effect on the

[[Page 88]]

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



 Subpart H--Rules and Procedures Applicable to Proceedings Relating to 
  Assessment and Collection of Civil Money Penalties for Violation of 

Cease-and-Desist Orders and of Certain Federal Statutes, Including Call 
Report Penalties



Sec. 308.132  Assessment of penalties.

    (a) Scope. The rules and procedures of this subpart, subpart B of 
the Local Rules, and the Uniform Rules shall apply to proceedings to 
assess and collect civil money penalties, including civil money 
penalties for violation of section 7(a) of the FDIA (12 U.S.C. 1817(a)).
    (b) Relevant considerations. In determining the amount of the civil 
penalty to be assessed, the Board of Directors or its designee shall 
consider the financial resources and good faith of the bank or official, 
the gravity of the violation, the history of previous violations, and 
any such other matters as justice may require.
    (c) Amount. (1) The Board of Directors or its designee may assess 
civil money penalties pursuant to section 8(i) of the FDIA (12 U.S.C. 
1818(i)), and Sec. 308.01(e)(1) of the Uniform Rules.
    (2) The Board of Directors or its designee may assess civil money 
penalties pursuant to section 7(a) of the FDIA (12 U.S.C. 1817(a)) as 
follows:
    (i) Late filing--Tier One penalties. In cases in which a bank fails 
to make or publish its Report of Condition and Income (Call Report) 
within the appropriate time periods, a civil money penalty of not more 
than $2,000 per day may be assessed where the bank maintains procedures 
in place reasonably adapted to avoid inadvertent error and the late 
filing occurred unintentionally and as a result of such error; or the 
bank inadvertently transmitted a Call Report which is minimally late.
    (A) First offense. Generally, in such cases, the amount assessed 
shall be $300 per day for each of the first 15 days for which the 
failure continues, and $600 per day for each subsequent day the failure 
continues, beginning on the sixteenth day. For banks with less than 
$25,000,000 in assets, the amount assessed shall be the greater of $100 
per day or \1/1000\th of the bank's total assets (\1/10\th of a basis 
point) for each of the first 15 days for which the failure continues, 
and $200 or \1/500\th of the bank's total assets, \1/5\ of a basis 
point) for each subsequent day the failure continues, beginning on the 
sixteenth day.
    (B) Second offense. Where the bank has been delinquent in making or 
publishing its Call Report within the preceding five quarters, the 
amount assessed for the most current failure shall generally be $500 per 
day for each of the first 15 days for which the failure continues, and 
$1,000 per day for each

[[Page 89]]

subsequent day the failure continues, beginning on the sixteenth day. 
For banks with less than $25,000,000 in assets, those amounts, 
respectively, shall be \1/500\th of the bank's total assets and \1/
250\th of the bank's total assets.
    (C) Mitigating factors. The amounts set forth in paragraph 
(c)(2)(i)(A) of this section may be reduced based upon the factors set 
forth in paragraph (b) of this section.
    (D) Lengthy or repeated violations. The amounts set forth in this 
paragraph (c)(2)(i) will be assessed on a case-by-case basis where the 
amount of time of the bank's delinquency is lengthy or the bank has been 
delinquent repeatedly in making or publishing its Call Reports.
    (E) Waiver. Absent extraordinary circumstances outside the control 
of the bank, penalties assessed for late filing shall not be waived.
    (ii) Late filing--Tier Two penalties. Where a bank fails to make or 
publish its Call Report within the appropriate time period, the Board of 
Directors or its designee may assess a civil money penalty of not more 
than $20,000 per day for each day the failure continues. Pursuant to the 
Debt Collection Improvement Act of 1996, for violations which occur 
after November 12, 1996, the maximum Tier Two penalty amount will 
increase to $22,000 per day for each day the failure continues.
    (iii) False or misleading reports or information--(A) Tier One 
penalties. In cases in which a bank submits or publishes any false or 
misleading Call Report or information, the Board of Directors or its 
designee may assess a civil money penalty of not more than $2,000 per 
day for each day the information is not corrected, where the bank 
maintains procedures in place reasonably adapted to avoid inadvertent 
error and the violation occurred unintentionally and as a result of such 
error; or the bank inadvertently transmits a Call Report or information 
which is false or misleading.
    (B) Tier Two penalties. Where a bank submits or publishes any false 
or misleading Call Report or other information, the Board of Directors 
or its designee may assess a civil money penalty of not more than 
$20,000 per day for each day the information is not corrected. Pursuant 
to the Debt Collection Improvement Act of 1996, for violations which 
occur after November 12, 1996, the maximum Tier Two penalty amount will 
increase to $22,000 per day for each day the information is not 
corrected.
    (C) Tier Three penalties. Where a bank knowingly or with reckless 
disregard for the accuracy of any Call Report or information submits or 
publishes any false or misleading Call Report or other information, the 
Board of Directors or its designee may assess a civil money penalty of 
not more than the lesser of $1,000,000 or 1 percent of the bank's total 
assets per day for each day the information is not corrected. Pursuant 
to the Debt Collection Improvement Act of 1996, for violations which 
occur after November 12, 1996, the maximum Tier Three penalty amount 
will increase to the lesser of $1,100,000 per day or 1 percent of the 
bank's total assets per day for each day the information is not 
corrected.
    (D) Mitigating factors. The amounts set forth in this paragraph 
(c)(2) may be reduced based upon the factors set forth in paragraph (b) 
of this section.
    (3) Adjustment of civil money penalties by the rate of inflation 
pursuant to section 31001(s) of the Debt Collection Act. Pursuant to 
section 31001(s) of the Debt Collection Act, for violations which occur 
after November 12, 1996, the Board of Directors or its designee may 
assess civil money penalties in the maximum amounts as follows:
    (i) Civil money penalties assessed pursuant to section 8(i)(2) of 
the FDIA. Tier One civil money penalties may be assessed pursuant to 
section 8(i)(2)(A) of the FDIA (12 U.S.C. 1818(i)(2)(A)) in an amount 
not to exceed $5,500 for each day during which the violation continues. 
Tier Two civil money penalties may be assessed pursuant to section 
8(i)(2)(B) of the FDIA (12 U.S.C. 1818(i)(2)(B)) in an amount not to 
exceed $27,500 for each day during which the violation, practice or 
breach continues. Tier Three civil money penalties may be assessed 
pursuant to section 8(i)(2)(C)(12 U.S.C. 1818(i)(2)(C)) in an amount not 
to exceed, in the case of any person other than an insured depository 
institution $1,100,000 or, in the

[[Page 90]]

case of any insured depository institution, an amount not to exceed the 
lesser of $1,100,000 or 1 percent of the total assets of such 
institution for each day during which the violation, practice, or breach 
continues.
    (A) Civil money penalties may be assessed pursuant to section 
8(i)(2) of the FDIA in the amounts set forth in this paragraph (c)(3)(i) 
for violations of various consumer laws, including, the Home Mortgage 
Disclosure Act (12 U.S.C. 2804 et seq. and 12 CFR 203.6), the Expedited 
Funds Availability Act (12 U.S.C. 4001 et seq.), the Truth in Savings 
Act (12 U.S.C. 4301 et seq.), the Real Estate Settlement Procedures Act 
(12 U.S.C. 2601 et seq. and 12 CFR part 3500), the Truth in Lending Act 
(15 U.S.C. 1601 et seq.), the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) the 
Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.), the 
Electronic Funds Transfer Act (15 U.S.C. 1693 et seq.) and the Fair 
Housing Act (42 U.S.C. 3601 et seq.) in the amounts set forth in 
paragraphs (c)(3)(i) through (c)(3)(iii) of this section.
    (ii) Civil money penalties assessed pursuant to section 7(c) of the 
FDIA for late filing or the submission false or misleading certified 
statements. Tier One civil money penalties may be assessed pursuant to 
section 7(c)(4)(A) of the FDIA (12 U.S.C. 1817(c)(4)(A)) in an amount 
not to exceed $2,000 for each day during which the failure to file 
continues or the false or misleading information is not corrected. Tier 
Two civil money penalties may be assessed pursuant to section 7(c)(4)(B) 
of the FDIA (12 U.S.C. 1817(c)(4)(B)) in an amount not to exceed $22,000 
for each day during which the failure to file continues or the false or 
misleading information is not corrected. Tier Three civil money 
penalties may be assessed pursuant to section 7(c)(4)(C) in an amount 
not to exceed the lesser of $1,100,000 or 1 percent of the total assets 
of the institution for each day during which the failure to file 
continues or the false or misleading information is not corrected.
    (iii) Civil money penalties assessed pursuant to section 10(e)(4) of 
the FDIA for refusal to allow examination or to provide required 
information during an examination. Pursuant to section 10(e)(4) of the 
FDIA (12 U.S.C. 1820(e)(4)), civil money penalties may be assessed 
against any affiliate of an insured depository institution which refuses 
to permit a duly-appointed examiner to conduct an examination or to 
provide information during the course of an examination as set forth in 
section 20(b) of the FDIA (12 U.S.C. 1820(b)), in an amount not to 
exceed $5,500 for each day the refusal continues.
    (iv) Civil money penalties assessed pursuant to section 18(a)(3) of 
the FDIA for incorrect display of insurance logo. Pursuant to section 
18(a)(3) of the FDIA (12 U.S.C. 1828(a)(3)), civil money penalties may 
be assessed against an insured depository institution which fails to 
correctly display its insurance logo pursuant to that section, in an 
amount not to exceed $110 for each day the violation continues.
    (v) Civil money penalties assessed pursuant to section 18(h) of the 
FDIA for failure to file a certified statement or to pay assessment. 
Pursuant to section 18(h) of the FDIA (12 U.S.C. 1828(h)), a civil money 
penalty may be assessed against an insured depository institution which 
wilfully fails or refuses to file a certified statement or pay any 
assessment required under the FDIA in an amount not to exceed $110 for 
each day the violation continues.
    (vi) Civil money penalties assessed pursuant to section 19b(j) of 
the FDIA for recordkeeping violations. Pursuant to section 19b(j) of the 
FDIA (12 U.S.C. 1829b(j)), civil money penalties may be assessed against 
an insured depository institution and any director, officer or employee 
thereof who wilfully or through gross negligence violates or causes a 
violation of the recordkeeping requirements of that section or its 
implementing regulations in an amount not to exceed $11,000 per 
violation.
    (vii) Civil fine pursuant to 12 U.S.C. 1832(c) for violation of 
provisions forbidding interest-bearing demand deposit accounts. Pursuant 
to 12 U.S.C. 1832(c), any depository institution which violates the 
prohibition on deposit or withdrawal from interest-bearing accounts via 
negotiable or transferable instruments payable to third parties shall be 
subject to a fine of $1,100 per violation.

[[Page 91]]

    (viii) Civil penalties for violations of security measure 
requirements under 12 U.S.C. 1884. Pursuant to 12 U.S.C. 1884, an 
institution which violates a rule establishing minimum security 
requirements as set forth in 12 U.S.C. 1882, shall be subject to a civil 
penalty not to exceed $110 for each day of the violation.
    (ix) Civil money penalties assessed pursuant to the Bank Holding 
Company Act of 1970 for prohibited tying arrangements. Pursuant to the 
Bank Holding Company Act of 1970, Tier One civil money penalties may be 
assessed pursuant to 12 U.S.C. 1972(2)(F)(i) in an amount not to exceed 
$5,500 for each day during which the violation continues. Tier Two civil 
money penalties may be assessed pursuant to 12 U.S.C. 1972(2)(F)(ii) in 
an amount not to exceed $27,500 for each day during which the violation, 
practice or breach continues. Tier Three civil money penalties may be 
assessed pursuant to 12 U.S.C. 1972(2)(F)(iii) in an amount not to 
exceed, in the case of any person other than an insured depository 
institution $1,100,000 for each day during which the violation, 
practice, or breach continues or, in the case of any insured depository 
institution, an amount not to exceed the lesser of $1,100,000 or 1 
percent of the total assets of such institution for each day during 
which the violation, practice, or breach continues.
    (x) Civil money penalties assessed pursuant to the International 
Banking Act of 1978. Pursuant to the International Banking Act of 1978 
(IBA) (12 U.S.C. 3108(b)), civil money penalties may be assessed for 
failure to comply with the requirements of the IBA pursuant to section 
8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)), in the amounts set forth in 
paragraph (c)(3)(i) of this section.
    (xi) Civil money penalties assessed for appraisal violations. 
Pursuant to 12 U.S.C. 3349(b), where a financial institution seeks, 
obtains, or gives any other thing of value in exchange for the 
performance of an appraisal by a person that the institution knows is 
not a state certified or licensed appraiser in connection with a 
federally related transaction, a civil money penalty may be assessed 
pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)) in the 
amounts set forth in paragraph (c)(3)(i) of this section.
    (xii) Civil money penalties assessed pursuant to International 
Lending Supervision Act. Pursuant to the International Lending 
Supervision Act (ILSA) (12 U.S.C. 3909(d)), the CMP that may be assessed 
against any banking institution or any officer, director, employee, 
agent or other person participating in the conduct of the affairs of 
such banking institution is amount not to exceed $1,100 for each day a 
violation of the ILSA or any rule, regulation or order issued pursuant 
to ILSA continues.
    (xiii) Civil money penalties assessed for violations of the 
Community Development Banking and Financial Institution Act. Pursuant to 
the Community Development Banking and Financial Institution Act 
(Community Development Banking Act) (12 U.S.C. 4717(b)) a civil money 
penalty may be assessed for violations of the Community Development 
Banking Act pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 
1818(i)(2)), in the amounts set forth in paragraph (c)(3)(i) of this 
section.
    (xiv) Civil money penalties assessed for violations of the 
Securities Exchange Act of 1934. Pursuant to section 21B of the 
Securities Exchange Act of 1934 (Exchange Act) (15 U.S.C. 78u-2), civil 
money penalties may be assessed for violations of certain provisions of 
the Exchange Act, where such penalties are in the public interest. Tier 
One civil money penalties may be assessed pursuant to 15 U.S.C. 78u-
2(b)(1) in an amount not to exceed $5,500 for a natural person or 
$55,000 for any other person for violations set forth in 15 U.S.C. 78u-
2(a). Tier Two civil money penalties may be assessed pursuant to 15 
U.S.C. 78u-2(b)(2) in an amount not to exceed--for each violation set 
forth in 15 U.S.C. 78u-2(a)--$55,000 for a natural person or $275,000 
for any other person if the act or omission involved fraud, deceit, 
manipulation, or deliberate or reckless disregard of a regulatory 
requirement. Tier Three civil money penalties may be assessed pursuant 
to 15 U.S.C. 78u-2(b)(3) for each violation set forth in 15 U.S.C. 78u-
2(a), in an amount not to exceed $110,000 for a natural person or 
$550,000 for any other person, if the act or omission involved

[[Page 92]]

fraud, deceit, manipulation, or deliberate or reckless disregard of a 
regulatory requirement; and such act or omission directly or indirectly 
resulted in substantial losses, or created a significant risk of 
substantial losses to other persons or resulted in substantial pecuniary 
gain to the person who committed the act or omission.
    (xv) Civil money penalties assessed for false claims and statements 
pursuant to the Program Fraud Civil Remedies Act. Pursuant to the 
Program Fraud Civil Remedies Act (31 U.S.C. 3802), civil money penalties 
of not more than $5,500 per day may be assessed for violations involving 
false claims and statements.
    (xvi) Civil money penalties assessed for violations of the Flood 
Disaster Protection Act. Pursuant to the Flood Disaster Protection Act 
(FDPA)(42 U.S.C. 4012a(f)), civil money penalties may be assessed 
against any regulated lending institution that engages in a pattern or 
practice of violations of the FDPA in an amount not to exceed $350 per 
violation, and not to exceed a total of $105,000 annually.
[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 57991, Nov. 12, 1996]



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

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



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



Sec. 308.134  Scope.

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



Sec. 308.135  Grounds for imposition of sanctions.

    (a) Action under section 15(b)(4) of the Exchange Act. The Board of 
Directors or its designee may issue and have served upon any municipal 
securities dealer for which the FDIC is the appropriate regulatory 
agency, or any person associated or seeking to become associated with a 
municipal securities dealer for which the FDIC is the appropriate 
regulatory agency, a written notice of its intention to censure, limit 
the activities or functions or operations of, suspend, or revoke the 
registration of, such municipal securities dealer, or to censure, 
suspend, or bar the person from being associated with the municipal 
securities dealer, when the Board of Directors or its designee 
determines:
    (1) That such municipal securities dealer or such person

[[Page 93]]

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



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

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



Sec. 308.137  Effective date of order imposing sanctions.

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



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



Sec. 308.138  Scope.

    The rules and procedures of this subpart J shall apply to 
proceedings by the Board of Directors or its designee to exempt, in 
whole or in part, an issuer of securities from the provisions of 
sections 12(g), 13, 14(a), 14(c), 14(d), or 14(f) of the Exchange Act, 
as amended (15 U.S.C. 781, 78m, 78n (a), (c) (d) or (f)), or to exempt 
an officer or a director or beneficial owner of securities of such an 
issuer from the provisions of section 16 of the Exchange Act (15 U.S.C. 
78p).



Sec. 308.139  Application for exemption.

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

[[Page 94]]



Sec. 308.140  Newspaper notice.

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



Sec. 308.141  Notice of hearing.

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



Sec. 308.142  Hearing.

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



Sec. 308.143  Decision of Board of Directors.

    Following submission of the hearing transcript to the Board of 
Directors, the Board of Directors may grant the exemption where it 
determines, by reason of the number of public investors, the amount of 
trading interest in the securities, the nature and extent of the 
issuer's activities, the issuer's income or assets, or otherwise, that 
the exemption is consistent with the public interest or the protection 
of investors. Any exemption shall be set forth in an order specifying 
the terms of the exemption, the person to whom it is granted, and the 
period for which it is granted. A copy of the order shall be served upon 
each party to the proceeding.



 Subpart K--Procedures Applicable to Investigations Pursuant to Section 
                            10(c) of the FDIA



Sec. 308.144  Scope.

    The procedures of this subpart shall be followed when an 
investigation is instituted and conducted in connection with any open or 
failed insured depository institution, any institutions making 
application to become insured depository institutions, and affiliates 
thereof, or with other types of investigations to determine compliance 
with applicable law and regulations, pursuant to section 10(c) of the 
FDIA (12 U.S.C. 1820(c)). The Uniform Rules

[[Page 95]]

and subpart B of the Local Rules shall not apply to investigations under 
this subpart.



Sec. 308.145  Conduct of investigation.

    An investigation conducted pursuant to section 10(c) of the FDIA 
shall be initiated only upon issuance of an order by the Board of 
Directors; or by the General Counsel, the Director of the Division of 
Supervision, the Director of the Division of Depositor and Asset 
Services, or their respective designees as set forth at Sec. 303.9 of 
this chapter. The order shall indicate the purpose of the investigation 
and designate FDIC's representative(s) to direct the conduct of the 
investigation. Upon application and for good cause shown, the persons 
who issue the order of investigation may limit, quash, modify, or 
withdraw it. Upon the conclusion of the investigation, an order of 
termination of the investigation shall be issued by the persons issuing 
the order of investigation.
[56 FR 37975, Aug. 9, 1991, as amended at 60 FR 31384, June 15, 1995]



Sec. 308.146  Powers of person conducting investigation.

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



Sec. 308.147  Investigations confidential.

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



Sec. 308.148  Rights of witnesses.

    In an investigation pursuant to section 10(c):
    (a) Any person compelled or requested to furnish testimony, 
documentary evidence, or other information, shall upon request be shown 
and provided with a copy of the order initiating the proceeding;
    (b) Any person compelled or requested to provide testimony as a 
witness or to furnish documentary evidence may be represented by a 
counsel who meets the requirements of Sec. 308.06 of the Uniform Rules. 
That counsel may be present and may:
    (1) Advise the witness before, during, and after such testimony;
    (2) Briefly question the witness at the conclusion of such testimony 
for clarification purposes; and
    (3) Make summary notes during such testimony solely for the use and 
benefit of the witness;
    (c) All persons testifying shall be sequestered. Such persons and 
their counsel shall not be present during the testimony of any other 
person, unless permitted in the discretion of the person conducting the 
investigation;
    (d) In cases of a perceived or actual conflict of interest arising 
out of an attorney's or law firm's representation of multiple witnesses, 
the person conducting the investigation may require the attorney to 
comply with the provisions of Sec. 308.08 of the Uniform Rules; and
    (e) Witness fees shall be paid in accordance with Sec. 308.14 of the 
Uniform Rules.

[[Page 96]]



Sec. 308.149  Service of subpoena.

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



Sec. 308.150  Transcripts.

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



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



Sec. 308.151  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the notice filed by a state nonmember bank pursuant to section 32 of the 
FDIA (12 U.S.C. 1831i) for the consent of the FDIC to add to or replace 
an individual on the Board of Directors, or to employ any individual as 
a senior executive officer, or change the responsibilities of any 
individual to a position of senior executive officer where the bank:
    (a) Has been chartered and operating as an insured nonmember bank 
for less than two years or the insured state branch has been licensed 
and operating as an insured branch for less than two years;
    (b) Has undergone a change in control within the preceding two 
years; or
    (c) Is not in compliance with the minimum capital requirement 
applicable to it or is otherwise in a troubled condition as determined 
by the FDIC on the basis of such institution's most recent report of 
condition or report of examination or inspection.



Sec. 308.152  Grounds for disapproval of notice.

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



Sec. 308.153  Procedures where notice of disapproval issues pursuant to Sec. 303.14 of this chapter.

    (a) The Notice of Disapproval shall be served upon the insured state 
nonmember bank and the candidate for director or senior executive 
officer. The Notice of Disapproval shall:
    (1) Summarize or cite the relevant considerations specified in 
Sec. 308.152;
    (2) Inform the individual and the bank that a request for review of 
the disapproval may be filed within fifteen days of receipt of the 
Notice of Disapproval; and
    (3) Specify that additional information, if any, must be contained 
in the request for review.
    (b) The request for review must be filed at the appropriate regional 
office.
    (c) The request for review must be in writing and should:

[[Page 97]]

    (1) Specify the reasons why the FDIC should reconsider its 
disapproval; and
    (2) Set forth relevant, substantive and material documents, if any, 
that for good cause were not previously set forth in the notice required 
to be filed pursuant to section 32 of the FDIA (12 U.S.C. 1831i).



Sec. 308.154  Decision on review.

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



Sec. 308.155  Hearing.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 30 days after receipt of a request for a hearing 
filed pursuant to Sec. 308.154. Upon request of the petitioner or the 
FDIC, the presiding officer or the Executive Secretary may order a later 
hearing date.
    (b) Burden of proof. The ultimate burden of proof shall be upon the 
candidate for director or senior executive officer. The burden of going 
forward with a prima facie case shall be upon the FDIC.
    (c) Hearing procedure. (1) The hearing shall be held in Washington, 
DC or at another designated place, before a presiding officer designated 
by the Executive Secretary.
    (2) The provisions of Secs. 308.06 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Secs. 308.101 through 308.102, and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The petitioner may appear at the hearing and shall have the 
right to introduce relevant and material documents and make an oral 
presentation. Members of the FDIC enforcement staff may attend the 
hearing and participate as representatives of the FDIC enforcement 
staff.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the petitioner afforded the hearing.
    (6) In the course of or in connection with any hearing under 
paragraph (c) of this section the presiding officer shall have the power 
to administer oaths and affirmations, to take or cause to be taken 
depositions of unavailable witnesses, and to issue, revoke, quash, or 
modify subpoenas and subpoenas duces tecum. Where the presentation of 
witnesses is permitted, the presiding officer may require the attendance 
of witnesses from any state, territory, or other place subject to the 
jurisdiction of the United States at any location where the proceeding 
is being conducted. Witness fees shall be paid in accordance with 
Sec. 308.14 of the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or the 
members of the FDIC enforcement staff, the record shall remain open for 
five business days following the hearing for the parties to make 
additional submissions to the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors or its designee, where possible, within fifteen days after the 
last day

[[Page 98]]

for the parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors or its designee. 
The Executive Secretary's certification shall close the record.
    (d) Written submissions in lieu of hearing. The petitioner may in 
writing waive a hearing and elect to have the matter determined on the 
basis of written submissions.
    (e) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the order shall be final and unappealable, and shall remain in 
full force and effect.
    (f) Decision by Board of Directors or its designee. Within 45 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected individual whether the denial of the 
notice will be continued, terminated, or otherwise modified. The 
notification shall state the basis for any decision of the Board of 
Directors or its designee that is adverse to the petitioner. The Board 
of Directors or its designee shall promptly rescind or modify the denial 
where the decision is favorable to the petitioner.



    Subpart M--Procedures and Standards Applicable to an Application 
                   Pursuant to Section 19 of the FDIA



Sec. 308.156  Scope.

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



Sec. 308.157  Relevant considerations.

    (a) In proceedings under Sec. 308.156 on an application to become or 
continue as an institution-affiliated party with respect to an insured 
depository institution; to own or control directly or indirectly an 
insured depository institution; or to participate directly or indirectly 
in any manner in the conduct of the affairs of an insured depository 
institution, the following shall be considered:
    (1) Whether the conviction or entry into a pretrial diversion or 
similar program is for a criminal offense involving dishonesty or breach 
of trust;
    (2) Whether participation directly or indirectly by the person in 
any manner in the conduct of the affairs of the insured depository 
institution constitutes a threat to the safety or soundness of the 
insured depository institution or the interests of its depositors, or 
threatens to impair public confidence in the insured depository 
institution;
    (3) Evidence of the applicant's rehabilitation;
    (4) The position to be held by the applicant;
    (5) The amount of influence and control the applicant will be able 
to exercise over the affairs and operations of the insured depository 
institution;
    (6) The ability of the management at the insured depository 
institution to supervise and control the activities of the applicant;
    (7) The level of ownership which the applicant will have at the 
insured depository institution;
    (8) Applicable fidelity bond coverage for the applicant; and
    (9) Additional factors in the specific case that appear relevant.
    (b) The question of whether a person, who was convicted of a crime 
or who agreed to enter a pretrial diversion or similar program, was 
guilty of that

[[Page 99]]

crime shall not be at issue in a proceeding under this subpart.



Sec. 308.158  Filing papers and effective date.

    (a) Filing with the regional office. Applications pursuant to 
section 19 shall be filed in the appropriate regional office.
    (b) Effective date. An application pursuant to section 19 may be 
made in writing at any time more than one year after the issuance of a 
decision denying an application pursuant to section 19. The removal and/
or prohibition pursuant to section 19 shall continue until the applicant 
has been reinstated by the Board of Directors or its designee for good 
cause shown.



Sec. 308.159  Denial of applications.

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



Sec. 308.160  Hearings.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 60 days after receipt of a request for hearing on an 
application filed pursuant to Sec. 308.159. Upon the request of the 
applicant or FDIC enforcement counsel, the presiding officer or the 
Executive Secretary may order a later hearing date.
    (b) Burden of proof. The ultimate burden of proof shall be upon the 
person proposing to become or continue as an institution-affiliated 
party with respect to an insured depository institution; to own or 
control directly or indirectly an insured depository institution; or to 
participate directly or indirectly in any manner in the conduct of the 
affairs of an insured depository institution. The burden of going 
forward with a prima facie case shall be upon the FDIC.
    (c) Hearing procedure. (1) The hearing shall be held in Washington, 
DC, or at another designated place, before a presiding officer 
designated by the Executive Secretary.
    (2) The provisions of Secs. 308.06 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Secs. 308.101 through 308.102 and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The applicant may appear at the hearing and shall have the right 
to introduce relevant and material documents and oral argument. Members 
of the FDIC enforcement staff may attend the hearing and participate as 
a party.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the applicant afforded the hearing.
    (6) In the course of or in connection with any hearing under this 
subsection, the presiding officer shall have the power to administer 
oaths and affirmations, to take or cause to be taken depositions of 
unavailable witnesses, and to issue, revoke, quash, or modify subpoenas 
and subpoenas duces tecum. Where the presentation of witnesses is 
permitted, the presiding officer may require the attendance of witnesses 
from any state, territory, or other place subject to the jurisdiction of 
the United States at any location where the proceeding is being 
conducted. Witness fees shall be paid in accordance with Sec. 308.14 of 
the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or FDIC 
enforcement staff, the record shall remain open for five business days 
following the hearing for the parties to make additional submissions to 
the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors, where possible, within 20 days

[[Page 100]]

after the last day for the parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors or its designee. 
The Executive Secretary's certification shall close the record.
    (d) Written submissions in lieu of hearing. The applicant or the 
bank may in writing waive a hearing and elect to have the matter 
determined on the basis of written submissions.
    (e) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the person shall remain barred under section 19.
    (f) Decision by Board of Directors or its designee. Within 60 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected person whether the person shall 
remain barred under section 19. The notification shall state the basis 
for any decision of the Board of Directors or its designee that is 
adverse to the applicant.



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



Sec. 308.161  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the following proceedings:
    (a) To suspend an institution-affiliated party of an insured state 
nonmember bank, or to prohibit such party from further participation in 
the conduct of the affairs of the bank, where the individual is charged 
in any state, Federal, or territorial information or indictment, or 
complaint, with the commission of, or participation in, a crime 
involving dishonesty or breach of trust punishable by imprisonment 
exceeding one year under state or Federal law; or
    (b) To remove from office or to prohibit an institution-affiliated 
party from further participation in the conduct of the affairs of the 
bank, except with the consent of the Board of Directors or its designee, 
if continued service or participation by such party poses a threat to 
the interests of the bank's depositors or threatens to impair public 
confidence in the depository institution, where a judgment of conviction 
or an agreement to enter a pre-trial diversion or other similar program 
is entered against such party, not subject to further appellate review, 
has been entered against the individual for the commission of, or 
participation in, a crime involving dishonesty or breach of trust 
punishable by imprisonment exceeding one year under state or Federal 
law.



Sec. 308.162  Relevant considerations.

    (a)(1) In proceedings under Sec. 308.161 (a) and (b) for a 
suspension, removal or prohibition order, the following shall be 
considered:
    (i) Whether the alleged offense is a crime which is punishable by 
imprisonment for a term exceeding one year under state or Federal law, 
and which involves dishonesty or breach of trust; and
    (ii) Whether continued service or participation by the institution-
affiliated party may pose a threat to the interest of the bank's 
depositors, or threatens to impair public confidence in the bank.
    (2) Additional factors in the specific case that appear relevant to 
its decision to continue in effect, rescind, terminate, or modify a 
suspension, removal or prohibition order may be considered.
    (b) The question of whether an institution-affiliated party charged 
with a crime is guilty of the crime charged shall not be tried or 
considered in a proceeding under this subpart.



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

    (a) Notice of suspension or prohibition. (1) The Board of Directors 
or its designee may suspend or prohibit from further participation in 
the conduct of

[[Page 101]]

the affairs of the bank an institution-affiliated party by written 
notice of suspension or prohibition upon a determination by the Board of 
Directors or its designee that the grounds for such suspension or 
prohibition exist. The written notice of suspension or prohibition shall 
be served upon the institution-affiliated party and the bank.
    (2) The written notice of suspension shall:
    (i) Inform the institution-affiliated party that a written request 
for a hearing, stating the relief desired and grounds therefore, and any 
supporting evidence, may be filed with the Executive Secretary within 30 
days after receipt of the written notice; and
    (ii) Summarize or cite to the relevant considerations specified in 
Sec. 308.162 of this subpart.
    (3) The suspension or prohibition shall be effective immediately 
upon service on the institution-affiliated party, and shall remain in 
effect until final disposition of the information, indictment, 
complaint, or until it is terminated by the Board of Directors or its 
designee under the provisions of Sec. 308.164 or otherwise.
    (b) Order of removal or prohibition. (1) The Board of Directors or 
its designee may issue an order removing or prohibiting from further 
participation in the conduct of the affairs of the bank an institution-
affiliated party, when:
    (i) A final judgment of conviction not subject to further appellate 
review is entered against the individual for a crime referred to in 
Sec. 308.161(b); and
    (ii) The Board of Directors or its designee determines that 
continued service or participation of the institution-affiliated party 
may threaten the interests of the bank's depositors or may threaten to 
impair public confidence in the bank.
    (2) The order shall be served upon the institution-affiliated party 
and the bank.
    (3) The order shall:
    (i) Inform the institution-affiliated party that a written request 
for a hearing, stating the relief desired and grounds therefor, and any 
supporting evidence, may be filed with the Executive Secretary within 30 
days after receipt of the order; and
    (ii) Summarize or cite the relevant considerations specified in 
Sec. 308.162 of this subpart.
    (4) The order shall be effective immediately upon service on the 
institution-affiliated party, and shall remain in effect until it is 
terminated by the Board of Directors or its designee under the 
provisions of Sec. 308.164 or otherwise.



Sec. 308.164  Hearings.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 30 days after receipt of a request for hearing on an 
application filed pursuant to Sec. 308.163. Upon the request of the 
applicant, the presiding officer or the Executive Secretary may order a 
later hearing date.
    (b) Hearing procedure. (1) The hearing shall be held in Washington, 
DC, or at another designated place, before a presiding officer 
designated by the Executive Secretary.
    (2) The provisions of Secs. 308.06 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Secs. 308.101 through 308.102 and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The applicant may appear at the hearing and shall have the right 
to introduce relevant and material documents and oral argument. Members 
of the FDIC enforcement staff may attend the hearing and participate as 
representatives of the FDIC enforcement staff.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the applicant afforded the hearing.
    (6) In the course of or in connection with any hearing under 
paragraph (b) of this section, the presiding officer

[[Page 102]]

shall have the power to administer oaths and affirmations, to take or 
cause to be taken depositions of unavailable witnesses, and to issue, 
revoke, quash, or modify subpoenas and subpoenas duces tecum. Where the 
presentation of witnesses is permitted, the presiding officer may 
require the attendance of witnesses from any state, territory, or other 
place subject to the jurisdiction of the United States at any location 
where the proceeding is being conducted. Witness fees shall be paid in 
accordance with Sec. 308.14 of the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or the 
members of the FDIC enforcement staff, the record shall remain open for 
five business days following the hearing for the parties to make 
additional submissions to the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors, where possible, within ten days after the last day for the 
parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors. The Executive 
Secretary's certification shall close the record.
    (c) Written submissions in lieu of hearing. The applicant or the 
bank may in writing waive a hearing and elect to have the matter 
determined on the basis of written submissions.
    (d) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the order shall be final and unappealable, and shall remain in 
full force and effect pursuant to Sec. 308.163.
    (e) Decision by Board of Directors or its designee. Within 60 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected individual whether the order of 
removal or prohibition will be continued, terminated, or otherwise 
modified. The notification shall state the basis for any decision of the 
Board of Directors or its designee that is adverse to the applicant. The 
Board of Directors or its designee shall promptly rescind or modify an 
order of removal or prohibition where the decision is favorable to the 
applicant.



   Subpart O--Liability of Commonly Controlled Depository Institutions



Sec. 308.165  Scope.

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



Sec. 308.166  Grounds for assessment of liability.

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



Sec. 308.167  Notice of assessment of liability.

    (a) The amount of liability shall be assessed upon service of a 
Notice of Assessment of Liability upon the liable depository 
institution, within two years of the date the Corporation incurred the 
loss.
    (b) Contents of Notice. (1) The Notice of Assessment of Liability 
shall set forth:
    (i) The basis for the FDIC's jurisdiction over the proceeding;
    (ii) A statement of the Corporation's good faith estimate of the 
amount of loss it has incurred or anticipates incurring;
    (iii) A statement of the method by which the estimated loss was 
calculated;
    (iv) A proposed order directing payment by the liable institution of 
the FDIC's estimated amount of loss, and

[[Page 103]]

the schedule under which the payment will be due;
    (v) In cases involving more than one liable institution, the 
estimated amount of each institution's share of the liability.
    (2) The Notice of Assessment of Liability shall advise the liable 
institution(s):
    (i) That an answer must be filed within 20 days after service of the 
Notice;
    (ii) That, if a hearing is requested, a request for a hearing must 
be filed within 20 days after service of the Notice;
    (iii) That if a hearing is requested, such hearing will be held 
within the judicial district in which the liable institution is found, 
or, in cases involving more than one liable institution, within a 
judicial district in which at least one liable institution is found;
    (iv) That, unless the administrative law judge sets a different 
date, the hearing will commence 120 days after service of the Notice of 
Assessment of Liability; and
    (v) That failure to request a hearing shall render the Notice of 
Assessment a final and unappealable order.



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

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



  Subpart P--Rules and Procedures Relating to the Recovery of Attorney 
                         Fees and Other Expenses



Sec. 308.169  Scope.

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



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

    (a) Time to file. An application and any other pleading or document 
related to the application may be filed with the Executive Secretary 
whenever the applicant has prevailed in the proceeding or in a discrete 
significant substantive portion of the proceeding within 30 days after 
service of the final order of the Board of Directors in disposition of 
the proceeding.
    (b) Content. The application and related documents shall conform to 
the requirements of Sec. 308.10 of the Uniform Rules.
    (c) Service. The application and related documents shall be served 
on all parties to the adversary adjudication in accordance with 
Sec. 308.11 of the Uniform Rules, except that statements of net worth 
shall be served only on counsel for the FDIC.
    (d) Upon receipt of an application, the Executive Secretary shall 
refer the matter to the administrative law judge who heard the 
underlying adversary proceeding, provided that if the original 
administrative law judge is unavailable, or the Executive Secretary 
determines, in his or her sole discretion, that there is cause to refer 
the matter to a different administrative law judge, the matter shall be 
referred to a different administrative law judge.



Sec. 308.171  Responses to application.

    (a) By FDIC. (1) Within 20 days after service of an application, 
counsel for the FDIC may file with the Executive Secretary and serve on 
all parties an answer to the application. Unless counsel for the FDIC 
requests and is granted an extension of time for filing or files a 
statement of intent to negotiate under Sec. 308.179 of this subpart, 
failure to file an answer within the 20-day period will be treated as a 
consent to the award requested.
    (2) The answer shall explain in detail any objections to the award 
requested and identify the facts relied on in support of the FDIC's 
position. If the answer is based on any alleged facts not

[[Page 104]]

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



Sec. 308.172  Eligibility of applicants.

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

[[Page 105]]

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



Sec. 308.173  Prevailing party.

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



Sec. 308.174  Standards for awards.

    A prevailing applicant may receive an award for fees and expenses 
unless the position of the FDIC during the proceeding was substantially 
justified or special circumstances make the award unjust. An award will 
be reduced or denied if the applicant has unduly or unreasonably 
protracted the proceedings. Awards for fees and expenses incurred before 
the date on which the adversary adjudication was initiated are allowable 
if their incurrence was necessary to prepare for the proceeding.



Sec. 308.175  Measure of awards.

    (a) General rule. Awards will be based on rates customarily charged 
by persons engaged in the business of acting as attorneys, agents, and 
expert witnesses, even if the services were made available without 
charge or at a reduced rate, provided that no award under this subpart 
for the fee of an attorney or agent may exceed $75 per hour. No award to 
compensate an expert witness may exceed the highest rate at which the 
FDIC pays expert witnesses. An award may include the reasonable expenses 
of the attorney, agent, or expert witness as a separate item, if the 
attorney, agent, or expert witness ordinarily charges clients separately 
for such expenses.
    (b) Determination of reasonableness of fees. In determining the 
reasonableness of the fee sought for an attorney, agent, or expert 
witness, the administrative law judge shall consider the following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fee for like services, or, if he or she 
is an employee of the applicant, the fully allocated cost of the 
services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;
    (3) The time actually spent in the representation of the applicant;
    (4) The time reasonably spent in light of the difficulty or 
complexity of the issues in the proceeding; and

[[Page 106]]

    (5) Such other factors as may bear on the value of the services 
provided.
    (c) Awards for studies. The reasonable cost of any study, analysis, 
test, project, or similar matter prepared on behalf of an applicant may 
be awarded to the extent that the charge for the service does not exceed 
the prevailing rate payable for similar services, and the study or other 
matter was necessary for preparation of the applicant's case and not 
otherwise required by law or sound business or financial practice.



Sec. 308.176  Application for awards.

    (a) Contents. An application for an award of fees and expenses under 
this subpart shall contain:
    (1) The name of the applicant and an identification of the 
proceeding;
    (2) A showing that the applicant has prevailed, and an 
identification of each issue with regard to which the applicant believes 
that the position of the FDIC in the proceeding was not substantially 
justified;
    (3) A statement of the amount of fees and expenses for which an 
award is sought;
    (4) If the applicant is not an individual, a statement of the number 
of its employees on the date the proceeding was initiated;
    (5) A description of any affiliated individuals or entities, as 
defined in Sec. 308.172(c)(5), or a statement that none exist;
    (6) A declaration that the applicant, together with any affiliates, 
had a net worth not more than the ceiling established for it by 
Sec. 308.172(b) as of the date the proceeding was initiated; and
    (7) Any other matters that the applicant wishes the FDIC to consider 
in determining whether and in what amount an award should be made.
    (b) Verification. The application shall be signed by the applicant 
or an authorized officer or attorney of the applicant. It shall also 
contain or be accompanied by a written verification under oath or under 
penalty of perjury that the information provided in the application and 
supporting documents is true and correct.



Sec. 308.177  Statement of net worth.

    (a) General rule. A statement of net worth must be filed with the 
application for an award of fees. The statement shall reflect the net 
worth of the applicant and all affiliates of the applicant.
    (b) Contents. (1) The statement of net worth may be in any form 
convenient to the applicant which fully discloses all the assets and 
liabilities of the applicant and all the assets and liabilities of its 
affiliates, as of the time of the initiation of the adversary 
adjudication. Unaudited financial statements are acceptable unless the 
administrative law judge or the Board of Directors otherwise requires. 
Financial statements or reports to a Federal or state agency, prepared 
before the initiation of the adversary adjudication for other purposes, 
and accurate as of a date not more than three months prior to the 
initiation of the proceeding, are acceptable in establishing net worth 
as of the time of the initiation of the proceeding, unless the 
administrative law judge or the Board of Directors otherwise requires.
    (2) In the case of applicants or affiliates that are not banks, net 
worth shall be considered for the purposes of this subpart to be the 
excess of total assets over total liabilities, as of the date the 
underlying proceeding was initiated, except as adjusted under 
Sec. 308.172(c)(2). Assets and liabilities of individuals shall include 
those beneficially owned within the meaning of the FDIC's rules and 
regulations.
    (3) If the applicant or any of its affiliates is a bank, the portion 
of the statement of net worth which relates to the bank shall consist of 
a copy of the bank's last Consolidated Report of Condition and Income 
filed before the initiation of the adversary adjudication. In all cases 
the administrative law judge or the Board of Directors may call for 
additional information needed to establish the applicant's net worth as 
of the initiation of the proceeding. Except as adjusted by additional 
information that was called for under the preceding sentence, net worth 
shall be considered for the purposes of this subpart to be the total 
equity capital (or, in the case of mutual savings banks, the total 
surplus accounts) as reported,

[[Page 107]]

in conformity with applicable instructions and guidelines, on the bank's 
Consolidated Report of Condition and Income filed for the last reporting 
date before the initiation of the proceeding.
    (c) Statement confidential. Unless otherwise ordered by the Board of 
Directors or required by law, the statement of net worth shall be for 
the confidential use of counsel for the FDIC, the Board of Directors, 
and the administrative law judge.



Sec. 308.178  Statement of fees and expenses.

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



Sec. 308.179  Settlement negotiations.

    If counsel for the FDIC and the applicant believe that the issues in 
a fee application can be settled, they may jointly file with the 
Executive Secretary a statement of their intent to negotiate a 
settlement. The filing of this statement shall extend the time for 
filing an answer under Sec. 308.171 for an additional 20 days, and 
further extensions may be granted by the administrative law judge upon 
the joint request of counsel for the FDIC and the applicant.



Sec. 308.180  Further proceedings.

    (a) General rule. Ordinarily, the determination of a recommended 
award will be made by the administrative law judge on the basis of the 
written record. However, on request of either the applicant or the FDIC, 
or on his or her own initiative, the administrative law judge may order 
further proceedings such as an informal conference, oral argument, 
additional written submissions, or an evidentiary hearing. Such further 
proceedings will be held only when necessary for full and fair 
resolution of the issues arising from the application and will be 
conducted promptly and expeditiously.
    (b) Request for further proceedings. A request for further 
proceedings under this section shall specifically identify the 
information sought or the issues in dispute and shall explain why 
additional proceedings are necessary.
    (c) Hearing. Ordinarily, the administrative law judge shall hold an 
oral evidentiary hearing only on disputed issues of material fact which 
cannot be adequately resolved through written submissions.



Sec. 308.181  Recommended decision.

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



Sec. 308.182  Board of Directors action.

    (a) Exceptions to recommended decision. Within 20 days after service 
of the recommended decision, findings, conclusions, and proposed order, 
the applicant or counsel for the FDIC may file

[[Page 108]]

with the Executive Secretary written exceptions thereto. A supporting 
brief may also be filed.
    (b) Decision of Board of Directors. The Board of Directors shall 
render its decision within 60 days after the matter is submitted to it 
by the Executive Secretary. The Executive Secretary shall furnish copies 
of the decision and order of the Board of Directors to the parties. 
Judicial review of the decision and order may be obtained as provided in 
5 U.S.C. 504(c)(2).



Sec. 308.183  Payment of awards.

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



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

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



Sec. 308.200  Scope.

    The rules and procedures set forth in this subpart apply to banks, 
insured branches of foreign banks and senior executive officers and 
directors of banks that are subject to the provisions of section 38 of 
the Federal Deposit Insurance Act (section 38) (12 U.S.C. 1831o) and 
subpart B of part 325 of this chapter.
[57 FR 44897, Sept. 29, 1992; 57 FR 48426, Oct. 23, 1992]



Sec. 308.201  Directives to take prompt corrective action.

    (a) Notice of intent to issue directive--(1) In general. The FDIC 
shall provide an undercapitalized, significantly undercapitalized, or 
critically undercapitalized bank prior written notice of the FDIC's 
intention to issue a directive requiring such bank to take actions or to 
follow proscriptions described in section 38 that are within the FDIC's 
discretion to require or impose under section 38 of the FDI Act, 
including sections 38 (e)(5), (f)(2), (f)(3), or (f)(5). The bank shall 
have such time to respond to a proposed directive as provided by the 
FDIC under paragraph (c) of this section.
    (2) Immediate issuance of final directive. If the FDIC finds it 
necessary in order to carry out the purposes of section 38 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue a directive requiring a bank immediately 
to take actions or to follow proscriptions described in section 38 that 
are within the FDIC's discretion to require or impose under section 38 
of the FDI Act, including section 38 (e)(5), (f)(2), (f)(3), or (f)(5). 
A bank that is subject to such an immediately effective directive may 
submit a written appeal of the directive to the FDIC. Such an appeal 
must be received by the FDIC within 14 calendar days of the issuance of 
the directive, unless the FDIC permits a longer period. The FDIC shall 
consider any such appeal, if filed in a timely matter, within 60 days of 
receiving the appeal. During such period of review, the directive shall 
remain in effect unless the FDIC, in its sole discretion, stays the 
effectiveness of the directive.
    (b) Contents of notice. A notice of intention to issue a directive 
shall include:
    (1) A statement of the bank's capital measures and capital levels;
    (2) A description of the restrictions, prohibitions or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of such affirmative 
actions; and
    (4) The date by which the bank subject to the directive may file 
with the FDIC a written response to the notice.
    (c) Response to notice--(1) Time for response. A bank may file a 
written response to a notice of intent to issue a

[[Page 109]]

directive within the time period set by the FDIC. The date shall be at 
least 14 calendar days from the date of the notice unless the FDIC 
determines that a shorter period is appropriate in light of the 
financial condition of the bank or other relevant circumstances.
    (2) Content of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 38;
    (ii) Any recommended modification of the proposed directive; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the proposed directive.
    (d) FDIC consideration of response. After considering the response, 
the FDIC may:
    (1) Issue the directive as proposed or in modified form;
    (2) Determine not to issue the directive and so notify the bank; or
    (3) Seek additional information or clarification of the response 
from the bank or any other relevant source.
    (e) Failure to file response. Failure by a bank to file with the 
FDIC, within the specified time period, a written response to a proposed 
directive shall constitute a waiver of the opportunity to respond and 
shall constitute consent to the issuance of the directive.
    (f) Request for modification or rescission of directive. Any bank 
that is subject to a directive under this subpart may, upon a change in 
circumstances, request in writing that the FDIC reconsider the terms of 
the directive, and may propose that the directive be rescinded or 
modified. Unless otherwise ordered by the FDIC, the directive shall 
continue in place while such request is pending before the FDIC.



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

    (a) Reclassification based on unsafe or unsound condition or 
practice--(1) Issuance of notice of proposed reclassification--(i) 
Grounds for reclassification. (A) Pursuant to Sec. 325.103(d) of this 
chapter, the FDIC may reclassify a well capitalized bank as adequately 
capitalized or subject an adequately capitalized or undercapitalized 
institution to the supervisory actions applicable to the next lower 
capital category if:
    (1) The FDIC determines that the bank is in unsafe or unsound 
condition; or
    (2) The FDIC, pursuant to section 8(b)(8) of the FDI Act (12 U.S.C. 
1818(b)(8)), deems the bank to be engaged in an unsafe or unsound 
practice and not to have corrected the deficiency.
    (B) Any action pursuant to this paragraph (a)(1)(i) shall 
hereinafter be referred to as reclassification.
    (ii) Prior notice to institution. Prior to taking action pursuant to 
Sec. 325.103(d) of this chapter, the FDIC shall issue and serve on the 
bank a written notice of the FDIC's intention to reclassify the bank.
    (2) Contents of notice. A notice of intention to reclassify a bank 
based on unsafe or unsound condition shall include:
    (i) A statement of the bank's capital measures and capital levels 
and the category to which the bank would be reclassified;
    (ii) The reasons for reclassification of the bank;
    (iii) The date by which the bank subject to the notice of 
reclassification may file with the FDIC a written appeal of the proposed 
reclassification and a request for a hearing, which shall be at least 14 
calendar days from the date of service of the notice unless the FDIC 
determines that a shorter period is appropriate in light of the 
financial condition of the bank or other relevant circumstances.
    (3) Response to notice of proposed reclassification. A bank may file 
a written response to a notice of proposed reclassification within the 
time period set by the FDIC. The response should include:
    (i) An explanation of why the bank is not in an unsafe or unsound 
condition or otherwise should not be reclassified; and
    (ii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the reclassification.
    (4) Failure to file response. Failure by a bank to file, within the 
specified

[[Page 110]]

time period, a written response with the FDIC to a notice of proposed 
reclassification shall constitute a waiver of the opportunity to respond 
and shall constitute consent to the reclassification.
    (5) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the FDIC under this section. If the bank desires to present oral 
testimony or witnesses at the hearing, the bank shall include a request 
to do so with the request for an informal hearing. A request to present 
oral testimony or witnesses shall specify the names of the witnesses and 
the general nature of their expected testimony. Failure to request a 
hearing shall constitute a waiver of any right to a hearing, and failure 
to request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (6) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the FDIC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the bank requests a later date. The 
hearing shall be held in Washington, DC or at such other place as may be 
designated by the FDIC, before a presiding officer(s) designated by the 
FDIC to conduct the hearing.
    (7) Hearing procedures. (i) The bank shall have the right to 
introduce relevant written materials and to present oral argument at the 
hearing. The bank may introduce oral testimony and present witnesses 
only if expressly authorized by the FDIC or the presiding officer(s). 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules of Practice and Procedure in this part 
apply to an informal hearing under this section unless the FDIC orders 
that such procedures shall apply.
    (ii) The informal hearing shall be recorded, and a transcript shall 
be furnished to the bank upon request and payment of the cost thereof. 
Witnesses need not be sworn, unless specifically requested by a party or 
the presiding officer(s). The presiding officer(s) may ask questions of 
any witness.
    (iii) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (8) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the FDIC 
on the reclassification.
    (9) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the FDIC will decide whether to reclassify the 
bank and notify the bank of the FDIC's decision.
    (b) Request for rescission of reclassification. Any bank that has 
been reclassified under this section, may, upon a change in 
circumstances, request in writing that the FDIC reconsider the 
reclassification, and may propose that the reclassification be rescinded 
and that any directives issued in connection with the reclassification 
be modified, rescinded, or removed. Unless otherwise ordered by the 
FDIC, the bank shall remain subject to the reclassification and to any 
directives issued in connection with that reclassification while such 
request is pending before the FDIC.



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

    (a) Service of notice. When the FDIC issues and serves a directive 
on a bank pursuant to Sec. 308.201 of this part requiring the bank to 
dismiss from office any director or senior executive officer under 
Sec. 38(f)(2)(F)(ii) of the FDI Act, the FDIC shall also serve a copy of 
the directive, or the relevant portions of the directive where 
appropriate, upon the person to be dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed

[[Page 111]]

within 10 calendar days of the receipt of the directive by the 
Respondent, unless further time is allowed by the FDIC at the request of 
the Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement shall include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
FDIC under this section. If the Respondent desires to present oral 
testimony or witnesses at the hearing, the Respondent shall include a 
request to do so with the request for an informal hearing. The request 
to present oral testimony or witnesses shall specify the names of the 
witnesses and the general nature of their expected testimony. Failure to 
request a hearing shall constitute a waiver of any right to a hearing 
and failure to request the opportunity to present oral testimony or 
witnesses shall constitute a waiver of any right or opportunity to 
present oral testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the FDIC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a bank to dismiss from office any director or senior 
executive officer, the FDIC shall issue an order directing an informal 
hearing to commence no later than 30 days after receipt of the request, 
unless the Respondent requests a later date. The hearing shall be held 
in Washington, DC, or at such other place as may be designated by the 
FDIC, before a presiding officer(s) designated by the FDIC to conduct 
the hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the FDIC or the presiding officer(s). Neither 
the provisions of the Administrative Procedure Act governing 
adjudications required by statute to be determined on the record nor the 
Uniform Rules of Practice and Procedure in this part apply to an 
informal hearing under this section unless the FDIC orders that such 
procedures shall apply.
    (2) The informal hearing shall be recorded, and a transcript shall 
be furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the bank would materially strengthen the bank's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the bank's capital level or failure 
to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the bank based on supervisory criteria other than 
capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the FDIC 
concerning the Respondent's request for reinstatement with the bank.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the FDIC shall grant or deny the request for 
reinstatement and notify the Respondent of the FDIC's decision. If the 
FDIC denies the request for reinstatement, the FDIC shall set forth in 
the notification the reasons for the FDIC's action.

[[Page 112]]



Sec. 308.204  Enforcement of directives.

    (a) Judicial remedies. Whenever a bank fails to comply with a 
directive issued under section 38, the FDIC may seek enforcement of the 
directive in the appropriate United States district court pursuant to 
section 8(i)(1) of the FDI Act (12 U.S.C. 1818(i)(1)).
    (b) Administrative remedies--(1) Failure to comply with directive. 
Pursuant to section 8(i)(2)(A) of the FDI Act, the FDIC may assess a 
civil money penalty against any bank that violates or otherwise fails to 
comply with any final directive issued under section 38 and against any 
institution-affiliated party who participates in such violation or 
noncompliance.
    (2) Failure to implement capital restoration plan. The failure of a 
bank to implement a capital restoration plan required under section 38, 
or subpart B of part 325 of this chapter, or the failure of a company 
having control of a bank to fulfill a guarantee of a capital restoration 
plan made pursuant to section 38(e)(2) of the FDI Act shall subject the 
bank to the assessment of civil money penalties pursuant to section 
8(i)(2)(A) of the FDI Act.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the FDIC may seek enforcement 
of the provisions of section 38 or subpart B of part 325 of this chapter 
through any other judicial or administrative proceeding authorized by 
law.
[57 FR 44897, Sept. 29, 1992; 57 FR 48426, Oct. 23, 1992]



  Subpart R--Submission and Review of Safety and Soundness Compliance 
      Plans and Issuance of Orders To Correct Safety and Soundness 
                              Deficiencies

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



Sec. 308.300  Scope.

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



Sec. 308.301  Purpose.

    Section 39 of the FDI Act requires the FDIC to establish safety and 
soundness standards. Pursuant to section 39, a bank may be required to 
submit a compliance plan if it is not in compliance with a safety and 
soundness standard established by guideline under section 39(a) or (b). 
An enforceable order under section 8 of the FDI Act may be issued if, 
after being notified that it is in violation of a safety and soundness 
standard established under section 39, the bank fails to submit an 
acceptable compliance plan or fails in any material respect to implement 
an accepted plan. This subpart establishes procedures for requiring 
submission of a compliance plan and issuing an enforceable order 
pursuant to section 39.



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

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



Sec. 308.303  Filing of safety and soundness compliance plan.

    (a) Schedule for filing compliance plan--(1) In general. A bank 
shall file a written safety and soundness compliance plan with the FDIC 
within 30 days of receiving a request for a compliance

[[Page 113]]

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



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

    (a) Notice of intent to issue order--(1) In general. The FDIC shall 
provide a bank prior written notice of the FDIC's intention to issue an 
order requiring the bank to correct a safety and soundness deficiency or 
to take or refrain from taking other actions pursuant to section 39 of 
the FDI Act. The bank shall have such time to respond to a proposed 
order as provided by the FDIC under paragraph (c) of this section.
    (2) Immediate issuance of final order. If the FDIC finds it 
necessary in order to carry out the purposes of section 39 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue an order requiring a bank immediately to 
take actions to correct a safety and soundness deficiency or take or 
refrain from taking other actions pursuant to section 39. A bank that is 
subject to such an immediately effective order may submit a written 
appeal of the order to the FDIC. Such an appeal must be received by the 
FDIC within 14 calendar days of the issuance of the order, unless the 
FDIC permits a longer period. The FDIC shall consider any such appeal, 
if filed in a timely matter, within 60 days of receiving the appeal. 
During such period of review, the order shall remain in effect unless 
the FDIC, in its sole discretion, stays the effectiveness of the order.
    (b) Contents of notice. A notice of intent to issue an order shall 
include:

[[Page 114]]

    (1) A statement of the safety and soundness deficiency or 
deficiencies that have been identified at the bank;
    (2) A description of any restrictions, prohibitions, or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of any required action; 
and
    (4) The date by which the bank subject to the order may file with 
the FDIC a written response to the notice.
    (c) Response to notice--(1) Time for response. A bank may file a 
written response to a notice of intent to issue an order within the time 
period set by the FDIC. Such a response must be received by the FDIC 
within 14 calendar days from the date of the notice unless the FDIC 
determines that a different period is appropriate in light of the safety 
and soundness of the bank or other relevant circumstances.
    (2) Contents of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 39;
    (ii) Any recommended modification of the proposed order; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the proposed order.
    (d) Agency consideration of response. After considering the 
response, the FDIC may:
    (1) Issue the order as proposed or in modified form;
    (2) Determine not to issue the order and so notify the bank; or
    (3) Seek additional information or clarification of the response 
from the bank, or any other relevant source.
    (e) Failure to file response. Failure by a bank to file with the 
FDIC, within the specified time period, a written response to a proposed 
order shall constitute a waiver of the opportunity to respond and shall 
constitute consent to the issuance of the order.
    (f) Request for modification or rescission of order. Any bank that 
is subject to an order under this subpart may, upon a change in 
circumstances, request in writing that the FDIC reconsider the terms of 
the order, and may propose that the order be rescinded or modified. 
Unless otherwise ordered by the FDIC, the order shall continue in place 
while such request is pending before the FDIC.



Sec. 308.305  Enforcement of orders.

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



Subpart S--Applications for a Stay or Review of Actions of Bank Clearing 
                                Agencies

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



Sec. 308.400  Scope.

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

[[Page 115]]



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

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



Sec. 308.402  Applications for review of final disciplinary sanctions, denials of participation, or prohibitions or limitations of access to services imposed by 
          bank clearing agencies.

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



PART 309--DISCLOSURE OF INFORMATION--Table of Contents




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

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

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



Sec. 309.1  Purpose and scope.

    This part sets forth the basic policies of the Federal Deposit 
Insurance Corporation regarding information it maintains and the 
procedures for obtaining access to such information.



Sec. 309.2  Definitions.

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

[[Page 116]]

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



Sec. 309.3  Federal Register publication.

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



Sec. 309.4  Publicly available records.

    The following records are available upon request or, as noted, 
available for public inspection during normal business hours, at the 
listed offices. Certain records are also available on the Internet at 
the following address: http://www.fdic.gov. To the extent permitted by 
law, the FDIC may delete identifying details when it makes available or 
publishes a final opinion, final order, statement of policy, 
interpretation or staff manual or instruction. Fees for furnishing 
records under this section are as set forth in Sec. 309.5(c).
    (a) At the Office of Corporate Communications, Federal Deposit 
Insurance Corporation, 550 17th Street, N.W., Washington, DC 20429, 
(202) 898-6996:
    (1) Documents, including press releases, financial institution 
letters and proposed and adopted regulations, published by the FDIC and 
pertaining to its operations and those of insured depository 
institutions that it supervises.
    (2) Reports on the competitive factors involved in merger 
transactions and the bases for approval of merger transactions as 
required by sections 18(c)(4) and 18(c)(9) of the Federal Deposit 
Insurance Act (12 U.S.C. 1828(c) (4) and (9)).
    (3) Community Reinvestment Act (CRA) Public Evaluations.
    (4) Final decisions and orders concerning compliance, enforcement, 
and other related administrative actions.
    (5) At the FDIC's discretion, Summary of Deposits filed by insured 
depository institutions, except that information on the size and number 
of accounts filed before June, 1982 is not available.1
---------------------------------------------------------------------------

    \1\ Summary of Deposits reports are described at 12 CFR 304.5.
---------------------------------------------------------------------------

    (6) Annual Report of Trust Assets for commercial banks and state 
savings banks.2
---------------------------------------------------------------------------

    \2\ Annual Report of Trust Assets, FFIEC Form 001.
---------------------------------------------------------------------------

    (b) At the Office of the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, N.W., Washington, DC 20429, 
which information is available for public inspection:
    (1) All final opinions (including concurring and dissenting 
opinions) and all final orders made in the adjudication of 
administrative cases.
    (2) Statements of policy and interpretations which have been adopted 
by the FDIC but have not been published in the Federal Register.
    (3) A current index of matters covered by paragraphs (b)(1) and 
(b)(2) of this section that were issued, adopted or promulgated after 
July 4, 1967. Copies of the index will be provided at the

[[Page 117]]

direct cost of duplication as set forth in Sec. 309.5(b).
    (c) At the Division of Supervision, Federal Deposit Insurance 
Corporation, 550 17th Street, N.W., Washington, DC 20429:
    (1) Filings and reports required under the provisions of 12 CFR Part 
335 and the Securities and Exchange Act of 1934, as amended (15 U.S.C. 
78a), by insured nonmember banks the securities of which are registered 
with the FDIC pursuant to section 12 of that Act (15 U.S.C. 78l). These 
filings and reports are available for public inspection as detailed in 
12 CFR 335.702.
    (2) Manual of Examination Policies.
    (3) Manual of Trust Examination Policies.
    (4) Federal Financial Institutions Examination Council (FFIEC) 
Information Systems Examination Handbook.
    (5) In the FDIC's discretion, the Consolidated Reports of Condition 
and Income filed by insured nonmember banks (and certain nonfederally 
insured depository institutions in the case of reports of condition), 
except that select sensitive financial information may be 
withheld.3
---------------------------------------------------------------------------

    \3\ Reports of income and of condition are described at 12 CFR 
304.4.
---------------------------------------------------------------------------

    (d) At the regional office of the FDIC for the region in which the 
applicant or subject depository institution is located (A list of FDIC's 
regional offices is available from the Office of Corporate 
Communications, Federal Deposit Insurance Corporation, 550 17th Street, 
N.W., Washington, DC 20429, (202) 898-6996):
    (1) In the FDIC's discretion, non-confidential portions of 
application files as provided in 12 CFR 303.6(g), including applications 
for deposit insurance, to establish branches, to relocate offices and to 
merge.
    (2)(i) After acceptance by the FDIC of a notice filed pursuant to 
the Change in Bank Control Act of 1978 (12 U.S.C. 1817(j)) (other than a 
notice filed in contemplation of a public tender offer subject to the 
Securities Exchange Act of 1934 (15 U.S.C. 78m and 78n) and the FDIC's 
tender offer regulations (12 CFR 335.501-335.530), the appropriate FDIC 
regional office will make available, on request, the following 
information: The name of the depository institution whose stock is to be 
acquired; the date the notice was accepted; the identity of the 
acquiring person(s); the number of shares to be acquired; and the number 
of outstanding shares of stock in the depository institution. (The mere 
filing of a notice does not automatically constitute ``acceptance'' by 
the FDIC; a notice is ``accepted'' when the regional office determines 
that the notice contains all the information required by 12 U.S.C. 
1817(j)(6)).
    (ii) In the case of a notice filed in contemplation of a public 
tender offer that is subject to the Securities Exchange Act of 1934 (15 
U.S.C. 78m and 78n) and the FDIC's tender offer regulations (12 CFR 
335.501-335.530), when public disclosure is determined under 
Sec. 303.4(b)(4) of the FDIC's regulations (12 CFR 303.4(b)(4)) to be 
appropriate, the appropriate FDIC regional office will make available, 
on request, the information described in paragraph (d)(2)(i) of this 
section.
    (iii) After a transaction subject to the Change in Bank Control Act 
of 1978 has been consummated, the appropriate FDIC regional office will 
make available, on request, the following information, in addition to 
the information described in paragraph (d)(2)(i) of this section: The 
date the shares were acquired; the names of the sellers (or 
transferors); and the total number of shares owned by the purchasers (or 
acquirors).
    (e) At the Division of Depositor and Asset Services, Federal Deposit 
Insurance Corporation, 550 17th Street, N.W., Washington, DC, 20429:
    (1) Credit Manual;
    (2) Agriculture Manual;
    (3) Claims Manual;
    (4) Operations Manual;
    (5) Closing Manual;
    (6) Environmental Guidelines Manual;
    (7) Deposit Insurance Manual;
    (8) Settlement Manual.
    (f) At the Division of Compliance and Consumer Affairs, Federal 
Deposit Insurance Corporation, 550 17th Street, N.W., Washington, DC 
20429: Compliance Examination Manual.

[[Page 118]]



Sec. 309.5  Procedures for requesting records.

    (a) Definitions. For purposes of this section:
    (1) Commercial use request means a request from or on behalf of a 
requester who seeks records for a use or purpose that furthers the 
commercial, trade, or profit interests of the requester or the person on 
whose behalf the request is made. In determining whether a request falls 
within this category, the FDIC will determine the use to which a 
requester will put the records requested and seek additional information 
as it deems necessary.
    (2) Direct costs means those expenditures the FDIC actually incurs 
in searching for, duplicating, and, in the case of commercial 
requesters, reviewing records in response to a request for records.
    (3) Duplication means the process of making a copy of a record 
necessary to respond to a request for records or for inspection of 
original records that contain exempt material or that cannot otherwise 
be directly inspected. Such copies can take the form of paper copy, 
microfilm, audiovisual records, or machine readable records (e.g., 
magnetic tape or computer disk).
    (4) Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate or 
graduate higher education, an institution of professional education, and 
an institution of vocational education, which operates a program or 
programs of scholarly research.
    (5) Non-commercial scientific institution means an institution that 
is not operated on a commercial basis as that term is defined in 
paragraph (a)(1) of this section, and which is operated solely for the 
purpose of conducting scientific research, the results of which are not 
intended to promote any particular product or industry.
    (6) Representative of the news media means any person actively 
gathering news for, or a free-lance journalist who reasonably expects to 
have his or her work product published or broadcast by, an entity that 
is organized and operated to publish or broadcast news to the public. 
The term news means information that is about current events or that 
would be of current interest to the general public.
    (7) Review means the process of examining records located in 
response to a request for records to determine whether any portion of 
any record is permitted to be withheld as exempt information. It 
includes processing any record for disclosure, e.g., doing all that is 
necessary to excise them or otherwise prepare them for release.
    (8) Search includes all time spent looking for material that is 
responsive to a request, including page-by-page or line-by-line 
identification of material within records. Searches may be done manually 
and/or by computer using existing programming.
    (b) Initial request. (1) Except as provided in paragraphs (d) and 
(h) of this section, the FDIC, upon request for any record in its 
possession, will make the record available to any person who agrees to 
pay the costs of searching, review and duplication as set forth in 
paragraph (c) of this section. The request must be in writing, provide 
information reasonably sufficient to enable the FDIC to identify the 
requested records and specify a dollar limit which the requester is 
willing to pay for the costs of searching, review and duplication, 
unless the costs are believed to be less than the FDIC's cost of 
processing the requester's remittance, which cost will be set forth in 
the ``Notice of Federal Deposit Insurance Corporation Records Fees'' as 
described in paragraph (c)(3) of this section. Requests under this 
paragraph (b) should be addressed to the Office of the Executive 
Secretary, FDIC, 550 17th Street, N.W., Washington, DC 20429.
    (2) The FDIC will transmit notice to the requester within 10 
business days after receipt of the initial request whether it is granted 
or denied. Denials of requests will be based on the exemptions provided 
for in paragraph (d) of this section.
    (3) Notification of a denial of an initial request will be in 
writing and will state:
    (i) If the denial is in part or in whole;
    (ii) The name and title of each person responsible for the denial 
(when other than the person signing the notification);

[[Page 119]]

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

[[Page 120]]

Fees'' as may be issued. Copies of such notices may be obtained at no 
charge from the FDIC's Office of the Executive Secretary, FOIA Unit, 550 
17th Street NW., Washington, DC 20429. The fees implemented in the 
December or Interim Notice will be effective 30 days after issuance. The 
FDIC may charge fees that recoup the full allowable direct costs it 
incurs. The FDIC may contract with independent contractors to locate, 
reproduce, and/or disseminate records; provided however, that the FDIC 
has determined that the ultimate cost to the requester will be no 
greater than it would be if the FDIC performed these tasks itself. In no 
case will the FDIC contract out responsibilities which the Freedom of 
Information Act (FOIA) (5 U.S.C. 552) provides that the FDIC alone may 
discharge, such as determining the applicability of an exemption or 
whether to waive or reduce fees. Fees are subject to change as costs 
change.
    (i) Manual searches for records. The FDIC will charge for manual 
searches for records at the basic rate of pay of the employee making the 
search plus 16 percent to cover employee benefit costs. Where a single 
class of personnel (e.g., all clerical, all professional, or all 
executive) is used exclusively, the FDIC, at its discretion, may 
establish and charge an average rate for the range of grades typically 
involved.
    (ii) Computer searches for records. The fee for searches of 
computerized records is the actual direct cost of the search, including 
computer time, computer runs, and the operator's time apportionable to 
the search. The fee for a computer printout is the actual cost. The fees 
for computer supplies are the actual costs. The FDIC may, at its 
discretion, establish and charge a fee for computer searches based upon 
a reasonable FDIC-wide average rate for central processing unit 
operating costs and the operator's basic rate of pay plus 16 percent to 
cover employee benefit costs.
    (iii) Duplication of records. (A) The per-page fee for paper copy 
reproduction of documents is the average FDIC-wide cost based upon the 
reasonable direct costs of making such copies.
    (B) For other methods of reproduction or duplication, the FDIC will 
charge the actual direct costs of reproducing or duplicating the 
documents.
    (iv) Review of records. The FDIC will charge commercial use 
requesters for the review of records at the time of processing the 
initial request to determine whether they are exempt from mandatory 
disclosure at the basic rate of pay of the employee making the search 
plus 16 percent to cover employee benefit costs. Where a single class of 
personnel (e.g., all clerical, all professional, or all executive) is 
used exclusively, the FDIC, at its discretion, may establish and charge 
an average rate for the range of grades typically involved. The FDIC 
will not charge at the administrative appeal level for review of an 
exemption already applied. When records or portions of records are 
withheld in full under an exemption which is subsequently determined not 
to apply, the FDIC may charge for a subsequent review to determine the 
applicability of other exemptions not previously considered.
    (v) Other services. Complying with requests for special services is 
at the FDIC's discretion. The FDIC may recover the full costs of 
providing such services to the extent it elects to provide them.
    (d) Exempt information. A request for records may be denied if the 
requested record contains information which falls into one or more of 
the following categories.4 If the requested record contains 
both exempt and nonexempt information, the nonexempt portions which may 
reasonably be segregated from the exempt portions will be released to 
the requester.
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    \4\ Classification of a record as exempt from disclosure under the 
provisions of Sec. 309.5(d) shall not be construed as authority to 
withhold the record if it is otherwise subject to disclosure under the 
Privacy Act of 1974 (5 U.S.C. 552a) or other federal statute, any 
applicable regulation of FDIC or any other federal agency having 
jurisdiction thereof, or any directive or order of any court of 
competent jurisdiction.
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    (1) Records which are specifically authorized under criteria 
established by an Executive Order to be kept secret in the interest of 
national defense or foreign policy and are in fact properly classified 
pursuant to such Executive Order;

[[Page 121]]

    (2) Records related solely to the internal personnel rules and 
practices of the FDIC;
    (3) Records specifically exempted from disclosure by statute, 
provided that such statute:
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue; or
    (ii) Establishes particular criteria for withholding or refers to 
particular types of matters to be withheld;
    (4) Trade secrets and commercial or financial information obtained 
from a person that is privileged or confidential;
    (5) Interagency or intra-agency memoranda or letters which would not 
be available by law to a private party in litigation with the FDIC;
    (6) Personnel, medical, and similar files (including financial 
files) the disclosure of which would constitute a clearly unwarranted 
invasion of personal privacy;
    (7) Records compiled for law enforcement purposes, but only to the 
extent that the production of such law enforcement records:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trial or an 
impartial adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential source, including a state, local, or foreign agency or 
authority or any private institution which furnished records on a 
confidential basis;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual;
    (8) Records that are contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the FDIC or any agency responsible for the regulation or 
supervision of financial institutions; or
    (9) geological and geophysical information and data, including maps, 
concerning wells.
    (e) Appeals. (1) A person whose initial request for records under 
paragraph (a) of this section, or whose request for a waiver of fees 
under paragraph (c)(1)(ix) of this section, has been denied, either in 
part or in whole, has the right to appeal the denial to FDIC's General 
Counsel (or designee) within 30 business days after receipt of 
notification of the denial. Appeals of denials of initial requests or 
for a waiver of fees must be in writing and include any additional 
information relevant to consideration of the appeal. Appeals should be 
addressed to the Office of the Executive Secretary, FDIC, 550 17th 
Street, N.W., Washington, DC 20429.
    (2) The FDIC will notify the appellant within 20 business days after 
receipt of the appeal whether it is granted or denied. Denials of 
appeals on initial requests for records will be based on the exemptions 
provided for in paragraph (c) of this section.
    (3) Notifications of a denial of an appeal will be in writing and 
will state:
    (i) Whether the denial is in part or in whole;
    (ii) The name and title of each person responsible for the denial 
(if other than the person signing the notification);
    (iii) The exemptions relied upon for the denial in the case of 
initial requests for records; and
    (iv) The right to judicial review of the denial under the FOIA.
    (f) Extension of time. (1) Under unusual circumstances the FDIC may 
require additional time, up to a maximum of 10 business days, to 
determine whether to grant or deny an initial request or to respond to 
an appeal of an initial denial. These circumstances would arise in cases 
where:
    (i) The records are in facilities, such as field offices or storage 
centers, that are not part of the FDIC's Washington office;
    (ii) The records requested are voluminous and are not in close 
proximity to one another; or

[[Page 122]]

    (iii) There is a need to consult with another agency or among two or 
more components of the FDIC having a substantial interest in the 
determination.
    (2) The FDIC will promptly give written notification to the person 
making the request of the estimated date it will make its determination 
and the reasons why additional time is required.
    (g) FDIC procedures. (1) Initial requests for records will be 
forwarded by the Executive Secretary to the head of the FDIC division or 
office which has primary authority over such records. Where it is 
determined that the requested records may be released, the appropriate 
division or office head will grant access to the records. A request for 
records may be denied only by the Executive Secretary (or designee), 
except that a request for records not responded to within 10 business 
days following its receipt by the Office of Executive Secretary--by 
notice to the requester either granting the request, denying the 
request, or extending the time for making a determination on the 
request--shall, if the requester chooses to treat such delay in response 
as a denial, be deemed to have been denied.
    (2) Appeals from a denial of an initial request will be forwarded by 
the Executive Secretary to the General Counsel (or designee) for a 
determination whether the appeal will be granted or denied. The General 
Counsel (or designee) may on his or her own motion refer an appeal to 
the Board of Directors for a determination or the Board of Directors may 
in its discretion consider such an appeal.
    (h) Records of another agency. If a requested record is the property 
of another federal agency or department, and that agency or department, 
either in writing or by regulation, expressly retains ownership of such 
record, upon receipt of a request for the record the FDIC will promptly 
inform the requester of this ownership and immediately shall forward the 
request to the proprietary agency or department either for processing in 
accordance with the latter's regulations or for guidance with respect to 
disposition.



Sec. 309.6  Disclosure of exempt records.

    (a) Disclosure prohibited. Except as provided in paragraph (b) of 
this section or by 12 CFR part 310 5, no person shall 
disclose or permit the disclosure of any exempt records, or information 
contained therein, to any persons other than those officers, directors, 
employees, or agents of the Corporation who have a need for such records 
in the performance of their official duties. In any instance in which 
any person has possession, custody or control of FDIC exempt records or 
information contained therein, all copies of such records shall remain 
the property of the Corporation and under no circumstances shall any 
person, entity or agency disclose or make public in any manner the 
exempt records or information without written authorization from the 
Director of the Corporation's Division having primary authority over the 
records or information as provided in this section.
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    \5\ The procedures for disclosing records under the Privacy Act are 
separately set forth in 12 CFR part 310.
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    (b) Disclosure authorized. Exempt records or information of the 
Corporation may be disclosed only in accordance with the conditions and 
requirements set forth in this paragraph (b). Requests for discretionary 
disclosure of exempt records or information pursuant to this paragraph 
(b) may be submitted directly to the Division having primary authority 
over the exempt records or information or to the Office of Executive 
Secretary for forwarding to the appropriate Division having primary 
authority over the records sought. Such administrative request must 
clearly state that it seeks discretionary disclosure of exempt records, 
clearly identify the records sought, provide sufficient information for 
the Corporation to evaluate whether there is good cause for disclosure, 
and meet all other conditions set forth in paragraph (b)(1) through (10) 
of this section. Information regarding the appropriate FDIC Division 
having primary authority over a particular record or records may be 
obtained from the Office of Executive Secretary. Authority to disclose 
or authorize disclosure of exempt records of the Corporation is 
delegated as follows:

[[Page 123]]

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

[[Page 124]]

certifies pursuant to section 1112(a) 6 of the RFPA that the 
records are believed relevant to a legitimate law enforcement inquiry 
within the jurisdiction of the receiving agency; and
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    \6\ The form of certification generally is as follows. Additional 
information may be added:
    Pursuant to section 1112(a) of the Right to Financial Privacy Act of 
1978 (12 U.S.C. 3412), I, ______ [name and appropriate title] hereby 
certify that the financial records described below were transferred to 
(agency or department) in the belief that they were relevant to a 
legitimate law enforcement inquiry, within the jurisdiction of the 
receiving agency.
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    (2) A copy of such certification and the notice required by section 
1112(b) 7 of the RFPA is sent within fourteen days of the 
disclosure to the customer whose records are disclosed.8
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    \7\ The form of notice generally is as follows. Additional 
information may be added:
    Dear Mr./Ms. ______
    Copies of, or information contained in, your financial records 
lawfully in the possession of the Federal Deposit Insurance Corporation 
have been furnished to (agency or department) pursuant to the Right to 
Financial Privacy Act of 1978 for the following purpose: ______. If you 
believe that this transfer has not been made to further a legitimate law 
enforcement inquiry, you may have legal rights under the Right to 
Financial Privacy Act of 1978 or the Privacy Act of 1974.
    \8\ Whenever the Corporation is subject to a court-ordered delay of 
the customer notice, the notice shall be sent immediately upon the 
expiration of the court-ordered delay.
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    (5) Disclosure to servicers and serviced institutions. The Director 
of the Corporation's Division having primary authority over the exempt 
records, or designee, may disclose copies of any exempt record related 
to a bank data center, a depository institution service corporation or 
any other data center that provides data processing or related services 
to an insured institution (hereinafter referred to as ``data center'') 
to:
    (i) The examined data center;
    (ii) Any insured institution that receives data processing or 
related services from the examined data center;
    (iii) Any state agency or authority which exercises general 
supervision over an institution serviced by the examined data center; 
and
    (iv) Any federal financial institution supervisory agency which 
exercises general supervision over an institution serviced by the 
examined data center. The federal supervisory agency may disclose any 
such examination report received from the Corporation to an insured 
institution over which it exercises general supervision and which is 
serviced by the examined data center.
    (6) Disclosure to third parties. (i) Except as otherwise provided in 
paragraphs (c) (1) through (5) of this section, the Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may in his or her discretion and for good cause, disclose 
copies of any exempt records to any third party where requested to do so 
in writing. Any such written request shall:
    (A) Specify, with reasonable particularity, the record or records to 
which access is requested; and
    (B) Give the reasons for the request.
    (ii) Either prior to or at the time of any disclosure, the Director 
or designee shall require such terms and conditions as he deems 
necessary to protect the confidential nature of the record, the 
financial integrity of any depository institution to which the record 
relates, and the legitimate privacy interests of any individual named in 
such records.
    (7) Authorization for disclosure by depository institutions or other 
third parties. (i) The Director of the Corporation's Division having 
primary authority over the exempt records, or designee, may, in his or 
her discretion and for good cause, authorize any director, officer, 
employee, or agent of a depository institution to disclose copies of any 
exempt record in his custody to anyone who is not a director, officer or 
employee of the depository institution. Such authorization must be in 
response to a written request from the party seeking the record or from 
management of the depository institution to which the report or record 
pertains. Any such request shall specify, with reasonable particularity, 
the record sought, the party's interest therein, and the party's 
relationship to the depository institution to which the record relates.

[[Page 125]]

    (ii) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may, in his or her 
discretion and for good cause, authorize any third party, including a 
federal or state agency, that has received a copy of a Corporation 
exempt record, to disclose such exempt record to another party or 
agency. Such authorization must be in response to a written request from 
the party that has custody of the copy of the exempt record. Any such 
request shall specify the record sought to be disclosed and the reasons 
why disclosure is necessary.
    (iii) Any subsidiary depository institution of a bank holding 
company or a savings and loan holding company may reproduce and furnish 
a copy of any report of examination of the subsidiary depository 
institution to the parent holding company without prior approval of the 
Director of the Division having primary authority over the exempt 
records and any depository institution may reproduce and furnish a copy 
of any report of examination of the disclosing depository institution to 
a majority shareholder if the following conditions are met:
    (A) The parent holding company or shareholder owns in excess of 50% 
of the voting stock of the depository institution or subsidiary 
depository institution;
    (B) The board of directors of the depository institution or 
subsidiary depository institution at least annually by resolution 
authorizes the reproduction and furnishing of reports of examination 
(the resolution shall specifically name the shareholder or parent 
holding company, state the address to which the reports are to be sent, 
and indicate that all reports furnished pursuant to the resolution 
remain the property of the Federal Deposit Insurance Corporation and are 
not to be disclosed or made public in any manner without the prior 
written approval of the Director of the Corporation's Division having 
primary authority over the exempt records as provided in paragraph (b) 
of this section;
    (C) A copy of the resolution authorizing disclosure of the reports 
is sent to the shareholder or parent holding company; and
    (D) The minutes of the board of directors of the depository 
institution or subsidiary depository institution for the meeting 
immediately following disclosure of a report state:
    (1) That disclosure was made;
    (2) The date of the report which was disclosed;
    (3) To whom the report was sent; and
    (4) The date the report was disclosed.
    (iv) With respect to any disclosure that is authorized under this 
paragraph (b)(7), the Director of the Corporation's Division having 
primary authority over the exempt records, or designee, shall only 
permit disclosure of records upon determining that good cause exists. If 
the exempt record contains information derived from depository 
institution customer financial records, disclosure is to be authorized 
only upon the condition that the requesting party and the party 
releasing the records comply with any applicable provision of the RFPA. 
Before authorizing the disclosure, the Director (or designee) may 
require that both the party having custody of a copy of a Corporation 
exempt record and the party seeking access to the record agree to such 
limitations as the Director (or designee) deems necessary to protect the 
confidential nature of the record, the financial integrity of any 
depository institution to which the record relates and the legitimate 
privacy interests of any persons named in such record.
    (8) Disclosure by General Counsel. (i) The Corporation's General 
Counsel, or designee, may disclose or authorize the disclosure of any 
exempt record in response to a valid judicial subpoena, court order, or 
other legal process, and authorize any current or former officer, 
director, employee, agent of the Corporation, or third party, to appear 
and testify regarding an exempt record or any information obtained in 
the performance of such person's official duties, at any administrative 
or judicial hearing or proceeding where such person has been served with 
a valid subpoena, court order, or other legal process requiring him or 
her to testify. The General Counsel shall consider the relevancy of such 
exempt records or testimony to the litigation, and the interests of 
justice, in determining whether

[[Page 126]]

to disclose such records or testimony. Third parties seeking disclosure 
of exempt records or testimony in litigation to which the FDIC is not a 
party shall submit a request for discretionary disclosure directly to 
the General Counsel.9 Such request shall specify the 
information sought with reasonable particularity and shall be 
accompanied by a statement with supporting documentation showing in 
detail the relevance of such exempt information to the litigation, 
justifying good cause for disclosure, and a commitment to be bound by a 
protective order. Failure to exhaust such administrative request prior 
to service of a subpoena or other legal process may, in the General 
Counsel's discretion, serve as a basis for objection to such subpoena or 
legal process. Customer financial records may not be disclosed to any 
federal agency that is not a federal financial supervisory agency 
pursuant to this paragraph unless notice to the customer and 
certification as required by the RFPA have been given except where 
disclosure is subject to the relevant exceptions set forth in the RFPA.
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    \9\ This administrative requirement does not apply to subpoenas, 
court orders or other legal process issued for records of depository 
institutions held by the FDIC as Receiver or Conservator. Subpoenas, 
court orders or other legal process issued for such records will be 
processed in accordance with State and Federal law, regulations, rules 
and privileges applicable to FDIC as Receiver or Conservator.
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    (ii) The General Counsel, or designee, may in his or her discretion 
and for good cause, disclose or authorize disclosure of any exempt 
record or testimony by a current or former officer, director, employee, 
agent of the Corporation, or third party, sought in connection with any 
civil or criminal hearing, proceeding or investigation without the 
service of a judicial subpoena, or other legal process requiring such 
disclosure or testimony, if he or she determines that the records or 
testimony are relevant to the hearing, proceeding or investigation and 
that disclosure is in the best interests of justice and not otherwise 
prohibited by Federal statute. Customer financial records shall not be 
disclosed to any federal agency pursuant to this paragraph that is not a 
federal financial supervisory agency, unless the records are sought 
under the Federal Rules of Civil Procedure (28 U.S.C. appendix) or the 
Federal Rules of Criminal Procedure (18 U.S.C. appendix) or comparable 
rules of other courts and in connection with litigation to which the 
receiving federal agency, employee, officer, director, or agent, and the 
customer are parties, or disclosure is otherwise subject to the relevant 
exceptions in the RFPA. Where the General Counsel or designee authorizes 
a current or former officer, director, employee or agent of the 
Corporation to testify or disclose exempt records pursuant to this 
paragraph (b)(8), he or she may, in his or her discretion, limit the 
authorization to so much of the record or testimony as is relevant to 
the issues at such hearing, proceeding or investigation, and he or she 
shall give authorization only upon fulfillment of such conditions as he 
or she deems necessary and practicable to protect the confidential 
nature of such records or testimony.
    (9) Authorization for disclosure by the Chairman of the 
Corporation's Board of Directors. Except where expressly prohibited by 
law, the Chairman of the Corporation's Board of Directors may in his or 
her discretion, authorize the disclosure of any Corporation records. 
Except where disclosure is required by law, the Chairman may direct any 
current or former officer, director, employee or agent of the 
Corporation to refuse to disclose any record or to give testimony if the 
Chairman determines, in his or her discretion, that refusal to permit 
such disclosure is in the public interest.
    (10) Limitations on disclosure. All steps practicable shall be taken 
to protect the confidentiality of exempt records and information. Any 
disclosure permitted by paragraph (b) of this section is discretionary 
and nothing in paragraph (b) of this section shall be construed as 
requiring the disclosure of information. Further, nothing in paragraph 
(b) of this section shall be construed as restricting, in any manner,

[[Page 127]]

the authority of the Board of Directors, the Chairman of the Board of 
Directors, the Director of the Corporation's Division having primary 
authority over the exempt records, the Corporation's General Counsel, or 
their designees, or any other Corporation Division or Office head, in 
their discretion and in light of the facts and circumstances attendant 
in any given case, to require conditions upon and to limit the form, 
manner, and extent of any disclosure permitted by this section. Wherever 
practicable, disclosure of exempt records shall be made pursuant to a 
protective order and redacted to exclude all irrelevant or non-
responsive exempt information.



Sec. 309.7  Service of process.

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



PART 310--PRIVACY ACT REGULATIONS--Table of Contents




Sec.
310.1  Purpose and scope.
310.2  Definitions.
310.3  Procedures for requests pertaining to individual records in a 
          system of records.
310.4  Times, places, and requirements for identification of individuals 
          making requests.
310.5  Disclosure of requested information to individuals.
310.6  Special procedures: Medical records.
310.7  Request for amendment of record.

[[Page 128]]

310.8  Agency review of request for amendment of record.
310.9  Appeal of adverse initial agency determination on access or 
          amendment.
310.10  Disclosure of record to person other than the individual to whom 
          it pertains.
310.11  Fees.
310.12  Penalties.
310.13  Exemptions.

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

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



Sec. 310.1  Purpose and scope.

    The purpose of this part is to establish regulations implementing 
the Privacy Act of 1974, 5 U.S.C. 552a. These regulations delineate the 
procedures that an individual must follow in exercising his or her 
access or amendment rights under the Privacy Act to records maintained 
by the Corporation in systems of records.
[61 FR 43419, Aug. 23, 1996]



Sec. 310.2  Definitions.

    For purposes of this part:
    (a) The term Corporation means the Federal Deposit Insurance 
Corporation;
    (b) The term individual means a natural person who is either a 
citizen of the United States or an alien lawfully admitted for permanent 
residence;
    (c) The term maintain includes maintain, collect, use, disseminate, 
or control;
    (d) The term record means any item, collection or grouping of 
information about an individual that contains his/her name, or the 
identifying number, symbol, or other identifying particular assigned to 
the individual;
    (e) The term system of records means a group of any records under 
the control of the Corporation from which information is retrieved by 
the name of the individual or some identifying number, symbol or other 
identifying particular assigned to the individual;
    (f) The term designated system of records means a system of records 
which has been listed and summarized in the Federal Register pursuant to 
the requirements of 5 U.S.C. 552a(e);
    (g) The term routine use means, with respect to disclosure of a 
record, the use of such record for a purpose which is compatible with 
the purpose for which it was created;
    (h) The terms amend or amendment mean any correction, addition to or 
deletion from a record; and
    (i) The term system manager means the agency official responsible 
for a designated system of records, as denominated in the Federal 
Register publication of ``Systems of Records Maintained by the Federal 
Deposit Insurance Corporation.''
[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977]



Sec. 310.3  Procedures for requests pertaining to individual records in a system of records.

    (a) Any present or former employee of the Corporation seeking access 
to, or amendment of, his/her official personnel records maintained by 
the Corporation shall submit his/her request in such manner as is 
prescribed by the United States Office of Personnel Management in part 
297 of its rules and regulations (5 CFR part 297). For access to, or 
amendment of, other government-wide records systems maintained by the 
Corporation, the procedures prescribed in the respective Federal 
Register Privacy Act system notice shall be followed.
    (b) Requests by individuals for access to records pertaining to them 
and maintained within one of the Corporation's designated systems of 
records should be submitted in writing to the Office of the Executive 
Secretary, FOIA/PA Unit, Federal Deposit Insurance Corporation, 
Washington, DC 20429. Each such request should contain a reasonable 
description of the records sought, the system or systems in which such 
record may be contained, and any additional identifying information, as 
specified in the Corporation's Federal Register ``Notice of Systems of 
Records'' for that particular system, copies of which are available upon 
request from the FOIA/PA Unit, Office of the Executive Secretary.
[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 61 
FR 43419, Aug. 23, 1996]



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

    (a) Individuals may request access to records pertaining to 
themselves by

[[Page 129]]

submitting a written request as provided in Sec. 310.3 of these 
regulations, or by appearing in person on weekdays, other than official 
holidays, at the Office of the Executive Secretary, Records Unit, 
Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, 
DC 20429, between the hours of 8:30 a.m. and 5 p.m.
    (b) Individuals appearing in person at the Corporation seeking 
access to or amendment of their records shall present two forms of 
reasonable identification, such as employment identification cards, 
driver's licenses, or other identification cards or documents typically 
used for identification purposes.
    (c) Except for records that must be publicly disclosed pursuant to 
the Freedom of Information Act, 5 U.S.C. 552, where the Corporation 
determines it to be necessary for the individual's protection, a 
certification of a duly commissioned notary public, of any state or 
territory, attesting to the requesting individual's identity, or an 
unsworn declaration subscribed to as true under the penalty of perjury 
under the laws of the United States of America, at the election of the 
individual, may be required before a written request seeking access to 
or amendment of a record will be honored. The Corporation may also 
require that individuals provide minimal identifying data such as full 
name, date and place of birth, or other personal information necessary 
to ensure proper identity before processing requests for records.
[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 61 
FR 43419, Aug. 23, 1996]



Sec. 310.5  Disclosure of requested information to individuals.

    (a) Except to the extent that Corporation records pertaining to an 
individual:
    (1) Are exempt from disclosure under Secs. 310.6 and 310.13 of this 
part, or
    (2) Were compiled in reasonable anticipation of a civil action or 
proceeding, the Corporation will make such records available upon 
request for purposes of inspection and copying by the individual (after 
proper identity verification as provided in Sec. 310.4) and, upon the 
individual's request and written authorization, by another person of the 
individual's own choosing.
    (b) The Executive Secretary will notify, in writing, the individual 
making a request, whenever practicable within ten business days 
following receipt of the request, whether any specified designated 
system of records maintained by the Corporation contains a record 
pertaining to the individual. Where such a record does exist, the 
Executive Secretary also will inform the individual of the system 
manager's decision whether to grant or deny the request for access. In 
the event existing records are determined not to be disclosable, the 
notification will inform the individual of the reasons for which 
disclosure will not be made and will provide a description of the 
individual's right to appeal the denial, as more fully set forth in 
Sec. 310.9. Where access is to be granted, the notification will specify 
the procedures for verifying the individual's identity, as set forth in 
Sec. 310.4.
    (c) Individuals will be granted access to records disclosable under 
this part 310 as soon as is practicable. The Executive Secretary will 
give written notification of a reasonable period within which 
individuals may inspect disclosable records pertaining to themselves at 
the Office of the Executive Secretary during normal business hours. 
Alternatively, individuals granted access to records under this part may 
request that copies of such records be forwarded to them. Fees for 
copying such records will be assessed as provided in Sec. 310.11.
[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977]



Sec. 310.6  Special procedures: Medical records.

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

[[Page 130]]

named by the requesting individual for release of the patient.
[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.7  Request for amendment of record.

    The Corporation will maintain all records it uses in making any 
determination about any individual with such accuracy, relevance, 
timeliness and completeness as is reasonably necessary to assure 
fairness to the individual in the determination. An individual may 
request that the Corporation amend any portion of a record pertaining to 
that individual which the Corporation maintains in a designated system 
of records. Such a request should be submitted in writing to the Office 
of the Executive Secretary, Records Unit, Federal Deposit Insurance 
Corporation, Washington, DC 20429 and should contain the individual's 
reason for requesting the amendment and a description of the record 
(including the name of the appropriate designated system and category 
thereof) sufficient to enable the Corporation to identify the particular 
record or portion thereof with respect to which amendment is sought.



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

    (a) Requests by individuals for the amendment of records will be 
acknowledged by the Executive Secretary of the Corporation, and referred 
to the system manager of the system of records in which the record is 
contained for determination, within ten business days following receipt 
of such requests. Promptly thereafter, the Executive Secretary will 
notify the individual of the system manager's decision to grant or deny 
the request to amend.
    (b) If the system manager denies a request to amend a record, the 
notification of such denial shall contain the reason for the denial and 
a description of the individual's right to appeal the denial as more 
fully set forth in Sec. 310.9.
[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977]



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

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

[[Page 131]]

    (e) The General Counsel (or designee) may on his or her own motion 
refer an appeal to the Board of Directors for a determination, and the 
Board of Directors on its own motion may consider an appeal.
[52 FR 34290, Sept. 10, 1987, as amended at 61 FR 43420, Aug. 23, 1996]



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

    (a) Except as provided in paragraph (b) of this section, the 
Corporation will not disclose any record contained in a designated 
system of records to any person or agency except with the prior written 
consent of the individual to whom the record pertains.
    (b) The restrictions on disclosure in paragraph (a) of this section 
do not apply to any of the following disclosures:
    (1) To those officers and employees of the Corporation who have a 
need for the record in the performance of their duties;
    (2) Which is required under the Freedom of Information Act (5 U.S.C. 
552);
    (3) For a routine use listed with respect to a designated system of 
records;
    (4) To the Bureau of the Census for purposes of planning or carrying 
out a census or survey or related activity pursuant to the provisions of 
title 13 U.S.C.;
    (5) To a recipient who has provided the Corporation with advance 
adequate written assurance that the record will be used solely as a 
statistical research or reporting record, and the record is to be 
transferred in a form that is not individually identifiable;
    (6) To the National Archives and Records Administration as a record 
which has sufficient historical or other value to warrant its continued 
preservation by the United States Government, or for evaluation by the 
Archivist of the United States or his or her designee to determine 
whether the record has such value;
    (7) To another agency or to an instrumentality of any governmental 
jurisdiction within or under the control of the United States for a 
civil or criminal law enforcement activity if the activity is authorized 
by law, and if the head of the agency or instrumentality has made a 
written request to the Corporation specifying the particular portion 
desired and the law enforcement activity for which the record is sought;
    (8) To a person pursuant to a showing of compelling circumstances 
affecting the health or safety of an individual if, upon such 
disclosure, notification is transmitted to the last known address of 
such individual;
    (9) To either House of Congress, or, to the extent of matter within 
its jurisdiction, any committee or subcommittee thereof, any joint 
committee of Congress or subcommittee of any such joint committee;
    (10) To the Comptroller General, or any of his or her authorized 
representatives, in the course of the performance of the duties of the 
General Accounting Office;
    (11) Pursuant to the order of a court of competent jurisdiction.
    (12) To a consumer reporting agency in accordance with section 
3711(f) of Title 31.
    (c) The Corporation will adhere to the following procedures in the 
case of disclosure of any record pursuant to the authority of paragraphs 
(b)(3) through (b)(12) of this section.
    (1) The Corporation will keep a record of the date, nature and 
purpose of each such disclosure, as well as the name and address of the 
person or agency to whom such disclosure is made; and
    (2) The Corporation will retain and, with the exception of 
disclosures made pursuant to paragraph (b)(7) of this section, make 
available to the individual named in the record for the greater of five 
years or the life of the record all material compiled under paragraph 
(d)(1) of this section with respect to disclosure of such record.
    (d) Whenever a record which has been disclosed by the Corporation 
under authority of paragraph (b) of this section is, within a reasonable 
amount of time after such disclosure, either amended by the Corporation 
or the subject of a statement of disagreement, the Corporation will 
transmit such additional information to any person or agency to whom the 
record was disclosed, if such

[[Page 132]]

disclosure was subject to the accounting requirements of paragraph 
(c)(1) of this section.
[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.11  Fees.

    The Corporation, upon a request for records disclosable pursuant to 
the Privacy Act of 1974 (5 U.S.C. 552a), shall charge a fee of $0.10 per 
page for duplicating, except as follows:
    (a) If the Corporation determines that it can grant access to a 
record only by providing a copy of the record, no fee will be charged 
for providing the first copy of the record or any portion thereof;
    (b) Whenever the aggregate fees computed under this section do not 
exceed $10 for any one request, the fee will be deemed waived by the 
Corporation; or
    (c) Whenever the Corporation determines that a reduction or waiver 
is warranted, it may reduce or waive any fees imposed for furnishing 
requested information pursuant to this section.
[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.12  Penalties.

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

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



Sec. 310.13  Exemptions.

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

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

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

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

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

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

30-64-0009--Examiner training and education records.
[42 FR 6797, Feb. 4, 1977, as amended at 42 FR 33720, July 1, 1977; 54 
FR 38507, Sept. 19, 1989; 61 FR 43420, Aug. 23, 1996]



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




Sec.
311.1  Purpose.
311.2  Definitions.

[[Page 133]]

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

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

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



Sec. 311.1  Purpose.

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



Sec. 311.2  Definitions.

    For purposes of this part:
    (a) Board means Board of Directors of the Federal Deposit Insurance 
Corporation and includes any subdivision of the Board authorized to act 
on behalf of the Corporation.
    (b) Meeting means the deliberations (including those conducted by 
conference telephone call, or by any other method) of at least three 
members where such deliberations determine or result in the joint 
conduct or disposition of agency business but does not include:
    (1) Deliberations to determine whether meetings will be open or 
closed or whether information pertaining to closed meetings will be 
withheld;
    (2) Informal background discussions among Board members and staff 
which clarify issues and expose varying views;
    (3) Decision-making by circulating written material to individual 
Board members;
    (4) Sessions with individuals from outside the Corporation where 
Board members listen to a presentation and may elicit additional 
information.
    (c) Member means a member of the Board.
    (d) Open to public observation and open to the public mean that 
individuals may witness the meeting, but not participate in the 
deliberations. The meeting may be recorded, photographed, or otherwise 
reproduced if the reproduction does not disturb the meeting.
    (e) Public announcement and publicly announce mean making reasonable 
effort under the particular circumstances of each case to fully inform 
the public. This may include posting notice on the Corporation's public 
notice bulletin board maintained in the lobby of its offices located at 
550 17th Street, NW., Washington, DC 20429, issuing a press release and 
employing other methods of notification that may be desirable in a 
particular situation.
[42 FR 14675, Mar. 16, 1977, as amended at 42 FR 59494, Nov. 18, 1977; 
54 FR 38965, Sept. 22, 1989; 61 FR 38357, July 24, 1996]



Sec. 311.3  Meetings.

    (a) Open meetings. Except as provided in paragraph (b) of this 
section, every portion of every meeting of the Corporation's Board will 
be open to public observation. Board members will not jointly conduct or 
dispose of Corporation business other than in accordance with this part.
    (b) When meetings may be closed and announcements and disclosures 
withheld. Except where the Board finds that the public interest requires 
otherwise, a meeting or portion thereof may be closed, and announcements 
and disclosure pertaining thereto may be withheld when the Board 
determines that such meeting or portion of the meeting or the disclosure 
of such information is likely to:
    (1) Disclose matters that are: (i) Specifically authorized under 
criteria established by an Executive order to be kept secret in the 
interests of national defense or foreign policy and (ii) in fact 
properly classified pursuant to such Executive order;
    (2) Relate solely to the internal personnel rules and practices of 
the Corporation;
    (3) Disclose matters specifically exempted from disclosure by 
statute (other than the Freedom of Information Act, 5 U.S.C. 552): 
Provided, That such statute: (i) Requires that the matters be withheld 
from the public in such a manner as to leave no discretion on the issue, 
or (ii) establishes particular types of matters to be withheld;

[[Page 134]]

    (4) Disclose trade secrets and commercial or financial information 
obtained from a person and privileged or confidential;
    (5) Involve accusing any person of a crime, or formally censuring 
any person;
    (6) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Disclose investigatory records compiled for law enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would: (i) Interfere with enforcement proceedings, (ii) 
deprive a person of a right to a fair trial or an impartial 
adjudication, (iii) constitute an unwarranted invasion of personal 
privacy, (iv) disclose the identity of a confidential source, (v) 
disclose investigative techniques and procedures, or (vi) endanger the 
life or physical safety of law enforcement personnel;
    (8) Disclose information contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the Corporation or any other agency responsible for the 
supervision of financial institutions;
    (9) Disclose information the premature disclosure of which would be 
likely to:
    (i)(A) Lead to significant financial speculation in currencies, 
securities, or commodities, or
    (B) Significantly endanger the stability of any financial 
institution; or
    (ii) Significantly frustrate implementation of a proposed 
Corporation action, except that this paragraph (b)(9)(ii) shall not 
apply in any instance where the Corporation has already disclosed to the 
public the content or nature of its proposed action, or where the 
Corporation is required by law to make such disclosure on its own 
initiative prior to taking final action on such proposal; or
    (10) Specifically concern the Corporation's issuance of a subpoena, 
or the Corporation's participation in a civil action or proceeding, an 
action in a foreign court or international tribunal, or an arbitration, 
or the initiation, conduct, or disposition by the Corporation of a 
particular case of formal agency adjudication pursuant to the procedures 
in 5 U.S.C. 554 or otherwise involving a determination on the record 
after opportunity for a hearing.



Sec. 311.4  Procedures for announcing meetings.

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

[[Page 135]]

    (2) The Corporation publicly announces the change and the vote of 
each member upon such change at the earliest practicable time, which may 
be later than the commencement of the meeting.
    (e) Publication of announcements in Federal Register. Immediately 
following each public announcement under this section, such announcement 
will be submitted for publication in the Federal Register by the Office 
of the Executive Secretary.



Sec. 311.5  Regular procedure for closing meetings.

    (a) Scope. Unless Sec. 311.6 is applicable, the procedures for 
closing meetings will be those set forth in this section.
    (b) Procedure. (1) A decision to close a meeting or portion of a 
meeting will be taken only when a majority of the entire Board votes to 
take such action. In deciding whether to close a meeting or portion of a 
meeting, the Board will consider whether the public interest requires an 
open meeting. A separate vote of the Board will be taken with respect to 
each meeting which is proposed to be closed in whole or in part to the 
public. A single vote may be taken with respect to a series of meetings 
which are proposed to be closed in whole or in part to the public, or 
with respect to any information concerning such series of meetings, so 
long as each meeting in the series involves the same particular matters 
and is scheduled to be held no more than thirty days after the initial 
meeting in the series. The vote of each Board member will be recorded 
and no proxies will be allowed.
    (2) Any individual whose interests may be directly affected may 
request that the Corporation close any portion of a meeting for any of 
the reasons referred to in paragraph (b) (5), (6), or (b)(7) of 
Sec. 311.3. Requests should be directed to the Office of the Executive 
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429. After receiving notice that an individual desires 
a portion of a meeting to be closed, the Board, upon request of any one 
of its members, will vote by recorded vote whether to close the relevant 
portion of the meeting. This procedure will apply even if the 
individual's request is made subsequent to the announcement of a 
decision to hold an open meeting.
    (3) The Corporation's General Counsel will make the public 
certification required by Sec. 311.7.
    (4) Within 1 day after any vote taken pursuant to paragraphs (b)(1) 
or (2) of this section, the Corporation will make publicly available a 
written copy of the vote, reflecting the vote of each Board member. 
Except to the extent that such information is exempt from disclosure, if 
a meeting or portion of a meeting is to be closed to the public, the 
Corporation will make publicly available within 1 day after the required 
vote a full written explanation of its action, together with a list of 
all persons expected to attend the meeting and their affiliation.
    (5) The Corporation will publicly announce the time, place, and 
subject matter of the meeting, with determinations as to open and closed 
portions, in the manner and within the time limits prescribed in 
Sec. 311.4.
[42 FR 14675, Mar. 16, 1977; 42 FR 16616, Mar. 29, 1977, as amended at 
42 FR 59494, Nov. 18, 1977]



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

    (a) Scope. Since a majority of its meetings may properly be closed 
pursuant to paragraph (b)(4), (8), (9)(i), or (b)(10) of Sec. 311.3, 
subsection (d)(4) of the Government in the Sunshine Act (5 U.S.C. 552b) 
allows the Corporation to use expedited procedures in closing meetings 
under these four subparagraphs. Absent a compelling public interest to 
the contrary, meetings or portions of meetings that can be expected to 
be closed using these procedures include, but are not limited to: 
Administrative enforcement proceedings under section 8 of the Federal 
Deposit Insurance Act (12 U.S.C. 1818); appointment of the Corporation 
as conservator of a depository institution, or as receiver, liquidator 
or liquidating agent of a closed depository institution or a depository 
institution in danger of closing; and certain management and liquidation 
activities pursuant to such appointments; possible financial assistance 
by the Corporation under section 13 of the Federal Deposit Insurance Act

[[Page 136]]

(12 U.S.C. 1823); certain depository institution applications including 
applications to establish or move branches, applications to merge, and 
applications for insurance; and investigatory activity under section 
10(c) of the Federal Deposit Insurance Act (12 U.S.C. 1820(c)). In 
announcing and closing meetings or portions of meetings under this 
section, the following procedures will be observed.
    (b) Announcement. Except to the extent that such information is 
exempt from disclosure under the provisions of Sec. 311.3(b) the 
Corporation will make public announcement of the time, place and subject 
matter of the meeting and of each portion thereof at the earliest 
practicable time. This announcement will be published in the Federal 
Register if publication can be effected at least 1 day prior to the 
scheduled date of the meeting.
    (c) Procedure for closing. (1) The Corporation's General Counsel 
will make the public certification required by Sec. 311.7.
    (2) At the beginning of a meeting or portion of a meeting to be 
closed under this section, a recorded vote of the Board will be taken. 
The Board will determine by its vote whether to proceed with the 
closing. If a majority of the entire Board votes to close, the meeting 
will be closed to public observation. Even though a meeting or portion 
thereof could properly be closed under this section, a majority of the 
entire Board may find that the public interest requires an open session 
and vote, reflecting the vote of each Board member, will be made 
available to the public.
[42 FR 14675, Mar. 16, 1977; 42 FR 16616, Mar. 29, 1977, as amended at 
54 FR 38965, Sept. 22, 1989]



Sec. 311.7  General Counsel certification.

    For every meeting or portion thereof closed under Sec. 311.5 or 
Sec. 311.6, the Corporation's General Counsel will publicly certify 
that, in the opinion of such General Counsel, the meeting may be closed 
to the public and will state each relevant exemptive provision. In the 
absence of the General Counsel, the next ranking official in the Legal 
Division may perform the certification. If the General Counsel and such 
next ranking official in the Legal Division are both absent, the 
official in the Legal Division who is then next in rank may provide the 
required certification. A copy of this certification, together with a 
statement from the presiding officer of the meeting setting forth the 
time and place of the meeting, and the persons present, will be retained 
in the Board's permanent files.
[42 FR 14675, Mar. 16, 1977, as amended at 61 FR 38357, July 24, 1996]



Sec. 311.8  Transcripts and minutes of meetings.

    (a) When required. The Corporation will maintain a complete 
transcript, identifying each speaker, to record fully the proceedings of 
each meeting or portion of a meeting closed to the public, except that 
in the case of a meeting or portions of a meeting closed to the public 
pursuant to paragraph (b)(8), (9)(i), or (10) of Sec. 311.3, the 
Corporation may, in lieu of a transcript, maintain a set of minutes.
    (b) Content of minutes. If minutes are maintained, they will fully 
and clearly describe all matters discussed and will provide a full and 
accurate summary of any actions taken, and the reasons for taking such 
action. Minutes will also include a description of each of the views 
expressed by each person in attendance on any item and the record of any 
roll call vote, reflecting the vote of each member. All documents 
considered in connection with any action will be identified in the 
minutes.
    (c) Available material. The Corporation will maintain a complete 
verbatim copy of the transcript or minutes of each meeting or portion of 
a meeting closed to the public for a period of at least 2 years after 
the meeting, or until 1 year after the conclusion of any proceeding with 
respect to which the meeting or portion was held, whichever occurs 
later. The Corporation will make promptly available to the public the 
transcript, identifying each speaker, or minutes of items on the agenda 
or testimony of any witness received at the closed meeting except that 
in cases where the Privacy Act of 1974 (5 U.S.C. 552a) does not apply, 
the Corporation may withhold information exempt from disclosure under 
Sec. 311.3(b). For the convenience of members of the public

[[Page 137]]

who may be unable to attend open meetings of the Board, the Corporation 
will maintain for at least 2 years a set of minutes of each meeting of 
the Board or portion thereof open to public observation.
    (d) Procedures for inspecting or copying available material. (1) An 
individual may inspect materials made available under paragraph (c) of 
this section at the Office of the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, N.W., Washington, DC 20429, 
during normal business hours. If the individual desires a copy of such 
material, the Corporation will furnish copies at a cost of 10 cents per 
page. Whenever the Corporation determines that in the public interest a 
reduction or waiver is warranted, it may reduce or waive any fees 
imposed under this section.
    (2) An individual may also submit a written request for transcripts 
or minutes, reasonably identifying the records sought, to the Office of 
the Executive Secretary, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429.
    (e) Procedures for obtaining documents identified in minutes. Copies 
of documents identified in minutes or considered by the Board in 
connection with any action identified in the minutes may be made 
available to the public upon request, to the extent permitted by the 
Freedom of Information Act, under the provisions of 12 CFR part 309, 
Disclosure of Information.
[42 FR 14675, Mar. 16, 1977, as amended at 61 FR 38357, July 24, 1996]



PART 312--ASSESSMENT OF FEES UPON ENTRANCE TO OR EXIT FROM THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND--Table of Contents




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

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

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



Sec. 312.1  Definitions.

    For purposes of this part:
    (a) The term Bank Insurance Fund shall mean the fund established by 
section 11(a)(5) of the Federal Deposit Insurance Act, 12 U.S.C. 
1821(a)(5). The term Savings Association Insurance Fund shall mean the 
fund established by section 11(a)(6) of the Federal Deposit Insurance 
Act, 12 U.S.C. 1821(a)(6).
    (b) The terms Bank Insurance Fund member and Savings Association 
Insurance Fund member shall have the meanings given them in sections 
7(l) (4) and (5) of the Federal Deposit Insurance Act, 12 U.S.C. 1817(l) 
(4), (5), respectively.
    (c) The term Bank Insurance Fund reserve ratio shall mean the ratio 
of the net worth of the Bank Insurance Fund to the value of the 
aggregate total domestic deposits held in all Bank Insurance Fund 
members. The term ``Savings Association Insurance Fund reserve ratio'' 
shall mean the ratio of the value of the net worth of the Savings 
Association Insurance Fund to the value of the aggregate total domestic 
deposits held in all Savings Association Insurance Fund members.
    (d) The term conversion transaction shall have the meaning given it 
in section 5(d)(2)(B) of the Federal Deposit Insurance Act, 12 U.S.C. 
1815(d)(2)(B).
    (e) The terms default and in danger of default shall have the 
meanings given

[[Page 138]]

them in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 
1813(x).
    (f) The term deposit broker shall have the meaning given it in 
section 29 of the Federal Deposit Insurance Act, 12 U.S.C. 1831f.
    (g) The term entrance fee deposit base generally refers to those 
deposits which the Federal Deposit Insurance Corporation, in its 
discretion, estimates to have a high probability of remaining with the 
acquiring or resulting depository institution for a reasonable period of 
time following the acquisition, in excess of those deposits that would 
have remained in the insurance fund of the depository institution in 
default or in danger of default had such institution been resolved by 
means of an insured deposit transfer. The estimated dollar amount of the 
entrance fee deposit base shall be determined on a case-by-case basis by 
the Federal Deposit Insurance Corporation at the time offers to acquire 
an insured depository institution (or any part thereof) are solicited by 
the Federal Deposit Insurance Corporation or the Resolution Trust 
Corporation.
    (h) The term insured deposit transfer shall mean a transaction 
wherein the insured deposits of an insured depository institution in 
default or in danger of default, are paid by means of a transferred 
deposit pursuant to a written agreement between the Federal Deposit 
Insurance Corporation or the Resolution Trust Corporation and an insured 
depository institution. The term transferred deposit shall have the 
meaning given it in section 3(n) of the Federal Deposit Insurance Act, 
12 U.S.C. 1813 (n).
    (i) The term premium shall mean the amount paid by an insured 
depository institution in consideration for the right to enter into an 
insured deposit transfer agreement. The premium shall not include the 
amount of any transferred deposits, nor shall the premium include any 
amount paid for the purchase of assets or the right to purchase assets 
of a depository institution in default or in danger of default.
    (j) The term retained deposit base shall mean the total deposits 
transferred from a Savings Association Insurance Fund Member to a Bank 
Insurance Fund Member, or from a Bank Insurance Fund member to a Savings 
Association Insurance Fund member, less the following deposits:
    (1) Any deposit acquired, directly or indirectly, by or through any 
deposit broker; and
    (2) Any portion of any deposit account exceeding $80,000.
[54 FR 40380, Oct. 2, 1989; 54 FR 43521, Oct. 25, 1989, as amended at 55 
FR 10412, Mar. 21, 1990]



Sec. 312.2  Bank Insurance Fund reserve ratio.

    The Bank Insurance Fund reserve ratio to be used in computing the 
entrance fee under this part with respect to any particular conversion 
transaction shall be the most recent Bank Insurance Fund reserve ratio 
calculated quarterly by the Federal Deposit Insurance Corporation prior 
to the date on which deposit liabilities are transferred from a Savings 
Association Insurance Fund member to a Bank Insurance Fund member in 
connection with that conversion transaction.
[56 FR 29895, July 1, 1991]



Sec. 312.3  Savings Association Insurance Fund reserve ratio.

    The Savings Association Insurance Fund reserve ratio to be used in 
computing the entrance fee under this part with respect to any 
particular conversion transaction shall be the most recent Savings 
Association Insurance Fund reserve ratio calculated quarterly by the 
Federal Deposit Insurance Corporation prior to the date on which deposit 
liabilities are transferred from a Bank Insurance Fund member to a 
Savings Association Insurance Fund member in connection with that 
conversion transaction.
[56 FR 29895, July 1, 1991]



Sec. 312.4  Entrance fees assessed in connection with conversion transactions from the Savings Association Insurance Fund to the Bank Insurance Fund.

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Savings Association Insurance Fund member to a Bank 
Insurance Fund

[[Page 139]]

member shall pay an entrance fee to the Bank Insurance Fund.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Savings Association 
Insurance Fund member to the Bank Insurance Fund member by the Bank 
Insurance Fund reserve ratio.
    (c) Notwithstanding paragraph (b) of this section, the entrance fee 
to be assessed against an insured depository institution participating 
in a conversion transaction:
    (1) Occurring in connection with the acquisition of a Savings 
Association Insurance Fund member in default or in danger of default, or
    (2) Otherwise arranged by the Federal Deposit Insurance Corporation 
in its capacity as exclusive manager of the Resolution Trust 
Corporation, shall be the product derived by multiplying the dollar 
amount of the entrance fee deposit base transferred from the Savings 
Association Insurance Fund member to the Bank Insurance Fund member by 
the Bank Insurance Fund ratio.
[55 FR 10413, Mar. 21, 1990]



Sec. 312.5  Exit fees assessed in connection with conversion transactions from the Savings Association Insurance Fund to the Bank Insurance Fund.

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Savings Association Insurance Fund member to a Bank 
Insurance Fund member shall pay an exit fee.
    (b) The exit fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Savings Association 
Insurance Fund member to the Bank Insurance Fund member by 0.90 percent 
(0.0090).
    (c) Notwithstanding paragraph (b) of this section, the exit fee to 
be assessed against an insured depository institution participating in a 
conversion transaction:
    (1) Occurring in connection with the acquisition of a Savings 
Association Insurance Fund member in default or in danger of default, or
    (2) Otherwise arranged by the Federal Deposit Insurance Corporation 
in its capacity as exclusive manager of the Resolution Trust 
Corporation, shall be the product derived by multiplying the dollar 
amount of the retained deposit base transferred from the Savings 
Association Insurance Fund member to the Bank Insurance Fund member by 
0.90 percent (0.0090).
    (d) The exit fee required to be paid by this section shall be paid 
to the Savings Association Insurance Fund or, if the Secretary of the 
Treasury determines that the Financing Corporation has exhausted all 
other sources of funding for interest payments on the obligations of the 
Financing Corporation and orders that such exit fee be paid to the 
Financing Corporation.
    (e) Exit fees paid to the Savings Association Insurance Fund 
pursuant to paragraph (d) of this section shall be held in a reserve 
account until such time as the Federal Deposit Insurance Corporation and 
the Secretary of the Treasury determine that it is not necessary to 
reserve such funds for the payment of interest on the obligations of the 
Financing Corporation.
    (f) Before January 1, 1997, amendments to this section shall be 
determined jointly by the Federal Deposit Insurance Corporation and the 
Secretary of the Treasury.
[55 FR 10413, Mar. 21, 1990]



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

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Bank Insurance Fund member to a Savings Association 
Insurance Fund member shall pay an entrance fee to the Savings 
Association Insurance Fund.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Bank Insurance Fund 
member to the Savings Association Insurance Fund member by the Savings 
Association Insurance Fund reserve ratio, or by .01 percent (0.0001), 
whichever is greater.

[[Page 140]]

    (c) Notwithstanding paragraph (b) of this section, the entrance fee 
to be assessed against an insured depository institution participating 
in a conversion transaction occurring in connection with the acquisition 
of a Bank Insurance Fund member in default or in danger of default shall 
be the product derived by multiplying the dollar amount of the entrance 
fee deposit base transferred from the Bank Insurance Fund member to the 
Savings Association Insurance Fund member by the Savings Association 
Insurance Fund reserve ratio, or by .01 percent (0.0001), whichever is 
greater.
    (d) Interim entrance fee until initial calculation of Savings 
Association Insurance Fund reserve ratio. Notwithstanding paragraphs (b) 
and (c) of this section, until such time as the Savings Association 
Insurance Fund reserve ratio is initially calculated and made publicly 
available, the entrance fee for all conversions from the Bank Insurance 
Fund to the Savings Association Insurance Fund shall be the product 
derived by multiplying the dollar amount of total deposits transferred 
from the Bank Insurance Fund member to the Savings Association Insurance 
Fund member by .01 percent (0.0001), unless the conversion transaction 
is occurring in connection with the acquisition of a Bank Insurance Fund 
member in default or in danger of default, where it shall be the product 
derived by multiplying the dollar amount of the entrance fee deposit 
base transferred from the Bank Insurance Fund member to the Savings 
Association Insurance Fund member by 0.01 percent (0.0001).
[55 FR 10413, Mar. 21, 1990]



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

    (a) Each insured depository institution participating in a 
conversion transaction as a result of which insured deposits are 
transferred from a Bank Insurance Fund member to a Savings Association 
Insurance Fund member shall pay an exit fee to the Bank Insurance Fund.
    (b) The exit fee shall be the product derived by multiplying the 
dollar amount of total deposits transferred from the Bank Insurance Fund 
member to the Savings Association Insurance Fund member by .01 percent 
(0.0001).
    (c) Notwithstanding paragraph (b) of this section, the exit fee to 
be assessed against an insured depository institution participating in a 
conversion transaction occurring in connection with the acquisition of a 
Bank Insurance Fund member in default or in danger of default shall be 
the product derived by multiplying the dollar amount of the retained 
deposit base transferred from the Bank Insurance Fund member to the 
Savings Association Insurance Fund member by 0.01 percent (0.0001).
[55 FR 10413, Mar. 21, 1990]



Sec. 312.8  Entrance and exit fees assessed in connection with insured deposit transfers from the Savings Association Insurance Fund to the Bank Insurance Fund.

    (a) Insured deposit transfers resulting in a transfer of insured 
deposits from a Savings Association Insurance Fund member to a Bank 
Insurance Fund member, shall be subject to an entrance fee and an exit 
fee.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Savings Association 
Insurance Fund member in default or in danger of default by the Bank 
Insurance Fund ratio.
    (c) The exit fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Savings Association 
Insurance Fund member in default or in danger of default by 0.90 percent 
(0.0090).
    (d) Notwithstanding paragraphs (a), (b), and (c) of this section, 
the sum total of the entrance fee and the exit fee required by this 
section shall in no event exceed the amount of the premium.
    (e) The entrance and exit fees required by this section shall be 
paid by the acquiring institution from the premium as follows. First, 
the premium shall be allocated in payment of the exit fee to one-third 
of the premium received. Second, the remaining premium shall be 
allocated to the entrance fee. Third, if any premium remains, it shall 
be applied to the remaining balance (if

[[Page 141]]

any) owing on the exit fee. Fourth, any amount remaining after 
application pursuant to steps one through three shall be allocated to 
the Resolution Trust Corporation.
    (f) The entrance fee required by this section shall be paid to the 
Bank Insurance Fund. The exit fee required by this section shall be paid 
to the Savings Association Insurance Fund or, if the Secretary of the 
Treasury determines that the Financing Corporaiton has exhausted all 
other sources of funding for interest payments on the obligations of the 
Financing Corporation and orders that such exit fee be paid to the 
Financing Corporation.
    (g) Exit fees paid to the Savings Association Insurance Fund 
pursuant to paragraph (f) of this section shall be held in a reserve 
account until such time as the Federal Deposit Insurance Corporation and 
the Secretary of the Treasury determine that it is not necessary to 
reserve such funds for the payment of interest on the obligations of the 
Financing Corporation.
    (h) Insured deposit transfers occurring before March 21, 1990 shall 
not be subject to the assessment of entrance or exit fees.
    (i) Before January 1, 1997, amendments to this section concerning 
exit fees assessed in connection with insured deposit transfers from the 
Savings Association Insurance Fund to the Bank Insurance Fund shall be 
determined jointly by the Federal Deposit Insurance Corporation and the 
Secretary of the Treasury.
[55 FR 10414, Mar. 21, 1990]



Sec. 312.9  Entrance and exit fees assessed in connection with insured deposit transfers from the Bank Insurance Fund to the Savings Association Insurance Fund.

    (a) Insured deposit transfers resulting in a transfer of insured 
deposits from a Bank Insurance Fund member to a Savings Association 
Insurance Fund member, shall be subject to an entrance fee and in exit 
fee.
    (b) The entrance fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Bank Insurance Fund 
member in default or in danger of default by the Savings Association 
Insurance Fund ratio or by .01 percent (0.0001), whichever is greater.
    (c) The exit fee shall be the product derived by multiplying the 
dollar amount of the retained deposit base of the Bank Insurance Fund 
member by 0.01 percent (0.0001).
    (d) Notwithstanding paragraphs (a), (b), and (c) of this section, 
the sum total of the entrance fee and the exit fee required by this 
section shall in no event exceed the amount of the premium.
    (e) The entrance and exit fees required by this section shall be 
paid by the acquiring institution from the premium as follows. First, 
the premium shall be allocated in payment of the exit fee to one-third 
of the premium received. Second, the remaining premium will be allocated 
to the entrance fee. Third, if any premium remains, it shall be applied 
to the remaining balance (if any) owing on the exit fee. Fourth, any 
amount remaining after application pursuant to steps one through three 
shall be allocated to the Federal Deposit Insurance Corporation.
    (f) The entrance fee required by this section shall be paid to the 
Savings Association Insurance Fund. The exit fee required by this 
section shall be paid to the Bank Insurance Fund.
    (g) Insured deposit transfers occurring before March 21, 1990 shall 
not be subject to the assessment of entrance or exit fees.
[55 FR 10414, Mar. 21, 1990]



Sec. 312.10  Payment of entrance and exit fees.

    (a) A resulting or acquiring depository institution shall be liable 
for the payment of the entrance and exit fees required by this part.
    (b) Notwithstanding paragraph (a) of this section, an acquiring 
depository institution participating in an insured deposit transfer 
pursuant to Sec. 312.8 or Sec. 312.9 of this part shall pay the entrance 
and exit fees from the premium, and in any event, shall not be liable 
for the payment of that portion of the entrance and exit fees that 
exceeds the premium paid by such acquiring depository institution.
    (c) The ``conversion transaction payment date'' shall be either 
March 31st or September 30th, whichever occurs

[[Page 142]]

first following the expiration of 30 days from the date the deposits are 
transferred.
    (d) A resulting or acquiring depository institution shall pay the 
entrance and exit fees required by this part on the conversion 
transaction payment date.
    (e) Notwithstanding paragraph (d) of this section, where the sum of 
the entrance and exit fees required to be paid by an insured depository 
institution pursuant to Secs. 312.4, 312.5, 312.6, or 312.7 of this part 
exceeds $5,000, a resulting or acquiring depository institution may, at 
its option, and upon notification to the Federal Deposit Insurance 
Corporation, pay the entrance and exit fees in equal annual 
installments, interest-free, over a period of not more than five years. 
The first such installment shall be paid on the date described in 
paragraph (c) of this section.
    (f) Entrance and exit fees required to be paid by an insured 
depository institution as the result of an insured deposit transfer 
pursuant to Secs. 312.8 or 312.9 of this part shall be paid on the 
conversion transaction payment date described in paragraph (c) of this 
section.
[55 FR 10414, Mar. 21, 1990]

[[Page 143]]



       SUBCHAPTER B--REGULATIONS AND STATEMENTS OF GENERAL POLICY





PART 323--APPRAISALS--Table of Contents




Sec.
323.1  Authority, purpose, and scope.
323.2  Definitions.
323.3  Appraisals required; transactions requiring a State certified or 
          licensed appraiser.
323.4  Minimum appraisal standards.
323.5  Appraiser independence.
323.6  Professional association membership; competency.
323.7  Enforcement.

    Authority:  12 U.S.C. 1818, 1819 [``Seventh'' and ``Tenth''], and 
3331-3352.

    Source:  55 FR 33888, Aug. 20, 1990, unless otherwise noted.



Sec. 323.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under 12 U.S.C. 1818, 1819 
[``Seventh'' and ``Tenth''] and title XI of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (``FIRREA'') (Pub. L. 101-
73, 103 Stat. 183, 12 U.S.C. 3331 et seq. (1989)).
    (b) Purpose and scope. (1) Title XI provides protection for federal 
financial and public policy interests in real estate related 
transactions by requiring real estate appraisals used in connection with 
federally related transactions to be performed in writing, in accordance 
with uniform standards, by appraisers whose competency has been 
demonstrated and whose professional conduct will be subject to effective 
supervision. This part implements the requirements of title XI and 
applies to all federally related transactions entered into by the FDIC 
or by institutions regulated by the FDIC (regulated institutions).
    (2) This part: (i) Identifies which real estate-related financial 
transactions require the services of an appraiser;
    (ii) Prescribes which categories of federally related transactions 
shall be appraised by a State certified appraiser and which by a State 
licensed appraiser; and
    (iii) Prescribes minimum standards for the performance of real 
estate appraisals in connection with federally related transactions 
under the jurisdiction of the FDIC.



Sec. 323.2  Definitions.

    (a) Appraisal means a written statement independently and 
impartially prepared by a qualified appraiser setting forth an opinion 
as to the market value of an adequately described property as of a 
specific date(s), supported by the presentation and analysis of relevant 
market information.
    (b) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, as a not-for-profit corporation under the laws of 
Illinois.
    (c) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (d) Business loan means a loan or extension of credit to any 
corporation, general or limited partnership, business trust, joint 
venture, pool, syndicate, sole proprietorship, or other business entity.
    (e) Complex 1-to-4 family residential property appraisal means one 
in which the property to be appraised, the form of ownership, or market 
conditions are atypical.
    (f) Federally related transaction means any real estate-related 
financial transactions entered into after the effective date hereof 
that:
    (1) The FDIC or any regulated institution engages in or contracts 
for; and
    (2) Requires the services of an appraiser.
    (g) Market value means the most probable price which a property 
should bring in a competitive and open market under all conditions 
requisite to a fair sale, the buyer and seller each acting prudently and 
knowledgeably, and assuming the price is not affected by undue stimulus. 
Implicit in this definition is the consummation of a sale as of a 
specified date and the passing of title from seller to buyer under 
conditions whereby:
    (1) Buyer and seller are typically motivated;

[[Page 144]]

    (2) Both parties are well informed or well advised, and acting in 
what they consider their own best interests;
    (3) A reasonable time is allowed for exposure in the open market;
    (4) Payment is made in terms of cash in U.S. dollars or in terms of 
financial arrangements comparable thereto; and
    (5) The price represents the normal consideration for the property 
sold unaffected by special or creative financing or sales concessions 
granted by anyone associated with the sale.
    (h) Real estate or real property means an identified parcel or tract 
of land, with improvements, and includes easements, rights of way, 
undivided or future interests and similar rights in a tract of land, but 
does not include mineral rights, timber rights, growing crops, water 
rights and similar interests severable from the land when the 
transaction does not involve the associated parcel or tract of land.
    (i) Real estate-related financial transaction means any transaction 
involving:
    (1) The sale, lease, purchase, investment in or exchange of real 
property, including interests in property, or the financing thereof; or
    (2) The refinancing of real property or interests in real property; 
or
    (3) The use of real property or interests in property as security 
for a loan or investment, including mortgage-backed securities.
    (j) State certified appraiser means any individual who has satisfied 
the requirements for certification in a State or territory whose 
criteria for certification as a real estate appraiser currently meet the 
minimum criteria for certification issued by the Appraiser 
Qualifications Board of the Appraisal Foundation. No individual shall be 
a State certified appraiser unless such individual has achieved a 
passing grade upon a suitable examination administered by a State or 
territory that is consistent with and equivalent to the Uniform State 
Certification Examination issued or endorsed by the Appraiser 
Qualifications Board. In addition, the Appraisal Subcommittee must not 
have issued a finding that the policies, practices, or procedures of a 
State or territory are inconsistent with title XI of FIRREA. The FDIC 
may, from time to time, impose additional qualification criteria for 
certified appraisers performing appraisals in connection with federally 
related transactions within its jurisdiction.
    (k) State licensed appraiser means any individual who has satisfied 
the requirements for licensing in a State or territory where the 
licensing procedures comply with title XI of FIRREA and where the 
Appraisal Subcommittee has not issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI. The FDIC may, from time to time, impose additional 
qualification criteria for licensed appraisers performing appraisals in 
connection with federally related transactions within its jurisdiction.
    (l) Tract development means a project of five units or more that is 
constructed or is to be constructed as a single development.
    (m) Transaction value means: (1) For loans or other extensions of 
credit, the amount of the loan or extension of credit;
    (2) For sales, leases, purchases, and investments in or exchanges of 
real property, the market value of the real property interest involved; 
and
    (3) For the pooling of loans or interests in real property for 
resale or purchase, the amount of the loan or market value of the real 
property calculated with respect to each such loan or interest in real 
property.
[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9049, Mar. 16, 1992; 59 
FR 29501, June 7, 1994]



Sec. 323.3  Appraisals required; transactions requiring a State certified or licensed appraiser.

    (a) Appraisals required. An appraisal performed by a State certified 
or licensed appraiser is required for all real estate-related financial 
transactions except those in which:
    (1) The transaction value is $250,000 or less;
    (2) A lien on real estate has been taken as collateral in an 
abundance of caution;
    (3) The transaction is not secured by real estate;

[[Page 145]]

    (4) A lien on real estate has been taken for purposes other than the 
real estate's value;
    (5) The transaction is a business loan that:
    (i) Has a transaction value of $1 million or less; and
    (ii) Is not dependent on the sale of, or rental income derived from, 
real estate as the primary source of repayment;
    (6) A lease of real estate is entered into, unless the lease is the 
economic equivalent of a purchase or sale of the leased real estate;
    (7) The transaction involves an existing extension of credit at the 
lending institution, provided that:
    (i) There has been no obvious and material change in market 
conditions or physical aspects of the property that threatens the 
adequacy of the institution's real estate collateral protection after 
the transaction, even with the advancement of new monies; or
    (ii) There is no advancement of new monies, other than funds 
necessary to cover reasonable closing costs;
    (8) The transaction involves the purchase, sale, investment in, 
exchange of, or extension of credit secured by, a loan or interest in a 
loan, pooled loans, or interests in real property, including mortgaged-
backed securities, and each loan or interest in a loan, pooled loan, or 
real property interest met FDIC regulatory requirements for appraisals 
at the time of origination;
    (9) The transaction is wholly or partially insured or guaranteed by 
a United States government agency or United States government sponsored 
agency;
    (10) The transaction either:
    (i) Qualifies for sale to a United States government agency or 
United States government sponsored agency; or
    (ii) Involves a residential real estate transaction in which the 
appraisal conforms to the Federal National Mortgage Association or 
Federal Home Loan Mortgage Corporation appraisal standards applicable to 
that category of real estate;
    (11) The regulated institution is acting in a fiduciary capacity and 
is not required to obtain an appraisal under other law; or
    (12) The FDIC determines that the services of an appraiser are not 
necessary in order to protect Federal financial and public policy 
interests in real estate-related financial transactions or to protect 
the safety and soundness of the institution.
    (b) Evaluations required. For a transaction that does not require 
the services of a State certified or licensed appraiser under paragraph 
(a)(1), (a)(5) or (a)(7) of this section, the institution shall obtain 
an appropriate evaluation of real property collateral that is consistent 
with safe and sound banking practices.
    (c) Appraisals to address safety and soundness concerns. The FDIC 
reserves the right to require an appraisal under this part whenever the 
agency believes it is necessary to address safety and soundness 
concerns.
    (d) Transactions requiring a State certified appraiser--(1) All 
transactions of $1,000,000 or more. All federally related transactions 
having a transaction value of $1,000,000 or more shall require an 
appraisal prepared by a State certified appraiser.
    (2) Nonresidential transactions of $250,000 or more. All federally 
related transactions having a transaction value of $250,000 or more, 
other than those involving appraisals of 1-to-4 family residential 
properties, shall require an appraisal prepared by a State certified 
appraiser.
    (3) Complex residential transactions of $250,000 or more. All 
complex 1-to-4 family residential property appraisals rendered in 
connection with federally related transactions shall require a State 
certified appraiser if the transaction value is $250,000 or more. A 
regulated institution may presume that appraisals of 1-to-4 family 
residential properties are not complex, unless the institution has 
readily available information that a given appraisal will be complex. 
The regulated institution shall be responsible for making the final 
determination of whether the appraisal is complex. If during the course 
of the appraisal a licensed appraiser identifies factors that would 
result in the property, form of ownership, or market conditions being 
considered atypical, then either:

[[Page 146]]

    (i) The regulated institution may ask the licensed appraiser to 
complete the appraisal and have a certified appraiser approve and co-
sign the appraisal; or
    (ii) The institution may engage a certified appraiser to complete 
the appraisal.
    (e) Transactions requiring either a State certified or licensed 
appraiser. All appraisals for federally related transactions not 
requiring the services of a State certified appraiser shall be prepared 
by either a State certified appraiser or a State licensed appraiser.
    (f) Effective date. Regulated institutions are required to use state 
certified or licensed appraisers as set forth in this section no later 
than December 31, 1992, unless otherwise required by law.
[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9050, Mar. 16, 1992; 59 
FR 29501, June 7, 1994]



Sec. 323.4  Minimum appraisal standards.

    For federally related transactions, all appraisals shall, at a 
minimum:
    (a) Conform to generally accepted appraisal standards as evidenced 
by the Uniform Standards of Professional Appraisal Practice (USPAP) 
promulgated by the Appraisal Standards Board of the Appraisal 
Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless 
principles of safe and sound banking require compliance with stricter 
standards;
    (b) Be written and contain sufficient information and analysis to 
support the institution's decision to engage in the transaction;
    (c) Analyze and report appropriate deductions and discounts for 
proposed construction or renovation, partially leased buildings, non-
market lease terms, and tract developments with unsold units;
    (d) Be based upon the definition of market value as set forth in 
this part; and
    (e) Be performed by State licensed or certified appraisers in 
accordance with requirements set forth in this part.
[59 FR 29502, June 7, 1994]



Sec. 323.5  Appraiser independence.

    (a) Staff appraisers. If an appraisal is prepared by a staff 
appraiser, that appraiser must be independent of the lending, 
investment, and collection functions and not involved, except as an 
appraiser, in the federally related transaction, and have no direct or 
indirect interest, financial or otherwise, in the property. If the only 
qualified persons available to perform an appraisal are involved in the 
lending, investment, or collection functions of the regulated 
institution, the regulated institution shall take appropriate steps to 
ensure that the appraisers exercise independent judgment and that the 
appraisal is adequate. Such steps include, but are not limited to, 
prohibiting an individual from performing appraisals in connection with 
federally related transactions in which the appraiser is otherwise 
involved and prohibiting directors and officers from participating in 
any vote or approval involving assets on which they performed an 
appraisal.
    (b) Fee appraisers. (1) If an appraisal is prepared by a fee 
appraiser, the appraiser shall be engaged directly by the regulated 
institution or its agent, and have no direct or indirect interest, 
financial or otherwise, in the property or the transaction.
    (2) A regulated institution also may accept an appraisal that was 
prepared by an appraiser engaged directly by another financial services 
institution, if:
    (i) The appraiser has no direct or indirect interest, financial or 
otherwise, in the property or the transaction; and
    (ii) The regulated institution determines that the appraisal 
conforms to the requirements of this part and is otherwise acceptable.
[55 FR 33888, Aug. 20, 1990, as amended by 59 FR 29502, June 7, 1994]



Sec. 323.6  Professional association membership; competency.

    (a) Membership in appraisal organizations. A State certified 
appraiser or a State licensed appraiser may not be excluded from 
consideration for an assignment for a federally related transaction 
solely by virtue of membership or lack of membership in any particular 
appraisal organization.
    (b) Competency. All staff and fee appraisers performing appraisals 
in connection with federally related transactions must be State 
certified or licensed, as appropriate. However, a

[[Page 147]]

State certified or licensed appraiser may not be considered competent 
solely by virtue of being certified or licensed. Any determination of 
competency shall be based upon the individual's experience and 
educational background as they relate to the particular appraisal 
assignment for which he or she is being considered.



Sec. 323.7  Enforcement.

    Institutions and institution-affiliated parties, including staff 
appraisers and fee appraisers, may be subject to removal and/or 
prohibition orders, cease and desist orders, and the imposition of civil 
money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 
1811 et seq., as amended, or other applicable law.



PART 324--AGRICULTURAL LOAN LOSS AMORTIZATION--Table of Contents




Sec.
324.1  Authority.
324.2  Definitions.
324.3  Loss amortization and reappraisal.
324.4  Accounting for amortization.
324.5  Eligibility.
324.6  Conditions on acceptance.
324.7  Submission of proposals.
324.8  Revocation of eligibility.
324.9  Other administrative actions.

    Authority:  12 U.S.C. 1823(j), 1819, and 12 U.S.C. 1811-1831.

    Source:  52 FR 41968, Nov. 2, 1987, unless otherwise noted.

    Effective Date Note:  At 61 FR 33843, July 1, 1996, Part 324 was 
removed, effective Jan. 1, 1999.



Sec. 324.1  Authority.

    This part is issued by the Federal Deposit Insurance Corporation 
(Corporation) pursuant to 12 U.S.C. 1823(j), 1819, and other provisions 
of the Federal Deposit Insurance Act (12 U.S.C. 1811-31d).



Sec. 324.2  Definitions.

    For purposes of this part:
    (a) Agricultural Bank means a state nonmember bank, except a 
district bank,
    (1) The deposits of which are insured by the Corporation;
    (2) Which is located in an area of the country the economy of which 
is dependent on agriculture;
    (3) Which has total assets of $100 million or less as of the most 
recent Report of Condition; and
    (4) Which has--(i) At least 25 percent of its total loans in 
qualified agricultural loans and agriculturally related other property 
as defined below; or
    (ii) Less than 25 percent of its total loans in qualified 
agricultural loans and agriculturally related other property, but which 
bank the appropriate state banking authority has recommended to the 
Corporation and which the Corporation accepts for eligibility under this 
part or which the Corporation on its own motion deems eligible 
hereunder.
    (b) Qualified agricultural loan means--(1) Loans qualifying as loans 
to finance agricultural production and other loans to farmers or as 
loans secured by farmland for purpose of Schedule RC-C of the FFIEC 
Consolidated Reports of Condition and Income or such other comparable 
schedule as may be in effect;
    (2) Loans secured by farm machinery;
    (3) Other loans and leases that a bank proves to be sufficiently 
related to agriculture for classification as an agricultural loan by the 
Corporation;
    (4) The remaining unpaid balance of any loans as described in 
paragraphs (b) (1), (2) and (3) of this section that have been charged-
off since January 1, 1984, and that qualify for deferral under this 
regulation.
    (c) Agriculturally related other property means any property, real 
or personal, that a bank owned on January 1, 1983, and any such 
additional property that it acquires prior to January 1, 1992, in 
connection with a qualified agricultural loan. For purposes of 
Secs. 324.2(a)(4)(i) and 324.6(d) the value of such property shall 
include amounts previously charged-off.
    (d) Accepting Official means the Director, Division of Supervision, 
or his designees.
[53 FR 22133, June 14, 1988; 53 FR 36963, Sept. 23, 1988, as amended at 
60 FR 31384, June 15, 1995]

[[Page 148]]



Sec. 324.3  Loss amortization and reappraisal.

    (a) Provided that there is no evidence that the loss resulted from 
fraud or criminal abuse on the part of the bank, its officers, directors 
or principal shareholders, a bank that has been accepted under this part 
may, in the manner described below, amortize on its Reports of Condition 
and Income:
    (1) Any loss on any qualified agricultural loan that the bank would 
be required to reflect in its annual financial statements for any year 
between and including 1984 to 1991; and
    (2) Any loss that the bank would be required to reflect in its 
financial statements for any period between and including 1983 to 1991 
resulting from a reappraisal or sale of agriculturally related other 
property.
    (b) Amortization under this section shall be computed over a period 
not to exceed seven years on a quarterly straight-line basis commencing 
in the first quarter after the loss was or is charged off so as to be 
fully amortized not later than December 31, 1998.
[52 FR 41968, Nov. 2, 1987, as amended at 53 FR 22134, June 14, 1988]



Sec. 324.4  Accounting for amortization.

    Any bank which is permitted to amortize losses in accordance with 
Sec. 324.3 may restate its capital and other relevant accounts and 
account for future authorized deferrals and amortizations in accordance 
with the instructions to the FFIEC Consolidated Reports of Condition and 
Income. Any resulting increase in the capital account shall be included 
in Tier 2 capital under 12 CFR part 325.
[52 FR 41968, Nov. 2, 1987, as amended at 56 FR 23011, May 20, 1991]



Sec. 324.5  Eligibility.

    A proposal submitted in accord with Sec. 324.7 shall be accepted, 
subject to the conditions described in Sec. 324.6, if the Accepting 
Official finds:
    (a) The proposing bank is an agricultural bank;
    (b) The proposing bank's current capital is in need of restoration, 
but the bank remains an economically viable, fundamentally sound 
institution;
    (c) There is no evidence that fraud or criminal abuse by the bank or 
its officers, directors or principal shareholders led to significant 
losses on qualified agricultural loans and agriculturally related other 
property; and
    (d) The proposing bank has submitted a capital plan approved by the 
Corporation or the Accepting Official that will restore its capital to 
an acceptable level.
[52 FR 41968, Nov. 2, 1987, as amended at 53 FR 22134, June 14, 1988]



Sec. 324.6  Conditions on acceptance.

    All acceptances of proposals shall be subject to the following 
conditions:
    (a) The bank shall fully adhere to the approved capital plan and 
shall obtain the prior approval of the Accepting Official for any 
modifications to the plan;
    (b) With respect to each asset subject to loss deferral under the 
program, the bank shall maintain accounting records adequate to document 
the amount and timing of the deferrals, repayments and amortizations;
    (c) The financial condition of the bank shall not deteriorate to the 
point where it is no longer a viable, fundamentally sound institution;
    (d) The bank shall agree to make a reasonable effort, consistent 
with safe and sound banking practices, to maintain a percentage of 
agricultural loans and agriculturally related other property to total 
loans which is not lower than the percentage of such loans in its loan 
portfolio on January 1, 1986; and
    (e) The bank shall agree to provide the Accepting Official, upon 
request, with such information as the Accepting Official deems necessary 
to monitor the bank's amortization, its compliance with conditions, and 
its continued eligibility.
[52 FR 41968, Nov. 2, 1987, as amended at 53 FR 22134, June 14, 1988]



Sec. 324.7  Submission of proposals.

    (a) A bank wishing to amortize losses on qualified agricultural 
loans or agriculturally related other property shall submit a proposal 
to the Division of Supervision regional director of the region in which 
the bank is located.
    (b) The proposal shall contain the following information:

[[Page 149]]

    (1) Name and address of the bank;
    (2) Information establishing that the bank is located in an area, 
the economy of which is dependent on agriculture such as a description 
of the bank's location, dominant lines of commerce in its service area, 
and any other information the bank believes will support the contention 
that the bank is located in an area dependent on agriculture;
    (3) A copy of the bank's most recent Reports of Condition and 
Income;
    (4) If the Report of Condition fails to show that at least 25 
percent of the bank's total loans are qualified agricultural loans, the 
basis upon which the bank believes that it should be declared eligible 
to amortize losses;
    (5) A capital plan demonstrating that the bank will achieve an 
acceptable capital level not later than the end of the bank's 
amortization period (the plan should provide for a realistic improvement 
in the bank's capital, over the course of the bank's amortization 
period, from earnings retention, capital injections, or other sources 
and include specific information regarding dividend levels, compensation 
to directors, executive officers and individuals who have a controlling 
interest, and payments for services or products furnished by affiliated 
companies or companies which are related interests of insiders);
    (6) A list of the loans and agriculturally related other property 
upon which the bank proposes to defer loss including, for each such loan 
or property, the following information:
    (i) The name of the borrower, the amount of the loan that resulted 
in the loss, and the amount of the loss;
    (ii) The date on which the loss was declared;
    (iii) The basis upon which the loss resulted from a qualified 
agricultural loan;
    (7) A certification by the bank's chief executive officer that there 
is no evidence that the losses resulted from fraud or criminal abuse by 
the bank, its officers, directors, or principal shareholders;
    (8) A copy of a resolution by the bank's Board of Directors 
authorizing submission of the proposal; and
    (9) Such other information as the Accepting Official may require.

(Approved by the Office of Management and Budget under control number 
3064-0091)

[52 FR 41968, Nov. 2, 1987; 52 FR 43190, Nov. 10, 1987, as amended at 53 
FR 22134, June 14, 1988; 60 FR 31384, June 15, 1995]



Sec. 324.8  Revocation of eligibility.

    If the bank fails to continue to meet eligibility requirements or to 
comply with the capital plan or any condition of an acceptance, the 
Accepting Official may notify the bank of the intent to revoke 
authorization for deferral of losses. The bank will have 60 days from 
receipt of the notice in which it may submit written objections and 
reasons why authorization should continue. If no written objections are 
received within 60 days, the revocation shall be final. If the bank 
submits objections, they will be considered and a final decision, or a 
request for additional information, shall be made within the next 30 
days.



Sec. 324.9  Other administrative actions.

    Acceptance of a bank for loss amortization does not foreclose any 
administrative action against the bank that the Corporation may deem 
appropriate.



PART 325--CAPITAL MAINTENANCE--Table of Contents




                 Subpart A--Minimum Capital Requirements

Sec.
325.1  Scope.
325.2  Definitions.
325.3  Minimum leverage capital requirement.
325.4  Inadequate capital as an unsafe or unsound practice or condition.
325.5  Miscellaneous.
325.6  Issuance of directives.

                   Subpart B--Prompt Corrective Action

325.101  Authority, purpose, scope, other supervisory authority, and 
          disclosure of capital categories.
325.102  Notice of capital category.
325.103  Capital measures and capital category definitions.
325.104  Capital restoration plans.
325.105  Mandatory and discretionary supervisory actions under section 
          38.


Appendix A to Part 325--Statement of Policy on Risk-Based Capital

[[Page 150]]

Appendix B to Part 325--Statement of Policy on Capital Adequacy
Appendix C to Part 325--Risk-Based Capital for State Non-Member Banks; 
          Market Risk.

    Authority:  12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 1761, 
1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236, 
2355, 2386 (12 U.S.C. 1828 note).



                 Subpart A--Minimum Capital Requirements



Sec. 325.1  Scope.

    The provisions of this subpart A apply to those circumstances for 
which the Federal Deposit Insurance Act or this chapter requires an 
evaluation of the adequacy of an insured depository institution's 
capital structure. The FDIC is required to evaluate capital before 
approving various applications by insured depository institutions. The 
FDIC also must evaluate capital, as an essential component, in 
determining the safety and soundness of state nonmember banks it insures 
and supervises and in determining whether depository institutions are in 
an unsafe or unsound condition. This subpart A establishes the criteria 
and standards the FDIC will use in calculating the minimum leverage 
capital requirement and in determining capital adequacy. In addition, 
appendix A to this subpart sets forth the FDIC's risk-based capital 
policy statement and appendix B to this subpart includes a statement of 
policy on capital adequacy that provides interpretational guidance as to 
how this subpart will be administered and enforced. In accordance with 
subpart B of part 325, the FDIC also must evaluate an institution's 
capital for purposes of determining whether the institution is subject 
to the prompt corrective action provisions set forth in section 38 of 
the Federal Deposit Insurance Act (12 U.S.C. 1831o).
[58 FR 8219, Feb. 12, 1993]



Sec. 325.2  Definitions.

    (a) Allowance for loan and lease losses means those general 
valuation allowances that have been established through charges against 
earnings to absorb losses on loans and lease financing receivables. 
Allowances for loan and lease losses exclude allocated transfer risk 
reserves established pursuant to 12 U.S.C. 3904 and specific reserves 
created against identified losses.
    (b) Assets classified loss means:
    (1) When measured as of the date of examination of an insured 
depository institution, those assets that have been determined by an 
evaluation made by a state or federal examiner as of that date to be a 
loss; and
    (2) When measured as of any other date, those assets:
    (i) That have been determined--
    (A) By an evaluation made by a state or federal examiner at the most 
recent examination of an insured depository institution to be a loss; or
    (B) By evaluations made by the insured depository institution since 
its most recent examination to be a loss; and
    (ii) That have not been charged off from the insured depository 
institution's books or collected.
    (c) Bank means an FDIC-insured, state-chartered commercial or 
savings bank that is not a member of the Federal Reserve System and for 
which the FDIC is the appropriate federal banking agency pursuant to 
section 3(q) of the FDI Act (12 U.S.C. 1813(q)).
    (d) Common stockholders' equity means the sum of common stock and 
related surplus, undivided profits, disclosed capital reserves that 
represent a segregation of undivided profits, and foreign currency 
translation adjustments, less net unrealized holding losses on 
available-for-sale equity securities with readily determinable fair 
values.
    (e)(1) Control has the same meaning assigned to it in section 2 of 
the Bank Holding Company Act (12 U.S.C. 1841), and the term controlled 
shall be construed consistently with the term control.
    (2) Exclusion for fiduciary ownership. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares in a 
fiduciary capacity. Shares shall not be deemed to have been acquired in 
a fiduciary capacity if the acquiring insured depository institution

[[Page 151]]

or company has sole discretionary authority to exercise voting rights 
with respect thereto.
    (3) Exclusion for debts previously contracted. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares acquired in 
securing or collecting a debt previously contracted in good faith, until 
two years after the date of acquisition. The two-year period may be 
extended at the discretion of the appropriate federal banking agency for 
up to three one-year periods.
    (f) Controlling person means any person having control of an insured 
depository institution and any company controlled by that person.
    (g)(1) Highly leveraged transaction means an extension of credit to 
or investment in a business by an insured depository institution where 
the financing transaction involves a buyout, acquisition, or 
recapitalization of an existing business and one of the following 
criteria is met:
    (i) The transaction results in a liabilities-to-assets leverage 
ratio higher than 75 percent; or
    (ii) The transaction at least doubles the subject company's 
liabilities and results in a liabilities-to-assets leverage ratio higher 
than 50 percent; or
    (iii) The transaction is designated an HLT by a syndication agent or 
a federal bank regulator.
    (2) Notwithstanding paragraph (g)(1) of this section, loans and 
exposures to any obligor in which the total financing package, including 
all obligations held by all participants is $20 million or more, or such 
lower level as the FDIC may establish by order on a case-by-case basis, 
will be excluded from this definition.
    (h) Identified losses means:
    (1) When measured as of the date of examination of an insured 
depository institution, those items that have been determined by an 
evaluation made by a state or federal examiner as of that date to be 
chargeable against income, capital and/or general valuation allowances 
such as the allowance for loan and lease losses (examples of identified 
losses would be assets classified loss, off-balance sheet items 
classified loss, any provision expenses that are necessary for the 
institution to record in order to replenish its general valuation 
allowances to an adequate level, liabilities not shown on the 
institution's books, estimated losses in contingent liabilities, and 
differences in accounts which represent shortages); and
    (2) When measured as of any other date, those items:
    (i) That have been determined--
    (A) By an evaluation made by a state or federal examiner at the most 
recent examination of an insured depository institution to be chargeable 
against income, capital and/or general valuation allowances; or
    (B) By evaluations made by the insured depository institution since 
its most recent examination to be chargeable against income, capital 
and/or general valuation allowances; and
    (ii) For which the appropriate accounting entries to recognize the 
loss have not yet been made on the insured depository institution's 
books nor has the item been collected or otherwise settled.
    (i) Insured depository institution means any depository institution 
(except for a foreign bank having an insured branch) the deposits of 
which are insured in accordance with the provisions of the Federal 
Deposit Insurance Act (12 U.S.C. 1811 et seq.)
    (j) Intangible assets means those assets that are required to be 
reported as intangible assets in a banking institution's ``Reports of 
Condition and Income'' (Call Report) or in a savings association's 
``Thrift Financial Report.''
    (k) Leverage ratio means the ratio of Tier 1 capital to total 
assets, as calculated under this part.
    (l) Management fee means any payment of money or provision of any 
other thing of value to a company or individual for the provision of 
management services or advice to the bank or related overhead expenses, 
including payments related to supervisory, executive, managerial, or 
policymaking functions, other than compensation to an individual in the 
individual's capacity as an officer or employee of the bank.
    (m) Minority interests in consolidated subsidiaries means minority 
interests in

[[Page 152]]

equity capital accounts of those subsidiaries that have been 
consolidated for the purpose of computing regulatory capital under this 
part, except that minority interests which fail to provide meaningful 
capital support are excluded from this definition.
    (n) Mortgage servicing rights means those intagible assets that 
represent the rights to perform the servicing function for a specific 
group of mortgage loans that are owned by others. Mortgage servicing 
rights must be amortized over a period not to exceed 15 years or their 
estimated useful life, whichever is shorter. For purposes of determining 
regulatory capital under this part, mortgage servicing rights will be 
recognized only to the extent the rights meet the conditions, 
limitations and restrictions described in Sec. 325.5(f).
    (o) Noncumulative perpetual preferred stock means perpetual 
preferred stock (and related surplus) where the issuer has the option to 
waive payment of dividends and where the dividends so waived do not 
accumulate to future periods nor do they represent a contingent claim on 
the issuer. Preferred stock issues where the dividend is reset 
periodically based, in whole or in part, upon the bank's current credit 
standing, including but not limited to, auction rate, money market and 
remarketable preferred stock, are excluded from this definition of 
noncumulative perpetual preferred stock, regardless of whether the 
dividends are cumulative or noncumulative.
    (p) Perpetual preferred stock means a preferred stock that does not 
have a maturity date, that cannot be redeemed at the option of the 
holder, and that has no other provisions that will require future 
redemption of the issue. It includes those issues of preferred stock 
that automatically convert into common stock at a stated date. It 
excludes those issues, the rate on which increases, or can increase, in 
such a manner that would effectively require the issuer to redeem the 
issue.
    (q) Risk-weighted assets means total risk-weighted assets, as 
calculated in accordance with the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to part 325).
    (r) Savings association means any federally-chartered savings 
association, any state-chartered savings association, and any 
corporation (other than a bank) that the Board of Directors of the FDIC 
and the Director of the Office of Thrift Supervision jointly determine 
to be operating in substantially the same manner as a savings 
association.
    (s) Tangible equity means the amount of core capital elements as 
defined in Section I.A.1. of the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to this Part 325), plus the amount of 
outstanding cumulative perpetual preferred stock (including related 
surplus), minus all intangible assets except mortgage servicing rights 
to the extent that the FDIC determines pursuant to Sec. 325.5(f) of this 
part that mortgage servicing rights may be included in calculating the 
bank's Tier 1 capital.
    (t) Tier 1 capital or core capital means the sum of common 
stockholders' equity, noncumulative perpetual preferred stock (including 
any related surplus), and minority interests in consolidated 
subsidiaries, minus all intangible assets (other than mortgage servicing 
rights and purchased credit card relationships eligible for inclusion in 
core capital pursuant to Sec. 325.5(f) and qualifying supervisory 
goodwill eligible for inclusion in core capital pursuant to 12 CFR part 
567), minus deferred tax assets in excess of the limit set forth in 
Sec. 325.5(g), minus identified losses, (to the extent that Tier 1 
capital would have been reduced if the appropriate accounting entries to 
reflect the identified losses had been recorded on the insured 
depository institution's books) and minus investments in securities 
subsidiaries subject to 12 CFR 337.4.
    (u) Tier 1 risk-based capital ratio means the ratio of Tier 1 
capital to risk-weighted assets, as calculated in accordance with the 
FDIC's Statement of Policy on Risk-Based Capital (appendix A to part 
325).
    (v) Total assets means the average of total assets required to be 
included in a banking institution's ``Reports of Condition and Income'' 
(Call Report) or, for savings associations, the consolidated total 
assets required to be included in the ``Thrift Financial Report,'' as 
these reports may from time

[[Page 153]]

to time be revised, as of the most recent report date (and after making 
any necessary subsidiary adjustments for state nonmember banks as 
described in Secs. 325.5(c) and 325.5(d) of this part), minus intangible 
assets (other than mortgage servicing rights and purchased credit card 
relationships eligible for inclusion in core capital pursuant to 
Sec. 325.5(f) and qualifying supervisory goodwill eligible for inclusion 
in core capital pursuant to 12 CFR part 567), minus deferred tax assets 
in excess of the limit set forth in 325.5(g), and minus assets 
classified loss and any other assets that are deducted in determining 
Tier 1 capital. For banking institutions, the average of total assets is 
found in the Call Report schedule of quarterly averages. For savings 
associations, the consolidated total assets figure is found in Schedule 
CSC of the Thrift Financial Report.
    (w) Total risk-based capital ratio means the ratio of qualifying 
total capital to risk-weighted assets, as calculated in accordance with 
the FDIC's Statement of Policy on Risk-Based Capital (appendix A to part 
325).
    (x) Written agreement means an agreement in writing executed by 
authorized representatives entered into with the FDIC by an insured 
depository institution which is enforceable by an action under section 
8(a) and/or section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 
1818 (a), (b)).
[56 FR 10160, Mar. 11, 1991, as amended at 57 FR 44899, Sept. 29, 1992; 
58 FR 6368, 6369, Jan. 28, 1993; 58 FR 8219, Feb. 12, 1993; 58 FR 60103, 
Nov. 15, 1993; 59 FR 66666, Dec. 28, 1994; 60 FR 8187, Feb. 13, 1995; 60 
FR 39232, Aug. 1, 1995]



Sec. 325.3  Minimum leverage capital requirement.

    (a) General. Banks must maintain at least the minimum leverage 
capital requirement set forth in this section. The capital standards in 
this part are the minimum acceptable for banks whose overall financial 
condition is fundamentally sound, which are well-managed and which have 
no material or significant financial weaknesses. Thus, the FDIC is not 
precluded from requiring an institution to maintain a higher capital 
level based on the institution's particular risk profile. Where the FDIC 
determines that the financial history or condition, managerial resources 
and/or the future earnings prospects of a bank are not adequate, or 
where a bank has sizable off-balance sheet or funding risks, significant 
risks from concentrations of credit or nontraditional activities, 
excessive interest rate risk exposure, or a significant volume of assets 
classified substandard, doubtful or loss or otherwise criticized, the 
FDIC will take these other factors into account in analyzing the bank's 
capital adequacy and may determine that the minimum amount of capital 
for that bank is greater than the minimum standards stated in this 
section. These same criteria will apply to any insured depository 
institution making an application to the FDIC that requires the FDIC to 
consider the adequacy of the institution's capital structure.
    (b) Minimum leverage capital requirement. (1) The minimum leverage 
capital requirement for a bank (or an insured depository institution 
making application to the FDIC) shall consist of a ratio of Tier 1 
capital to total assets of not less than 3 percent if the FDIC 
determines that the institution is not anticipating or experiencing 
significant growth and has well-diversified risk, including no undue 
interest rate risk exposure, excellent asset quality, high liquidity, 
good earnings and in general is considered a strong banking 
organization, rated composite 1 under the Uniform Financial Institutions 
Rating System (the CAMEL rating system) established by the Federal 
Financial Institutions Examination Council.
    (2) For all but the most highly-rated institutions meeting the 
conditions set forth in paragraph (b)(1) of this section, the minimum 
leverage capital requirement for a bank (or for an insured depository 
institution making an application to the FDIC) shall be 3 percent plus 
an additional cushion of at least 100 to 200 basis points and therefore 
shall consist of a ratio of Tier 1 capital to total assets of not less 
than 4 percent.
    (c) Insured depository institutions with less than the minimum 
leverage capital requirement. (1) A bank (or an insured depository 
institution making an application to the FDIC) operating with less

[[Page 154]]

than the minimum leverage capital requirement does not have adequate 
capital and therefore has inadequate financial resources.
    (2) Any insured depository institution operating with an inadequate 
capital structure, and therefore inadequate financial resources, will 
not receive approval for an application requiring the FDIC to consider 
the adequacy of its capital structure or its financial resources.
    (3) As required under Sec. 325.104(a)(1) of this part, a bank must 
file a written capital restoration plan with the appropriate FDIC 
regional director within 45 days of the date that the bank receives 
notice or is deemed to have notice that the bank is undercapitalized, 
significantly undercapitalized or critically undercapitalized, unless 
the FDIC notifies the bank in writing that the plan is to be filed 
within a different period.
    (4) In any merger, acquisition or other type of business combination 
where the FDIC must give its approval, where it is required to consider 
the adequacy of the financial resources of the existing and proposed 
institutions, and where the resulting entity is either insured by the 
FDIC or not otherwise federally insured, approval will not be granted 
when the resulting entity does not meet the minimum leverage capital 
requirement.
    (d) Exceptions. Notwithstanding the provisions of paragraphs (a), 
(b) and (c) of this section:
    (1) The FDIC, in its discretion, may approve an application pursuant 
to the Federal Deposit Insurance Act where it is required to consider 
the adequacy of capital if it finds that such approval must be taken to 
prevent the closing of a depository institution or to facilitate the 
acquisition of a closed depository institution, or, when severe 
financial conditions exist which threaten the stability of an insured 
depository institution or of a significant number of depository 
institutions insured by the FDIC or of insured depository institutions 
possessing significant financial resources, such action is taken to 
lessen the risk to the FDIC posed by an insured depository institution 
under such threat of instability.
    (2) The FDIC, in its discretion, may approve an application pursuant 
to the Federal Deposit Insurance Act where it is required to consider 
the adequacy of capital or the financial resources of the insured 
depository institution where it finds that the applicant has committed 
to and is in compliance with a reasonable plan to meet its minimum 
leverage capital requirements within a reasonable period of time.

(Approved by the Office of Management and Budget under control number 
3064-0075 for use through December 31, 1993)

[56 FR 10162, Mar. 11, 1991, as amended at 58 FR 8219, Feb. 12, 1993; 59 
FR 64564, Dec. 15, 1994; 60 FR 45609, Aug. 31, 1995; 62 FR 55493, Oct. 
24, 1997]



Sec. 325.4  Inadequate capital as an unsafe or unsound practice or condition.

    (a) General. As a condition of federal deposit insurance, all 
insured depository institutions must remain in a safe and sound 
condition.
    (b) Unsafe or unsound practice. Any bank which has less than its 
minimum leverage capital requirement is deemed to be engaged in an 
unsafe or unsound practice pursuant to section 8(b)(1) and/or 8(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(1) and/or 1818(c)). 
Except that such a bank which has entered into and is in compliance with 
a written agreement with the FDIC or has submitted to the FDIC and is in 
compliance with a plan approved by the FDIC to increase its Tier 1 
leverage capital ratio to such level as the FDIC deems appropriate and 
to take such other action as may be necessary for the bank to be 
operated so as not to be engaged in such an unsafe or unsound practice 
will not be deemed to be engaged in an unsafe or unsound practice 
pursuant to section 8(b)(1) and/or 8(c) of the Federal Deposit Insurance 
Act (12 U.S.C. 1818(b)(1) and/or 1818(c)) on account of its capital 
ratios. The FDIC is not precluded from taking section 8(b)(1), section 
8(c) or any other enforcement action against a bank with capital above 
the minimum requirement if the specific circumstances deem such action 
to be appropriate. Under the conditions set forth in section 8(t) of the 
Federal Deposit Insurance Act (12 U.S.C. 1818(t)), the FDIC also may 
take section 8(b)(1) and/or 8(c)

[[Page 155]]

enforcement action against any savings association that is deemed to be 
engaged in an unsafe or unsound practice on account of its inadequate 
capital structure.
    (c) Unsafe or unsound condition. Any insured depository institution 
with a ratio of Tier 1 capital to total assets that is less than two 
percent is deemed to be operating in an unsafe or unsound condition 
pursuant to section 8(a) of the Federal Deposit Insurance Act (12 U.S.C. 
1818(a)).
    (1) A bank with a ratio of Tier 1 capital to total assets of less 
than two percent which has entered into and is in compliance with a 
written agreement with the FDIC (or any other insured depository 
institution with a ratio of Tier 1 capital to total assets of less than 
two percent which has entered into and is in compliance with a written 
agreement with its primary federal regulator and to which agreement the 
FDIC is a party) to increase its Tier 1 leverage capital ratio to such 
level as the FDIC deems appropriate and to take such other action as may 
be necessary for the insured depository institution to be operated in a 
safe and sound manner, will not be subject to a proceeding by the FDIC 
pursuant to 12 U.S.C. 1818(a) on account of its capital ratios.
    (2) An insured depository institution with a ratio of Tier 1 capital 
to total assets that is equal to or greater than two percent may be 
operating in an unsafe or unsound condition. The FDIC is not precluded 
from bringing an action pursuant to 12 U.S.C. 1818(a) where an insured 
depository institution has a ratio of Tier 1 capital to total assets 
that is equal to or greater than two percent.
[56 FR 10162, Mar. 11, 1991]



Sec. 325.5  Miscellaneous.

    (a) Intangible assets. Any intangible assets that were explicitly 
approved by the FDIC as part of the bank's regulatory capital on a 
specific case basis will be included in capital under the terms and 
conditions that were approved by the FDIC, provided that the intangible 
asset is being amortized over a period not to exceed 15 years or its 
estimated useful life, whichever is shorter. However, pursuant to 
section 18(n) of the Federal Deposit Insurance Act (12 U.S.C. 1828(n)), 
an unidentifiable intangible asset such as goodwill, if acquired after 
April 12, 1989, cannot be included in calculating regulatory capital 
under this part.
    (b) Reservation of authority. Notwithstanding the definition of Tier 
1 capital in Sec. 325.2(t) of this subpart and the risk-based capital 
definitions of Tier 1 and Tier 2 capital in appendix A to this subpart, 
the Director of the Division of Supervision may, if the Director finds a 
newly developed or modified capital instrument or a particular balance 
sheet entry or account to be the functional equivalent of a component of 
Tier 1 or Tier 2 capital, permit one or more insured depository 
institutions to include all or a portion of such instrument, entry, or 
account as Tier 1 or Tier 2 capital, permanently, or on a temporary 
basis, for purposes of this part. Similarly, the Director of the 
Division of Supervision may, if the Director finds that a particular 
Tier 1 or Tier 2 capital component or balance sheet entry or account has 
characteristics or terms that diminish its contribution to an insured 
depository institution's ability to absorb losses, require the deduction 
of all or a portion of such component, entry, or account from Tier 1 or 
Tier 2 capital.
    (c) Securities subsidiary. For purposes of this part, any securities 
subsidiary subject to 12 CFR 337.4 shall not be consolidated with its 
bank parent and any investment therein shall be deducted from the bank 
parent's Tier 1 capital and total assets.
    (d) Depository institution subsidiary. Any domestic depository 
institution subsidiary that is not consolidated in the ``Reports of 
Condition and Income'' (Call Report) of its insured parent bank shall be 
consolidated with the insured parent bank for purposes of this part. The 
financial statements of the subsidiary that are to be used for this 
consolidation must be prepared in the same manner as the ``Reports of 
Condition and Income'' (Call Report). A domestic depository institution 
subsidiary of a savings association shall be consolidated for purposes 
of this part if such consolidation also is required pursuant to the 
capital requirements of

[[Page 156]]

the association's primary federal regulator.
    (e) Restrictions relating to capital components. To qualify as Tier 
1 capital under this part or Tier 1 or Tier 2 capital under appendix A 
to this part, a capital instrument must not contain or be subject to any 
conditions, covenants, terms, restrictions, or provisions that are 
inconsistent with safe and sound banking practices. A condition, 
covenant, term, restriction, or provision is inconsistent with safe and 
sound banking practices if it:
    (1) Unduly interferes with the ability of the issuer to conduct 
normal banking operations;
    (2) Results in significantly higher dividends or interest payments 
in the event of deterioration in the financial condition of the issuer;
    (3) Impairs the ability of the issuer to comply with statutory or 
regulatory requirements regarding the disposition of assets or 
incurrence of additional debt; or
    (4) Limits the ability of the FDIC or a similar regulatory authority 
to take any necessary action to resolve a problem bank or failing bank 
situation.

Other conditions and covenants that are not expressly listed in 
paragraphs (e)(1) through (e)(4) of this section also may be 
inconsistent with safe and sound banking practices.
    (f) Treatment of mortgage servicing rights and purchased credit card 
relationships. For purposes of determining Tier 1 capital under this 
part, mortgage servicing rights and purchased credit card relationships 
will be deducted from assets and from equity capital to the extent that 
the mortgage servicing rights and purchased credit card relationships do 
not meet the conditions, limitations, and restrictions described in this 
section.
    (1) Market valuations. A valuation of the estimated fair market 
value of mortgage servicing rights and purchased credit card 
relationships shall be performed at least quarterly. The quarterly 
market valuation shall include adjustments for any significant changes 
in the original valuation assumptions, including changes in prepayment 
estimates or attrition rates. The valuation shall be based on an 
analysis of the current fair market value of the mortgage servicing 
rights and purchased credit card relationships, determined by applying 
an appropriate market discount rate to the net cash flows expected to be 
generated from the intangible assets. The FDIC in its discretion may 
require independent market valuations on a case-by-case basis where it 
is deemed appropriate for safety and soundness purposes.
    (2) Market value limitation. For purposes of calculating Tier 1 
capital under this part (but not for financial statement purposes), the 
balance sheet assets for mortgage servicing rights and purchased credit 
card relationships will be reduced to an amount equal to the lesser of:
    (i) 90 percent of the fair market value of the intangible assets, 
determined in accordance with paragraph (f)(1) of this section; or
    (ii) 100 percent of the remaining unamortized book value of the 
intangible assets, determined in accordance with the instructions for 
the preparation of Consolidated Reports of Condition and Income (Call 
Reports).
    (3) Tier 1 capital limitation. The maximum allowable amount of 
mortgage servicing rights and purchased credit care relationships, in 
the aggregate, will be limited to the lesser of:
    (i) Fifty percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing rights, any 
disallowed purchased credit card relationships, and any disallowed 
deferred tax assets; or
    (ii) The amount of mortgage servicing rights and purchased credit 
card relationships, and any disallowed deferred tax assets determined in 
accordance with paragraph (f)(2) of this section.
    (4) Purchased credit card relationships limitation. In addition to 
the aggregate limitation on mortgage servicing rights and purchased 
credit card relationships set forth in paragraph (f)(3) of this section, 
a sublimit will apply to purchased credit card relationships. The 
maximum allowable amount of purchased credit card relationships will be 
limited to the lesser of:
    (i) Twenty-five percent of the amount of Tier 1 capital that exists 
before the deduction of any disallowed mortgage

[[Page 157]]

servicing rights, any disallowed purchased credit card relationships, 
and any disallowed deferred tax assets; or
    (ii) The amount of purchased credit card relationships determined in 
accordance with paragraph (f)(2) of this section.
    (g) Treatment of deferred tax assets. For purposes of calculating 
Tier 1 capital under this part (but not for financial statement 
purposes), deferred tax assets are subject to the conditions, 
limitations, and restrictions described in this section.
    (1) Deferred tax assets that are dependent upon future taxable 
income. These assets are:
    (i) Deferred tax assets arising from deductible temporary 
differences that exceed the amount of taxes previously paid that could 
be recovered through loss carrybacks if existing temporary differences 
(both deductible and taxable and regardless of where the related 
deferred tax effects are reported on the balance sheet) fully reverse at 
the calendar quarter-end date; and
    (ii) Deferred tax assets arising from operating loss and tax credit 
carryforwards.
    (2) Tier 1 capital limitations. (i) The maximum allowable amount of 
deferred tax assets that are dependent upon future taxable income, net 
of any valuation allowance for deferred tax assets, will be limited to 
the lesser of:
    (A) The amount of deferred tax assets that are dependent upon future 
taxable income that is expected to be realized within one year of the 
calendar quarter-end date, based on projected future taxable income for 
that year; or
    (B) Ten percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing rights, any 
disallowed purchased credit card relationships, and any disallowed 
deferred tax assets.
    (ii) For purposes of this limitation, all existing temporary 
differences should be assumed to fully reverse at the calendar quarter-
end date. The recorded amount of deferred tax assets that are dependent 
upon future taxable income, net of any valuation allowance for deferred 
tax assets, in excess of this limitation will be deducted from assets 
and from equity capital for purposes of determining Tier 1 capital under 
this part. The amount of deferred tax assets that can be realized from 
taxes paid in prior carryback years and from the reversal of existing 
taxable temporary differences generally would not be deducted from 
assets and from equity capital. However, notwithstanding the above, the 
amount of carryback potential that may be considered in calculating the 
amount of deferred tax assets that a member of a consolidated group (for 
tax purposes) may include in Tier 1 capital may not exceed the amount 
which the member could reasonably expect to have refunded by its parent.
    (3) Projected future taxable income. Projected future taxable income 
should not include net operating loss carryforwards to be used within 
one year of the most recent calendar quarter-end date or the amount of 
existing temporary differences expected to reverse within that year. 
Projected future taxable income should include the estimated effect of 
tax planning strategies that are expected to be implemented to realize 
tax carryforwards that will otherwise expire during that year. Future 
taxable income projections for the current fiscal year (adjusted for any 
significant changes that have occurred or are expected to occur) may be 
used when applying the capital limit at an interim calendar quarter-end 
date rather then preparing a new projection each quarter.
    (4) Unrealized holding gains and losses on available-for-sale debt 
securities. The deferred tax effects of any unrealized holding gains and 
losses on available-for-sale debt securities may be excluded from the 
determination of the amount of deferred tax assets that are dependent 
upon future taxable income and the calculation of the maximum allowable 
amount of such assets. If these deferred tax effects are excluded, this 
treatment must be followed consistently over time.
    (5) Intangible assets acquired in nontaxable purchase business 
combinations. A deferred tax liability that is specifically related to 
an intangible asset (other than mortgage servicing rights and purchased 
credit card relationships) acquired in a nontaxable purchase business 
combination may be netted against this intangible asset. Only the net 
amount of the intangible

[[Page 158]]

asset must be deducted from Tier 1 capital. When a deferred tax 
liability is netted in this manner, the taxable temporary difference 
that gives rise to this deferred tax liability must be excluded from 
existing taxable temporary differences when determining the amount of 
deferred tax assets that are dependent upon future taxable income and 
calculating the maximum allowable amount of such assets.
[56 FR 10163, Mar. 11, 1991, as amended at 57 FR 7647, Mar. 4, 1992; 58 
FR 6369, Jan. 28, 1993; 58 FR 8219, Feb. 12, 1993; 60 FR 8187, Feb. 13, 
1995; 60 FR 39232, Aug. 1, 1995]



Sec. 325.6  Issuance of directives.

    (a) General. A directive is a final order issued to a bank that 
fails to maintain capital at or above the minimum leverage capital 
requirement as set forth in Secs. 325.3 and 325.4. A directive issued 
pursuant to this section, including a plan submitted under a directive, 
is enforceable in the same manner and to the same extent as a final 
cease-and-desist order issued under 12 U.S.C. 1818(b).
    (b) Issuance of directives. If a bank is operating with less than 
the minimum leverage capital requirement established by this regulation, 
the Board of Directors, or its designee(s), may issue and serve upon any 
insured state nonmember bank a directive requiring the bank to restore 
its capital to the minimum leverage capital requirement within a 
specified time period. The directive may require the bank to submit to 
the appropriate FDIC regional director, or other specified official, for 
review and approval, a plan describing the means and timing by which the 
bank shall achieve the minimum leverage capital requirement. After the 
FDIC has approved the plan, the bank may be required under the terms of 
the directive to adhere to and monitor compliance with the plan. The 
directive may be issued during the course of an examination of the bank, 
or at any other time that the FDIC deems appropriate, if the bank is 
found to be operating with less than the minimum leverage capital 
requirement.
    (c) Notice and opportunity to respond to issuance of a directive. 
(1) If the FDIC makes an initial determination that a directive should 
be issued to a bank pursuant to paragraph (b) of this section, the FDIC, 
through the appropriate designated official(s), shall serve written 
notification upon the bank of its intent to issue a directive. The 
notice shall include the current Tier 1 leverage capital ratio, the 
basis upon which said ratio was calculated, the proposed capital 
injection, the proposed date for achieving the minimum leverage capital 
requirement and any other relevant information concerning the decision 
to issue a directive. When deemed appropriate, specific requirements of 
a proposed plan for meeting the minimum leverage capital requirement may 
be included in the notice.
    (2) Within 14 days of receipt of notification, the bank may file 
with the appropriate designated FDIC official(s) a written response, 
explaining why the directive should not be issued, seeking modification 
of its terms, or other appropriate relief. The bank's response shall 
include any information, mitigating circumstances, documentation or 
other relevant evidence which supports its position, and may include a 
plan for attaining the minimum leverage capital requirement.
    (3) After considering the bank's response, the appropriate 
designated FDIC official(s) shall serve upon the bank a written 
determination addressing the bank's response and setting forth the 
FDIC's findings and conclusions in support of any decision to issue or 
not to issue a directive. The directive may be issued as originally 
proposed or in modified form. The directive may order the bank to:
    (i) Achieve the minimum leverage capital requirement established by 
this regulation by a certain date;
    (ii) Submit for approval and adhere to a plan for achieving the 
minimum leverage capital requirement;
    (iii) Take other action as is necessary to achieve the minimum 
leverage capital requirement; or
    (iv) A combination of the above actions.

If a directive is to be issued, it may be served upon the bank along 
with the final determination.
    (4) Any bank, upon a change in circumstances, may request the FDIC 
to reconsider the terms of a directive and may propose changes in the 
plan under

[[Page 159]]

which it is operating to meet the minimum leverage capital requirement. 
The directive and plan continue in effect while such request is pending 
before the FDIC.
    (5) All papers filed with the FDIC must be postmarked or received by 
the appropriate designated FDIC official(s) within the prescribed time 
limit for filing.
    (6) Failure by the bank to file a written response to notification 
of intent to issue a directive within the specified time period shall 
constitute consent to the issuance of such directive.
    (d) Enforcement of a directive. (1) Whenever a bank fails to follow 
the directive or to submit or adhere to its capital adequacy plan, the 
FDIC may seek enforcement of the directive in the appropriate United 
States district court, pursuant to 12 U.S.C. 3907(b)(2)(B)(ii), in the 
same manner and to the same extent as if the directive were a final 
cease-and-desist order. In addition to enforcement of the directive, the 
FDIC may seek assessment of civil money penalties for violation of the 
directive against any bank, any officer, director, employee, agent, or 
other person participating in the conduct of the affairs of the bank, 
pursuant to 12 U.S.C. 3909(d).
    (2) The directive may be issued separately, in conjunction with, or 
in addition to, any other enforcement mechanisms available to the FDIC, 
including cease-and-desist orders, orders of correction, the approval or 
denial of applications, or any other actions authorized by law. In 
addition to addressing a bank's minimum leverage capital requirement, 
the capital directive may also address minimum risk-based capital 
requirements that are to be maintained and calculated in accordance with 
appendix A to this part.
[56 FR 10164, Mar. 11, 1991]



                   Subpart B--Prompt Corrective Action

    Source:  57 FR 44900, Sept. 29, 1992, unless otherwise noted.



Sec. 325.101  Authority, purpose, scope, other supervisory authority, and disclosure of capital categories.

    (a) Authority. This subpart is issued by the FDIC pursuant to 
section 38 (section 38) of the Federal Deposit Insurance Act (FDI Act), 
as added by section 131 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (Pub. L. 102-242, 105 Stat. 2236 (1991)) (12 
U.S.C. 1831o).
    (b) Purpose. Section 38 of the FDI Act establishes a framework of 
supervisory actions for insured depository institutions that are not 
adequately capitalized. The principal purpose of this subpart is to 
define, for FDIC-insured state-chartered nonmember banks, the capital 
measures and capital levels, and for insured branches of foreign banks, 
comparable asset-based measures and levels, that are used for 
determining the supervisory actions authorized under section 38 of the 
FDI Act. This subpart also establishes procedures for submission and 
review of capital restoration plans and for issuance and review of 
directives and orders pursuant to section 38.
    (c) Scope. This subpart implements the provisions of section 38 of 
the FDI Act as they apply to FDIC-insured state-chartered nonmember 
banks and insured branches of foreign banks for which the FDIC is the 
appropriate Federal banking agency. Certain of these provisions also 
apply to officers, directors and employees of those insured 
institutions. In addition, certain provisions of this subpart apply to 
all insured depository institutions that are deemed critically 
undercapitalized.
    (d) Other supervisory authority. Neither section 38 nor this subpart 
in any way limits the authority of the FDIC under any other provision of 
law to take supervisory actions to address unsafe or unsound practices, 
deficient capital levels, violations of law, unsafe or unsound 
conditions, or other practices. Action under section 38 of the FDI Act 
and this subpart may be taken independently of, in conjunction with,

[[Page 160]]

or in addition to any other enforcement action available to the FDIC, 
including issuance of cease and desist orders, capital directives, 
approval or denial of applications or notices, assessment of civil money 
penalties, or any other actions authorized by law.
    (e) Disclosure of capital categories. The assignment of a bank or 
insured branch under this subpart within a particular capital category 
is for purposes of implementing and applying the provisions of section 
38. Unless permitted by the FDIC or otherwise required by law, no bank 
may state in any advertisement or promotional material its capital 
category under this subpart or that the FDIC or any other federal 
banking agency has assigned the bank to a particular capital category.



Sec. 325.102  Notice of capital category.

    (a) Effective date of determination of capital category. A bank 
shall be deemed to be within a given capital category for purposes of 
section 38 of the FDI Act and this subpart as of the date the bank is 
notified of, or is deemed to have notice of, its capital category, 
pursuant to paragraph (b) of this section.
    (b) Notice of capital category. A bank shall be deemed to have been 
notified of its capital levels and its capital category as of the most 
recent date:
    (1) A Consolidated Report of Condition and Income (Call Report) is 
required to be filed with the FDIC;
    (2) A final report of examination is delivered to the bank; or
    (3) Written notice is provided by the FDIC to the bank of its 
capital category for purposes of section 38 of the FDI Act and this 
subpart or that the bank's capital category has changed as provided in 
Sec. 325.103(d).
    (c) Adjustments to reported capital levels and capital category--(1) 
Notice of adjustment by bank. A bank shall provide the appropriate FDIC 
regional director with written notice that an adjustment to the bank's 
capital category may have occurred no later than 15 calendar days 
following the date that any material event has occurred that would cause 
the bank to be placed in a lower capital category from the category 
assigned to the bank for purposes of section 38 and this subpart on the 
basis of the bank's most recent Call Report or report of examination.
    (2) Determination by the FDIC to change capital category. After 
receiving notice pursuant to paragraph (c)(1) of this section, the FDIC 
shall determine whether to change the capital category of the bank and 
shall notify the bank of the FDIC's determination.



Sec. 325.103  Capital measures and capital category definitions.

    (a) Capital measures. For purposes of section 38 and this subpart, 
the relevant capital measures shall be:
    (1) The total risk-based capital ratio;
    (2) The Tier 1 risk-based capital ratio; and
    (3) The leverage ratio.
    (b) Capital categories. For purposes of section 38 and this subpart, 
a bank shall be deemed to be:
    (1) Well capitalized if the bank:
    (i) Has a total risk-based capital ratio of 10.0 percent or greater; 
and
    (ii) Has a Tier 1 risk-based capital ratio of 6.0 percent or 
greater; and
    (iii) Has a leverage ratio of 5.0 percent or greater; and
    (iv) Is not subject to any written agreement, order, capital 
directive, or prompt corrective action directive issued by the FDIC 
pursuant to section 8 of the FDI Act (12 U.S.C. 1818), the International 
Lending Supervision Act of 1983 (12 U.S.C. 3907), or section 38 of the 
FDI Act (12 U.S.C. 1831o), or any regulation thereunder, to meet and 
maintain a specific capital level for any capital measure.
    (2) Adequately capitalized if the bank:
    (i) Has a total risk-based capital ratio of 8.0 percent or greater; 
and
    (ii) Has a Tier 1 risk-based capital ratio of 4.0 percent or 
greater; and
    (iii) Has:
    (A) A leverage ratio of 4.0 percent or greater; or
    (B) A leverage ratio of 3.0 percent or greater if the bank is rated 
composite 1 under the CAMEL rating system in the most recent examination 
of the bank and is not experiencing or anticipating significant growth; 
and
    (iv) Does not meet the definition of a well capitalized bank.
    (3) Undercapitalized if the bank:
    (i) Has a total risk-based capital ratio that is less than 8.0 
percent; or

[[Page 161]]

    (ii) Has a Tier 1 risk-based capital ratio that is less than 4.0 
percent; or
    (iii)(A) Except as provided in paragraph (b)(3)(iii)(B) of this 
section, has a leverage ratio that is less than 4.0 percent; or
    (B) Has a leverage ratio that is less than 3.0 percent if the bank 
is rated composite 1 under the CAMEL rating system in the most recent 
examination of the bank and is not experiencing or anticipating 
significant growth.
    (4) Significantly undercapitalized if the bank has:
    (i) A total risk-based capital ratio that is less than 6.0 percent; 
or
    (ii) A Tier 1 risk-based capital ratio that is less than 3.0 
percent; or
    (iii) A leverage ratio that is less than 3.0 percent.
    (5) Critically undercapitalized if the insured depository 
institution has a ratio of tangible equity to total assets that is equal 
to or less than 2.0 percent.
    (c) Capital categories for insured branches of foreign banks. For 
purposes of the provisions of section 38 and this subpart, a insured 
branch of a foreign bank shall be deemed to be:
    (1) Well capitalized if the insured branch:
    (i) Maintains the pledge of assets required under 12 CFR 346.19; and
    (ii) Maintains the eligible assets prescribed under 12 CFR 346.20 at 
108 percent or more of the preceding quarter's average book value of the 
insured branch's third-party liabilities; and
    (iii) Has not received written notification from:
    (A) The OCC to increase its capital equivalency deposit pursuant to 
12 CFR 28.6(a), or to comply with asset maintenance requirements 
pursuant to 12 CFR 28.9; or
    (B) The FDIC to pledge additional assets pursuant to 12 CFR 346.19 
or to maintain a higher ratio of eligible assets pursuant to 12 CFR 
346.20.
    (2) Adequately capitalized if the insured branch:
    (i) Maintains the pledge of assets required under 12 CFR 346.19; and
    (ii) Maintains the eligible assets prescribed under 12 CFR 346.20 at 
106 percent or more of the preceding quarter's average book value of the 
insured branch's third-party liabilities; and
    (iii) Does not meet the definition of a well capitalized insured 
branch.
    (3) Undercapitalized if the insured branch:
    (i) Fails to maintain the pledge of assets required under 12 CFR 
346.19; or
    (ii) Fails to maintain the eligible assets prescribed under 12 CFR 
346.20 at 106 percent or more of the preceding quarter's average book 
value of the insured branch's third-party liabilities.
    (4) Significantly undercapitalized if it fails to maintain the 
eligible assets prescribed under 12 CFR 346.20 at 104 percent or more of 
the preceding quarter's average book value of the insured branch's 
third-party liabilities.
    (5) Critically undercapitalized if the insured depository 
institution fails to maintain the eligible assets prescribed under 12 
CFR 346.20 at 102 percent or more of the preceding quarter's average 
book value of the insured branch's third-party liabilities.
    (d) Reclassifications based on supervisory criteria other than 
capital. The FDIC may reclassify a well capitalized bank as adequately 
capitalized and may require an adequately capitalized bank or an 
undercapitalized bank to comply with certain mandatory or discretionary 
supervisory actions as if the bank were in the next lower capital 
category (except that the FDIC may not reclassify a significantly 
undercapitalized bank as critically undercapitalized) (each of these 
actions are hereinafter referred to generally as ``reclassifications'') 
in the following circumstances:
    (1) Unsafe or unsound condition. The FDIC has determined, after 
notice and opportunity for hearing pursuant to Sec. 308.202(a) of this 
chapter, that the bank is in unsafe or unsound condition; or
    (2) Unsafe or unsound practice. The FDIC has determined, after 
notice and opportunity for hearing pursuant to Sec. 308.202(a) of this 
chapter, that, in the most recent examination of the bank, the bank 
received and has not corrected a less-than-satisfactory rating for any 
of the categories of asset quality, management, earnings, or liquidity.

[[Page 162]]



Sec. 325.104  Capital restoration plans.

    (a) Schedule for filing plan--(1) In general. A bank shall file a 
written capital restoration plan with the appropriate FDIC regional 
director within 45 days of the date that the bank receives notice or is 
deemed to have notice that the bank is undercapitalized, significantly 
undercapitalized, or critically undercapitalized, unless the FDIC 
notifies the bank in writing that the plan is to be filed within a 
different period. An adequately capitalized bank that has been required 
pursuant to Sec. 325.103(d) of this subpart to comply with supervisory 
actions as if the bank were undercapitalized is not required to submit a 
capital restoration plan solely by virtue of the reclassification.
    (2) Additional capital restoration plans. Notwithstanding paragraph 
(a)(1) of this section, a bank that has already submitted and is 
operating under a capital restoration plan approved under section 38 and 
this subpart is not required to submit an additional capital restoration 
plan based on a revised calculation of its capital measures or a 
reclassification of the institution under Sec. 325.103 unless the FDIC 
notifies the bank that it must submit a new or revised capital plan. A 
bank that is notified that it must submit a new or revised capital 
restoration plan shall file the plan in writing with the appropriate 
FDIC regional director within 45 days of receiving such notice, unless 
the FDIC notifies the bank in writing that the plan must be filed within 
a different period.
    (b) Contents of plan. All financial data submitted in connection 
with a capital restoration plan shall be prepared in accordance with the 
instructions provided on the Call Report, unless the FDIC instructs 
otherwise. The capital restoration plan shall include all of the 
information required to be filed under section 38(e)(2) of the FDI Act. 
A bank that is required to submit a capital restoration plan as a result 
of a reclassification of the bank pursuant to Sec. 325.103(d) of this 
subpart shall include a description of the steps the bank will take to 
correct the unsafe or unsound condition or practice. No plan shall be 
accepted unless it includes any performance guarantee described in 
section 38(e)(2)(C) of the FDI Act by each company that controls the 
bank.
    (c) Review of capital restoration plans. Within 60 days after 
receiving a capital restoration plan under this subpart, the FDIC shall 
provide written notice to the bank of whether the plan has been 
approved. The FDIC may extend the time within which notice regarding 
approval of a plan shall be provided.
    (d) Disapproval of capital plan. If a capital restoration plan is 
not approved by the FDIC, the bank shall submit a revised capital 
restoration plan within the time specified by the FDIC. Upon receiving 
notice that its capital restoration plan has not been approved, any 
undercapitalized bank (as defined in Sec. 325.103(b) of this subpart) 
shall be subject to all of the provisions of section 38 and this subpart 
applicable to significantly undercapitalized institutions. These 
provisions shall be applicable until such time as a new or revised 
capital restoration plan submitted by the bank has been approved by the 
FDIC.
    (e) Failure to submit capital restoration plan. A bank that is 
undercapitalized (as defined in Sec. 325.103(b) of this subpart) and 
that fails to submit a written capital restoration plan within the 
period provided in this section shall, upon the expiration of that 
period, be subject to all of the provisions of section 38 and this 
subpart applicable to significantly undercapitalized institutions.
    (f) Failure to implement capital restoration plan. Any 
undercapitalized bank that fails in any material respect to implement a 
capital restoration plan shall be subject to all of the provisions of 
section 38 and this subpart applicable to significantly undercapitalized 
institutions.
    (g) Amendment of capital restoration plan. A bank that has filed an 
approved capital restoration plan may, after prior written notice to and 
approval by the FDIC, amend the plan to reflect a change in 
circumstance. Until such time as a proposed amendment has been approved, 
the bank shall implement the capital restoration plan as approved prior 
to the proposed amendment.
    (h) Performance guarantee by companies that control a bank--(1) 
Limitation

[[Page 163]]

on liability--(i) Amount limitation. The aggregate liability under the 
guarantee provided under section 38 and this subpart for all companies 
that control a specific bank that is required to submit a capital 
restoration plan under this subpart shall be limited to the lesser of:
    (A) An amount equal to 5.0 percent of the bank's total assets at the 
time the bank was notified or deemed to have notice that the bank was 
undercapitalized; or
    (B) The amount necessary to restore the relevant capital measures of 
the bank to the levels required for the bank to be classified as 
adequately capitalized, as those capital measures and levels are defined 
at the time that the bank initially fails to comply with a capital 
restoration plan under this subpart.
    (ii) Limit on duration. The guarantee and limit of liability under 
section 38 and this subpart shall expire after the FDIC notifies the 
bank that it has remained adequately capitalized for each of four 
consecutive calendar quarters. The expiration or fulfillment by a 
company of a guarantee of a capital restoration plan shall not limit the 
liability of the company under any guarantee required or provided in 
connection with any capital restoration plan filed by the same bank 
after expiration of the first guarantee.
    (iii) Collection on guarantee. Each company that controls a given 
bank shall be jointly and severally liable for the guarantee for such 
bank as required under section 38 and this subpart, and the FDIC may 
require and collect payment of the full amount of that guarantee from 
any or all of the companies issuing the guarantee.
    (2) Failure to provide guarantee. In the event that a bank that is 
controlled by any company submits a capital restoration plan that does 
not contain the guarantee required under section 38(e)(2) of the FDI 
Act, the bank shall, upon submission of the plan, be subject to the 
provisions of section 38 and this subpart that are applicable to banks 
that have not submitted an acceptable capital restoration plan.
    (3) Failure to perform guarantee. Failure by any company that 
controls a bank to perform fully its guarantee of any capital plan shall 
constitute a material failure to implement the plan for purposes of 
section 38(f) of the FDI Act. Upon such failure, the bank shall be 
subject to the provisions of section 38 and this subpart that are 
applicable to banks that have failed in a material respect to implement 
a capital restoration plan.



Sec. 325.105  Mandatory and discretionary supervisory actions under section 38.

    (a) Mandatory supervisory actions--(1) Provisions applicable to all 
banks. All banks are subject to the restrictions contained in section 
38(d) of the FDI Act on payment of capital distributions and management 
fees.
    (2) Provisions applicable to undercapitalized, significantly 
undercapitalized, and critically undercapitalized banks. Immediately 
upon receiving notice or being deemed to have notice, as provided in 
Sec. 325.102 of this subpart, that the bank is undercapitalized, 
significantly undercapitalized, or critically undercapitalized, the bank 
shall become subject to the provisions of section 38 of the FDI Act:
    (i) Restricting payment of capital distributions and management fees 
(section 38(d));
    (ii) Requiring that the FDIC monitor the condition of the bank 
(section 38(e)(1));
    (iii) Requiring submission of a capital restoration plan within the 
schedule established in this subpart (section 38(e)(2));
    (iv) Restricting the growth of the bank's assets (section 38(e)(3)); 
and
    (v) Requiring prior approval of certain expansion proposals (section 
38(e)(4)).
    (3) Additional provisions applicable to significantly 
undercapitalized, and critically undercapitalized banks. In addition to 
the provisions of section 38 of the FDI Act described in paragraph 
(a)(2) of this section, immediately upon receiving notice or being 
deemed to have notice, as provided in Sec. 325.102 of this subpart, that 
the bank is significantly undercapitalized, or critically 
undercapitalized, or that the bank is subject to the provisions 
applicable to institutions that are significantly undercapitalized 
because the bank failed to

[[Page 164]]

submit or implement in any material respect an acceptable capital 
restoration plan, the bank shall become subject to the provisions of 
section 38 of the FDI Act that restrict compensation paid to senior 
executive officers of the institution (section 38(f)(4)).
    (4) Additional provisions applicable to critically undercapitalized 
institutions. (i) In addition to the provisions of section 38 of the FDI 
Act described in paragraphs (a)(2) and (a)(3) of this section, 
immediately upon receiving notice or being deemed to have notice, as 
provided in Sec. 325.102 of this subpart, that the insured depository 
institution is critically undercapitalized, the institution is 
prohibited from doing any of the following without the FDIC's prior 
written approval:
    (A) Entering into any material transaction other than in the usual 
course of business, including any investment, expansion, acquisition, 
sale of assets, or other similar action with respect to which the 
depository institution is required to provide notice to the appropriate 
Federal banking agency;
    (B) Extending credit for any highly leveraged transaction;
    (C) Amending the institution's charter or bylaws, except to the 
extent necessary to carry out any other requirement of any law, 
regulation, or order;
    (D) Making any material change in accounting methods;
    (E) Engaging in any covered transaction (as defined in section 
23A(b) of the Federal Reserve Act (12 U.S.C. 371c(b));
    (F) Paying excessive compensation or bonuses;
    (G) Paying interest on new or renewed liabilities at a rate that 
would increase the institution's weighted average cost of funds to a 
level significantly exceeding the prevailing rates of interest on 
insured deposits in the institution's normal market areas; and
    (H) Making any principal or interest payment on subordinated debt 
beginning 60 days after becoming critically undercapitalized except that 
this restriction shall not apply, until July 15, 1996, with respect to 
any subordinated debt outstanding on July 15, 1991, and not extended or 
otherwise renegotiated after July 15, 1991.
    (ii) In addition, the FDIC may further restrict the activities of 
any critically undercapitalized institution to carry out the purposes of 
section 38 of the FDI Act.
    (5) Exception for certain savings associations. The restrictions in 
paragraph (a)(4) of this section shall not apply, before July 1, 1994, 
to any insured savings association if:
    (i) The savings association had submitted a plan meeting the 
requirements of section 5(t)(6)(A)(ii) of the Home Owners' Loan Act (12 
U.S.C. 1464(t)(6)(A)(ii)) prior to December 19, 1991;
    (ii) The Director of OTS had accepted the plan prior to December 19, 
1991; and
    (iii) The savings association remains in compliance with the plan or 
is operating under a written agreement with the appropriate federal 
banking agency.
    (b) Discretionary supervisory actions. In taking any action under 
section 38 that is within the FDIC's discretion to take in connection 
with:
    (1) An insured depository institution that is deemed to be 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized, or has been reclassified as undercapitalized, or 
significantly undercapitalized; or
    (2) An officer or director of such institution, the FDIC shall 
follow the procedures for issuing directives under Secs. 308.201 and 
308.203 of this chapter, unless otherwise provided in section 38 or this 
subpart.

    Appendix A to Part 325--Statement of Policy on Risk-Based Capital

    Capital adequacy is one of the critical factors that the FDIC is 
required to analyze when taking action on various types of applications 
and when conducting supervisory activities related to the safety and 
soundness of individual banks and the banking system. In view of this, 
the FDIC's Board of Directors has adopted part 325 of its regulations, 
which sets forth (1) minimum standards of capital adequacy for insured 
state nonmember banks and (2) standards for determining when an insured 
bank is in an unsafe or unsound condition by reason of the amount of its 
capital.
    This capital maintenance regulation was designed to establish, in 
conjunction with other Federal bank regulatory agencies, uniform capital 
standards for all federally-regulated banking organizations, regardless 
of

[[Page 165]]

size. The uniform capital standards were based on ratios of capital to 
total assets. While those leverage ratios have served as a useful tool 
for assessing capital adequacy, the FDIC believes there is a need for a 
capital measure that is more explicitly and systematically sensitive to 
the risk profiles of individual banks. As a result, the FDIC's Board of 
Directors has adopted this Statement of Policy on Risk-Based Capital to 
supplement the part 325 regulation. This statement of policy does not 
replace or eliminate the existing part 325 capital-to-total assets 
leverage ratios. Once the risk-based capital framework is implemented, 
the FDIC will consider whether the part 325 definitions of capital for 
leverage purposes and the minimum leverage ratios should be amended.
    The framework set forth in this statement of policy consists of (1) 
a definition of capital for risk-based capital purposes, (2) a system 
for calculating risk-weighted assets by assigning assets and off-balance 
sheet items to broad risk categories, and (3) a schedule, which includes 
transitional arrangements during a phase-in period, for achieving a 
minimum supervisory ratio of capital to risk weighted assets. A bank's 
risk-based capital ratio is calculated by dividing its qualifying total 
capital base (the numerator of the ratio) by its risk-weighted assets 
(the denominator).\1\ Table I outlines the definition of capital and 
provides a general explanation of how the risk-based capital ratio is 
calculated, Table II summarizes the risk weights and risk categories, 
and Table III sets forth the credit conversation factors for off-balance 
sheet items. Additional explanations of the capital definitions, the 
risk-weighted asset calculations, and the minimum risk-based capital 
ratio guidelines are provided in Sections I, II and III of this 
statement of policy.
---------------------------------------------------------------------------

    \1\ Period-end amounts, rather than average balances, normally will 
be used when calculating risk-based capital ratios. However, on a case-
by-case basis, ratios based on average balances may also be required if 
supervisory concerns render it appropriate.
---------------------------------------------------------------------------

    In addition, when certain banks that engage in trading activities 
calculate their risk-based capital ratio under this appendix A, they 
must also refer to appendix C of this part, which incorporates capital 
charges for certain market risks into the risk-based capital ratio. When 
calculating their risk-based capital ratio under this appendix A, such 
banks are required to refer to appendix C of this part for supplemental 
rules to determine qualifying and excess capital, calculate risk-
weighted assets, calculate market risk equivalent assets and add them to 
risk-weighted assets, and calculate risk-based capital ratios as 
adjusted for market risk.
    This statement of policy applies to all FDIC-insured state-chartered 
banks (excluding insured branches of foreign banks) that are not members 
of the Federal Reserve System, hereafter referred to as state nonmember 
banks, regardless of size, and to all circumstances in which the FDIC is 
required to evaluate the capital of a banking organization. Therefore, 
the risk-based capital framework set forth in this statement of policy 
will be used in the examination and supervisory process as well as in 
the analysis of applications that the FDIC is required to act upon.
    The risk-based capital ratio focuses principally on broad categories 
of credit risk, however, the ratio does not take account of many other 
factors that can affect a bank's financial condition. These factors 
include overall interest rate risk exposure, liquidity, funding and 
market risks; the quality and level of earnings; investment, loan 
portfolio, and other concentrations of credit risk, certain risks 
arising from nontraditional activities; the quality of loans and 
investments; the effectiveness of loan and investment policies; and 
management's overall ability to monitor and control financial and 
operating risks, including the risk presented by concentrations of 
credit and nontraditional activities. In addition to evaluating capital 
ratios, an overall assessment of capital adequacy must take account of 
each of these other factors, including, in particular, the level and 
severity of problem and adversely classified assets as well as a bank's 
interest rate risk as measured by the bank's exposure to declines in the 
economic value of its capital due to changes in interest rates. For this 
reason, the final supervisory judgment on a bank's capital adequacy may 
differ significantly from the conclusions that might be drawn solely 
from the absolute level of the bank's risk-based capital ratio.
    In light of these other considerations, banks generally are expected 
to operate above the minimum risk-based capital ratio. Banks 
contemplating significant expansion plans, as well as those institutions 
with high or inordinate levels of risk, should hold capital commensurate 
with the level and nature of the risks to which they are exposed.

        I. Definition of Capital for the Risk-Based Capital Ratio

    A bank's qualifying total capital base consists of two types of 
capital elements: core capital elements (Tier 1) and supplementary 
capital elements (Tier 2). To qualify as an element of Tier 1 or Tier 2 
capital, a capital instrument should not contain or be subject to any 
conditions, covenants, terms, restrictions, or provisions that are 
inconsistent with safe and sound banking practices.

[[Page 166]]

          A. The Components of Qualifying Capital (see Table I)

    1. Core capital elements (Tier 1) consists of:
--Common stockholders' equity capital (includes common stock and related 
surplus, undivided profits, disclosed capital reserves that represent a 
segregation of undivided profits, and foreign currency translation 
adjustments, less net unrealized holding losses on available-for-sale 
equity securities with readily determinable fair values);
--Noncumulative perpetual preferred stock,\2\ including any related 
surplus; and
---------------------------------------------------------------------------

    \2\ Preferred stock issues where the dividend is reset periodically 
based, in whole or in part, upon the bank's current credit standing, 
including but not limited to, auction rate, money market or remarketable 
preferred stock, are assigned to Tier 2 capital, regardless of whether 
the dividends are cumulative or noncumulative.
---------------------------------------------------------------------------

--Minority interests in the equity capital accounts of consolidated 
subsidiaries.

    At least 50 percent of the qualifying total capital base should 
consist of Tier 1 capital. Core (Tier 1) capital is defined as the sum 
of core capital elements \3\ minus all intangible assets other than 
mortgage servicing rights and purchased credit card relationships \4\ 
and minus any disallowed deferred tax assets.
---------------------------------------------------------------------------

    \3\ In addition to the core capital elements, Tier 1 may also 
include certain supplementary capital elements during the transition 
period subject to certain limitations set forth in section III of this 
statement of policy.
    \4\ An exception is allowed for intangible assets that are 
explicitly approved by the FDIC as part of the bank's regulatory capital 
on a specific case basis. These intangibles will be included in capital 
for risk-based capital purposes under the terms and conditions that are 
specifically approved by the FDIC.
---------------------------------------------------------------------------

    Although nonvoting common stock noncumulative perpetual preferred 
stock, and minority interests in the equity capital accounts of 
consolidated subsidiaries are normally included in Tier 1 capital, 
voting common stockholders' equity generally will be expected to be the 
dominant form of Tier 1 capital. Thus, banks should avoid undue reliance 
on nonvoting equity, preferred stock and minority interests.
    Although minority interests in consolidated subsidiaries are 
generally included in regulatory capital, exceptions to this general 
rule will be made if the minority interests fail to provide meaningful 
capital support to the consolidated bank. Such a situation could arise 
if the minority interests are entitled to a preferred claim on 
essentially low risk assets of the subsidiary. Similarly, although 
intangible assets in the form of mortgage servicing rights and purchased 
credit card relationships are generally recognized for risk-based 
capital purposes, the deduction of part or all of the mortgage servicing 
rights and purchased credit card relationships may be required if the 
carrying amounts of these rights are excessive in relation to their 
market value or the level of the bank's capital accounts. Mortgage 
servicing rights and purchased credit card relationships that do not 
meet the conditions, limitations and restrictions described in 12 CFR 
325.5(f) will not be recognized for risk-based capital purposes.
    2. Supplementary capital elements (Tier 2) consist of:

    --Allowances for loan and lease losses, up to a maximum of 1.25 
percent of risk-weighted assets;
    --Cumulative perpetual preferred stock, long-term preferred stock 
(original maturity of at least 20 years) and any related surplus;
    --Perpetual preferred stock (and any related surplus) where the 
dividend is reset periodically based, in whole or part, on the bank's 
current credit standing, regardless of whether the dividends are 
cumulative or noncumulative;
    --Hybrid capital instruments, including mandatory convertible debt 
securities; and
    --Term subordinated debt and intermediate-term preferred stock 
(original average maturity of five years or more) and any related 
surplus.

    The definition of supplementary capital does not include revaluation 
reserves or hidden reserves that represent unrealized appreciation on 
assets such as bank premises and equity securities. Although such 
reserves will not be explicitly recognized when calculating a bank's 
risk-based capital ratio, these reserves may be taken into account as 
additional factors when assessing a bank's overall capital adequacy.
    The maximum amount of Tier 2 capital that may be recognized for 
risk-based capital purposes is limited to 100 percent of Tier 1 capital 
(after any deductions for disallowed intangibles). In addition, the 
combined amount of term subordinated debt and intermediate-term 
preferred stock that may be treated as part of Tier 2 capital for risk-
based capital purposes is limited to 50 percent of Tier 1 capital. 
Amounts in excess of these limits may be issued but are not included in 
the calculation of the risk-based capital ratio.
    (a) Allowance for loan and lease losses. Allowances for loan and 
lease losses are reserves that have been established through a charge 
against earnings to absorb future losses on loans or lease financing 
receivables. Allowances for loan and lease losses

[[Page 167]]

exclude allocated transfer risk reserves, \5\ and reserves created 
against identified losses.
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    \5\ Allocated transfer risk reserves are reserves that have been 
established in accordance with section 905(a) of the International 
Lending Supervision Act of 1983 against certain assets whose value has 
been found by the U.S. supervisory authorities to have been 
significantly impaired by protracted transfer risk problems.
---------------------------------------------------------------------------

    This risk-based capital framework provides a phasedown during the 
transition period of the extent to which the allowance for loan and 
lease losses may be included in an institution's capital base. By year-
end 1990, the allowance for loan and lease losses, as an element of 
supplementary capital, may constitute no more than 1.5 percent of risk-
weighted assets and, by year-end 1992, no more than 1.25 percent of 
risk-weighted assets.\6\
---------------------------------------------------------------------------

    \6\ The amount of the allowance for loan and lease losses that may 
be included as a supplementary capital element is based on a percentage 
of gross risk-weighted assets. A bank may deduct reserves for loan and 
lease losses that are in excess of the amount permitted to be included 
in capital, as well as allocated transfer risk reserves, from gross 
risk-weighted assets when computing the denominator of the risk-based 
capital ratio.
---------------------------------------------------------------------------

    (b) Preferred stock. Perpetual preferred stock is defined as 
preferred stock that does not have a maturity date, that cannot be 
redeemed at the option of the holder, and that has no other provisions 
that will require future redemption of the issue. Long-term preferred 
stock includes limited-life preferred stock with an original maturity of 
20 years or more, provided that the stock cannot be redeemed at the 
option of the holder prior to maturity, except with the prior approval 
of the FDIC.
    Cumulative perpetual preferred stock and long-term preferred stock 
qualify for inclusion in supplementary capital provided that the 
instruments can absorb losses while the issuer operates as a going 
concern (a fundamental characteristic of equity capital) and provided 
the issuer has the option to defer payment of dividends on these 
instruments. Given these conditions, and the perpetual or long-term 
nature of the intruments, there is no limit on the amount of these 
preferred stock instruments that may be included with Tier 2 capital.
    Noncumulative perpetual preferred stock where the dividend is reset 
periodically based, in whole or in part, on the bank's current credit 
standing, including auction rate, money market, or remarketable 
preferred stock, are also assigned to Tier 2 capital without limit, 
provided the above conditions are met.
    (c) Hybrid capital instruments. Hybrid capital instruments include 
instruments that have certain characteristics of both debt and equity. 
In order to be included as supplementary capital elements, these 
instruments should meet the following criteria:
    (1) The instrument should be unsecured, subordinated to the claims 
of depositors and general creditors, and fully paid-up.
    (2) The instrument should not be redeemable at the option of the 
holder prior to maturity, except with the prior approval of the FDIC. 
This requirement implies that holders of such instruments may not 
accelerate the payment of principal except in the event of bankruptcy, 
insolvency, or reorganization.
    (3) The instrument should be available to participate in losses 
while the issuer is operating as a going concern. (Term subordinated 
debt would not meet this requirement.) To satisfy this requirement, the 
instrument should convert to common or perpetual preferred stock in the 
event that the sum of the undivided profits and capital surplus accounts 
of the issuer results in a negative balance.
    (4) The instrument should provide the option for the issuer to defer 
principal and interest payments if: (a) The issuer does not report a 
profit in the preceding annual period, defined as combined profits 
(i.e., net income) for the most recent four quarters, and (b) the issuer 
eliminates cash dividends on its common and preferred stock.
    Mandatory convertible debt securities, which are subordinated debt 
instruments that require the issuer to convert such instruments into 
common or perpetual preferred stock by a date at or before the maturity 
of the debt instruments, will qualify as hybrid capital instruments 
provided the maturity of these instruments is 12 years or less and the 
instruments meet the criteria set forth below for ``term subordinated 
debt.'' There is no limit on the amount of hybrid capital instruments 
that may be included within Tier 2 capital.
    (d) Term subordinated debt and intermediate-term preferred stock. 
The aggregate amount of term subordinated debt (excluding mandatory 
convertible debt securities) and intermediate-term preferred stock 
(including any related surplus) that may be treated as Tier 2 capital 
for risk-based capital purposes is limited to 50 percent of Tier 1 
capital. Term subordinated debt and intermediate-term preferred stock 
should have an original average maturity of at least five years to 
qualify as supplementary capital and should not be redeemable at the 
option of the holder prior to maturity, except with the prior approval 
of the FDIC. For state nonmember banks, a term subordinated debt 
instrument is an obligation other than a deposit obligation that:
    (1) Bears on its face, in boldface type, the following: This 
obligation is not a deposit

[[Page 168]]

and is not insured by the Federal Deposit Insurance Corporation;
    (2)(i) Has a maturity of at least five years; or
    (ii) In the case of an obligation or issue that provides for 
scheduled repayments of principal, has an average maturity of at least 
five years; provided that the Director of the Division of Supervision 
may permit the issuance of an obligation or issue with a shorter 
maturity or average maturity if the Director has determined that exigent 
circumstances require the issuance of such obligation or issue; provided 
further that the provisions of this paragraph I.A.2.(d)(2) shall not 
apply to mandatory convertible debt obligations or issues;
    (3) States express that the obligation:
    (i) Is subordinated and junior in right of payment to the issuing 
bank's obligations to its depositors and to the bank's other obligations 
to its general and secured creditors; and
    (ii) Is ineligible as collateral for a loan by the issuing bank;
    (4) Is unsecured;
    (5) States expressly that the issuing bank may not retire any part 
of its obligation without the prior written consent of the FDIC or other 
primary federal regulator; and
    (6) Includes, if the obligation is issued to a depository 
institution, a specific waiver of the right of offset by the lending 
depository institution.

Subordinated debt obligations issued prior to December 2, 1987 that 
satisfied the definition of the term ``subordinated note and debenture'' 
that was in effect prior to that date also will be deemed to be term 
subordinated debt for risk-based capital purposes. An optional 
redemption (``call'') provision in a subordinated debt instrument that 
is exercisable by the issuing bank in less than five years will not be 
deemed to constitute a maturity of less than five years, provided that 
the obligation otherwise has a stated contractual maturity of at least 
five years; the call is exercisable solely at the discretion or option 
of the issuing bank, and not at the discretion or option of the holder 
of the obligation; and the call is exercisable only with the express 
prior written consent of the FDIC under 12 U.S.C. 1828(i)(1) at the time 
early redemption or retirement is sought, and such consent has not been 
given in advance at the time of issuance of the obligation. Optional 
redemption provisions will be accorded similar treatment when 
determining the perpetual nature and/or maturity of preferred stock and 
other capital instruments.
    Discount of limited-life supplementary capital instruments. As a 
limited-life capital instrument approaches maturity, the instrument 
begins to take on charcteristics of a short-term obligation and becomes 
less like a component of capital. Therefore, for risk-based capital 
purposes, the outstanding amount of term subordinated debt and limited-
life preferred stock eligible for inclusion in capital will be adjusted 
downward, or discounted, as the instruments approach maturity. Each 
limited-life capital instrument will be discounted by reducing the 
outstanding amount of the capital instrument eligible for inclusion as 
supplementary capital by a fifth of the original amount (less 
redemptions) each year during the instrument's last five years before 
maturity. Such instruments, therefore, will have no capital value when 
they have a remaining maturity of less than a year.

            B. Deductions from Capital and Other Adjustments

    Certain assets are deducted from a bank's capital base for the 
purpose of calculating the numerator of the risk-based capital ratio.\7\ 
These assets include:
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    \7\ Any assets deducted from capital when computing the numerator of 
the risk-based capital ratio will also be excluded from risk-weighted 
assets when computing the denominator of the ratio.
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    (1) All intangible assets other than mortgage servicing rights and 
purchased credit card relationships.\8\ These disallowed intangibles are 
deducted from the core capital (Tier 1) elements.
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    \8\ In addition to mortgage servicing rights and purchased credit 
card relationships, certain other intangibles may be allowed if 
explicitly approved by the FDIC as part of the bank's regulatory capital 
on a specific case basis. In evaluating whether other types of 
intangibles should be recognized for regulatory capital purposes on a 
specific case basis, the FDIC will accord special attention to the 
general characteristics of the intangibles, including: (1) The 
separability of the intangible asset and the ability to sell it separate 
and apart from the bank or the bulk of the bank's assets, (2) the 
certainty that a readily identifiable stream of cash flows associated 
with the intangible asset can hold its value notwithstanding the future 
prospects of the bank, and (3) the existence of a market of sufficient 
depth to provide liquidity for the intangible asset.
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    (2) Investments in unconsolidated banking and finance 
subsidiaries.\9\ This includes any

[[Page 169]]

equity or debt capital investments in banking or finance subsidaries if 
the subsidiaries are not consolidated for regulatory capital 
requirements.\10\ Generally, these investments include equity and debt 
capital securities and any other instruments or commitments that are 
deemed to be capital of the subsidiary. These investments are deducted 
from the bank's total (Tier 1 plus Tier 2) capital base.
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    \9\ For risk-based capital purposes, these subsidiaries are 
generally defined as any company that is primarily engaged in banking or 
finance and in which the bank, either directly or indirectly, owns more 
than 50 percent of the outstanding voting stock but does not consolidate 
the company for regulatory capital purposes. In addition to investments 
in unconsolidated banking and finance subsidiaries, the FDIC may, on a 
case- by-case basis, deduct investments in associated companies or joint 
ventures, which are generally defined as any companies in which the 
bank, either directly or indirectly, owns 20 to 50 percent of the 
outstanding voting stock. Alternatively, the FDIC may, in certain cases, 
apply an appropriate risk-weighted capital charge against a bank's 
proportionate interest in the assets of associated companies and joint 
ventures. The definitions for subsidiaries, associated companies and 
joint ventures are contained in the instructions for the preparation of 
the Consolidated Reports of Condition and Income.
    \10\ Consolidation requirements for regulatory capital purposes 
generally follow the consolidation requirements set forth in the 
instructions for preparation of the consolidated Reports of Condition 
and Income. However, although investments in subsidiaries representing 
majority ownership in another Federally-insured depository institution 
are not consolidated for purposes of the consolidated Reports of 
Condition and Income that are filed by the parent bank, they are 
generally consolidated for purposes of determining FDIC regulatory 
capital requirements. Therefore, investments in these depository 
institution subsidiaries generally will not be deducted for risk-based 
capital purposes; rather, assets and liabilities of such subsidiaries 
will be consolidated with those of the parent bank when calculating the 
risk-based capital ratio. In addition, although securities subsidiaries 
established pursuant to 12 CFR 337.4 are consolidated for Report of 
Condition and Income purposes, they are not consolidated for regulatory 
capital purposes.
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    (3) Investments in securities subsidiaries established pursuant to 
12 CFR 337.4. The FDIC may also consider deducting investments in other 
subsidiaries, either on a case-by-case basis or, as with securities 
subsidiaries, based on the general characteristics or functional nature 
of the subsidiaries.
    (4) Reciprocal holdings of capital instruments of banks that 
represent intentional cross-holdings by the banks. These holdings are 
deducted from the bank's total capital base.
    (5) Deferred tax assets in excess of the limit set forth in 
Sec. 325.5(g). These disallowed deferred tax assets are deducted from 
the core capital (Tier 1) elements.
    On a case-by-case basis, and in conjunction with supervisory 
examinations, other deductions from capital may also be required, 
including any adjustments deemed appropriate for assets classified as 
loss.

            II. Procedures For Computing Risk-Weighted Assets

                          A. General Procedures

    Under the risk-based capital framework, a bank's balance sheet 
assets and credit equivalent amounts of off-balance sheet items are 
assigned to one of four broad risk categories according to the obligor 
or, if relevent, the guarantor or the nature of the collateral. The 
aggregate dollar amount in each category is then multiplied by the risk 
weight assigned to that category. The resulting weighted values from 
each of the four risk categories are added together and this sum is the 
risk-weighted assets total that, as adjusted.\11\ comprises the 
denominator of the risk-based capital ratio.
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    \11\ Any asset deducted from a bank's capital accounts when 
computing the numerator of the risk-based capital ratio will also be 
excluded from risk-weighted assets when calculating the denominator for 
the ratio.
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    The risk-weighted amounts for all off-balance sheet items are 
determined by a two-step process. First, the notional principal, or face 
value, amount of each off-balance sheet item generally is multiplied by 
a credit conversion factor to arrive at a balance sheet credit 
equivalent amount. Second, the credit equivalent amount generally is 
assigned to the appropriate risk category, like any balance sheet asset, 
according to the obligor or, if relevant, the guarantor or the nature of 
the collateral.

                         B. Other Considerations

    1. Indirect Holdings of Assets. Some of the assets on a bank's 
balance sheet may represent an indirect holding of a pool of assets; for 
example, mutual funds. An investment in shares of a mutual fund whose 
portfolio consists solely of various securities or money market 
instruments that, if held separately, would be assigned to different 
risk categories, generally is assigned to the risk category appropriate 
to the highest risk-weighted asset that the fund is permitted to hold in 
accordance with its stated investment objectives, but in no case to the 
zero percent risk category. If, in order to maintain a necessary degree 
of liquidity, a fund is permitted to hold an insignificant amount of its 
investments in short-term, highly liquid assets that are of superior 
credit quality but that do not qualify for a preferential risk weight, 
such assets may generally be disregarded in determining the risk 
category into which the bank's holding in the overall

[[Page 170]]

fund should be assigned. Regardless of the composition of the fund's 
assets, if the fund is allowed to engage in any activities that appear 
speculative in nature (for example, use of futures, forwards, or option 
contracts for purposes other than to reduce interest rate risk) or if 
the fund has any other characteristics that are inconsistent with the 
preferential risk-weighting assigned to the fund's assets, holdings in 
the fund will be assigned to the 100 percent risk category.
    2. Collateral. In determining risk weights of various assets, the 
only forms of collateral that are formally recognized by the risk-based 
capital framework are cash on deposit in the lending bank; securities 
issued or guaranteed by the central governments of the OECD-based group 
of countries,\1\\2\ U.S. Government agencies, or U.S. Government-
sponsored agencies; and securities issued or guaranteed by multilateral 
lending institutions or regional development banks. Claims fully secured 
by such collateral are assigned to the 20 percent risk category. The 
extent to which these securities are recognized as collateral for risk-
based capital purposes is determined by their current market value. If a 
claim is partially secured, the portion of the claim that is not covered 
by the collateral is assigned to the risk category appropriate to the 
obligor or, if relevant, the guarantor.
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    \12\ The OECD-based group of countries comprises all full members of 
the Organization for Economic Cooperation and Development (OECD) 
regardless of entry date, as well as countries that have concluded 
special lending arrangements with the International Monetary Fund (IMF) 
associated with the IMF's General Arrangements to Borrow, but excludes 
any country that has rescheduled its external sovereign debt within the 
previous five years. As of November 1995, the OECD included the 
following countries: Australia, Austria, Belgium, Canada, Denmark, 
Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, 
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, 
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United 
States; and Saudi Arabia had concluded special lending arrangements with 
the IMF associated with the IMF's General Arrangements to Borrow. A 
rescheduling of external sovereign debt generally would include any 
renegotiation of terms arising from a country's inability or 
unwillingness to meet its external debt service obligations, but 
generally would not include renegotiations of debt in the normal course 
of business, such as a renegotiation to allow the borrower to take 
advantage of a decline in interest rates or other change in market 
conditions.
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    3. Guarantees. Guarantees of the OECD and non-OECD central 
governments, U.S. Government agencies, U.S. Government-sponsored 
agencies, state and local governments of the OECD-based group of 
countries, multilateral lending institutions and regional development 
banks, U.S. depository institutions and foreign banks are also 
recognized. If a claim is partially guaranteed, the portion of the claim 
that is not fully covered by the guarantee is assigned to the risk 
category appropriate to the obligor or, if relevant, the collateral.
    4. Maturity. Maturity is generally not a factor in assigning items 
to risk categories with the exceptions of claims on non-OECD banks, 
commitments, and interest rate and foreign exchange rate related 
contracts. Except for commitments, short-term is defined as one year or 
less remaining maturity and long-term is defined as over one year 
remaining maturity. In the case of commitments, short-term is defined as 
one year or less original maturity and long-term is defined as over one 
year original maturity.\1\\3\
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    \1\\3\ Through year-end 1992, remaining rather than original 
maturity may be used for determining term to maturity for commitments.
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    5. Mortgage-Backed Securities. Mortgage-backed securities, including 
pass-throughs and collateralized mortgage obligations (but not stripped 
mortgage-backed securities) that are issued or guaranteed by a U.S. 
Government agency or a U.S. Government-sponsored agency, normally are 
assigned to the risk weight category appropriate to the issuer or 
guarantor. Generally, a privately-issued mortgage-backed security is 
treated as essentially an indirect holding of the underlying assets, and 
assigned to the same risk category as the underlying assets, in 
accordance with the provisions and criteria spelled out in detail in the 
accompanying footnote; \1\\4\ however, such privately-issued

[[Page 171]]

mortgage-backed securities may not be assigned to the zero percent risk 
category. Privately-issued mortgage-backed securities whose structures 
do not comply with the specified provisions set forth in the footnote 
are assigned to the 100 percent risk category. In addition, any class of 
a mortgage-backed security that can absorb more than its pro rata share 
of loss without the whole issue being in default (for example, a 
subordinated class or residual interest) will also be assigned to the 
100 percent risk weight category. All stripped mortgage-backed 
securities, including interest-only strips (IOs), principal-only strips 
(POs), and similar instruments, are assigned to the 100 percent risk 
weight category, regardless of the issuer or guarantor.
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    \1\\4\ A privately-issued mortgage-backed security may be treated as 
an indirect holding of the underlying assets provided that (1) the 
underlying assets are held by an independent trustee and the trustee has 
a first priority, perfected security interest in the underlying assets 
on behalf of the holders of the security, (2) either the holder of the 
security has an undivided pro rata ownership interest in the underlying 
mortgage assets or the trust or single purpose entity (or conduit) that 
issues the security has no liabilities unrelated to the issued 
securities, (3) the security is structured such that the cash flow from 
the underlying assets in all cases fully meets the cash flow 
requirements of the security without undue reliance on any reinvestment 
income, and (4) there is no material reinvestment risk associated with 
any funds awaiting distribution to the holders of the security. In 
addition, if the underlying assets of a mortgage-backed security are 
composed of more than one type of asset, the entire mortgage-backed 
security is generally assigned to the category appropriate to the 
highest risk-weighted asset underlying the issue.
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    6. Small Business Loans and Leases on Personal Property Transferred 
with Recourse--(a) Notwithstanding other provisions of this appendix A, 
a qualifying institution that has transferred small business loans and 
leases on personal property (small business obligations) with recourse 
shall include in risk-weighted assets only the amount of retained 
recourse, provided two conditions are met. First, the transaction must 
be treated as a sale under generally accepted accounting principles 
(GAAP) and, second, the qualifying institution must establish pursuant 
to GAAP a non-capital reserve sufficient to meet the institution's 
reasonably estimated liability under the recourse arrangement. Only 
loans and leases to businesses that meet the criteria for a small 
business concern established by the Small Business Administration under 
section 3(a) of the Small Business Act (15 U.S.C. 632(a)) are eligible 
for this capital treatment.
    (b) For purposes of this appendix A, a qualifying institution is a 
bank that is well capitalized. In addition, by order of the FDIC, a bank 
that is adequately capitalized may be deemed a qualifying institution. 
In determining whether a bank meets the qualifying institution criteria, 
the prompt corrective action well capitalized and adequately capitalized 
definitions set forth in Sec. 325.103 shall be used, except that the 
bank's capital ratios must be calculated without regard to the 
preferential capital treatment for transfers of small business 
obligations with recourse specified in section II.B.6.(a) of this 
appendix A. The total outstanding amount of recourse retained by a 
qualifying institution on transfers of small business obligations 
receiving the preferential capital treatment cannot exceed 15 percent of 
the institution's total risk-based capital. By order, the FDIC may 
approve a higher limit.
    (c) If a bank ceases to be a qualifying institution or exceeds the 
15 percent of capital limit under section II.B.6.(b) of this appendix A, 
the preferential capital treatment will continue to apply to any 
transfers of small business obligations with recourse that were 
consummated during the time the bank was a qualifying institution and 
did not exceed such limit.
    (d) The risk-based capital ratios of a bank shall be calculated 
without regard to the preferential capital treatment for transfers of 
small business obligations with recourse specified in paragraph (a) of 
this section for purposes of:
    (i) Determining whether a bank is adequately capitalized, 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized under the prompt corrective action capital category 
definitions specified in Sec. 325.103; and
    (ii) Applying the prompt corrective action reclassification 
provisions specified in Sec. 325.103(d), regardless of the bank's 
capital level.

         C. Risk Weights for Balance Sheet Assets (see Table II)

    The risk-based capital framework contains four risk weight 
categories--0 percent, 20 percent, 50 percent and 100 percent. In 
general, if a particular item can be placed in more than one risk 
category, it is assigned to the category that has the lowest risk 
weight. An explanation of the components of each category follows:
    Category 1--Zero Percent Risk Weight. This category includes cash 
(domestic and foreign) owned and held in all offices of the bank or in 
transit; balances due from Federal Reserve Banks and central banks in 
other OECD countries; the portions of local currency claims on or 
unconditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency; and gold bullion 
held in the bank's own vaults or in another bank's vaults on an 
allocated basis, to the extent it is offset by gold bullion 
liabilities.\1\\5\
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    \1\\5\ All other bullion holdings are to be assigned to the 100 
percent risk weight category.
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    The zero percent risk category also includes direct claims \1\\6\ 
(including securities, loans, and leases) on, and the portions of

[[Page 172]]

claims that are unconditionally guaranteed by, OECD central governments 
\1\\7\ and U.S. Government agencies.\1\\8\ Federal Reserve Bank stock 
also is included in this category.
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    \1\\6\ For purposes of determining the appropriate risk weights for 
this risk-based capital framework, the terms claims and securities refer 
to loans or other debt obligations of the entity on whom the claim is 
held. Investments in the form of stock or equity holdings in commercial 
or financial firms are generally assigned to the 100 percent risk 
category.
    \1\\7\ A central government is defined to include departments and 
ministries, including the central bank, of the central government. The 
U.S. central bank includes the 12 Federal Reserve Banks. The definition 
of central government does not include state, provincial or local 
governments or commercial enterprises owned by the central government. 
In addition, it does not include local government entities or commercial 
enterprises whose obligations are guaranteed by the central government. 
OECD central governments are defined as central governments of the OECD-
based group of countries. Non-OECD central governments are defined as 
central governments of countries that do not belong to the OECD-based 
group of countries.
    \1\\8\ For risk-based capital purposes U.S. Government agency is 
defined as an instrumentality of the U.S. Government whose debt 
obligations are fully and explicitly guaranteed as to the timely payment 
of principal and interest by the full faith and credit of the U.S. 
Government. These agencies include the Government National Mortgage 
Association (GNMA), the Veterans Administration (VA), the Federal 
Housing Administration (FHA), the Farmers Home Administration (FHA), the 
Export-Import Bank (Exim Bank), the Overseas Private Investment 
Corporation (OPIC), the Commodity Credit Corporation (CCC), and the 
Small Business Administration (SBA). U.S. Government agencies generally 
do not directly issue securities to the public; however, a number of 
U.S. Government agencies, such as GNMA, guarantee securities that are 
publicly held.
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    Category 2--20 Percent Risk Weight. This category includes short-
term claims (including demand deposits) on, and portions of short-term 
claims that are guaranteed \19\ by, U.S. depository institutions \20\ 
and foreign banks;\21\ portions of claims collateralized by cash held in 
a segregated deposit account of the lending bank; cash items in process 
of collection, both foreign and domestic; and long-term claims on, and 
portions of long-term claims guaranteed by, U.S. depository institutions 
and OECD banks.\22\
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    \19\ Claims guaranteed by U.S. depository institutions and foreign 
banks include risk participations in both bankers acceptances and 
standby letters of credit, as well as participations in commitments, 
that are conveyed to other U.S. depository institutions or foreign 
banks.
    \20\ U.S. depository institutions are defined to include branches 
(foreign and domestic) of federally-insured banks and depository 
institutions chartered and headquartered in the 50 states of the United 
States, the District of Columbia, Puerto Rico, and U.S. territories and 
possessions. The definition encompasses banks, mutual or stock savings 
banks, savings or building and loan associations, cooperative banks, 
credit unions, international banking facilities of domestic depository 
institutions, and U.S.-chartered depository institutions owned by 
foreigners. However, this definition excludes branches and agencies of 
foreign banks located in the U.S. and bank holding companies.
    \21\ Foreign banks are distinguished as either OECD banks or non-
OECD banks. OECD banks include banks and their branches (foreign and 
domestic) organized under the laws of countries (other than the U.S.) 
that belong to the OECD-based group of countries. Non-OECD banks include 
banks and their branches (foreign and domestic) organized under the laws 
of countries that do not belong to the OECD-based group of countries. 
For risk-based capital purposes, a bank is defined as an institution 
that engages in the business of banking; is recognized as a bank by the 
bank supervisory or monetary authorities of the country of its 
organization or principal banking operations; receives deposits to a 
substantial extent in the regular course of business; and has the power 
to accept demand deposits.
    \22\ Long-term claims on, or guaranteed by, non-OECD banks and all 
claims on bank holding companies are assigned to the 100 percent risk 
weight category, as are holdings of bank-issued securities that qualify 
as capital of the issuing banks for risk-based capital purposes.
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    This category also includes claims on, or portions of claims 
guaranteed by, U.S. Government-sponsored agencies;\23\ and portions of 
claims (including repurchase agreements) collateralized by securities 
issued or guaranteed by OECD central governments, U.S. Government 
agencies, or U.S. Government-sponsored agencies. Also included in the 20 
percent risk category are portions of claims that are conditionally 
guaranteed by OECD

[[Page 173]]

central governments and U.S. Government agencies,\24\ as well as 
portions of local currency claims that are conditionally guaranteed by 
non-OECD central governments to the extent that the bank has liabilities 
booked in that currency.
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    \23\ For risk-based capital purposes, U.S. Government-sponsored 
agencies are defined as agencies originally established or chartered by 
the U.S. Government to serve public purposes specified by the U.S. 
Congress but whose debt obligations are not explicitly guaranteed by the 
full faith and credit of the U.S. Government. These agencies include the 
Federal Home Loan Mortgage Corporation (FHLMC), the Federal National 
Mortgage Association (FNMA), the Farm Credit System, the Federal Home 
Loan Bank System, and the Student Loan Marketing Association (SLMA). For 
risk-based capital purposes, claims on U.S. Government-sponsored 
agencies also include capital stock in a Federal Home Loan Bank that is 
held as a condition of membership in that Bank.
    \24\ For risk-based capital purposes, a conditional guarantee is 
deemed to exist if the validity of the guarantee by the OECD central 
government or the U.S. Government agency is dependent upon some 
affirmative action (e.g., servicing requirements on the part of the 
beneficiary of the guarantee). Portions of claims that are 
unconditionally guaranteed by OECD central governments or U.S. 
Government agencies are assigned to the zero percent risk category.
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    General obligation claims on, or portions of claims guaranteed by, 
the full faith and credit of states or other political subdivisions of 
the United States or other countries of the OECD-based group are also 
assigned to this 20 percent risk category.\25\ In addition, this 
category includes claims on the International Bank for Reconstruction 
and Development (World Bank), International Finance Corporation the 
Inter-American Development Bank, the Asian Development Bank, the African 
Development Bank, the European Investment Bank, the European Bank for 
Reconstruction and Development, the Nordic Investment Bank, and other 
multilateral lending institutions or regional development institutions 
in which the U.S. Government is a shareholder or contributing member, as 
well as portions of claims guaranteed by such organizations or 
collateralized by their securities.
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    \25\ Claims on, or guaranteed by, states or other political 
subdivisions of countries that do not belong to the OECD-based group of 
countries are to be placed in the 100 percent risk weight category.
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    Category 3--50 Percent Risk Weight. This category includes loans 
fully secured by first liens \26\ on one-to-four family residential 
properties, provided that such loans have been approved in accordance 
with prudent underwriting standards, including standards relating to the 
loan amount as a percent of the appraised value of the property,\27\ and 
provided that the loans are not past due 90 days or more or carried in 
nonaccrual status.\28\ The types of loans that qualify as loans secured 
by one-to-four family residential properties are listed in the 
instructions for preparation of the Consolidated Reports of Condition 
and Income. These properties may be either owner-occupied or rented. In 
addition, for risk-based capital purposes, loans secured by one-to-four 
family residential properties include loans to builders with substantial 
project equity for the construction of one-to-four family residences 
that have been presold under firm contracts to purchasers who have 
obtained firm commitments for permanent qualifying mortgage loans and 
have made substantial earnest money deposits. Such loans to builders 
will be considered prudently underwritten only if the bank has obtained 
sufficient documentation that the buyer of the home intends to purchase 
the home (i.e., has a legally binding written sales contract) and has 
the ability to obtain a mortgage loan sufficient to purchase the home 
(i.e., has a firm written commitment for permanent financing of the home 
upon completion), provided the following criteria are met:
    (1) The purchaser is an individual(s) who intends to occupy the 
residence and is not a partnership, joint venture, trust, corporation, 
or any other entity (including an entity acting as a sole 
proprietorship) that is purchasing one or more of the homes for 
speculative purposes;
    (2) The builder must incur at least the first ten percent of the 
direct costs (i.e., actual costs of the land, labor, and material) 
before any drawdown is made under the construction loan and the 
construction loan may not exceed 80 percent of the sales price of the 
presold home;
    (3) The purchaser has made a substantial ``earnest money deposit'' 
of no less than three percent of the sales price of the home and the 
deposit must be subject to forfeiture if the purchaser terminates the 
sales contract; and
    (4) The earnest money deposit must be held in escrow by the bank 
financing the builder or by an independent party in a fiduciary capacity 
and the escrow agreement must provide that, in the event of default 
arising from the cancellation of the sales contract by the buyer, the 
escrow funds must first be used to defray any costs incurred by the 
bank.
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    \26\ If a bank holds the first and junior lien(s) on a residential 
property and no other party holds an intervening lien, the transactions 
will be treated as a single loan secured by a first lien.
    \27\ For risk-based capital purposes, the loan-to-value ratio 
generally is based upon the most current appraised value of the 
property. The appraisal should be performed in a manner consistent with 
the Federal banking agencies' real estate appraisal guidelines and with 
the bank's own appraisal guidelines.
    \28\ Real estate loans that do not meet all of the specified 
criteria or that are made for the purpose of property development are 
placed in the 100 percent risk category.

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[[Page 174]]

    This category also includes loans fully secured by first liens on 
multifamily residential properties,29 provided that:
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    \29\ The types of loans that qualify as loans secured by multifamily 
residential properties are listed in the instructions for preparation of 
the Consolidated Reports of Condition and Income. In addition, as 
provided in those instructions, a multifamily residential property loan 
that is sold subject to a pro rata loss sharing arrangement is treated 
by the selling bank as sold (and excluded from balance sheet assets) to 
the extent that the sales agreement provides for the purchaser of the 
loan to share in any loss incurred on the loan on a pro rata basis with 
the selling bank. In such a transaction, from the standpoint of the 
selling bank, the portion of the loan that is treated as sold is not 
subject to the risk-based capital standards. In connection with sales of 
multifamily residential property loans in which the purchaser of a loan 
shares in any loss incurred on the loan with the selling institution on 
other than a pro rata basis, these other loss sharing arrangements are 
taken into account for purposes of determining the extent to which such 
loans are treated by the selling bank as sold (and excluded from balance 
sheet assets) under the risk-based capital framework in the same manner 
as prescribed for reporting purposes in the instructions for preparation 
of the Consolidated Reports of Condition and Income.
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    (1) The loan amount does not exceed 80 percent of the value 
30 of the property securing the loan as determined by the 
most current appraisal or evaluation, whichever may be appropriate (75 
percent if the interest rate on the loan changes over the term of the 
loan);
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    \30\ At the origination of a loan to purchase an existing property, 
the term ``value'' means the lesser of the actual acquisition cost or 
the estimate of value set forth in an appraisal or evaluation, whichever 
may be appropriate.
---------------------------------------------------------------------------

    (2) For the property's most recent fiscal year, the ratio of annual 
net operating income generated by the property (before payment of any 
debt service on the loan) to annual debt service on the loan is not less 
than 120 percent (115 percent if the interest rate on the loan changes 
over the term of the loan) or, in the case of a property owned by a 
cooperative housing corporation or nonprofit organization, the property 
generates sufficient cash flow to provide comparable protection to the 
bank;
    (3) Amortization of principal and interest on the loan occurs over a 
period of not more than 30 years;
    (4) The minimum original maturity for repayment of principal on the 
loan is not less than seven years;
    (5) All principal and interest payments have been made on a timely 
basis in accordance with the terms of the loan for at least one year 
before the loan is placed in this category; 31
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    \31\ In the case where the existing owner of a multifamily 
residential property refinances a loan on that property, all principal 
and interest payments on the loan being refinanced must have been made 
on a timely basis in accordance with the terms of that loan for at least 
the preceding year. The new loan must meet all of the other eligibility 
criteria in order to qualify for a 50 percent risk weight.
---------------------------------------------------------------------------

    (6) The loan is not 90 days or more past due or carried in 
nonaccrual status; and
    (7) The loan has been made in accordance with prudent underwriting 
standards.
    Also included in this category are privately-issued mortgage-backed 
securities provided that: (1) The structure of the security meets the 
criteria described above for ``Mortgage-Backed Securities;'' (2) if the 
security is backed by a pool of conventional mortgages on one-to-four 
family residential or multifamily residential properties, each 
underlying mortgage meets the criteria described in this section for 
inclusion in the 50 percent risk weight category at the time the pool is 
originated; (3) if the security is backed by privately-issued mortgage-
backed securities, each underlying security qualifies for inclusion in 
the 50 percent risk category; and (4) if the security is backed by a 
pool of multifamily residential mortgages, principal or interest 
payments on the security are not 30 days or more past due.32
---------------------------------------------------------------------------

    \32\  Privately-issued mortgage-backed securities that do not meet 
these criteria or that do not qualify for a lower risk weight generally 
are assigned to the 100 percent risk weight category.
---------------------------------------------------------------------------

    This category also includes revenue (non-general obligation) bonds 
or similar obligations, including loans and leases, that are obligations 
of states or political subdivisions of the United States or other OECD 
countries, but for which the government entity is committed to repay the 
debt with revenues from the specific projects financed, rather than from 
general tax funds (e.g., municipal revenue bonds). In addition, the 
credit equivalent amount of derivative contracts that do not qualify for 
a lower risk weight are assigned to the 50 percent risk category.
    Category 4--100 Percent Risk Weight. All assets not included in the 
above risk categories are assigned to this category, which comprises 
standard risk assets. Long-term claims on, or guaranteed by, non-OECD 
banks, and all claims on non-OECD central governments that entail some 
degree of

[[Page 175]]

transfer risk are assigned to the 100 percent risk category.\3\\3\
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    \3\\3\ Such assets include all non-local currency claims on non-OECD 
central governments and those portions of local currency claims on, or 
guaranteed by, non-OECD central governments that exceed the local 
currency liabilities held by the bank.
---------------------------------------------------------------------------

    This category also includes all claims on foreign and domestic 
private sector obligors that are not assigned to lower risk weight 
categories, including: loans to nondepository financial institutions and 
bank holding companies; claims on commercial firms owned by the public 
sector; customer liabilities to the bank on acceptances outstanding 
involving standard risk claims; \34\ investments in fixed assets, 
premises and other real estated owned; common and preferred stock of 
corporations, including stock acquired for debt previously contracted; 
commercial and consumer loans (except those loans assigned to lower risk 
categories due to recognized guarantees or collateral); real estate 
loans and mortgage-backed securities that do not meet the criteria for 
assignment to a lower risk weight (including any classes of mortgage-
backed securities that can absorb more than their pro rata share of loss 
without the whole issue being in default, such as subordinated classes 
or residual interests); and all stripped mortgage-backed securities, 
including interest-only (IOs) and principal-only (POs) strips.
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    \34\ Customer liabilities on acceptances outstanding involving non-
standard risk claims, such as claims on U.S. depository institutions, 
are assigned to the risk category appropriate to the identity of the 
obligor or, if relevant, the nature of the collateral or guarantees 
backing the claim. Portions of acceptances conveyed as risk 
participations to U.S. depository institutions or foreign banks should 
be assigned to the 20 percent risk category that is appropriate for 
short-term claims guaranteed by U.S. depository institutions and foreign 
banks.
---------------------------------------------------------------------------

    Also included in this category are industrial development bonds and 
similar obligations issued under the auspices of state or political 
subdivisions of the OECD-based group of countries for the benefit of a 
private party or enterprise where that party or enterprise, rather than 
the government entity, is obligated to pay the principal and interest, 
and all obligations of states or political subdivisions of countries 
that do not belong to the OECD-based group of countries.
    Unless already deducted from capital for risk-based capital 
purposes, the following assets also are included in the 100 percent risk 
category: investments in unconsolidated subsidiaries, joint ventures or 
associated companies; instruments that qualify as capital issued by 
other banks; and mortgage servicing rights and other allowed 
intangibles.

    D. Conversion Factors for Off-Balance Sheet Items (see Table III)

    The face amount of an off-balance sheet item is generally multiplied 
by a credit conversion factor and the resulting credit equivalent amount 
is assigned to the appropriate risk category according to the obligor 
or, if relevant, the guarantor or the nature of the collateral.\35\
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    \35\ The sufficiency of collateral and guarantees for off-balance-
sheet items is determined by the market value of the collateral or the 
amount of the guarantee in relation to the face amount of the item, 
except for derivative contracts, for which this determination is 
generally made in relation to the credit equivalent amount. Collateral 
and guarantees are subject to the same provisions noted under section 
II.B. of this appendix A.
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    1. Items With a 100 Percent Conversion Factor. A 100 percent 
conversion factor applies to direct credit substitutes, which include 
guarantees, or equivalent instruments, backing financial claims, such as 
securities, loans or other financial obligations, or backing off-balance 
sheet items that require capital under the risk-based capital framework. 
These direct credit substitutes include financial standby letters of 
credit, or other equivalent irrevocable undertakings or surety 
arrangements, that effectively guarantee repayment of financial 
obligations such as: commercial paper, tax-exempt securities, commercial 
or individual loans or other debt obligations, or standby or commercial 
letters of credit.
    For risk-based capital purposes, financial standby letters of credit 
(100 percent conversion factor) are distinguished from loan commitments 
(normally a 50 percent conversion factor) in that financial standbys are 
irrevocable obligations of the bank to pay a third-party beneficiary 
when a customer (account party) fails to repay an outstanding loan or 
debt instrument. A loan commitment, on the other hand, involves an 
obligation (with or without a material adverse change clause) of the 
bank to provide funds to its customer in the normal course of business 
should the customer seek to draw down the commitment.
    Therefore, the distinguishing characteristics of a financial standby 
letter of credit for risk-based capital purposes is the combination of 
irrevocability with the notion that funding is triggered by some failure 
to repay or perform on a financial obligation. Thus, any commitment (by 
whatever name) that involves an irrevocable obligation to make a payment 
to the customer or to a third party in the event the customer fails to 
repay an outstanding debt obligation will be treated,

[[Page 176]]

for risk-based capital purposes, as a financial standby letter of credit 
and assigned a 100 percent conversion factor. (Performance-related 
standby letters of credit are assigned a conversion factor of 50 
percent.)
    A bank that has conveyed risk participation \36\ in a direct credit 
substitute to a third party should convert the full amount of the direct 
credit substitute at a 100 percent conversion factor without deducting 
the risk participations conveyed. However, portions of direct credit 
substitutes that have been conveyed as risk participations to U.S. 
depository institutions and OECD banks may then be assigned to the 20 
percent risk category that is appropriate for claims guaranteed by U.S. 
depository institutions and OECD banks, rather than to the risk category 
appropriate to the account party obligor.\37\ A bank acquiring a risk 
participation in a direct credit substitute or bankers acceptance should 
convert the participation at 100 percent and then assign the credit 
equivalent amount to the risk category that is appropriate to the 
account party obligor or, if relevant, the guarantor or the nature of 
the collateral.
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    \36\ That is, participations in which the originating bank remains 
liable to the beneficiary for the full amount of the direct credit 
substitute if the party that has acquired the participation fails to pay 
when the instrument is drawn upon.
    \37\ Risk participations with a remaining maturity of one year or 
less that are conveyed to non-OECD banks are also assigned to the 20 
percent risk weight category.
---------------------------------------------------------------------------

    In the case of direct credit substitutes that are structured in the 
form of a syndication as defined in the instructions for the preparation 
of the Consolidated Reports of Condition and Income (that is, where each 
bank is obligated only for its pro rata share of the risk and there is 
no recourse to the originating bank), each bank will only include its 
pro rata share of the direct credit substitute in its risk-based capital 
calculation.
    Sale and repurchase agreements and asset sales with recourse, if not 
already included on the balance sheet, are also converted at 100 
percent. For risk-based capital purposes, the definition of sales of 
assets with recourse, including the sale of one-to-four family 
residential mortgages, is consistent with the definition contained in 
the instructions for the preparation of the Consolidated Reports of 
Condition and Income. Accordingly, except as noted below, the entire 
amount of any assets transferred with recourse that are not already 
included on the balance sheet, including pools of one-to-four family 
residential mortgages, is to be converted at 100 percent and assigned to 
the risk weight category appropriate to the obligor or, if relevant, the 
guarantor or the nature of the collateral. The terms of a transfer of 
assets with recourse may contractually limit the amount of the bank's 
liability to an amount less than the effective risk-based capital 
requirement for the assets being transferred with recourse. If such a 
transaction (including one that, in accordance with the instructions for 
the preparation of the Consolidated Reports of Condition and Income, is 
reported as a financing, i.e., the assets are not removed from the 
balance sheet) meets the criteria for sale treatment under generally 
accepted accounting principles, the amount of total capital required is 
equal to the maximum amount of loss possible under the recourse 
provision. If the transaction is also treated as a sale in accordance 
with the instructions for the preparation of the Consolidated Reports of 
Condition and Income, then the required amount of capital may be reduced 
by the balance of any associated noncapital liability account 
established pursuant to generally accepted accounting principles to 
cover estimated probable losses under the recourse provision. So-called 
``loan strips'' (that is, short-term advances sold under long-term 
commitments without direct recourse) are defined in the instructions for 
the preparation of the Consolidated Reports of Condition and Income and 
for risk-based capital purposes as assets sold with recourse.
    In addition, a 100 percent conversion factor applies to forward 
agreements. Forward agreements are legally binding contractual 
obligations to purchase assets with drawdown which is certain at a 
specified future date. These obligations include forward purchases, 
forward deposits placed, and partly paid shares and securities, but do 
not include forward foreign exchange rate contracts or commitments to 
make residential mortgage loans.
    Securities lent by a bank are treated in one of two ways, depending 
on whether the lender is exposed to risk of loss. If a bank, as agent 
for a customer, lends the customer's securities and is not obligated to 
indemnify the customer against loss, the securities lending transaction 
is excluded from the risk-based capital calculation. On the other hand, 
if a bank lends its own securities, or acting as agent lends the 
customer's securities and agrees to indemnify the customer against loss, 
the transaction is converted at 100 percent and assigned to the risk 
weight category appropriate to the obligor or, if applicable, to the 
collateral delivered to the lending bank or to the independent custodian 
acting on the lending bank's behalf.
    2. Items With a 50 Percent Conversion Factor. Transaction-related 
contingencies are to be converted at 50 percent. Such contingencies 
include bid bonds, performance bonds, warranties, and performance 
standby letters of credit related to particular transactions, as well as 
acquisitions of risk participations in

[[Page 177]]

performance standby letters of credits. Performance standby letters of 
credit (performance bonds) are irrevocable obligations of the bank to 
pay a third-party beneficiary when a customer (account party) fails to 
perform on some contractual nonfinancial obligation. Thus, performance 
standby letters of credit represent obligations backing the performance 
of nonfinancial or commercial contracts or undertakings. To the extent 
permitted by law or regulation, performance standby letters of credit 
include arrangements backing, among other things, subcontractors' and 
suppliers' performance, labor and materials contracts, and construction 
bids.
    The unused portion of commitments with an original maturity 
exceeding one year,\38\ including underwriting commitments and 
commercial and consumer credit commitments, also are to be converted at 
50 percent. Original maturity is defined as the length of time between 
the date the commitment is issued and the earliest date on which: (1) 
The bank can at its option, unconditionally (without cause) cancel the 
commitment,\39\ and (2) the bank is scheduled to (and as a normal 
practice actually does) review the facility to determine whether or not 
it should be extended and, on at least an annual basis, continues to 
regularly review the facility. Facilities that are unconditionally 
cancelable (without cause) at any time by the bank are not deemed to be 
commitments, provided the bank makes a separate credit decision before 
each drawing under the facility.
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    \38\ Remaining maturity may be used for determining the term to 
maturity for loan commitments through year-end 1992; thereafter, 
original maturity shall be used.
    \39\ In the case of home equity or mortgage lines of credit secured 
by liens on one-to-four family residential properties, a bank is deemed 
able to unconditionally cancel the commitment if, at its option, it can 
prohibit additional extensions of credit, reduce the credit line, and 
terminate the commitment to the full extent permitted by relevant 
Federal law.
---------------------------------------------------------------------------

    Commitments, for risk-based capital purposes, are defined as any 
arrangements that obligate a bank to extend credit in the form of loans 
or lease financing receivables; to purchase loans, securities, or other 
assets; or to participate in loans and leases. Commitments also include 
overdraft facilities, revolving credit, home equity and mortgage lines 
of credit, and similar transactions. Normally, commitments involve a 
written contract or agreement and a commitment fee, or some other form 
of consideration. Commitments are included in risk-weighted assets 
regardless of whether they contain material adverse change clauses or 
other provisions that are intended to relieve the issuer of its funding 
obligation under certain conditions.
    In the case of commitments structured as syndications where the bank 
is obligated only for its pro rata share, the risk-based capital 
framework includes only the bank's proportional share of such 
commitments. Thus, after a commitment has been converted at 50 percent, 
portions of commitments that have been conveyed to other U.S. depository 
institutions or OECD banks, but for which the originating bank retains 
the full obligation to the borrower if the participating bank fails to 
pay when the commitment is drawn upon, will be assigned to the 20 risk 
category. The acquisition of such a participation in a commitment would 
be converted at 50 percent and the credit equivalent amount would be 
assigned to the risk category that is appropriate for the account party 
obligor or, if relevant, to the nature of the collateral or guarantees.
    Revolving underwriting facilities (RUFs), note issuance facilities 
(NIFs), and other similar arrangements also are converted at 50 percent. 
These are facilities under which a borrower can issue on a revolving 
basis short-term notes in its own name, but for which the underwriting 
banks have a legally binding commitment either to purchase any notes the 
borrower is unable to sell by the rollover date or to advance funds to 
the borrower.
    3. Items With a 20 Percent Conversion Factor. Short-term, self-
liquidating, trade-related contingencies which arise from the movement 
of goods are converted at 20 percent. Such contingencies include 
commercial letters of credit and other documentary letters of credit 
collateralized by the underlying shipments.
    4. Items With a Zero Percent Conversion Factor. These include unused 
portions of commitments with an original maturity of one year or less, 
or which are unconditionally cancellable at any time (provided a 
separate credit decision is made before each drawing under the 
facility). Unused portions of retail credit card lines and related plans 
are deemed to be short-term commitments if the bank, in accordance with 
applicable law, has the unconditional option to cancel the credit line 
at any time.
    E. Derivative Contracts (Interest Rate, Exchange Rate, Commodity 
(including precious metal) and Equity Derivative Contracts)
    1. Credit equivalent amounts are computed for each of the following 
off-balance-sheet derivative contracts:
    (a) Interest Rate Contracts
    (i) Single currency interest rate swaps.
    (ii) Basis swaps.
    (iii) Forward rate agreements.
    (iv) Interest rate options purchased (including caps, collars, and 
floors purchased).
    (v) Any other instrument linked to interest rates that gives rise to 
similar credit

[[Page 178]]

risks (including when-issued securities and forward deposits accepted).
    (b) Exchange Rate Contracts
    (i) Cross-currency interest rate swaps.
    (ii) Forward foreign exchange contracts.
    (iii) Currency options purchased.
    (iv) Any other instrument linked to exchange rates that gives rise 
to similar credit risks.
    (c) Commodity (including precious metal) or Equity Derivative 
Contracts
    (i) Commodity- or equity-linked swaps.
    (ii) Commodity- or equity-linked options purchased.
    (iii) Forward commodity- or equity-linked contracts.
    (iv) Any other instrument linked to commodities or equities that 
gives rise to similar credit risks.
    2. Exchange rate contracts with an original maturity of 14 calendar 
days or less and derivative contracts traded on exchanges that require 
daily receipt and payment of cash variation margin may be excluded from 
the risk-based ratio calculation. Gold contracts are accorded the same 
treatment as exchange rate contracts except gold contracts with an 
original maturity of 14 calendar days or less are included in the risk-
based calculation. Over-the-counter options purchased are included and 
treated in the same way as other derivative contracts.
    3. Credit Equivalent Amounts for Derivative Contracts. (a) The 
credit equivalent amount of a derivative contract that is not subject to 
a qualifying bilateral netting contract in accordance with section 
II.E.5. of this appendix A is equal to the sum of:
    (i) The current exposure (which is equal to the mark-to-market 
value,40 if positive, and is sometimes referred to as the 
replacement cost) of the contract; and
---------------------------------------------------------------------------

    \40\ Mark-to-market values are measured in dollars, regardless of 
the currency or currencies specified in the contract and should reflect 
changes in both underlying rates, prices and indices, and counterparty 
credit quality.
---------------------------------------------------------------------------

    (ii) An estimate of the potential future credit exposure.
    (b) The current exposure is determined by the mark-to-market value 
of the contract. If the mark-to-market value is positive, then the 
current exposure is equal to that mark-to-market value. If the mark-to-
market value is zero or negative, then the current exposure is zero.
    (c) The potential future credit exposure of a contract, including a 
contract with a negative mark-to-market value, is estimated by 
multiplying the notional principal amount of the contract by a credit 
conversion factor. Banks should, subject to examiner review, use the 
effective rather than the apparent or stated notional amount in this 
calculation. The credit conversion factors are:

                                            Conversion Factor Matrix                                            
----------------------------------------------------------------------------------------------------------------
                                                                Exchange                  Precious              
               Remaining maturity                  Interest     rate and      Equity      metals,       Other   
                                                     rate         gold                  except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less...............................         0.0%         1.0%         6.0%         7.0%        10.0%
More than one year to five years...............         0.5%         5.0%         8.0%         7.0%        12.0%
More than five years...........................         1.5%         7.5%        10.0%         8.0%        15.0%
----------------------------------------------------------------------------------------------------------------

    (d) For contracts that are structured to settle outstanding exposure 
on specified dates and where the terms are reset such that the market 
value of the contract is zero on these specified dates, the remaining 
maturity is equal to the time until the next reset date. For interest 
rate contracts with remaining maturities of more than one year and that 
meet these criteria, the conversion factor is subject to a minimum value 
of 0.5 percent.
    (e) For contracts with multiple exchanges of principal, the 
conversion factors are to be multiplied by the number of remaining 
payments in the contract. Derivative contracts not explicitly covered by 
any of the columns of the conversion factor matrix are to be treated as 
``other commodities.''
    (f) No potential future exposure is calculated for single currency 
interest rate swaps in which payments are made based upon two floating 
rate indices (so called floating/floating or basis swaps); the credit 
exposure on these contracts is evaluated solely on the basis of their 
mark-to-market values.
    4. Risk Weights and Avoidance of Double Counting. (a) Once the 
credit equivalent amount for a derivative contract, or a group of 
derivative contracts subject to a qualifying bilateral netting 
agreement, has been determined, that amount is assigned to the risk 
category appropriate to the counterparty, or, if relevant, the guarantor 
or the nature of any collateral. However, the maximum weight that will 
be applied to the credit equivalent amount of such contracts is 50 
percent.
    (b) In certain cases, credit exposures arising from the derivative 
contracts covered by these guidelines may already be reflected, in part, 
on the balance sheet. To avoid double

[[Page 179]]

counting such exposures in the assessment of capital adequacy and, 
perhaps, assigning inappropriate risk weights, counterparty credit 
exposures arising from the types of instruments covered by these 
guidelines may need to be excluded from balance sheet assets in 
calculating a bank's risk-based capital ratio.
    (c) The FDIC notes that the conversion factors set forth in section 
II.E.3. of appendix A, which are based on observed volatilities of the 
particular types of instruments, are subject to review and modification 
in light of changing volatilities or market conditions.
    (d) Examples of the calculation of credit equivalent amounts for 
these types of contracts are contained in Table IV of this appendix A.
    5. Netting. (a) For purposes of this appendix A, netting refers to 
the offsetting of positive and negative mark-to-market values when 
determining a current exposure to be used in the calculation of a credit 
equivalent amount. Any legally enforceable form of bilateral netting 
(that is, netting with a single counterparty) of derivative contracts is 
recognized for purposes of calculating the credit equivalent amount 
provided that:
    (i) The netting is accomplished under a written netting contract 
that creates a single legal obligation, covering all included individual 
contracts, with the effect that the bank would have a claim or 
obligation to receive or pay, respectively, only the net amount of the 
sum of the positive and negative mark-to-market values on included 
individual contracts in the event that a counterparty, or a counterparty 
to whom the contract has been validly assigned, fails to perform due to 
default, bankruptcy, liquidation, or similar circumstances;
    (ii) The bank obtains a written and reasoned legal opinion(s) 
representing that in the event of a legal challenge, including one 
resulting from default, insolvency, bankruptcy or similar circumstances, 
the relevant court and administrative authorities would find the bank's 
exposure to be such a net amount under:
    (1) The law of the jurisdiction in which the counterparty is 
chartered or the equivalent location in the case of noncorporate 
entities and, if a branch of the counterparty is involved, then also 
under the law of the jurisdiction in which the branch is located;
    (2) The law that governs the individual contracts covered by the 
netting contract; and
    (3) The law that governs the netting contract.
    (iii) The bank establishes and maintains procedures to ensure that 
the legal characteristics of netting contracts are kept under review in 
the light of possible changes in relevant law; and
    (iv) The bank maintains in its file documentation adequate to 
support the netting of derivative contracts, including a copy of the 
bilateral netting contract and necessary legal opinions.
    (b) A contract containing a walkaway clause is not eligible for 
netting for purposes of calculating the credit equivalent 
amount.41
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    \41\ For purposes of this section, a walkaway clause means a 
provision in a netting contract that permits a non-defaulting 
counterparty to make lower payments than it would make otherwise under 
the contract, or no payment at all, to a defaulter or to the estate of a 
defaulter, even if a defaulter or the estate of a defaulter is a net 
creditor under the contract.
---------------------------------------------------------------------------

    (c) By netting individual contracts for the purpose of calculating 
its credit equivalent amount, a bank represents that it has met the 
requirements of this appendix A and all the appropriate documents are in 
the bank's files and available for inspection by the FDIC. Upon 
determination by the FDIC that a bank's files are inadequate or that a 
netting contract may not be legally enforceable under any one of the 
bodies of law described in paragraphs (ii)(1) through (3) of section 
II.E.5.(a) of this appendix A, underlying individual contracts may be 
treated as though they were not subject to the netting contract.
    (d) The credit equivalent amount of derivative contracts that are 
subject to a qualifying bilateral netting contract is calculated by 
adding:
    (i) The net current exposure of the netting contract; and
    (ii) The sum of the estimates of potential future exposure for all 
individual contracts subject to the netting contract, adjusted to take 
into account the effects of the netting contract.42
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    \42\ For purposes of calculating potential future credit exposure 
for foreign exchange contracts and other similar contracts in which 
notional principal is equivalent to cash flows, total notional principal 
is defined as the net receipts to each party falling due on each value 
date in each currency.
---------------------------------------------------------------------------

    (e) The net current exposure is the sum of all positive and negative 
mark-to-market values of the individual contracts subject to the netting 
contract. If the net sum of the mark-to-market values is positive, then 
the net current exposure is equal to that sum. If the net sum of the 
mark-to-market values is zero or negative, then the net current exposure 
is zero.
    (f) The effects of the bilateral netting contract on the gross 
potential future exposure are recognized through application of a 
formula, resulting in an adjusted add-on amount (Anet). The 
formula, which employs the ratio of net current exposure to gross 
current exposure (NGR) is expressed as:

Anet=(0.4 x Agross)+0.6(NGR x Agross)


[[Page 180]]


    The effect of this formula is that Anet is the weighted 
average of Agross, and Agross adjusted by the NGR.
    (g) The NGR may be calculated in either one of two ways--referred to 
as the counterparty-by-counterparty approach and the aggregate approach.
    (i) Under the counterparty-by-counterparty approach, the NGR is the 
ratio of the net current exposure of the netting contract to the gross 
current exposure of the netting contract. The gross current exposure is 
the sum of the current exposures of all individual contracts subject to 
the netting contract calculated in accordance with section II.E. of this 
appendix A.
    (ii) Under the aggregate approach, the NGR is the ratio of the sum 
of all of the net current exposures for qualifying bilateral netting 
contracts to the sum of all of the gross current exposures for those 
netting contracts (each gross current exposure is calculated in the same 
manner as in section II.E.5.(g)(i) of this appendix A). Net negative 
mark-to-market values to individual counterparties cannot be used to 
offset net positive current exposures to other counterparties.
    (iii) A bank must use consistently either the counterparty-by-
counterparty approach or the aggregate approach to calculate the NGR. 
Regardless of the approach used, the NGR should be applied individually 
to each qualifying bilateral netting contract to determine the adjusted 
add-on for that netting contract.

                  III. Minimum Risk-Based Capital Ratio

       A. Minimum Risk-Based Capital Ratio After Transition Period

    Banks generally will be expected to meet a minimum ratio of 
qualifying total capital to risk-weighted assets of 8 percent, of which 
at least 4 percentage points should be in the form of core capital (Tier 
1). Any bank that does not meet the minimum risk-based capital ratio, or 
whose capital is otherwise considered inadequate, generally will be 
expected to develop and implement a capital plan for achieving an 
adequate level of capital, consistent with the provisions of this risk-
based capital framework, the specific circumstances affecting the 
individual bank, and the requirements of any related agreements between 
the bank and the FDIC.

                      B. Transitional Arrangements

    The transition period commences with the adoption of this statement 
of policy and ends on December 31, 1992. Initially, this risk-based 
capital framework does not establish a minimum level of capital. 
However, by year-end 1990, banks generally will be expected to meet a 
minimum total capital to risk-weighted assets ratio of 7.25 percent, at 
least one-half of which should be in the form of Tier 1 capital. For 
purposes of calculating this interim minimum ratio, the amount of the 
allowance for loan and lease losses that may be included as a 
supplementary capital element is limited to 1.5 percent of risk-weighted 
assets. In addition, up to 10 percent of a bank's Tier 1 capital (before 
any deduction for disallowed intangibles) may consist of supplementary 
capital elements. Thus, the 7.25 percent interim ratio implies a minimum 
ratio of Tier 1 capital to risk-weighted assets of approximately 3.6 
percent (or one-half of 7.25) and a minimum ratio of core capital 
elements to risk-weighted assets of 3.25 percent (or nine-tenths of the 
Tier 1 capital ratio). By the end of 1992, a state nonmember bank's Tier 
1 capital should consist solely of core capital elements.
    During the transition period, banks should monitor their risk-based 
capital ratios and work toward achieving the interim and final risk-
based capital ratios. Any bank that has risk-based capital ratios of 
less than 4 percent Tier 1 capital and 8 percent total capital should 
develop and implement a capital plan for achieving those minimum 
standards by December 31, 1992, and for achieving the interim minimum 
ratio of 7.25 percent by December 31, 1990. Banks that at present have a 
risk-based capital ratio in excess of 8 percent generally should not 
take any action that would cause the ratio to fall below 8 percent.

                Table I--Definition of Qualifying Capital               
                 [Note: See footnotes at end of table.]                 
------------------------------------------------------------------------
                                              Minimum Requirements and  
                Components                  Limitations After Transition
                                                       Period.          
------------------------------------------------------------------------
Core Capital (Tier 1).....................  Must equal or exceed 4% of  
                                             risk-weighted assets.      
  Common stockholders' equity capital.....  No limit.\1\                
  Noncumulative perpetual preferred stock   No limit.\1\                
   and any related surplus.                                             
  Minority interests in equity capital      No limit.\1\                
   accounts of consolidated subsidiaries.                               
  Less: All intangible assets other than    (\1\)                       
   mortgage servicing rights and purchased                              
   credit card relationships.\2\                                        
  Less: Certain deferred tax assers.\3\                                 
Supplementary Capital (Tier 2)............  Total of Tier 2 is limited  
                                             to 100% of Tier 1.\4\      
  Allowance for loan and lease losses.....  Limited to 1.25% of risk-   
                                             weighted assets.\4\        
  Cumulative perpetual and long-term        No limit within Tier 2; long-
   preferred stock (original maturity of     term preferred is amortized
   20 years or more), and any related        for capital purposes as it 
   surplus.                                  approaches maturity.       
  Auction rate and similar preferred stock  No limit within Tier 2.     
   (both cumulative and non-cumulative).                                
  Hybrid capital instruments (including     No limit within Tier 2.     
   mandatory convertible debt securities).                              

[[Page 181]]

                                                                        
  Term subordinated debt and intermediate-  Term subordinated debt and  
   term preferred stock (original weighted   intermediate-term preferred
   average maturity of 5 years or more).     stock are limited to 50% of
                                             Tier 1 \4\ and amortized   
                                             for capital purposes as    
                                             they approach maturity.    
Deductions (from the sum of Tier 1 plus     ............................
 Tier 2).                                                               
  Investments in banking and finance        ............................
   subsidiaries that are not consolidated                               
   for regulatory capital purposes.                                     
  Intentional, reciprocal cross-holdings    ............................
   of capital securities issued by banks.                               
  Other deductions (such as investments in  On case-by-case basis or as 
   other subsidiaries or in joint            matter of policy after     
   ventures) as determined by supervisory    formal consideration of    
   authority.                                relevant issues.           
Total Capital (Tier 1 + Tier 2 -            Must equal or exceed 8% of  
 Deductions).                                risk-weighted assets.      
------------------------------------------------------------------------
\1\ No express limits are placed on the amounts of nonvoting common,    
  noncumulative perpetual preferred stock and minority interests that   
  may be recognized as part of Tier 1 capital. However, voting common   
  stockholders' equity capital generally will be expected to be the     
  dominant form of Tier 1 capital and banks should avoid undue reliance 
  on other Tier 1 capital elements.                                     
\2\ The amounts of mortgage servicing rights and purchased credit card  
  relationships that can be recognized for purposes of calculating Tier 
  1 capital are subject to the limitations set forth in Sec.  325.5(f)  
  of the FDIC's regulations. All deductions are for capital purposes    
  only; deductions would not affect accounting treatment.               
\3\ Deferred tax assets are subject to the capital limitations set forth
  in Sec.  325.5(g).                                                    
\4\ Amounts in excess of limitations are permitted but do not qualify as
  capital.                                                              

               Calculation of the Risk-Based Capital Ratio

    When calculating the risk-based capital ratio under the framework 
set forth in this statement of policy, qualifying total capital (the 
numerator) is divided by risk-weighted assets (the denominator). The 
process of determining the numerator for the ratio is summarized in 
Table I. The calculation of the denominator is based on the risk weights 
and conversion factors that are summarized in Tables II and III.
    When determining the amount of risk-weighted assets, balance sheet 
assets are assigned an appropriate risk weight (see Table II) and off-
balance sheet items are first converted to a credit equivalent amount 
(see Table III) and then assigned to one of the risk weight categories 
set forth in Table II.
    The balance sheet assets and the credit equivalent amount of off-
balance sheet items are then multiplied by the appropriate risk weight 
percentages and the sum of these risk-weighted amounts is the gross 
risk-weighted asset figure used in determining the denominator of the 
risk-based capital ratio. Any items deducted from capital when computing 
the amount of qualifying capital may also be excluded from risk-weighted 
assets when calculating the denominator for the risk-based capital 
ratio.

         Table II.--Summary of Risk Weights and Risk Categories

                  Category 1--Zero Percent Risk Weight

    (1) Cash (domestic and foreign).
    (2) Balances due from Federal Reserve Banks and central banks in 
other OECD countries.
    (3) Direct claims on, and portions of claims unconditionally 
guaranteed by, the U.S. Treasury, U.S. Government agencies,\1\ or 
central governments in other OECD countries.
---------------------------------------------------------------------------

    \1\ For the purpose of calculating the risk-based capital ratio, a 
U.S. Government agency is defined as an instrumentality of the U.S. 
Government whose obligations are fully and explicitly guaranteed as to 
the timely repayment of principal and interest by the full faith and 
credit of the U.S. Government.
---------------------------------------------------------------------------

    (4) Portions of local currency claims on, or unconditionally 
guaranteed by, non-OECD central governments (including non-OECD central 
banks), to the extent the bank has liabilities booked in that currency.
    (5) Gold bullion held in the bank's own vaults or in another bank's 
vaults on an allocated basis, to the extent that it is offset by gold 
bullion liabilities
    (6) Federal Reserve Bank stock.

                   Category 2--20 Percent Risk Weight

    (1) Cash items in the process of collection.
    (2) All claims (long- and short-term) on, and portions of claims 
(long- and short-term) guaranteed by, U.S. depository institutions and 
OECD banks.
    (3) Short-term (remaining maturity of one year or less) claims on, 
and portions of short-term claims guaranteed by, non-OECD banks.
    (4) Portions of loans and other claims conditionally guaranteed by 
the U.S. Treasury, U.S. Government agencies,\1\ or central governments 
in other OECD countries and portions of local currency claims 
conditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency.

[[Page 182]]

    (5) Securities and other claims on, and portions of claims 
guaranteed by, U.S. Government-sponsored agencies.\2\
---------------------------------------------------------------------------

    \2\ For the purpose of calculating the risk-based capital ratio, a 
U.S. Government-sponsored agency is defined as an agency originally 
established or chartered to serve public purposes specified by the U.S. 
Congress but whose obligations are not explicitly guaranteed by the full 
faith and credit of the U.S. Government.
---------------------------------------------------------------------------

    (6) Portions of loans and other claims (including repurchase 
agreements) collateralized \3\ by securities issued or guaranteed by the 
U.S. Treasury, U.S. Government agencies, U.S. Government-sponsored 
agencies or central governments in other OECD countries.
---------------------------------------------------------------------------

    \3\ Degree of collateralization is determined by current market 
value.
---------------------------------------------------------------------------

    (7) Portions of loans and other claims collateralized \3\ by cash on 
deposit in the lending bank.
    (8) General obligation claims on, and portions of claims guaranteed 
by, the full faith and credit of states or other political subdivisions 
of OECD countries, including U.S. state and local governments.
    (9) Claims on, and portions of claims guaranteed by, official 
multilateral lending institutions or regional development institutions 
in which the U.S. Government is a shareholder or a contributing member.
    (10) Portions of claims collateralized \3\ by securities issued by 
official multilateral lending institutions or regional development 
institutions in which the U.S. Government is a shareholder or 
contributing member.
    (11) Privately-issued mortgage-backed securities representing 
indirect ownership of U.S. Government agency or U.S. Government-
sponsored agency securities.
    (12) Investments in shares of mutual funds whose portfolios are 
permitted to hold only assets that qualify for the zero or 20 percent 
risk categories.

                   Category 3--50 Percent Risk Weight

    (1) Loans fully secured by first liens on one-to-four family 
residential properties (including certain presold residential 
construction loans), provided that the loans were approved in accordance 
with prudent underwriting standards and are not past due 90 days or more 
or carried in nonaccrual status.
    (2) Loans fully secured by first liens on multifamily residential 
properties that have been prudently underwritten and meet specified 
requirements with respect to loan-to-value ratio, level of annual net 
operating income to required debt service, maximum amortization period, 
minimum original maturity, and demonstrated timely repayment 
performance.
    (3) Certain privately-issued mortgage-backed securities representing 
indirect ownership of a pool of residential loans that meet the criteria 
for a 50 percent risk weight.
    (4) Revenue bonds or similar obligations, including loans and 
leases, that are obligations of U.S. state or political subdivisions of 
the United States or other OECD countries but for which the government 
entity is committed to repay the debt only out of revenues from the 
specific projects financed.
    (5) Credit equivalent amounts of interest rate and foreign exchange 
rate related contracts, except for those assigned to a lower risk 
category.

                   Category 4--100 Percent Risk Weight

    (1) All other claims on private obligors.
    (2) Claims on, or guaranteed by, non-OECD banks with a remaining 
maturity exceeding one year.
    (3) Claims on non-OECD central governments that are not included in 
item 4 of Category 1 or item 3 of Category 2, and all claims on non-OECD 
state and local governments.
    (4) Obligations issued by U.S. state or local governments or other 
OECD local governments (including industrial development authorities and 
similar entities) that are repayable solely by a private party or 
enterprise.
    (5) Premises, plant, and equipment; other fixed assets; and other 
real estate owned.
    (6) Investments in any unconsolidated subsidiaries, joint ventures, 
or associated companies--if not deducted from capital.
    (7) Instruments issued by other banking organizations that qualify 
as capital.
    (8) Claims on commercial firms owned by the U.S. Government or 
foreign governments.
    (9) All other assets, including any intangible assets that are not 
deducted from capital, and the credit equivalent amounts \4\ of off-
balance sheet items not assigned to a lower risk category.
---------------------------------------------------------------------------

    \4\ For each off-balance sheet item, a conversion factor (see Table 
III) must be applied to determine the credit equivalent amount prior to 
assigning the off-balance sheet item to a risk weight category.
---------------------------------------------------------------------------

    Table III.--Credit Conversion Factors for Off-Balance Sheet Items

                      100 Percent Conversion Factor

    (1) Direct credit substitutes, including general guarantees of 
indebtedness and guarantee-type instruments, such as standby letters of 
credit that serve as financial guarantees for, or support the repayment 
of, loans, securities or commercial letters of credit.

[[Page 183]]

    (2) Acquisitions of risk participations in bankers acceptances and 
in such direct credit substitutes and financial standby letters of 
credit.
    (3) Sale and repurchase agreements and asset sales with recourse, if 
not already included on the balance sheet.
    (4) Forward agreements representing contractual obligations to 
purchase assets, including financing facilities, with drawdown certain 
at a specified future date.
    (5) Securities lent, if the lending bank is exposed to risk of loss.

                      50 Percent Conversion Factor

    (1) Transaction-related contingencies, including bid bonds, 
performance bonds, warranties, and performance standby letters of credit 
backing the nonfinancial performance of other parties.
    (2) Unused portions of commitments with an original maturity \1\ 
exceeding one year, including underwriting commitments and commercial 
credit lines.
---------------------------------------------------------------------------

    \1\ Remaining maturity may be used until year-end 1990.
---------------------------------------------------------------------------

    (3) Revolving underwriting facilities (RUFs), note issuance 
facilities (NIFs) and other similar arrangements.

                      20 Percent Conversion Factor

    (1) Short-term, self-liquidating, trade-related contingencies, 
including commercial letters of credit.

                     Zero Percent Conversion Factor

    (1) Unused portions of commitments with an original maturity \1\ of 
one year or less.
    (2) Unused portions of commitments (regardless of maturity) which 
are unconditionally cancelable at any time, provided a separate credit 
decision is made before each drawing.

 Credit Conversion for Interest Rate and Foreign Exchange Rate Related 
                                Contracts

    The total replacement cost of contracts (obtained by summing the 
positive mark-to-market values of contracts) is added to a measure of 
future potential increases in credit exposure. This future potential 
credit exposure measure is calculated by multiplying the total notional 
value of contracts by one of the following credit conversion factors, as 
appropriate:

                                            Conversion Factor Matrix                                            
----------------------------------------------------------------------------------------------------------------
                                                                Exchange                  Precious              
               Remaining maturity                  Interest     rate and      Equity      metals,       Other   
                                                     rate         gold                  except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less...............................         0.0%         1.0%         6.0%         7.0%        10.0%
More than one year to five years...............         0.5%         5.0%         8.0%         7.0%        12.0%
More than five years...........................         1.5%         7.5%        10.0%         8.0%        15.0%
----------------------------------------------------------------------------------------------------------------

    No potential exposure is calculated for single currency interest 
rate contracts on which payments are made based on two floating rate 
indices (floating/floating or basis swaps); the credit exposure on these 
contracts is evaluated solely on the basis of their mark-to-market 
values. In the event a netting contract covers transactions that are 
normally not included in the risk-based ratio calculation--for example, 
exchange rate contracts with an original maturity of fourteen calendar 
days or less or instruments traded on exchanges that require daily 
payment of variation margin--an institution may elect to consistently 
either include or exclude all mark-to-market values of such transactions 
when determining a net current exposure. Multiple contracts with the 
same counterparty may be netted for risk-based capital purposes pursuant 
to section II.E.5. of this appendix.

                  Table IV.--Calculation of Credit Equivalent Amounts for Derivative Contracts                  
----------------------------------------------------------------------------------------------------------------
        Potential exposure               +         Current         =       Credit equivalent amount             
------------------------------------------------   exposure  ---------------------------------------    Credit  
                                      Notional  -------------  Potential     Mark-to      Current     equivalent
    Type of contract (remaining      principal    Conversion    exposure      market      exposure      amount  
             maturity)               (dollars)      factor     (dollars)      value      (dollars)              
----------------------------------------------------------------------------------------------------------------
(1) 120-Day Forward Foreign                                                                                     
 Exchange.........................    5,000,000          .01       50,000      100,000      100,000      150,000
(2) 4-Year Forward Foreign                                                                                      
 Exchange.........................    6,000,000          .05      300,000     -120,000            0      300,000
(3) 3-Year Single-Currency Fixed/                                                                               
 Floating Interest Rate Swap......   10,000,000         .005       50,000      200,000      200,000      250,000
(4) 6-Month Oil Swap..............   10,000,000          .10    1,000,000     -250,000            0    1,000,000
(5) 7-Year Cross-Currency Floating/                                                                             
 Floating Interest Rate Swap......   20,000,000         .075    1,500,000   -1,500,000            0    1,500,000
      Total.......................  ...........  ...........    2,900,000  ...........      300,000    3,200,000

[[Page 184]]

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

    (1) If contracts (1) through (5) above are subject to a qualifying 
bilateral netting contract, then the following applies:

----------------------------------------------------------------------------------------------------------------
                                             Potential                                                          
                                               future                                                   Credit  
                                              exposure                  Net current                   equivalent
                                               (from                     exposure*                      amount  
                                               above)                                                           
----------------------------------------------------------------------------------------------------------------
(1).......................................       50,000                                                         
(2).......................................      300,000                                                         
(3).......................................       50,000                                                         
(4).......................................    1,000,000                                                         
(5).......................................    1,500,000                                                         
      Total...............................    2,900,000  +                        0  =                2,900,000 
----------------------------------------------------------------------------------------------------------------
*The total of the mark-to-market values from above is -1,370,000. Since this is a negative amount, the net      
  current exposure is zero.                                                                                     

    (2) To recognize the effects of netting on potential future 
exposure, the following formula applies:

Anet=(0.4 x Agross)+0.6(NGR x Agross)

    (3) In the above example:

NGR=0=(0/300,000)
Anet=(0.4 x 2,900,000)+0.6(0 x 2,900,000)
Anet=1,160,000

Credit Equivalent Amount: 1,160,000+0=1,160,000

    (4) If the net current exposure was a positive amount, for example, 
$200,000, the credit equivalent amount would be calculated as follows:

NGR=.67=(200,000/300,000)
Anet=(0.4 x 2,900,000)+0.6(.67 x 2,900,000)
Anet=2,325,800

Credit Equivalent Amount: 2,325,800+200,000=2,525,800
[54 FR 11509, Mar. 21, 1989]

    Editorial Note:  For Federal Register citations affecting Appendix A 
of part 325, see the List of CFR Sections Affected in the Finding Aids 
section of this volume.

     Appendix B to Part 325--Statement of Policy on Capital Adequacy

    Part 325 of the Federal Deposit Insurance Corporation rules and 
regulations (12 CFR part 325) sets forth minimum leverage capital 
requirements for fundamentally sound, well-managed banks having no 
material or significant financial weaknesses. It also defines capital 
and sets forth sanctions which will be used against banks which are in 
violation of the part 325 regulation. This statement of policy on 
capital adequacy provides some interpretational and definitional 
guidance as to how this part 325 regulation will be administered and 
enforced by the FDIC. This statement of policy also addresses certain 
aspects of the FDIC's minimum risk-based capital guidelines that are set 
forth in appendix A to part 325. This statement of policy does not 
address the prompt corrective action provisions mandated by the Federal 
Deposit Insurance Corporation Improvement Act of 1991. However, section 
38 of the Federal Deposit Insurance Act and subpart B of part 325 
provide guidance on the prompt corrective action provisions, which 
generally apply to institutions with inadequate levels of capital.

             I. Enforcement of Minimum Capital Requirements

    Section 325.3(b)(1) specifies that FDIC-supervised, state-chartered 
nonmember commercial and savings banks (or other insured depository 
institutions making applications to the FDIC that require the FDIC to 
consider the adequacy of the institutions' capital structure) must 
maintain a minimum leverage ratio of Tier 1 (or core) capital to total 
assets of at least 3 percent; however, this minimum only applies to the 
most highly-rated banks (i.e., those with a composite CAMEL rating of 1 
under the Uniform Financial Institutions Rating System established by 
the Federal Financial Institutions Examination Council) that are not 
anticipating or experiencing any significant growth. All other state 
nonmember banks would need to meet a minimum leverage ratio that is at 
least 100 to 200 basis points above this minimum. That is, in accordance 
with Sec. 325.3(b)(2), an absolute minimum leverage ratio of not less 
than 4 percent must be maintained by those banks that are not highly-
rated or that are anticipating or experiencing significant growth.
    In addition to the minimum leverage capital standards, section III 
of appendix A to part 325 indicates that state nonmember banks generally 
are expected to maintain a minimum risk-based capital ratio of 
qualifying total capital to risk-weighted assets of 8 percent by 
December 31, 1992 (and at least 7.25 percent by December 31, 1990), with 
at least one-half of that total capital amount consisting of Tier 1 
capital.
    State nonmember banks (hereinafter referred to as ``banks'') 
operating with leverage capital ratios below the minimums set

[[Page 185]]

forth in part 325 will be deemed to have inadequate capital and will be 
in violation of the part 325 regulation. Furthermore, banks operating 
with risk-based capital ratios below the minimums set forth in appendix 
A to part 325 generally will be deemed to have inadequate capital. Banks 
failing to meet the minimum leverage and/or risk-based capital ratios 
normally can expect to have any application submitted to the FDIC denied 
(if such application requires the FDIC to evaluate the adequacy of the 
institution's capital structure) and also can expect to be subject to 
the use of capital directives or other formal enforcement action by the 
FDIC to increase capital.
    Capital adequacy in banks which have capital ratios at or above the 
minimums will be assessed and enforced based on the following factors 
(these same criteria will apply to any insured depository institutions 
making applications to the FDIC and to any other circumstances in which 
the FDIC is requested or required to evaluate the adequacy of a 
depository institution's capital structure):

         A. Banks Which Are Fundamentally Sound and Well-Managed

    The minimum leverage capital ratios set forth in Sec. 325.3(b)(2) 
and the minimum risk-based capital ratios set forth in section III of 
appendix A to part 325 generally will be viewed as the minimum 
acceptable capital standards for banks whose overall financial condition 
is fundamentally sound, which are well-managed and which have no 
material or significant financial weaknesses. While the FDIC will make 
this determination in each bank based upon its own condition and 
specific circumstances, this definition will generally apply to those 
banks evidencing a level of risk which is no greater than that normally 
associated with a Composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System. Banks meeting this definition which are in 
compliance with the minimum leverage and risk-based capital ratio 
standards will not generally be required by the FDIC to raise new 
capital from external sources.
    The FDIC does, however, encourage such banks to maintain capital 
well above the minimums, particularly those institutions that are 
anticipating or experiencing significant growth, and will carefully 
evaluate their earnings and growth trends, dividend policies, capital 
planning procedures and other factors important to the continuous 
maintenance of adequate capital. Adverse trends or deficiencies in these 
areas will be subject to criticism at regular examinations and may be an 
important factor in the FDIC's action on applications submitted by such 
banks. In addition, the FDIC's consideration of capital adequacy in 
banks making applications to the FDIC will also fully examine the 
expected impact of those applications on the bank's ability to maintain 
its capital adequacy. In all cases, banks should maintain capital 
commensurate with the level and nature of risks, including the volume 
and severity of adversely classified assets, to which they are exposed.

                           B. All Other Banks

    Banks not meeting the definition set forth in I.A. of this appendix, 
that is, banks evidencing a level of risk which is at least as great as 
that normally associated with a Composite rating of 3, 4, or 5 under the 
Uniform Financial Institutions Rating System, will be required to 
maintain capital higher than the minimum regulatory requirement and at a 
level deemed appropriate in relation to the degree of risk within the 
institution. These higher capital levels will normally be addressed 
through memorandums of understanding between the FDIC and the bank or, 
in cases of more pronounced risk, through the use of formal enforcement 
actions under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 
1818).

              C. Capital Requirements of Primary Regulator

    Notwithstanding I.A. and B. of this appendix, all banks (or other 
depository institutions making applications to the FDIC that require the 
FDIC to consider the adequacy of the institutions' capital structure) 
will be expected to meet any capital requirements established by their 
primary state or federal regulator which exceed the minimum capital 
requirement set forth in the FDIC's part 325 regulation. In addition, 
the FDIC will, when establishing capital requirements higher than the 
minimum set forth in the regulation, consult with an institution's 
primary state or federal regulator.

                            II. Capital Plans

    Section 325.4(b) specifies that any bank which has less than its 
minimum leverage capital requirement is deemed to be engaging in an 
unsafe or unsound banking practice unless it has submitted, and is in 
compliance with, a plan approved by the FDIC to increase its Tier 1 
leverage capital ratio to such level as the FDIC deems appropriate.
    As required under Sec. 325.104(a)(1) of this part, a bank must file 
a written capital restoration plan with the appropriate FDIC regional 
director within 45 days of the date that the bank receives notice or is 
deemed to have notice that the bank is undercapitalized, significantly 
undercapitalized or critically undercapitalized, unless the FDIC 
notifies the bank in writing that the plan is to be filed within a 
different period. The amount of time allowed to achieve the minimum 
leverage capital requirement will be evaluated by the FDIC on a case-by-
case basis and will depend on a number of factors, including the

[[Page 186]]

viability of the bank and whether it is fundamentally sound and well-
managed.
    Banks evidencing more than normal levels of risk will normally have 
their minimum capital requirements established in a formal or informal 
enforcement proceeding. The time frames for meeting these requirements 
will be set forth in such actions and will generally require some 
immediate action on the bank's part to meet its minimum capital 
requirement. The reasonableness of capital plans submitted by depository 
institutions in connection with applications as provided for in 
Sec. 325.3(d)(2) will be determined in conjunction with the FDIC's 
consideration of the application.

                         III. Written Agreements

    Section 325.4(c) provides that any insured depository institution 
with a Tier 1 capital to total assets (leverage) ratio of less than 2 
percent must enter into and be in compliance with a written agreement 
with the FDIC (or with its primary federal regulator with FDIC as a 
party to the agreement) to increase its Tier 1 leverage capital ratio to 
such level as the FDIC deems appropriate or may be subject to a section 
8(a) termination of insurance action by the FDIC. Except in the very 
rarest of circumstances, the FDIC will require that such agreements 
contemplate immediate efforts by the depository institution to acquire 
the required capital.
    A bank which has issued net worth certificates to the FDIC or 
received approval from the FDIC to defer agricultural loan losses will 
be considered to be in compliance with this written agreement 
requirement for so long as it is in compliance with the FDIC 
requirements set forth in the net worth certificate program and/or 
agricultural loan loss deferral program, provided that both its board 
and the FDIC agree that the net worth certificate or agricultural loan 
loss deferral agreements they enter into or have entered into are 
written agreements as defined in the part 325 regulation. In addition, a 
savings association with qualifying supervisory goodwill that is being 
recognized as Tier 1 capital by the association's primary federal 
regulator will be allowed to recognize this intangible asset for 
purposes of calculating core capital under part 325.
    The guidance in this section III is not intended to preclude the 
FDIC from taking section 8(a) or other enforcement action against any 
institution, regardless of its capital level, if the specific 
circumstances deem such action to be appropriate.

                         IV. Capital Components

    Section 325.2 sets forth the definition of Tier 1 capital for the 
leverage standard as well as the definitions for the various instruments 
and accounts which are included therein. Although nonvoting common 
stock, noncumulative perpetual preferred stock, and minority interests 
in consolidated subsidiaries are normally included in Tier 1 capital, 
voting common stockholders' equity generally will be expected to be the 
dominant form of Tier 1 capital. Thus, banks should avoid undue reliance 
on nonvoting equity, preferred stock and minority interests. The 
following provides some additional guidance with respect to some of the 
items that affect the calculation of Tier 1 capital.

                          A. Intangible Assets

    The FDIC permits state nonmember banks to record intangible assets 
on their books and to report the value of such assets in the 
Consolidated Reports of Condition and Income (``Call Report''). As noted 
in the instructions for preparation of the Consolidated Reports of 
Condition and Income (published by the Federal Financial Institutions 
Examination Council), intangible assets may arise from business 
combinations accounted for under the purchase method in accordance with 
Accounting Principles Board Opinion No. 16, as amended, and acquisitions 
of portions or segments of another institution's business, such as 
branch offices, mortgage servicing portfolios, and credit card 
portfolios.
    Intangible assets created from such transactions may be booked in 
accordance with generally accepted accounting principles with one 
exception. For the purpose of reporting such assets on Call Reports, 
banks reporting to the FDIC shall amortize such assets over their 
estimated useful lives or a period not in excess of 15 years, whichever 
is shorter.
    Notwithstanding the authority to report all intangible assets in the 
Consolidated Reports of Condition and Income, Sec. 325(t) of the 
regulation specifies that mortgage servicing rights and purchased credit 
card relationships are the only intangible assets which will be allowed 
as Tier 1 capital.\1\ The portion of equity capital represented by other 
types of intangible assets will be deducted

[[Page 187]]

from equity capital and assets in the computation of a bank's Tier 1 
capital. Certain of these intangible assets may, however, be recognized 
for regulatory capital purposes if explicitly approved by the Director 
of the Division of Supervision as part of the bank's regulatory capital 
on a specific case basis. These intangibles will be included in 
regulatory capital under the terms and conditions that are specifically 
approved by the FDIC.\2\
---------------------------------------------------------------------------

    \1\ Although intangible assets in the form of mortgage servicing 
rights and purchased credit card relationships are generally recognized 
for regulatory capital purposes, the --deduction of part or all of the 
mortgage servicing rights and purchased credit card relationships may be 
required if the carrying amounts of these rights are excessive in 
relation to their market value or the level of the bank's capital 
accounts. In this regard, mortgage servicing rights and purchased credit 
card relationships will be recognized for regulatory capital purposes 
only to the extent the rights meet the conditions, limitations and 
restrictions described in Sec. 325.5(f).
    \2\ This specific approval must be received in accordance with 
Sec. 325.5(b). In evaluating whether other types of intangibles should 
be recognized for regulatory capital purposes, the FDIC will accord 
special attention to the general characteristics of the intangibles, 
including: (1) The separability of the intangible asset and the ability 
to sell it separate and apart from the bank or the bulk of the bank's 
assets, (2) the certainty that a readily identifiable stream of cash 
flows associated with the intangible asset can hold its value 
notwithstanding the future prospects of the bank, and (3) the existence 
of a market of sufficient depth to provide liquidity for the intangible 
asset. However, pursuant to section 18(n) of the Federal Deposit 
Insurance Act (12 U.S.C. 1828(n)), specific approval cannot be given for 
an unidentifiable intangible asset, such as goodwill, if acquired after 
April 12, 1989.
---------------------------------------------------------------------------

    In certain instances banks may have investments in unconsolidated 
subsidiaries or joint ventures that have large volumes of intangible 
assets. In such instances the bank's consolidated statements will 
reflect an investment in a tangible asset even though such investment 
will, in fact, be represented by a large volume of intangible assets. In 
any such situation where this is material, the bank's investment in the 
unconsolidated subsidiary will be divided into a tangible and an 
intangible portion based on the percentage of intangible assets to total 
assets in the subsidiary. The intangible portion of the investment will 
be treated as if it were an intangible asset on the bank's books in the 
calculation of Tier 1 capital. However, intangible assets in the form of 
mortgage servicing rights and purchased credit card relationships, 
including servicing intangibles held by mortgage banking subsidiaries, 
are subject to the specific criteria set forth in Sec. 325.5(f).

                      B. Perpetual Preferred Stock

    Perpetual preferred stock is defined as preferred stock that does 
not have a maturity date, that cannot be redeemed at the option of the 
holder, and that has no other provisions that will require future 
redemption of the issue. Also, pursuant to section 18(i)(1) of the 
Federal Deposit Insurance Act (12 U.S.C. 1828(i)(1)), a state nonmember 
bank cannot, without the prior consent of the FDIC, reduce the amount or 
retire any part of its perferred stock. (This prior consent is also 
required for the reduction or retirement of any part of a state 
nonmember bank's common stock or capital notes and debentures.)
    Noncumulative perpetual preferred stock is generally included in 
Tier 1 capital. Nonetheless, it is possible for banks to issue preferred 
stock with a dividend rate which escalates to such a high rate that the 
terms become so onerous as to effectively force the bank to call the 
issue (for example, an issue with a low initial rate that is scheduled 
to escalate to much higher rates in subsequent periods). Preferred stock 
issues with such onerous terms have much the same characteristics as 
limited life preferred stock in that the bank would be effectively 
forced to redeem the issue to avoid performance of the onerous terms. 
Such instruments may be disallowed as Tier 1 capital and, for risk-based 
capital purposes, would be included in Tier 2 capital only to the extent 
that the instruments fall within the limitations applicable to 
intermediate-term preferred stock. Banks which are contemplating issues 
bearing terms which may be so characterized are encouraged to submit 
them to the appropriate FDIC regional office for review prior to 
issuance. Nothing herein shall prohibit banks from issuing floating rate 
preferred stock issues where the rate is constant in relation to some 
outside market or index rate. However, noncumulative floating rate 
instruments where the rate paid is based in some part on the current 
credit standing of the bank, and all cumulative preferred stock 
instruments, are excluded from Tier 1 capital. These instruments are 
included in Tier 2 capital for risk-based capital purposes in accordance 
with the limitations set forth in appendix A to part 325.
    The FDIC will also require that issues of perpetual preferred stock 
be consistent with safe and sound banking practices. Issues which would 
unduly enrich insiders or which contain dividend rates or other terms 
which are inconsistent with safe and sound banking practices will likely 
be the subject of appropriate supervisory response from the FDIC. Banks 
contemplating preferred stock issues which may pose safety and soundness 
concerns are encouraged to submit such issues to the appropriate FDIC 
regional office for review prior to sale. Pursuant to Sec. 325.5(e), 
capital instruments that contain or that are subject to any conditions, 
covenants, terms, restrictions or provisions that are inconsistent with 
safe and sound banking practices will not qualify as capital under part 
325.

   C. Other Instruments or Transactions Which Fail to Provide Capital 
                                 Support

    Section 325.5(b) specifies that any capital component or balance 
sheet entry or account

[[Page 188]]

which has characteristics or terms that diminish its contribution to an 
insured depository institution's ability to absorb losses shall be 
deducted from capital. An example involves certain types of minority 
interests in consolidated subsidiaries. Minority interests in 
consolidated subsidiaries have been included in capital based on the 
fact that they provide capital support to the risk in the consolidated 
subsidiaries. Certain transactions have been structured where a bank 
forms a subsidiary by transferring essentially risk-free or low-risk 
assets to the subsidiary in exchange for common stock of the subsidiary. 
The subsidiary then sells preferred stock to third parties.
    The preferred stock becomes a minority interest in a consolidated 
subsidiary but, in effect, represents an essentially risk-free or low-
risk investment for the preferred stockholders. This type of minority 
interest fails to provide any meaningful capital support to the 
consolidated entity inasmuch as it has a preferred claim on the 
essentially risk-free or low-risk assets of the subsidiary. In addition, 
certain minority interests are not substantially equivalent to permanent 
equity in that the interests must be paid off on specified future dates, 
or at the option of the holders of the minority interests, or contain 
other provisions or features that limit the ability of the minority 
interests to effectively absorb losses. Capital instruments or 
transactions of this nature which fail to absorb losses or provide 
meaningful capital support will be deducted from Tier 1 capital.

                      D. Mandatory Convertible Debt

    Mandatory convertible debt securities are subordinated debt 
instruments that require the issuer to convert such instruments into 
common or perpetual preferred stock by a date at or before the maturity 
of the debt instruments. The maturity of these instruments must be 12 
years or less and the instruments must also meet the other criteria set 
forth in appendix A to part 325. Mandatory convertible debt is excluded 
from Tier 1 capital but, for risk-based capital purposes, is included in 
Tier 2 capital as a ``hybrid capital instrument.''
    So-called ``equity commitment notes,'' which merely require a bank 
to sell common or perpetual preferred stock during the life of the 
subordinated debt obligation, are specifically excluded from the 
definition of mandatory convertible debt securities and are only 
included in Tier 2 capital under the risk-based capital framework to the 
extent that they satisfy the requirements and limitations for ``term 
subordinated debt'' set forth in appendix A to part 325.

                  V. Analysis of Consolidated Companies

    In determining a bank's compliance with its minimum capital 
requirements the FDIC will, with two exceptions, generally utilize the 
bank's consolidated statements as defined in the instructions for the 
preparation of Consolidated Reports of Condition and Income.
    The first exception relates to securities subsidiaries of state 
nonmember banks which are subject to Sec. 337.4 of the FDIC's rules and 
regulations (12 CFR 337.4). Any subsidiary subject to this section must 
be a bona fide subsidiary which is adequately capitalized. In addition, 
Sec. 337.4(b)(3) requires that any insured state nonmember bank's 
investment in such a subsidiary shall not be counted towards the bank's 
capital. In those instances where the securities subsidiary is 
consolidated in the bank's Consolidated Report of Condition it will be 
necessary, for the purpose of calculating the bank's Tier 1 capital, to 
adjust the Consolidated Report of Condition in such a manner as to 
reflect the bank's investment in the securities subsidiary on the equity 
method. In this case, and in those cases where the securities subsidiary 
has not been consolidated, the investment in the subsidiary will then be 
deducted from the bank's capital and assets prior to calculation of the 
bank's Tier 1 capital ratio. (Where deemed appropriate, the FDIC may 
also consider deducting investments in other subsidiaries, either on a 
case-by-case basis or, as with securities subsidiaries, based on the 
general characteristics or functional nature of the subsidiaries.)
    The second exception relates to the treatment of subsidiaries of 
insured banks that are domestic depository institutions such as 
commercial banks, savings banks, or savings associations. These 
subsidiaries are not consolidated on a line-by-line basis with the 
insured bank parent in the bank parent's Consolidated Reports of 
Condition and Income. Rather, the instructions for these reports provide 
that bank investments in such depository institution subsidiaries are to 
be reported on an unconsolidated basis in accordance with the equity 
method. Since the FDIC believes that the minimum capital requirements 
should apply to a bank's depository activities in their entirety, 
regardless of the form that the organization's corporate structure 
takes, it will be necessary, for the purpose of calculating the bank's 
Tier 1 leverage and total risk-based capital ratios, to adjust a bank 
parent's Consolidated Report of Condition to consolidate its domestic 
depository institution subsidiaries on a line-by-line basis. The 
financial statements of the subsidiary that are used for this 
consolidation must be prepared in the same manner as the Consolidated 
Report of Condition.
    The FDIC will, in determining the capital adequacy of a bank which 
is a member of a bank holding company or chain banking group, consider 
the degree of leverage and risks undertaken by the parent company or 
other affiliates. Where the level of risk in a

[[Page 189]]

holding company system is no more than normal and the consolidated 
company is adequately capitalized at all appropriate levels, the FDIC 
generally will not require additional capital in subsidiary banks under 
its supervision over and above that which would be required for the 
subsidiary bank on its own merit. In cases where a holding company or 
other affiliated banks (or other companies) evidence more than a normal 
degree of risk (either by virtue of the quality of their assets, the 
nature of the activities conducted, or other factors) or where the 
affiliated organizations are inadequately capitalized, the FDIC will 
consider the potential impact of the additional risk or excess leverage 
upon an individual bank to determine if such factors will likely result 
in excessive requirements for dividends, management fees, or other 
support to the holding company or affiliated organizations which would 
be detrimental to the bank. Where the excessive risk or leverage in such 
organizations is determined to be potentially detrimental to the bank's 
condition or its ability to maintain adequate capital, the FDIC may 
initiate appropriate supervisory action to limit the bank's ability to 
support its weaker affiliates and/or require higher than minimum capital 
ratios in the bank.

          VI. Applicability of Part 325 to Savings Associations

    Section 325.3(c) indicates that, where the FDIC is required to 
evaluate the adequacy of any depository institution's (including any 
savings association's) capital structure in conjunction with an 
application filed by the institution, the FDIC will not approve the 
application if the depository institution does not meet the minimum 
leverage capital requirement set forth in Sec. 325.3(b).
    Also, Sec. 325.4(b) states that, under certain conditions specified 
in section 8(t) of the Federal Deposit Insurance Act, the FDIC may take 
section 8(b)(1) and/or 8(c) enforcement action against a savings 
association that is deemed to be engaged in an unsafe or unsound 
practice on account of its inadequate capital structure. Section 
325.4(c) further specifies that any insured depository institution with 
a Tier 1 leverage ratio (as defined in part 325) of less than 2 percent 
is deemed to be operating in an unsafe or unsound condition pursuant to 
section 8(a) of the Federal Deposit Insurance Act.
    In addition, the Office of Thrift Supervision (OTS), as the primary 
federal regulator of savings associations, has established minimum core 
capital leverage, tangible capital and risk-based capital requirements 
for savings associations (12 CFR part 567). In this regard, certain 
differences exist between the methods used by the OTS to calculate a 
savings association's capital and the methods set forth by the FDIC in 
part 325. These differences include, among others, the core capital 
treatment for investments in subsidiaries and for certain intangible 
assets.
    In determining whether a savings association's application should be 
approved pursuant to Sec. 325.3(c), or whether an unsafe or unsound 
practice or condition exists pursuant to Secs. 325.4(b) and 325.4(c), 
the FDIC will consider the extent of the savings association's capital 
as determined in accordance with part 325. However, the FDIC will also 
consider the extent to which a savings association is in compliance with 
(a) the minimum capital requirements set forth by the OTS, (b) any 
related capital plans for meeting the minimum capital requirements 
approved by the OTS, and/or (c) any other criteria deemed by the FDIC as 
appropriate based on the association's specific circumstances.
[56 FR 10166, Mar. 11, 1991, as amended at 58 FR 6369, Jan. 28, 1993; 58 
FR 8219, Feb. 12, 1993; 58 FR 60103, Nov. 15, 1993; 60 FR 39232, Aug. 1, 
1995]

 Appendix C to Part 325--Risk-Based Capital for State Non-Member Banks; 
                               Market Risk

      Section 1. Purpose, Applicability, Scope, and Effective Date

    (a) Purpose. The purpose of this appendix is to ensure that banks 
with significant exposure to market risk maintain adequate capital to 
support that exposure.1 This appendix supplements and adjusts 
the risk-based capital ratio calculations under appendix A of this part 
with respect to those banks.
---------------------------------------------------------------------------

    \1\ This appendix is based on a framework developed jointly by 
supervisory authorities from the countries represented on the Basle 
Committee on Banking Supervision and endorsed by the Group of Ten 
Central Bank Governors. The framework is described in a Basle Committee 
paper entitled ``Amendment to the Capital Accord to Incorporate Market 
Risks,'' January 1996. Also see modifications issued in September 1997.
---------------------------------------------------------------------------

    (b) Applicability. (1) This appendix applies to any insured state 
nonmember bank whose trading activity 2 (on a worldwide 
consolidated basis) equals:
---------------------------------------------------------------------------

    \2\ Trading activity means the gross sum of trading assets and 
liabilities as reported in the bank's most recent quarterly Consolidated 
Report of Condition and Income (Call Report).
---------------------------------------------------------------------------

    (i) 10 percent or more of total assets; 3 or
---------------------------------------------------------------------------

    \3\ Total assets means quarter-end total assets as reported in the 
bank's most recent Call Report.
---------------------------------------------------------------------------

    (ii) $1 billion or more.
    (2) The FDIC may additionally apply this appendix to any insured 
state nonmember

[[Page 190]]

bank if the FDIC deems it necessary or appropriate for safe and sound 
banking practices.
    (3) The FDIC may exclude an insured state nonmember bank otherwise 
meeting the criteria of paragraph (b)(1) of this section from coverage 
under this appendix if it determines the bank meets such criteria as a 
consequence of accounting, operational, or similar considerations, and 
the FDIC deems it consistent with safe and sound banking practices.
    (c) Scope. The capital requirements of this appendix support market 
risk associated with a bank's covered positions.
    (d) Effective date. This appendix is effective as of January 1, 
1997. Compliance is not mandatory until January 1, 1998. Subject to 
supervisory approval, a bank may opt to comply with this appendix as 
early as January 1, 1997.4
---------------------------------------------------------------------------

    \4\ A bank that voluntarily complies with the final rule prior to 
January 1, 1998, must comply with all of its provisions.
---------------------------------------------------------------------------

                         Section 2. Definitions

    For purposes of this appendix, the following definitions apply:
    (a) Covered positions means all positions in a bank's trading 
account, and all foreign exchange 5 and commodity positions, 
whether or not in the trading account.6 Positions include on-
balance-sheet assets and liabilities and off-balance-sheet items. 
Securities subject to repurchase and lending agreements are included as 
if they are still owned by the lender.
---------------------------------------------------------------------------

    \5\ Subject to FDIC review, a bank may exclude structural positions 
in foreign currencies from its covered positions.
    \6\ The term trading account is defined in the instructions to the 
Call Report.
---------------------------------------------------------------------------

    (b) Market risk means the risk of loss resulting from movements in 
market prices. Market risk consists of general market risk and specific 
risk components.
    (1) General market risk means changes in the market value of covered 
positions resulting from broad market movements, such as changes in the 
general level of interest rates, equity prices, foreign exchange rates, 
or commodity prices.
    (2) Specific risk means changes in the market value of specific 
positions due to factors other than broad market movements. Specific 
risk includes such risk as idiosyncratic variation, as well as event and 
default risk.
    (c) Tier 1 and Tier 2 capital are defined in appendix A of this 
part.
    (d) Tier 3 capital is subordinated debt that is unsecured; is fully 
paid up; has an original maturity of at least two years; is not 
redeemable before maturity without prior approval by the FDIC; includes 
a lock-in clause precluding payment of either interest or principal 
(even at maturity) if the payment would cause the issuing bank's risk-
based capital ratio to fall or remain below the minimum required under 
appendix A of this part; and does not contain and is not covered by any 
covenants, terms, or restrictions that are inconsistent with safe and 
sound banking practices.
    (e) Value-at-risk (VAR) means the estimate of the maximum amount 
that the value of covered positions could decline during a fixed holding 
period within a stated confidence level, measured in accordance with 
section 4 of this appendix.

  Section 3. Adjustments to the Risk-Based Capital Ratio Calculations.

    (a) Risk-based capital ratio denominator. A bank subject to this 
appendix shall calculate its risk-based capital ratio denominator as 
follows:
    (1) Adjusted risk-weighted assets. Calculate adjusted risk-weighted 
assets, which equals risk-weighted assets (as determined in accordance 
with appendix A of this part), excluding the risk-weighted amounts of 
all covered positions (except foreign exchange positions outside the 
trading account and over-the-counter derivative positions).7
---------------------------------------------------------------------------

    \7\ Foreign exchange positions outside the trading account and all 
over-the-counter derivative positions, whether or not in the trading 
account, must be included in adjusted risk weighted assets as determined 
in appendix A of this part.
---------------------------------------------------------------------------

    (2) Measure for market risk. Calculate the measure for market risk, 
which equals the sum of the VAR-based capital charge, the specific risk 
add-on (if any), and the capital charge for de minimis exposures (if 
any).
    (i) VAR-based capital charge. The VAR-based capital charge equals 
the higher of:
    (A) The previous day's VAR measure; or
    (B) The average of the daily VAR measures for each of the preceding 
60 business days multiplied by three, except as provided in section 4(e) 
of this appendix;
    (ii) Specific risk add-on. The specific risk add-on is calculated in 
accordance with section 5 of this appendix; and
    (iii) Capital charge for de minimis exposure. The capital charge for 
de minimis exposure is calculated in accordance with section 4(a) of 
this appendix.
    (3) Market risk equivalent assets. Calculate market risk equivalent 
assets by multiplying the measure for market risk (as calculated in 
paragraph (a)(2) of this section) by 12.5.
    (4) Denominator calculation. Add market risk equivalent assets (as 
calculated in paragraph (a)(3) of this section) to adjusted risk-
weighted assets (as calculated in paragraph (a)(1) of this section). The 
resulting sum is

[[Page 191]]

the bank's risk-based capital ratio denominator.
    (b) Risk-based capital ratio numerator. A bank subject to this 
appendix shall calculate its risk-based capital ratio numerator by 
allocating capital as follows:
    (1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital equal 
to 8.0 percent of adjusted risk-weighted assets (as calculated in 
paragraph (a)(1) of this section).8
---------------------------------------------------------------------------

    \8\ A bank may not allocate Tier 3 capital to support credit risk 
(as calculated under appendix A of this part).
---------------------------------------------------------------------------

    (2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3 
capital equal to the measure for market risk as calculated in paragraph 
(a)(2) of this section. The sum of Tier 2 and Tier 3 capital allocated 
for market risk must not exceed 250 percent of Tier 1 capital allocated 
for market risk. (This requirement means that Tier 1 capital allocated 
in this paragraph (b)(2) must equal at least 28.6 percent of the measure 
for market risk.)
    (3) Restrictions. (i) The sum of Tier 2 capital (both allocated and 
excess) and Tier 3 capital (allocated in paragraph (b)(2) of this 
section) may not exceed 100 percent of Tier 1 capital (both allocated 
and excess).9
---------------------------------------------------------------------------

    \9\ Excess Tier 1 capital means Tier 1 capital that has not been 
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess Tier 2 
capital means Tier 2 capital that has not been allocated in paragraph 
(b)(1) and (b)(2) of this section, subject to the restrictions in 
paragraph (b)(3) of this section.
---------------------------------------------------------------------------

    (ii) Term subordinated debt (and intermediate-term preferred stock 
and related surplus) included in Tier 2 capital (both allocated and 
excess) may not exceed 50 percent of Tier 1 capital (both allocated and 
excess).
    (4) Numerator calculation. Add Tier 1 capital (both allocated and 
excess), Tier 2 capital (both allocated and excess), and Tier 3 capital 
(allocated under paragraph (b)(2) of this section). The resulting sum is 
the bank's risk-based capital ratio numerator.

                       Section 4. Internal Models

    (a) General. For risk-based capital purposes, a bank subject to this 
appendix must use its internal model to measure its daily VAR, in 
accordance with the requirements of this section.10 The FDIC 
may permit a bank to use alternative techniques to measure the market 
risk of de minimis exposures so long as the techniques adequately 
measure associated market risk.
---------------------------------------------------------------------------

    \10\ A bank's internal model may use any generally accepted 
measurement techniques, such as variance-covariance models, historical 
simulations, or Monte Carlo simulations. However, the level of 
sophistication and accuracy of a bank's internal model must be 
commensurate with the nature and size of its covered positions. A bank 
that modifies its existing modeling procedures to comply with the 
requirements of this appendix for risk-based capital purposes should, 
nonetheless, continue to use the internal model it considers most 
appropriate in evaluating risks for other purposes.
---------------------------------------------------------------------------

    (b) Qualitative requirements. A bank subject to this appendix must 
have a risk management system that meets the following minimum 
qualitative requirements:
    (1) The bank must have a risk control unit that reports directly to 
senior management and is independent from business trading units.
    (2) The bank's internal risk measurement model must be integrated 
into the daily management process.
    (3) The bank's policies and procedures must identify, and the bank 
must conduct, appropriate stress tests and backtests.11 The 
bank's policies and procedures must identify the procedures to follow in 
response to the results of such tests.
---------------------------------------------------------------------------

    \11\ Stress tests provide information about the impact of adverse 
market events on a bank's covered positions. Backtests provide 
information about the accuracy of an internal model by comparing a 
bank's daily VAR measures to its corresponding daily trading profits and 
losses.
---------------------------------------------------------------------------

    (4) The bank must conduct independent reviews of its risk 
measurement and risk management systems at least annually.
    (c) Market risk factors. The bank's internal model must use risk 
factors sufficient to measure the market risk inherent in all covered 
positions. The risk factors must address interest rate 
risk,12 equity price risk, foreign exchange rate risk, and 
commodity price risk.
---------------------------------------------------------------------------

    \12\ For material exposures in the major currencies and markets, 
modeling techniques must capture spread risk and must incorporate enough 
segments of the yield curve--at least six--to capture differences in 
volatility and less than perfect correlation of rates along the yield 
curve.
---------------------------------------------------------------------------

    (d) Quantitative requirements. For regulatory capital purposes, VAR 
measures must meet the following quantitative requirements:
    (1) The VAR measures must be calculated on a daily basis using a 99 
percent, one-tailed confidence level with a price shock equivalent to a 
ten-business day movement in rates and prices. In order to calculate VAR 
measures based on a ten-day price shock, the bank may either calculate 
ten-day figures directly or convert VAR figures based on holding periods 
other than ten days to the equivalent of a ten-day holding period (for 
instance, by multiplying a one-day VAR measure by the square root of 
ten).
    (2) The VAR measures must be based on an historical observation 
period (or effective observation period for a bank using a

[[Page 192]]

weighting scheme or other similar method) of at least one year. The bank 
must update data sets at least once every three months or more 
frequently as market conditions warrant.
    (3) The VAR measures must include the risks arising from the non-
linear price characteristics of options positions and the sensitivity of 
the market value of the positions to changes in the volatility of the 
underlying rates or prices. A bank with a large or complex options 
portfolio must measure the volatility of options positions by different 
maturities.
    (4) The VAR measures may incorporate empirical correlations within 
and across risk categories, provided that the bank's process for 
measuring correlations is sound. In the event that the VAR measures do 
not incorporate empirical correlations across risk categories, then the 
bank must add the separate VAR measures for the four major risk 
categories to determine its aggregate VAR measure.
    (e) Backtesting. (1) Beginning one year after a bank starts to 
comply with this appendix, a bank must conduct backtesting by comparing 
each of its most recent 250 business days' actual net trading profit or 
loss 13 with the corresponding daily VAR measures generated 
for internal risk measurement purposes and calibrated to a one-day 
holding period and a 99 percent, one-tailed confidence level.
---------------------------------------------------------------------------

    \13\ Actual net trading profits and losses typically include such 
things as realized and unrealized gains and losses on portfolio 
positions as well as fee income and commissions associated with trading 
activities.
---------------------------------------------------------------------------

    (2) Once each quarter, the bank must identify the number of 
exceptions, that is, the number of business days for which the magnitude 
of the actual daily net trading loss, if any, exceeds the corresponding 
daily VAR measure.
    (3) A bank must use the multiplication factor indicated in Table 1 
of this appendix in determining its capital charge for market risk under 
section 3(a)(2)(i)(B) of this appendix until it obtains the next 
quarter's backtesting results, unless the FDIC determines that a 
different adjustment or other action is appropriate.

------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor    
------------------------------------------------------------------------
4 or fewer..............................................          3.00  
5.......................................................          3.40  
6.......................................................          3.50  
7.......................................................          3.65  
8.......................................................          3.75  
9.......................................................          3.85  
10 or more..............................................          4.00  
------------------------------------------------------------------------

                        Section 5. Specific Risk

    (a)Modeled specific risk. A bank may use its internal model to 
measure specific risk. If the bank has demonstrated to the FDIC that its 
internal model measures the specific risk, including event and default 
risk as well as idiosyncratic variation, of covered debt and equity 
positions and includes the specific risk measure in the VAR-based 
capital charge in section 3(a)(2)(i) of this appendix, then the bank has 
no specific risk add-on for purposes of section 3(a)(2)(ii) of this 
appendix. The model should explain the historical price variation in the 
trading portfolio and capture concentration, both magnitude and changes 
in composition. The model should also be robust to an adverse 
environment and have been validated through backtesting which assesses 
whether specific risk is being accurately captured.
    (b) Add-on charge for modeled specific risk. If a bank's model 
measures specific risk, but the bank has not been able to demonstrate to 
the FDIC that the model adequately measures event and default risk for 
covered debt and equity positions, then the bank's specific risk add-on 
for purposes of section 3(a)(2)(ii) of this appendix is as follows:
    (1) If the model is susceptible to valid separation of the VAR-
measure into a specific risk portion and a general market risk portion, 
then the specific risk add-on is equal to the previous day's specific 
risk portion.
    (2) If the model does not separate the VAR measure into a specific 
risk portion and a general market risk portion, then the specific risk 
add-on is the sum of the previous day's VAR measures for subportfolios 
of covered debt and covered equity positions.
    (c) Add-on Charge if specific risk is not modeled. If a bank does 
not model specific risk in accordance with paragraph (a) or (b) of this 
section, the bank's specific risk add-on charge for purposes of section 
3(a)(2)(ii) of this appendix equals the components for covered debt and 
equity positions as appropriate:
    (1) Covered debt positions. (i) For purposes of this section 5, 
covered debt positions means fixed-rate or floating-rate debt 
instruments located in the trading account and instruments located in 
the trading account with values that react primarily to changes in 
interest rates, including certain non-convertible preferred stock, 
convertible bonds, and

[[Page 193]]

instruments subject to repurchase and lending agreements. Also included 
are derivatives (including written and purchased options) for which the 
underlying instrument is a covered debt instrument that is subject to a 
non-zero specific risk capital charge.
    (A) For covered debt positions that are derivatives, a bank must 
risk-weight (as described in paragraph (c)(1)(iii) of this section) the 
market value of the effective notional amount of the underlying debt 
instrument or index portfolio. Swaps must be included as the notional 
position in the underlying debt instrument or index portfolio, with a 
receiving side treated as a long position and a paying side treated as a 
short position; and
    (B) For covered debt positions that are options, whether long or 
short, a bank must risk-weight (as described in paragraph (c)(1)(iii) of 
this section) the market value of the effective notional amount of the 
underlying debt instrument or index multiplied by the option's delta.
    (ii) A bank may net long and short covered debt positions (including 
derivatives) in identical debt issues or indices.
    (iii) A bank must multiply the absolute value of the current market 
value of each net long or short covered debt position by the appropriate 
specific risk weighting factor indicated in Table 2 of this appendix. 
The specific risk capital charge component for covered debt positions is 
the sum of the weighted values.

  Table 2.--Specific Risk Weighting Factors for Covered Debt Positions  
------------------------------------------------------------------------
                                                               Weighting
              Category                  Remaining maturity    factor (in
                                          (contractual)        percent) 
------------------------------------------------------------------------
Government.........................  N/A....................        0.00
Qualifying.........................  6 months or less.......        0.25
                                     Over 6 months to 24            1.00
                                      months.                           
                                     Over 24 months.........        1.60
Other..............................  N/A....................        8.00
------------------------------------------------------------------------

    (A) The government category includes all debt instruments of central 
governments of OECD-based countries 14 including bonds, 
Treasury bills, and other short-term instruments, as well as local 
currency instruments of non-OECD central governments to the extent the 
bank has liabilities booked in that currency.
---------------------------------------------------------------------------

    \14\  Organization for Economic Cooperation and Development (OECD)-
based countries is defined in appendix A of this part.
---------------------------------------------------------------------------

    (B) The qualifying category includes debt instruments of U.S. 
government-sponsored agencies, general obligation debt instruments 
issued by states and other political subdivisions of OECD-based 
countries, multilateral development banks, and debt instruments issued 
by U.S. depository institutions or OECD-banks that do not qualify as 
capital of the issuing institution.15 This category also 
includes other debt instruments, including corporate debt and revenue 
instruments issued by states and other political subdivisions of OECD 
countries, that are:
---------------------------------------------------------------------------

    \15\  U.S. government-sponsored agencies, multilateral development 
banks, and OECD banks are defined in appendix A of this part.
---------------------------------------------------------------------------

    (1) Rated investment-grade by at least two nationally recognized 
credit rating services;
    (2) Rated investment-grade by one nationally recognized credit 
rating agency and not rated less than investment-grade by any other 
credit rating agency; or
    (3) Unrated, but deemed to be of comparable investment quality by 
the reporting bank and the issuer has instruments listed on a recognized 
stock exchange, subject to review by the FDIC.
    (C) The other category includes debt instruments that are not 
included in the government or qualifying categories.
    (2) Covered equity positions. (i) For purposes of this section 5, 
covered equity positions means equity instruments located in the trading 
account and instruments located in the trading account with values that 
react primarily to changes in equity prices, including voting or non-
voting common stock, certain convertible bonds, and commitments to buy 
or sell equity instruments. Also included are derivatives (including 
written and purchased options) for which the underlying is a covered 
equity position.
    (A) For covered equity positions that are derivatives, a bank must 
risk weight (as described in paragraph (c)(2)(iii) of this section) the 
market value of the effective notional amount of the underlying equity 
instrument or equity portfolio. Swaps must be included as the notional 
position in the underlying equity instrument or index portfolio, with a 
receiving side treated as a long position and a paying side treated as a 
short position; and
    (B) For covered equity positions that are options, whether long or 
short, a bank must risk weight (as described in paragraph (c)(2)(iii) of 
this section) the market value of the effective notional amount of the 
underlying equity instrument or index multiplied by the option's delta.
    (ii) A bank may net long and short covered equity positions 
(including derivatives) in identical equity issues or equity indices in 
the same market.16
---------------------------------------------------------------------------

    \16\ A bank may also net positions in depository receipts against an 
opposite position in the underlying equity or identical equity in 
different markets, provided that the bank includes the costs of 
conversion.
---------------------------------------------------------------------------

    (iii)(A) A bank must multiply the absolute value of the current 
market value of each

[[Page 194]]

net long or short covered equity position by a risk weighting factor of 
8.0 percent, or by 4.0 percent if the equity is held in a portfolio that 
is both liquid and well-diversified.17 For covered equity 
positions that are index contracts comprising a well-diversified 
portfolio of equity instruments, the net long or short position is 
multiplied by a risk weighting factor of 2.0 percent.
---------------------------------------------------------------------------

    \17\ A portfolio is liquid and well-diversified if: (1) it is 
characterized by a limited sensitivity to price changes of any single 
equity issue or closely related group of equity issues held in the 
portfolio; (2) the volatility of the portfolio's value is not dominated 
by the volatility of any individual equity issue or by equity issues 
from any single industry or economic sector; (3) it contains a large 
number of individual equity positions, with no single position 
representing a substantial portion of the portfolio's total market 
value; and (4) it consists mainly of issues traded on organized 
exchanges or in well-established over-the-counter markets.
---------------------------------------------------------------------------

    (B) For covered equity positions from the following futures-related 
arbitrage strategies, a bank may apply a 2.0 percent risk weighting 
factor to one side (long or short) of each position with the opposite 
side exempt from charge, subject to review by the FDIC:
    (1) Long and short positions in exactly the same index at different 
dates or in different market centers; or
    (2) Long and short positions in index contracts at the same date in 
different but similar indices.
    (C) For futures contracts on broadly-based indices that are matched 
by offsetting positions in a basket of stocks comprising the index, a 
bank may apply a 2.0 percent risk weighting factor to the futures and 
stock basket positions (long and short), provided that such trades are 
deliberately entered into and separately controlled, and that the basket 
of stocks comprises at least 90 percent of the capitalization of the 
index.
    (iv) The specific risk capital charge component for covered equity 
positions is the sum of the weighted values.
[61 FR 47376, Sept. 6, 1996, as amended at 62 FR 68068, Dec. 30, 1997]



PART 326--MINIMUM SECURITY DEVICES AND PROCEDURES AND BANK SECRECY ACT \1\ COMPLIANCE--Table of Contents



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

    \1\ In its original form, subchapter II of chapter 53 of title 31 
U.S.C., was part of Pub. L. 91-508 which requires recordkeeping for and 
reporting of currency transactions by banks and others and is commonly 
known as the Bank Secrecy Act.
---------------------------------------------------------------------------

                 Subpart A--Minimum Security Procedures

Sec.
326.0  Authority, purpose, and scope.
326.1  Definitions.
326.2  Designation of security officer.
326.3  Security program.
326.4  Reports.

    Subpart B--Procedures for Monitoring Bank Secrecy Act Complianace

326.8  Bank Secrecy Act compliance.

    Authority:  12 U.S.C. 1813, 1815, 1817, 1818, 1819 [Tenth], 1881-
1883; 31 U.S.C. 5311-5324.



                 Subpart A--Minimum Security Procedures

    Source:  56 FR 13581, Apr. 3, 1991, unless otherwise noted.



Sec. 326.0  Authority, purpose, and scope.

    (a) This part is issued by the Federal Deposit Insurance Corporation 
(``FDIC'') pursuant to section 3 of the Bank Protection Act of 1968 (12 
U.S.C. 1882). It applies to insured state banks that are not members of 
the Federal Reserve System. It requires each bank to adopt appropriate 
security procedures to discourage robberies, burglaries, and larcenies 
and to assist in identifying and apprehending persons who commit such 
acts.
    (b) It is the responsibility of the bank's board of directors to 
comply with this part and ensure that a written security program for the 
bank's main office and branches is developed and implemented.

(Approved by the Office of Management and Budget under control number 
3064-0095)



Sec. 326.1  Definitions.

    For the purposes of this part--
    (a) The term insured nonmember bank means any bank, including a 
foreign bank having a branch the deposits of which are insured in 
accordance with the provisions of the Federal Deposit Insurance Act, 
which is not a member of the Federal Reserve System. The term does not 
include any institution chartered or licensed by the Comptroller of the 
Currency, any District bank, or any savings association.

[[Page 195]]

    (b) The term banking office includes any branch of an insured 
nonmember bank, and, in the case of an insured state nonmember bank, it 
includes the main office of that bank.
    (c) The term branch for a bank chartered under the laws of any state 
of the United States includes any branch bank, branch office, branch 
agency, additional office, or any branch place of business located in 
any state or territory of the United States, District of Columbia, 
Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific 
Islands, the Northern Mariana Islands or the Virgin Islands at which 
deposits are received or checks paid or money lent. In the case of a 
foreign bank, as defined in 12 CFR 346.1(a), the term branch has the 
meaning given in 12 CFR 346.1(d).



Sec. 326.2  Designation of security officer.

    Upon the issuance of federal deposit insurance, the board of 
directors of each insured nonmember bank \2\ shall designate a security 
officer who shall have the authority, subject to the approval of the 
board of directors, to develop, within a reasonable time, but no later 
than 180 days, and to administer a written security program for each 
banking office.
---------------------------------------------------------------------------

    \2\ The term board of directors includes the managing official of an 
insured branch of a foreign bank for purposes of 12 CFR 326.0-326.4.
---------------------------------------------------------------------------



Sec. 326.3  Security program.

    (a) Contents of security program. The security program shall:
    (1) Establish procedures for opening and closing for business and 
for the safekeeping of all currency, negotiable securities, and similar 
valuables at all times;
    (2) Establish procedures that will assist in identifying persons 
committing crimes against the bank and that will preserve evidence that 
may aid in their identification and prosecution; such procedures may 
include, but are not limited to:
    (i) Retaining a record of any robbery, burglary, or larceny 
committed against the bank;
    (ii) Maintaining a camera that records activity in the banking 
office; and
    (iii) Using identification devices, such as prerecorded serial-
numbered bills, or chemical and electronic devices;
    (3) Provide for initial and periodic training of officers and 
employees in their responsibilities under the security program and in 
proper employee conduct during and after a robbery, burglary or larceny; 
and
    (4) Provide for selecting, testing, operating and maintaining 
appropriate security devices, as specified in paragraph (b) of this 
section.
    (b) Security devices. Each insured nonmember bank shall have, at a 
minimum, the following security devices:
    (1) A means of protecting cash or other liquid assets, such as a 
vault, safe, or other secure space;
    (2) A lighting system for illuminating, during the hours of 
darkness, the area around the vault, if the vault is visible from 
outside the banking office;
    (3) An alarm system or other appropriate device for promptly 
notifying the nearest responsible law enforcement officers of an 
attempted or perpetrated robbery or burglary;
    (4) Tamper-resistant locks on exterior doors and exterior windows 
that may be opened; and
    (5) Such other devices as the security officer determines to be 
appropriate, taking into consideration:
    (i) The incidence of crimes against financial institutions in the 
area;
    (ii) The amount of currency or other valuables exposed to robbery, 
burglary, and larceny;
    (iii) The distance of the banking office from the nearest 
responsible law enforcement officers;
    (iv) The cost of the security devices;
    (v) Other security measures in effect at the banking office; and
    (vi) The physical characteristics of the structure of the banking 
office and its surroundings.



Sec. 326.4  Reports.

    The security officer for each insured nonmember bank shall report at 
least

[[Page 196]]

annually to the bank's board of directors on the implementation, 
administration, and effectiveness of the security program.



    Subpart B--Procedures for Monitoring Bank Secrecy Act Compliance



Sec. 326.8  Bank Secrecy Act compliance.

    (a) Purpose. This subpart is issued to assure that all insured 
nonmember banks \3\ establish and maintain procedures reasonably 
designed to assure and monitor their compliance with the requirements of 
subchapter II of chapter 53 of title 31 U.S.C., and the implementing 
regulations promulgated thereunder by the Department of Treasury at 31 
CFR part 103.
---------------------------------------------------------------------------

    \3\ In regard to foreign banks, the programs and procedures required 
by Sec. 326.8 need be instituted only at an insured branch as defined in 
12 CFR 346.1(g) which is a State branch as defined in 12 CFR 346.1(f).
---------------------------------------------------------------------------

    (b) Compliance procedures. On or before April 27, 1987, each bank 
shall develop and provide for the continued administration of a program 
reasonably designed to assure and monitor compliance with recordkeeping 
and reporting requirements set forth in subchapter II of chapter 53 of 
title 31 U.S.C., and the implementing regulations promulgated thereunder 
by the Department of Treasury at 31 CFR part 103. The compliance program 
shall be reduced to writing, approved by the board of directors and 
noted in the minutes.
    (c) Contents of compliance program. The compliance program shall, at 
a minimum:
    (1) Provide for a system of internal controls to assure ongoing 
compliance;
    (2) Provide for independent testing for compliance to be conducted 
by bank personnel or by an outside party;
    (3) Designate an individual or individuals responsible for 
coordinating and monitoring day-to-day compliance; and
    (4) Provide training for appropriate personnel.

(Approved by the Office of Management and Budget under control number 
3064-0087)

[52 FR 2860, Jan. 27, 1987, as amended at 53 FR 17917, May 19, 1988]



PART 327--ASSESSMENTS--Table of Contents




                          Subpart A--In General

Sec.
327.1  Purpose and scope.
327.2  Certified statements.
327.3  Payment of semiannual assessments.
327.4  Annual assessment rate.
327.5  Assessment base.
327.6  Terminating transfers; other terminations of insurance.
327.7  Payment of interest on assessment underpayments and overpayments.
327.8  Definitions.
327.9  Assessment schedules.
327.10  Interpretive rule: section 7(b)(2)(A)(v).

  Subpart B--Insured Depository Institutions Participating in Section 
                          5(d)(3) Transactions

327.31  Scope.
327.32  Computation and payment of assessment.
327.33  ``Acquired'' deposits.
327.34  Application of AADAs.
327.35  Grandfathered AADA elements.
327.36  Growth computation.
327.37  Attribution of transferred deposits.

    Authority:  12 U.S.C. 1441, 1441b, 1813, 1815, 1817-1819; Deposit 
Insurance Funds Act of 1996, Pub. L. 104-208, 110 Stat. 3009 et seq.

    Source:  54 FR 51374, Dec. 15, 1989, unless otherwise noted.



                          Subpart A--In General



Sec. 327.1  Purpose and scope.

    (a) Scope. This part 327 applies to any insured depository 
institution, including any insured branch of a foreign bank.
    (b) Purpose. (1) Except as specified in paragraph (b)(2) of this 
section, this part 327 sets forth the rules for:
    (i) The time and manner of filing certified statements by insured 
depository institutions;
    (ii) The time and manner of payment of the semiannual assessments by 
such institutions; and
    (iii) The payment of assessments by depository institutions whose 
insured status has terminated.
    (2) Deductions from the assessment base of an insured branch of a 
foreign bank are stated in part 346 of this chapter.

[[Page 197]]



Sec. 327.2  Certified statements.

    (a) Required. Each insured depository institution shall file a 
certified statement during each semiannual period.
    (b) Time of filing. Certified statements for any semiannual period 
must be filed no later than the second-quarterly payment date specified 
in Sec. 327.3(d)(2). Certified statements postmarked on or before such 
date are deemed to be timely filed.
    (c) Form. The Corporation will provide to each insured depository 
institution a certified statement form showing the amount and 
computation of the institution's semiannual assessment. The president of 
the insured depository institution, or such other officer as the 
institution's board of directors or trustees may designate, shall review 
the information shown on the form.
    (d) Certification--(1) Form accepted. If such officer agrees that to 
the best of his or her knowledge and belief the information shown on the 
certified statement form is true, correct and complete and in accordance 
with the Federal Deposit Insurance Act and the regulations issued 
thereunder, the officer shall so certify.
    (2) Form amended--(i) In general. If such officer determines that to 
the best of his or her knowledge and belief the information shown on the 
certified statement form is not true, correct and complete and in 
accordance with the Federal Deposit Insurance Act and the regulations 
issued thereunder, the officer shall make such amendments to the 
information as he or she believes necessary. The officer shall certify 
that to the best of his or her knowledge and belief the information 
shown on the form, as so amended, is true, correct and complete and in 
accordance with the Federal Deposit Insurance Act and the regulations 
issued thereunder.
    (ii) Request for revision. The certification and filing of an 
amended form under paragraph (d)(2) of this section does not constitute 
a request for revision by the Corporation of the information shown on 
the form. Any such request to the Corporation for revision of the 
information shown on the form shall be submitted separately from the 
certified statement and in accordance with the provisions of 
Sec. 327.3(h).
    (iii) Rate multiplier. The rate multiplier shown on the certified 
statement form shall be amended only if it is inconsistent with the 
assessment risk classification assigned to the institution in writing by 
the Corporation for the current semiannual period pursuant to 
Sec. 327.4(a). Agreement with the rate multiplier shall not be deemed to 
constitute agreement with the assessment risk classification assigned.
[59 FR 67160, Dec. 29, 1994]



Sec. 327.3  Payment of semiannual assessments.

    (a) Required--(1) In general. Except as provided in paragraph (b) of 
this section, each insured depository institution shall pay to the 
Corporation, in two quarterly payments, a semiannual assessment 
determined in accordance with this part 327.
    (2) Notice of designated deposit account. For the purpose of making 
such payments, each insured depository institution shall designate a 
deposit account for direct debit by the Corporation. No later than 30 
days prior to the next payment date specified in paragraphs (c)(2) and 
(d)(2) of this section, each institution shall provide written notice to 
the Corporation of the account designated, including all information and 
authorizations needed by the Corporation for direct debit of the 
account. After the initial notice of the designated account, no further 
notice is required unless the institution designates a different account 
for assessment debit by the Corporation, in which case the requirements 
of the preceding sentence apply.
    (b) Newly insured institutions. A newly insured institution shall 
not be required to pay an assessment for the semiannual period during 
which it becomes an insured institution. For the semiannual period 
following the period during which it becomes an insured institution, it 
shall pay its full semiannual assessment at the time and in the manner 
provided for in paragraph (d) of this section, in an amount that is the 
product of its assessment base for the prior semiannual period, as 
provided for in Sec. 327.5(c), multiplied by one-half of the annual 
assessment rate corresponding to the assessment risk

[[Page 198]]

classification assigned to the institution pursuant to Sec. 327.4(a). 
For the purpose of making such payment, the institution shall provide to 
the Corporation no later than the payment date specified in paragraph 
(d)(2) of this section the notice required by paragraph (a)(2) of this 
section.
    (c) First-quarterly payment--(1) Invoice. Except in the case of 
invoices for the first quarterly payment for the first semiannual period 
of 1997, no later than 30 days prior to the payment date specified in 
paragraph (c)(2) of this section, the Corporation will provide to each 
insured depository institution an invoice showing the amount of the 
assessment payment due from the institution for the first quarter of the 
upcoming semiannual period, and the computation of that amount. Subject 
to paragraph (g) of this section and to subpart B of this part, the 
invoiced amount shall be the product of the following: The assessment 
base of the institution for the preceding September 30 (for the 
semiannual period beginning January 1) or March 31 (for the semiannual 
period beginning July 1) computed in accordance with Sec. 327.5; 
multiplied by one-quarter of the annual assessment rate corresponding to 
the assessment risk classification assigned to the institution pursuant 
to Sec. 327.4(a).
    (2) Payment date and manner. Except as provided in paragraphs (c)(3) 
and (j) of this section, the Corporation will cause the amount stated in 
the applicable invoice to be directly debited on the appropriate regular 
payment date from the deposit account designated by the insured 
depository institution for that purpose, as follows:
    (i) In the case of the first quarterly payment for a semiannual 
period that begins on January 1, the regular payment date is January 2; 
and
    (ii) In the case of the first quarterly payment for a semiannual 
period that begins on July 1, the regular payment date is the preceding 
June 30.
    (3) Alternate payment date--(i) Election. An insured depository 
institution may elect to pay the first quarterly payment for a 
semiannual period that begins on January 1 of a current year on the 
alternate payment date. The alternate payment date is December 30 of the 
prior year.
    (ii) Certification. (A) In order to elect the alternate payment date 
with respect to a current semiannual period, an institution must so 
certify in writing in advance. In order for the election to be effective 
with respect to the current semiannual period, the Corporation must 
receive the certification no later than the prior November 1.
    (B) The certification shall be made on a pre-printed form provided 
by the Corporation. The form shall be signed by the institution's chief 
financial officer or such other officer as the institution's board of 
directors may designate for that purpose. The form shall be sent to the 
attention of the Chief of the Assessment Operations Section of the 
Corporation's Division of Finance. An institution may obtain the form 
from the Corporation's Division of Finance.
    (C) The election of the alternate payment date shall be effective 
with respect to the semiannual period specified in the certification and 
thereafter, until terminated.
    (iii) Termination. (A) An insured depository institution may 
terminate its election of the alternate payment date, and thereby revert 
to the regular payment date, by so certifying in writing to the 
Corporation in advance. In order for the termination to be effective for 
a current semiannual period, the Corporation must receive the 
termination certification no later than the prior November 1.
    (B) The termination certification shall be made on a pre-printed 
form provided by the Corporation. The form shall be signed by the 
institution's chief financial officer or such other officer as the 
institution's board of directors may designate for that purpose. The 
form shall be sent to the attention of the Chief of the Assessment 
Operations Section of the Corporation's Division of Finance. An 
institution may obtain the form from the Corporation's Division of 
Finance.
    (C) The termination shall be permanent, except that an institution 
that has terminated an election may make a new election under paragraph 
(c)(3)(i) of this section.
    (iv) Manner of payment. Except as provided in paragraph (j) of this 
section, if an insured depository institution elects the alternate 
payment date,

[[Page 199]]

the Corporation will cause the amount stated in the applicable invoice 
to be directly debited on the alternate payment date from the deposit 
account designated by the insured depository institution for that 
purpose.
    (d) Second-quarterly payment--(1) Invoice. No later than 30 days 
prior to the payment date specified in paragraph (d)(2) of this section, 
the Corporation will provide to each insured depository institution an 
invoice showing the amount of the assessment payment due from the 
institution for the second quarter of that semiannual period, and the 
computation of that amount. Subject to paragraph (g) of this section and 
to subpart B of this part, the invoiced amount shall be the product of 
the following: The assessment base of the institution for the preceding 
December 31 (for the semiannual period beginning January 1) or June 30 
(for the semiannual period beginning July 1) computed in accordance with 
Sec. 327.5; multiplied by one-quarter of the annual assessment rate 
corresponding to the assessment risk classification assigned to the 
institution pursuant to Sec. 327.4(a).
    (2) Except as provided in paragraph (j) of this section, the 
Corporation will cause the amount stated in the applicable invoice to be 
directly debited on the appropriate regular payment date from the 
deposit account designated by the insured depository institution for 
that purpose, as follows:
    (i) In the case of the second quarterly payment for a semiannual 
period that begins on January 1, the regular payment date is March 30; 
and
    (ii) In the case of the second quarterly payment for a semiannual 
period that begins on July 1, the regular payment date is September 30.
    (e) Necessary action, sufficient funding by institution. Each 
insured depository institution shall take all actions necessary to allow 
the Corporation to debit assessments from the insured depository 
institution's designated deposit account. Each insured depository 
institution shall, prior to each payment date indicated in paragraphs 
(c)(2), (c)(3)(i), and (d)(2) of this section, ensure that funds in an 
amount at least equal to the invoiced amount (or twice the invoiced 
amount if the insured depository institution has elected the doubled-
payment option pursuant to paragraph (j) of this section) are available 
in the designated account for direct debit by the Corporation. Failure 
to take any such action or to provide such funding of the account shall 
be deemed to constitute nonpayment of the assessment.
    (f) Business days. If a payment date specified in paragraph 
(c)(2)(i) falls on a date that is not a business day, the applicable 
date shall be the following business day. If a payment date specified in 
paragraph (c)(1), (c)(2)(ii), (c)(3)(i), or (d)(2) of this section falls 
on a date that is not a business day, the applicable date shall be the 
previous business day.
    (g) Payment adjustments in succeeding quarters. The quarterly 
assessment invoices provided by the Corporation may reflect adjustments, 
initiated by the Corporation or an institution, resulting from such 
factors as amendments to prior quarterly reports of condition, 
retroactive revision of the institution's assessment risk 
classification, and revision of the Corporation's assessment 
computations for prior quarters.
    (h) Request for revision of computation of quarterly assessment 
payment--(1) In general. An institution may submit a request for 
revision of the computation of the institution's quarterly assessment 
payment as shown on the quarterly invoice. Such revision may be 
requested in the following circumstances:
    (i) The institution disagrees with the computation of the assessment 
base as stated on the invoice;
    (ii) The institution determines that the rate multiplier applied by 
the Corporation is inconsistent with the assessment risk classification 
assigned to the institution in writing by the Corporation for the 
semiannual period for which the payment is due; or
    (iii) The institution believes that the invoice does not fully or 
accurately reflect adjustments provided for in paragraph (g) of this 
section.
    (2) Inapplicability. This paragraph (h) is not applicable to 
requests for review of an institution's assessment risk classification, 
which are covered by Sec. 327.4(d).

[[Page 200]]

    (3) Requirements. Any such request for revision must be submitted 
within 60 days of the date of the quarterly assessment invoice for which 
revision is requested, except that requests for revision resulting from 
detection by the institution of an error or omission for which the 
institution files an amendment to its quarterly report of condition must 
be submitted within 60 days of the filing date of the amendment to the 
quarterly report of condition. The request for revision shall be 
submitted to the Chief of the Assessment Operations Section and shall 
provide documentation sufficient to support the revision sought by the 
institution. If additional information is requested by the Corporation, 
such information shall be provided by the institution within 21 days of 
the date of the Corporation's request for additional information. Any 
institution submitting a timely request for revision will receive 
written response from the Corporations's Chief Financial Officer (or his 
or her designee) within 60 days of receipt by the Corporation of the 
request for revision or, if additional information has been requested by 
the Corporation, within 60 days of receipt of the additional 
information. Whenever feasible, the response will notify the institution 
of the determination of the Chief Financial Officer (or designee) as to 
whether the requested revision is warranted. In all instances in which a 
timely request for revision is submitted, the Chief Financial Officer 
(or designee) will make a determination on the request as promptly as 
possible and notify the institution in writing of the determination.
    (i) Assessment notice not received. Any institution that has not 
received an assessment invoice for any quarterly payment by the 
fifteenth day of the month in which the quarterly payment is due shall 
promptly notify the Corporation. Failure to provide prompt notice to the 
Corporation shall not affect the institution's obligation to make full 
and timely assessment payment. Unless otherwise directed by the 
Corporation, the institution shall preliminarily pay the amount shown on 
its assessment invoice for the preceding quarter, subject to subsequent 
correction.
    (j) Doubled-payment option--(1) Election. In the case of a quarterly 
payment to be made on March 30, on June 30, on September 30, or on the 
alternate payment date, an insured depository institution may elect to 
pay twice the amount of such quarterly payment.
    (2) Certification. (i) In order to elect the doubled-payment option 
with respect to a selected payment date, an institution must so certify 
in writing to the Corporation in advance. In order for the election to 
be effective, the Corporation must receive the certification by the 
following dates: in the case of a quarterly payment to be made on March 
30, June 30, or September 30, the Corporation must receive the 
certification no later than the prior February 1, May 1, or August 1, 
respectively; in the case of a quarterly payment to be made on the 
alternate payment date, the Corporation must receive the certification 
by the prior November 1.
    (ii) The certification shall be made on a pre-printed form provided 
by the Corporation. The form shall be signed by the institution's chief 
financial officer or such other officer as the institution's board of 
directors may designate for that purpose. The form shall be sent to the 
attention of the Chief of the Assessment Operations Section of the 
Corporation's Division of Finance. An institution may obtain the form 
from the Corporation's Division of Finance.
    (iii) The election shall be effective with respect to the selected 
quarterly payment for the year specified in the certification and with 
respect to subsequent quarterly payments made on the selected payment 
date in subsequent years, until the election is terminated.
    (3) Termination. (i) An insured depository institution may terminate 
its election of the doubled-payment option for a selected payment date 
by so certifying in writing to the Corporation in advance. In order for 
the termination to be effective, the Corporation must receive the 
termination certification by the following dates: In the case of a 
quarterly payment to be made on March 30, June 30, or September 30, the 
Corporation must receive the termination certification no later than the 
prior February 1, May 1, or August 1, respectively; in the case of a 
quarterly payment to be made on the alternate

[[Page 201]]

payment date, the Corporation must receive the termination certification 
by the prior November 1.
    (ii) The termination certification shall be made on a pre-printed 
form provided by the Corporation. The form shall be signed by the 
institution's chief financial officer or such other officer as the 
institution's board of directors may designate for that purpose. The 
form shall be sent to the attention of the Chief of the Assessment 
Operations Section of the Corporation's Division of Finance. An 
institution may obtain the form from the Corporation's Division of 
Finance.
    (iii) The termination shall be permanent, except that an institution 
that has terminated its election of the doubled-payment option for a 
selected payment date may make a new election.
    (4) Manner of payment. If an insured depository institution elects 
the doubled-payment option for a selected payment date, the Corporation 
will cause an amount equal to twice the amount stated in the applicable 
invoice to be directly debited on the selected payment date from the 
deposit account designated by the insured depository institution for 
that purpose.
[59 FR 67161, Dec. 29, 1994, as amended at 60 FR 50407, Sept. 29, 1995; 
61 FR 67696, Dec. 24, 1996]



Sec. 327.4  Annual assessment rate.

    (a) Assessment risk classification. For the purpose of determining 
the annual assessment rate for insured depository institutions under 
Sec. 327.9, each insured depository institution will be assigned an 
``assessment risk classification''. Notice of the assessment risk 
classification applicable to a particular semiannual period will be 
provided to the institution with the first-quarterly invoice provided 
pursuant to Sec. 327.3(c)(1). Each institution's assessment risk 
classification, which will be composed of a group and a subgroup 
assignment, will be based on the following capital and supervisory 
factors:
    (1) Capital factors. Institutions will be assigned to one of the 
following three capital groups on the basis of data reported in the 
institution's Report of Income and Condition, Report of Assets and 
Liabilities of U.S. Branches and Agencies of Foreign Banks, or Thrift 
Financial Report containing the necessary capital data, for the report 
date that is closest to the last day of the seventh month preceding the 
current semiannual period.
    (i) Well capitalized. For assessment risk classification purposes, 
the short-form designation for this group is ``1''.
    (A) Except as provided in paragraph (a)(1)(i)(B) of this section, 
this group consists of institutions satisfying each of the following 
capital ratio standards: Total risk-based ratio, 10.0 percent or 
greater; Tier 1 risk-based ratio, 6.0 percent or greater; and Tier 1 
leverage ratio, 5.0 or greater. New insured depository institutions 
coming into existence after the report date specified in paragraph 
(a)(1) of this section will be included in this group for the first 
semiannual period for which they are required to pay assessments. For 
the purpose of computing the ratios referred to in this paragraph 
(a)(1)(i)(A) for the second semiannual period of 1997, each such ratio 
shall be computed for an institution as if the institution had retained 
the funds that the institution disbursed in payment of the special 
assessment prescribed by Sec. 329.41(a).
    (B) For purposes of assessment risk classification, an insured 
branch of a foreign bank will be deemed to be ``well capitalized'' if 
the insured branch:
    (1) Maintains the pledge of assets required under 12 CFR 346.19; and
    (2) Maintains the eligible assets prescribed under 12 CFR 346.20 at 
108 percent or more of the average book value of the insured branch's 
third-party liabilities for the quarter ending on the report date 
specified in paragraph (a)(1) of this section.
    (ii) Adequately capitalized. For assessment risk classification 
purposes, the short-form designation for this group is ``2''.
    (A) Except as provided in paragraph (a)(1)(ii)(B) of this section, 
this group consists of institutions that do not satisfy the standards of 
``well capitalized'' under this paragraph but which satisfy each of the 
following capital ratio standards: Total risk-based ratio, 8.0 percent 
or greater; Tier 1 risk-based ratio, 4.0 percent or greater; and Tier 1 
leverage ratio, 4.0 percent or greater.

[[Page 202]]

For the purpose of computing the ratios referred to in this paragraph 
(a)(1)(ii)(A) for the second semiannual period of 1997, each such ratio 
shall be computed for an institution as if the institution had retained 
the funds that the institution disbursed in payment of the special 
assessment prescribed by Sec. 327.41(a).
    (B) For purposes of assessment risk classification, an insured 
branch of a foreign bank will be deemed to be ``adequately capitalized'' 
if the insured branch:
    (1) Maintains the pledge of assets required under 12 CFR 346.19;
    (2) Maintains the eligible assets prescribed under 12 CFR 346.20 at 
106 percent or more of the average book value of the insured branch's 
third-party liabilities for the quarter ending on the report date 
specified in paragraph (a)(1) of this section; and
    (3) Does not meet the definition of a well capitalized insured 
branch of a foreign bank.
    (iii) Undercapitalized. For assessment risk classification purposes, 
the short-form designation for this group is ``3''. This group consists 
of institutions that do not qualify as either ``well capitalized'' or 
``adequately capitalized'' under paragraphs (a)(1) (i) and (ii) of this 
section.
    (2) Supervisory risk factors. Within its capital group, each 
institution will be assigned to one of three subgroups based on the 
Corporation's consideration of supervisory evaluations provided by the 
institution's primary federal regulator. The supervisory evaluations 
include the results of examination findings by the primary federal 
regulator, as well as other information the primary federal regulator 
determines to be relevant. In addition, the Corporation will take into 
consideration such other information (such as state examination 
findings, if appropriate) as it determines to be relevant to the 
institution's financial condition and the risk posed to the BIF or SAIF. 
Authority to set dates applicable to the determination of supervisory 
subgroup assignments is delegated to the Corporation's Director of the 
Division of Supervision (or his or her designee). The three supervisory 
subgroups are:
    (i) Subgroup ``A''. This subgroup consists of financially sound 
institutions with only a few minor weaknesses;
    (ii) Subgroup ``B''. This subgroup consists of institutions that 
demonstrate weaknesses which, if not corrected, could result in 
significant deterioration of the institution and increased risk of loss 
to the BIF or SAIF; and
    (iii) Subgroup ``C''. This subgroup consists of institutions that 
pose a substantial probability of loss to the BIF or SAIF unless 
effective corrective action is taken.
    (b) Payment of assessment at rate assigned. Institutions shall make 
timely payment of assessments based on the assessment risk 
classification assigned in the notice provided to the institution 
pursuant to paragraph (a) of this section. Timely payment is required 
notwithstanding any request for review filed pursuant to paragraph (d) 
of this section. An institution for which the assessment risk 
classification cannot be determined prior to an invoice date specified 
in Sec. 327.3(c)(1) or (d)(1) shall preliminarily pay on that invoice at 
the assessment rate applicable to the classification designated ``2A'' 
in the appropriate rate schedule set forth in Sec. 327.9. If such 
institution is subsequently assigned for that semiannual period an 
assessment risk classification other than that designated as ``2A'', or 
if the classification assigned to an institution in the notice is 
subsequently changed, any excess assessment paid by the institution will 
be credited by the Corporation, with interest, and any additional 
assessment owed shall be paid by the institution, with interest, in the 
next quarterly assessment payment after such subsequent assignment or 
change. Interest payable under this paragraph shall be determined in 
accordance with Sec. 327.7.
    (c) Classification for certain types of institutions. The annual 
assessment rate applicable to institutions that are bridge banks under 
12 U.S.C. 1821(n) and to institutions for which the Corporation has been 
appointed or serves as conservator shall in all cases be the rate 
applicable to the classification designated as ``2A'' in the appropriate 
assessment schedule prescribed pursuant to Sec. 327.9.

[[Page 203]]

    (d) Requests for review. An institution may submit a written request 
for review of its assessment risk classification. Any such request must 
be submitted within 30 days of the date of the assessment risk 
classification notice provided by the Corporation pursuant to paragraph 
(a) of this section. The request shall be submitted to the Corporation's 
Director of the Division of Supervision in Washington, DC, and shall 
include documentation sufficient to support the reclassification sought 
by the institution. If additional information is requested by the 
Corporation, such information shall be provided by the institution 
within 21 days of the date of the request for the additional 
information. Any institution submitting a timely request for review will 
receive written notice from the Corporation regarding the outcome of its 
request. Upon completion of a review, the Director of the Division of 
Supervision (or his or her designee) shall promptly notify the 
institution in writing of the FDIC's determination of whether 
reclassification is warranted. Notice of the procedures applicable to 
reviews will be included with the assessment risk classification notice 
to be provided pursuant to paragraph (a) of this section.
    (e) Disclosure restrictions. The supervisory subgroup to which an 
institution is assigned by the Corporation pursuant to paragraph (a) of 
this section is deemed to be exempt information within the scope of 
Sec. 309.5(c)(8) of this chapter and, accordingly, is governed by the 
disclosure restrictions set out at Sec. 309.6 of this chapter.
    (f) Limited use of assessment risk classification. The assignment of 
a particular assessment risk classification to a depository institution 
under this part 327 is for purposes of implementing and operating a 
risk-based assessment system. Unless permitted by the Corporation or 
otherwise required by law, no institution may state in any advertisement 
or promotional material the assessment risk classification assigned to 
it pursuant to this part.
    (g) Lifeline accounts. Notwithstanding any other provision of this 
part 327, the portion of an institution's assessment base that is 
attributable to deposits in lifeline accounts pursuant to the Bank 
Enterprise Act, 12 U.S.C. 1834, will be assessed at such rate as may be 
established by the Corporation pursuant to 12 U.S.C. 1834 and section 
7(b)(2)(H) of the Federal Deposit Insurance Act, as amended, 12 U.S.C. 
1817(b)(2)(H).
[59 FR 67162, Dec. 29, 1994, as amended at 61 FR 67696, Dec. 24, 1996]



Sec. 327.5  Assessment base.

    (a) Computation of assessment base. Except as provided in paragraph 
(c) of this section, the assessment base of an insured depository 
institution for any date on which the institution is required to file a 
quarterly report of condition shall be computed by:
    (1) Adding--
    (i) All demand deposits--
    (A) That the institution reported as such in the quarterly report of 
condition for that date;
    (B) That belong to subsidiaries of the institution and were 
eliminated in consolidation;
    (C) That are held in any insured branches of the institution that 
are located in the territories and possessions of the United States;
    (D) That represent any uninvested trust funds required to be 
separately stated in the quarterly report for that date;
    (E) That represent any unposted credits to demand deposits, as 
determined in accordance with the provisions of paragraph (b)(1) of this 
section; and
    (ii) All time and savings deposits, together with all interest 
accrued and unpaid thereon--
    (A) That the institution reported as such in the quarterly report of 
condition for that date;
    (B) That belong to subsidiaries of the institution and were 
eliminated in consolidation;
    (C) That are held in any insured branches of the institution that 
are located in the territories and possessions of the United States;
    (D) That represent any unposted credits to time and savings 
deposits, as determined in accordance with the provisions of paragraph 
(b)(1) of this section; then
    (2) Subtracting, in the case of any institution that maintains such 
records as will readily permit verification of

[[Page 204]]

the correctness of its assessment base--
    (i) Any unposted debits;
    (ii) Any pass-through reserve balances;
    (iii) 16\2/3\ percent of the amount computed by subtracting, from 
the amount specified in paragraph (a)(1)(i) of this section, the sum of:
    (A) Unposted debits allocated to demand deposits pursuant to the 
provisions of paragraph (b)(2) of this section; plus
    (B) Pass-through reserve balances representing demand deposits;
    (iv) 1 percent of the amount computed by subtracting, from the 
amount specified in paragraph (a)(1)(ii) of this section, the sum of:
    (A) Unposted debits allocated to time and savings deposits pursuant 
to the provisions of paragraph (b)(2) of this section; plus
    (B) Pass-through reserve balances representing time and savings 
deposits;
    (v) Liabilities arising from a depository institution investment 
contract that are not treated as insured deposits under section 11(a)(8) 
of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(8)).
    (b) Methods of reporting unposted credits and unposted debits--(1) 
Unposted credits. Each insured depository institution shall report 
unposted credits in quarterly reports of condition for addition to the 
assessment base in the following manner:
    (i) If the institution's records show the total actual amount of 
unposted credits segregated into demand deposits and time and savings 
deposits, the institution must report the segregated amounts for 
addition to demand deposits and time and savings deposits, respectively.
    (ii) If the institution's records show the total actual amount of 
unposted credits but do not segregate the amount as stated in paragraph 
(b)(1)(i) of this section, the institution must report the total actual 
amount of the unposted credits for addition to time and savings 
deposits.
    (2) Unposted debits. Unposted debits may be reported in the same 
manner as stated in paragraph (b)(1) of this section for deduction from 
the assessment base, except that unsegregated amounts may be reported 
for deduction only from demand deposits.
    (c) Newly insured institutions. In the case of a newly insured 
institution, the assessment base for the last date for which insured 
depository institutions are required to file quarterly reports of 
condition within the semiannual period in which the newly insured 
institution became an insured institution shall be deemed to be its 
assessment base for that semiannual period. If the institution has not 
filed such a report by the due date for such reports from insured 
depository institutions, it shall promptly provide to the Corporation 
such information as the Corporation may require to prepare the certified 
statement form for the institution for the current semiannual period.
[59 FR 67163, Dec. 29, 1994]



Sec. 327.6  Terminating transfers; other terminations of insurance.

    (a) Terminating transfer--(1) Assessment base computation. If a 
terminating transfer occurs at any time in the second half of a 
semiannual period, each surviving institution's assessment base (as 
computed pursuant to Sec. 327.5) for the first half of that semiannual 
period shall be increased by an amount equal to such institution's pro 
rata share of the terminating institution's assessment base for such 
first half.
    (2) Pro rata share. For purposes of paragraph (a)(1) of this 
section, the phrase pro rata share means a fraction the numerator of 
which is the deposits assumed by the surviving institution from the 
terminating institution during the second half of the semiannual period 
during which the terminating transfer occurs, and the denominator of 
which is the total deposits of the terminating institution as required 
to be reported in the quarterly report of condition for the first half 
of that semiannual period.
    (3) Other assessment-base adjustments. The Corporation may in its 
discretion make such adjustments to the assessment base of an 
institution participating in a terminating transfer, or in a related 
transaction, as may be necessary properly to reflect the likely amount 
of the loss presented by the institution to its insurance fund.

[[Page 205]]

    (4) Limitation on aggregate adjustments. The total amount by which 
the Corporation may increase the assessment bases of surviving or other 
institutions under this paragraph (a) shall not exceed, in the 
aggregate, the terminating institution's assessment base as reported in 
its quarterly report of condition for the first half of the semiannual 
period during which the terminating transfer occurs.
    (b) Other terminations. When the insured status of an institution is 
terminated, and the deposit liabilities of such institution are not 
assumed by another insured depository institution--
    (1) Payment of assessments; certified statements. The terminating 
depository institution shall continue to file certified statements and 
pay assessments for the period its deposits are insured. Such 
terminating institution shall not be required to file further certified 
statements or to pay further assessments after the depository 
institution has paid in full its deposit liabilities and the assessment 
to the Corporation required to be paid for the semiannual period in 
which its deposit liabilities are paid in full, and after it, under 
applicable law, has ceased to have authority to transact a banking 
business and to have existence, except for the purpose of, and to the 
extent permitted by law for, winding up its affairs.
    (2) Payment of deposits; certification to Corporation. When the 
deposit liabilities of the depository institution have been paid in 
full, the depository institution shall certify to the Corporation that 
the deposit liabilities have been paid in full and give the date of the 
final payment. When the depository institution has unclaimed deposits, 
the certification shall further state the amount of the unclaimed 
deposits and the disposition made of the funds to be held to meet the 
claims. For assessment purposes, the following will be considered as 
payment of the unclaimed deposits:
    (i) The transfer of cash funds in an amount sufficient to pay the 
unclaimed and unpaid deposits to the public official authorized by law 
to receive the same; or
    (ii) If no law provides for the transfer of funds to a public 
official, the transfer of cash funds or compensatory assets to an 
insured depository institution in an amount sufficient to pay the 
unclaimed and unpaid deposits in consideration for the assumption of the 
deposit obligations by the insured depository institution.
    (3) Notice to depositors. (i) The terminating depository institution 
shall give sufficient advance notice of the intended transfer to the 
owners of the unclaimed deposits to enable the depositors to obtain 
their deposits prior to the transfer. The notice shall be mailed to each 
depositor and shall be published in a local newspaper of general 
circulation. The notice shall advise the depositors of the liquidation 
of the depository institution, request them to call for and accept 
payment of their deposits, and state the disposition to be made of their 
deposits if they fail to promptly claim the deposits.
    (ii) If the unclaimed and unpaid deposits are disposed of as 
provided in paragraph (b)(2)(i) of this section, a certified copy of the 
public official's receipt issued for the funds shall be furnished to the 
Corporation.
    (iii) If the unclaimed and unpaid deposits are disposed of as 
provided in paragraph (b)(2)(ii) of this section, an affidavit of the 
publication and of the mailing of the notice to the depositors, together 
with a copy of the notice and a certified copy of the contract of 
assumption, shall be furnished to the Corporation.
    (4) Notice to Corporation. The terminating depository institution 
shall advise the Corporation of the date on which the authority or right 
of the depository institution to do a banking business has terminated 
and the method whereby the termination has been effected (i.e., whether 
the termination has been effected by the surrender of the charter, the 
cancellation of its authority or license to do a banking business by the 
supervisory authority, or otherwise).
    (c) Resumption of insured status before insurance of deposits 
ceases. If a depository institution whose insured status has been 
terminated is permitted by the Corporation to continue or resume

[[Page 206]]

its status as an insured depository institution before the insurance of 
its deposits has ceased, the institution will be deemed, for assessment 
purposes, to continue as an insured depository institution and must 
thereafter furnish certified statements and pay assessments as though 
its insured status had not been terminated. The procedure for applying 
for the continuance or resumption of insured status is set forth in 
Sec. 303.5 of this chapter.
[54 FR 51374, Dec. 15, 1989, as amended at 59 FR 67164, Dec. 29, 1994; 
61 FR 64983, Dec. 10, 1996]



Sec. 327.7  Payment of interest on assessment underpayments and overpayments.

    (a) Payment of interest--(1) Payment by institutions. Each insured 
depository institution shall pay interest to the Corporation on any 
underpayment of the institution's assessment.
    (2) Payment by Corporation. (i) The Corporation will pay interest on 
any overpayment by the institution of its assessment.
    (ii) When an institution elects the alternate payment date pursuant 
to Sec. 327.3(c)(3), or otherwise pays an amount due on a regular 
payment date before that date, the payment of the invoiced amount prior 
to the regular payment date shall not be regarded as an overpayment of 
an assessment.
    (iii) When an institution elects the doubled-payment option pursuant 
to Sec. 327.3(j), the payment of any amount in excess of the invoiced 
amount shall not be regarded as an overpayment of an assessment.
    (3) Accrual of interest. (i) Interest on an amount owed to or by the 
Corporation for the underpayment or overpayment of an assessment shall 
accrue interest at the relevant interest rate.
    (ii) Interest on an amount specified in paragraph (a)(3)(i) of this 
section shall begin to accrue on the day following the regular payment 
date, as provided for in Sec. 327.3(c)(2) and (d)(2), for the amount so 
overpaid or underpaid, provided, however, that interest shall not begin 
to accrue on any overpayment until the day following the date such 
overpayment was received by the Corporation. Interest shall continue to 
accrue through the date on which the overpayment or underpayment 
(together with any interest thereon) is discharged.
    (iii) The relevant interest rate shall be redetermined for each 
quarterly assessment interval. A quarterly assessment interval begins on 
the day following a regular payment date, as specified in 
Sec. 327.3(c)(2) and (d)(2), and ends on the immediately following 
regular payment date.
    (b) Rates after the first payment date in 1996. (1) On and after 
January 3, 1996, the relevant interest rate for a quarterly assessment 
interval that includes the month of January, April, July, and October, 
respectively, is the coupon equivalent yield of the average discount 
rate set on the 3-month Treasury bill at the last auction held by the 
United States Treasury Department during the preceding December, March, 
June, and September, respectively.
    (2) The relevant interest rate for a quarterly assessment interval 
will apply to any amounts overpaid or underpaid on the payment date 
(whether regular or alternate) immediately prior to the beginning of the 
quarterly assessment interval. The relevant interest rate will also 
apply to any amounts owed for previous overpayments or underpayments 
(including any interest thereon) that remain outstanding, after any 
adjustments to such overpayments or underpayments have been made 
thereon, at the end of the regular payment date immediately prior to the 
beginning of the quarterly assessment interval.
    (c) Rates prior to the first payment date in 1996. Through January 
3, 1996:
    (1) The interest rate will be the United States Treasury 
Department's current value of funds rate which is issued under the 
Treasury Fiscal Requirements Manual (TFRM rate) and published in the 
Federal Register;
    (2) The interest will be calculated based on the rate issued under 
the TFRM for each applicable period and compounded annually;
    (3) For the initial year, the rate will be applied to the gross 
amount of the underpayment or overpayment; and
    (4) For each additional year or portion thereof, the rate will be 
applied to the net amount of the underpayment or overpayment after that 
amount has

[[Page 207]]

been reduced by the assessment credit, if any, for the year.
[54 FR 51374, Dec. 15, 1989, as amended at 57 FR 45286, Oct. 1, 1992; 58 
FR 3069, Jan. 7, 1993; 59 FR 67164, Dec. 29, 1994; 60 FR 50409, Sept. 
29, 1995]



Sec. 327.8  Definitions.

     For the purposes of this part 327:
    (a) Unposted credits and debits--(1) Unposted credit. The term 
unposted credit means any deposit received in any office of a depository 
institution for deposit in any other office of the depository 
institution located in any State of the United States, the District of 
Columbia, Puerto Rico, Guam, American Samoa, the Northern Marianas 
Islands, or the Virgin Islands, except those which have been:
    (i) Included in the total deposits in the quarterly report of 
condition; or
    (ii) Offset in the quarterly report of condition by an equal amount 
of cash items in the institution's possession drawn on itself (on the 
same type of deposits as those offset) and not charged against deposit 
liabilities at the close of business on the date of the quarterly report 
of condition.
    (2) Unposted debit. The term unposted debit means a cash item in the 
reporting institution's possession that is drawn on the institution and 
immediately chargeable, but not yet charged, against the institution's 
deposit liabilities at the close of business on the date of the 
quarterly report of condition. The following items are excluded:
    (i) Cash items drawn on other depository institutions,
    (ii) Overdrafts and nonsufficient fund (NSF) items,
    (iii) Cash items returned unpaid to the last endorser for any 
reason, and
    (iv) Drafts and warrants that are payable at or payable through the 
reporting institution for which there is no written authorization on 
file at the institution or State statute allowing the institution at its 
discretion to charge the items against the deposit accounts of the 
drawees.
    (3) Exclusion. The above terms unposted credit and unposted debit do 
not include items which have been reflected in deposit accounts on the 
general ledger and in the quarterly report of condition, even though 
they have not been credited or debited to individual deposit accounts.
    (b) Deposits--(1) Deposit. The term deposit has the meaning 
specified in section 3(1) of the Federal Deposit Insurance Act. In 
particular, the term deposit includes any liability--without regard for 
whether the liability is a liability of an insured bank or of an insured 
savings association--that is of a kind which, had the liability been a 
liability of an insured bank immediately prior to the effective date of 
the Financial Institutions Reform, Recovery, and Enforcement Act of 
1989, would have constituted a deposit in such bank within the meaning 
of section 3(1) of the Federal Deposit Insurance Act as such section 
3(1) was then in effect.
    (2) Demand deposits. The term demand deposits refers to deposits 
specified in Sec. 329.1(b) of this chapter, except that any reference to 
bank in such section shall be deemed to refer to depository institution.
    (3) Time and savings deposits. The term time and savings deposits 
refers to any deposits other than demand deposits.
    (4) Exception. (i) Deposits accumulated for the payment of personal 
loans, which represent actual loan payments received by the depository 
institution from borrowers and accumulated by the depository institution 
in hypothecated deposit accounts for payment of the loans at maturity, 
shall not be reported as deposits on the quarterly report of condition. 
The deposit amounts covered by the exception are to be deducted from the 
loan amounts for which these deposits have been accumulated and assigned 
or pledged to effectuate payment.
    (ii) Time and savings deposits that are pledged as collateral to 
secure loans are not deposits accumulated for the payment of personal 
loans and are to be reported in the same manner as if they were not 
securing a loan.
    (c) Quarterly report of condition. The term quarterly report of 
condition means a report required to be filed pursuant to section 
7(a)(3) of the Federal Deposit Insurance Act.

[[Page 208]]

    (d) Semiannual period--(1) In general. The term semiannual period 
means a period beginning on January 1 of any calendar year and ending on 
June 30 of the same year, or a period beginning on July 1 of any 
calendar year and ending on December 31 of the same year.
    (2) Current semiannual period. The term current semiannual period 
means, with respect to a certified statement or an assessment, the 
semiannual period within which such certified statement is required to 
be filed or for which such assessment is required to be paid.
    (3) Prior semiannual period. The term prior semiannual period means, 
with respect to a certified statement or an assessment, the semiannual 
period immediately prior to the current semiannual period.
    (e) Newly insured institution. The term newly insured institution 
means an institution that became an insured depository institution 
during the semiannual period immediately prior to the period for which 
the certified statement is required: Provided, That the term newly 
insured institution does not include any institution that became an 
insured depository institution as a result of the operation of section 
4(a)(2) of the Federal Deposit Insurance Act.
    (f) BIF; BIF member.--(1) BIF. The term BIF means the Bank Insurance 
Fund.
    (2) BIF member. The term BIF member means a depository institution 
that is a member of the BIF.
    (g) SAIF; SAIF member.--(1) SAIF. The term SAIF means the Savings 
Association Insurance Fund.
    (2) SAIF member. The term SAIF member means a depository institution 
that is a member of the SAIF.
    (h) As used in Sec. 327.6(a), the following terms are given the 
following meanings:
    (1) Surviving institution. The term surviving institution means an 
insured depository institution that assumes some or all of the deposits 
of another insured depository institution in a terminating transfer.
    (2) Terminating institution. The term terminating institution means 
an insured depository institution some or all of the deposits of which 
are assumed by another insured depository institution in a terminating 
transfer.
    (3) Terminating transfer. The term terminating transfer means the 
assumption by one insured depository institution of another insured 
depository institution's liability for deposits, whether by way of 
merger, consolidation, or other statutory assumption, or pursuant to 
contract, when the terminating institution goes out of business or 
transfers all or substantially all its assets and liabilities to other 
institutions or otherwise ceases to be obliged to pay subsequent 
assessments by or at the end of the semiannual period during which such 
assumption of liability for deposits occurs. The term terminating 
transfer does not refer to the assumption of liability for deposits from 
the estate of a failed institution, or to a transaction in which the 
FDIC contributes its own resources in order to induce a surviving 
institution to assume liabilities of a terminating institution.
    (i) [Reserved]
    (j) Primary fund. The primary fund of an insured depository 
institution is the insurance fund of which the institution is a member.
    (k) Secondary fund. The secondary fund of an insured depository 
institution is the insurance fund that is not the primary fund of the 
institution.
[54 FR 51374, Dec. 15, 1989, as amended at 59 FR 67164, Dec. 29, 1994; 
60 FR 42741, Aug. 16, 1995; 61 FR 64983, Dec. 10, 1996; 61 FR 67696, 
Dec. 24, 1996; 62 FR 27176, May 19, 1997]



Sec. 327.9  Assessment schedules.

    (a) Base assessment schedules--(1) In general. Subject to 
Sec. 327.4(c) and subpart B of this part, the base annual assessment 
rate for an insured depository institution shall be the rate prescribed 
in the appropriate base assessment schedule set forth in paragraph 
(a)(2) of this section applicable to the assessment risk classification 
assigned by the Corporation under Sec. 327.4(a) to that institution. 
Each base assessment schedule utilizes the group and subgroup 
designations specified in Sec. 327.4(a). An institution shall pay 
assessments at the rate specified in the appropriate base assessment 
schedule except as provided in paragraph (b) of this section.
    (2) Assessment schedules--(i) Base rates for BIF members. The 
following base assessment schedule applies with respect to assessments 
paid to the BIF by BIF

[[Page 209]]

members and by other institutions that are required to make payments to 
the BIF pursuant to subpart B of this part:

                      BIF Base Assessment Schedule                      
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         4         7        21
2.........................................         7        14        28
3.........................................        14        28        31
------------------------------------------------------------------------

    (ii) Base rates for SAIF members. The following base assessment 
schedule applies with respect to assessments paid to the SAIF by SAIF 
members and by other institutions that are required to make payments to 
the SAIF pursuant to subpart B of this part:

                      SAIF Base Assessment Schedule                     
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         4         7        21
2.........................................         7        14        28
3.........................................        14        28        31
------------------------------------------------------------------------

    (b) Adjusted assessment schedules--(1) In general. Except as 
provided in paragraph (b)(3)(ii) of this section, institutions shall pay 
semiannual assessments at the rates specified in this paragraph (b) 
whenever such rates have been prescribed by the Board.
    (2) Adjusted rates for BIF members. The Board has adjusted the BIF 
Base Assessment Schedule by reducing each rate therein by 4 basis points 
for the first semiannual period of 1997 and thereafter. Accordingly, the 
following adjusted assessment schedule applies to BIF members:

                    BIF Adjusted Assessment Schedule                    
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         0         3        17
2.........................................         3        10        24
3.........................................        10        24        27
------------------------------------------------------------------------

    (3) Adjusted rates for SAIF members--(i) In general. The Board has 
adjusted the SAIF Base Assessment Schedule by reducing each rate therein 
by 4 basis points for the first semiannual period of 1997 and 
thereafter. Accordingly, except as provided in paragraph (b)(3)(ii) of 
this section, the following adjusted assessment schedule applies to SAIF 
members:

                    SAIF Adjusted Assessment Schedule                   
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         0         3        17
2.........................................         3        10        24
3.........................................        10        24        27
------------------------------------------------------------------------

    (ii) Institutions exempt from the special assessment--(A) Rate 
schedule. An institution that, pursuant to former Sec. 327.43 (a) or (b) 
as in effect on November 27, 1996 (See 12 CFR 327.43 as revised January 
1, 1997.), was exempt from the special assessment prescribed by 12 
U.S.C. 1817 Note shall pay regular semiannual assessments to the SAIF 
from the first semiannual period of 1996 through the second semiannual 
period of 1999 according to the schedule of rates specified in former 
Sec. 327.9(d)(1) as in effect for SAIF members on June 30, 1995 (See 12 
CFR 327.9 as revised January 1, 1996.), as follows:

------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................        23        26        29
2.........................................        26        29        30
3.........................................        29        30        31
------------------------------------------------------------------------

    (B) Termination of special rate schedule. An institution that makes 
a pro-rata payment of the special assessment shall cease to be subject 
to paragraph (b)(3)(ii)(A) of this section. The pro-rata payment must be 
equal to the following product: 16.7 percent of the amount the 
institution would have owed for the special assessment, multiplied by 
the number of full semiannual periods remaining between the date of the 
payment and December 31, 1999.
    (c) Rate adjustments; procedures--(1) Semiannual adjustments. The 
Board may increase or decrease the BIF Base Assessment Schedule set 
forth in paragraph (a)(2)(i) of this section or the SAIF Base Assessment 
Schedule set forth in paragraph (a)(2)(ii) of this section up to a 
maximum increase of 5 basis points or a fraction thereof or a maximum 
decrease of 5 basis points or a fraction thereof (after aggregating 
increases and decreases), as the Board

[[Page 210]]

deems necessary to maintain the reserve ratio of an insurance fund at 
the designated reserve ratio for that fund. Any such adjustment shall 
apply uniformly to each rate in the base assessment schedule. In no case 
may such adjustments result in an assessment rate that is mathematically 
less than zero or in a rate schedule for an insurance fund that, at any 
time, is more than 5 basis points above or below the base assessment 
schedule for that fund, nor may any one such adjustment constitute an 
increase or decrease of more than 5 basis points. The adjustment for any 
semiannual period for a fund shall be determined by:
    (i) The amount of assessment revenue necessary to maintain the 
reserve ratio at the designated reserve ratio; and
    (ii) The assessment schedule that would generate the amount of 
revenue in paragraph (c)(1)(i) of this section considering the risk 
profile of the institutions required to pay assessments to the fund.
    (2) Amount of revenue. In determining the amount of assessment 
revenue in paragraph (c)(1)(i) of this section, the Board shall take 
into consideration the following:
    (i) Expected operating expenses of the insurance fund;
    (ii) Case resolution expenditures and income of the insurance fund;
    (iii) The effect of assessments on the earnings and capital of the 
institutions paying assessments to the insurance fund; and
    (iv) Any other factors the Board may deem appropriate.
    (3) Adjustment procedure. Any adjustment adopted by the Board 
pursuant to this paragraph (c) will be adopted by rulemaking. 
Nevertheless, because the Corporation is generally required by statute 
to set assessment rates as necessary (and only to the extent necessary) 
to maintain or attain the target designated reserve ratio, and because 
the Corporation must do so in the face of constantly changing 
conditions, and because the purpose of the adjustment procedure is to 
permit the Corporation to act expeditiously and frequently to maintain 
or attain the designated reserve ratio in an environment of constant 
change, but within set parameters not exceeding 5 basis points, without 
the delays associated with full notice-and-comment rulemaking, the 
Corporation has determined that it is ordinarily impracticable, 
unnecessary and not in the public interest to follow the procedure for 
notice and public comment in such a rulemaking, and that accordingly 
notice and public procedure thereon are not required as provided in 5 
U.S.C. 553(b). For the same reasons, the Corporation has determined that 
the requirement of a 30-day delayed effective date is not required under 
5 U.S.C. 553(d). Any adjustment adopted by the Board pursuant to a 
rulemaking specified in this paragraph (c) will be reflected in an 
adjusted assessment schedule set forth in paragraph (b)(2) or (b)(3) of 
this section, as appropriate.
    (4) Announcement. Except with respect to assessments for the first 
semiannual period of 1997, the Board shall announce the semiannual 
assessment schedule and the amount and basis for any adjustment thereto 
not later than 15 days before the invoice date specified in 
Sec. 327.3(c) for the first quarter of the semiannual period for which 
the adjustment shall be effective.
    (d) Refunds or credits of certain assessments. If the amount paid by 
an institution for the regular semiannual assessment for the second 
semiannual period of 1996 exceeds, as a result of the reduction in the 
rate schedule for a portion of that semiannual period, the amount due 
from the institution for that semiannual period, the Corporation will 
refund or credit any such excess payment and will provide interest on 
the excess payment in accordance with the provisions of Sec. 327.7. 
Notwithstanding Sec. 327.7(a)(3)(ii), such interest will accrue 
beginning as of October 1, 1996.
[61 FR 67696, Dec. 24, 1996, as amended at 62 FR 27176, May 19, 1997]



Sec. 327.10  Interpretive rule: section 7(b)(2)(A)(v).

    This interpretive rule explains certain phrases used in section 
7(b)(2)(A)(v) of the Federal Deposit Insurance Act, 12 U.S.C. 
1817(b)(2)(A)(v).
    (a) An institution classified in supervisory subgroup B or C 
pursuant to Sec. 327.4(a)(2) exhibits ``financial, operational, or 
compliance weaknesses

[[Page 211]]

ranging from moderately severe to unsatisfactory'' within the meaning of 
such section 7(b)(2)(A)(v).
    (b) An institution classified in capital group 2 or 3 pursuant to 
Sec. 327.4(a)(1) is ``not well capitalized'' within the meaning of such 
section 7(b)(2)(A)(v).
[61 FR 67698, Dec. 24, 1996]



  Subpart B--Insured Depository Institutions Participating in Section 
                          5(d)(3) Transactions



Sec. 327.31  Scope.

    (a) Affected institutions. This subpart B applies to any insured 
depository institution that:
    (1) Is either a BIF or SAIF member; and
    (2) Is the assuming, surviving, or resulting institution in a 
transaction undertaken pursuant to section 5(d)(3) of the Federal 
Deposit Insurance Act.
    (b) Duration. This subpart B shall cease to apply to an insured 
depository institution if:
    (1) On or after August 9, 1994, the Corporation approves an 
application by an insured depository institution to treat the 
transaction described in paragraph (a) of this section as a conversion 
transaction; and
    (2) The insured depository institution pays the amount of any exit 
and entrance fee assessed by the Corporation with respect to such 
transaction.
[57 FR 45286, Oct. 1, 1992, as amended at 59 FR 67165, Dec. 29, 1994]



Sec. 327.32  Computation and payment of assessment.

    (a) Rate of assessment--(1) BIF and SAIF member rates. (i) Except as 
provided in paragraph (a)(2) of this section, and consistent with the 
provisions of Sec. 327.4, the assessment to be paid by an institution 
that is subject to this subpart B shall be computed at the rate 
applicable to institutions that are members of the primary fund of such 
institution. (ii) Such applicable rate shall be applied to the 
institution's assessment base less that portion of the assessment base 
which is equal to the institution's adjusted attributable deposit 
amount.
    (2) Rate applicable to the adjusted attributable deposit amount. 
Notwithstanding paragraph (a)(1)(i) of this section, that portion of the 
assessment base of any acquiring, assuming, or resulting institution 
which is equal to the adjusted attributable deposit amount of such 
institution shall:
    (i) Be subject to assessment at the assessment rate applicable to 
members of the secondary fund of such institution pursuant to subpart A 
of this part; and
    (ii) Not be taken into account in computing the amount of any 
assessment to be allocated to the primary fund of such institution.
    (3) Adjusted attributable deposit amount. An insured depository 
institution's ``adjusted attributable deposit amount'' for any 
semiannual period is equal to the sum of:
    (i) The amount of any deposits acquired by the institution in 
connection with the transaction (as determined at the time of such 
transaction) described in Sec. 327.31(a), but subject to the adjustment 
specified in paragraph (c) of this section;
    (ii) The total of the amounts determined under paragraph (a)(3)(iii) 
of this section for semiannual periods preceding the semiannual period 
for which the determination is being made under this section; and
    (iii) The amount by which the sum of the amounts described in 
paragraphs (a)(3)(i) and (a)(3)(ii) of this section would have increased 
during the preceding semiannual period (other than any semiannual period 
beginning before the date of such transaction) if such increase occurred 
at a rate equal to the annual rate of growth of deposits of the 
acquiring, assuming, or resulting depository institution minus the 
amount of any deposits acquired through the acquisition, in whole or in 
part, of another insured depository institution.
    (4) Deposits acquired by the institution. As used in paragraph 
(a)(3)(i) of this section, the term ``deposits acquired by the 
institution'' means all deposits that are held in the institution 
acquired by such institution on the date of such transaction; provided, 
that if on or before June 30, 1997, the Corporation has been appointed 
or serves as conservator or receiver for the acquired institution, such 
term:

[[Page 212]]

    (i) Does not include any deposit held in the acquired institution on 
the date of such transaction which the acquired institution has 
obtained, directly or indirectly, by or through any deposit broker;
    (ii) Does not include that part of any remaining deposit held in the 
acquired institution on the date of such transaction that is in excess 
of $80,000; and
    (iii) Is limited to 80 per centum of the remaining portion of the 
aggregate of the deposits specified in paragraph (a)(4)(ii) of this 
section.
    (5) Deposit broker. As used in paragraph (a)(4) of this section, the 
term ``deposit broker'' has the meaning specified in section 29 of the 
Federal Deposit Insurance Act (12 U.S.C. 1831f).
    (b) Procedures for computation and payment. An insured depository 
institution subject to this subpart B shall follow the payment procedure 
that is set forth in subpart A of this part.
    (c) Reduction of deposits acquired by certain institutions. In the 
case of a transaction occurring on or before March 31, 1995, the amount 
determined under paragraph (a)(3)(i) of this section shall be reduced by 
20 percent for the purpose of computing the adjusted attributable 
deposit amount for any semiannual period beginning after December 31, 
1996, of a BIF member bank that, as of June 30, 1995:
    (1) Had an adjusted attributable deposit amount the value of which 
was less than 50 percent of the amount of its total deposits; or
    (2)(i) Had an adjusted attributable deposit amount the value of 
which was less than 75 percent of the value of its total deposits;
    (ii) Had total deposits greater than $5,000,000,000; and
    (iii) Was owned or controlled by a bank holding company that owned 
or controlled insured depository institutions having an aggregate amount 
of deposits insured or treated as insured by the BIF greater than the 
aggregate amount of deposits insured or treated as insured by the SAIF.
[59 FR 67165, Dec. 29, 1994, as amended at 61 FR 53839, Oct. 16, 1996; 
61 FR 64983, Dec. 10, 1996]



Sec. 327.33  ``Acquired'' deposits.

    This section interprets the phrase ``deposits acquired by the 
institution'' as used in Sec. 327.32(a)(3)(i).
    (a) In general--(1) Secondary-fund deposits. The phrase ``deposits 
acquired by the institution'' refers to deposits that are insured by the 
secondary fund of the acquiring institution, and does not include 
deposits that are insured by the acquiring institution's primary fund.
    (2) Nominal dollar amount. Except as provided in paragraph (b) of 
this section, an acquiring institution is deemed to acquire the entire 
nominal dollar amount of any deposits that the transferring institution 
holds on the date of the transaction and transfers to the acquiring 
institution.
    (b) Conduit deposits--(1) Defined. As used in this paragraph (b), 
the term ``conduit deposits'' refers to deposits that an acquiring 
institution has assumed from another institution (original transferor) 
in the course of a transaction described in Sec. 327.31(a), and that are 
treated as insured by the secondary fund of the acquiring institution, 
but which the acquiring institution has been explicitly and specifically 
ordered by the Corporation, or by the appropriate federal banking agency 
for the institution, or by the Department of Justice to commit to re-
transfer to another insured depository institution (re-transferee 
institution) as a condition of approval of the transaction. The 
commitment must be enforceable, and the divestiture must be required to 
occur and must occur within 6 months after the date of the initial 
transaction.
    (2) Treatment with respect to acquiring institution. Conduit 
deposits are not considered to be acquired by the acquiring institution 
within the meaning of Sec. 327.32(a)(3)(i) for the purpose of computing 
the acquiring institution's adjusted attributable deposit amount for a 
current semiannual period that begins after the end of the semiannual 
period following the semiannual period in which the acquiring 
institution re-transfers the deposits.
    (3) Treatment with respect to re-transferee institution. Conduit 
deposits are treated as insured by the same insurance fund after having 
been acquired

[[Page 213]]

by the re-transferee institution as when held by the original 
transferor.
[61 FR 64983, Dec. 10, 1996]



Sec. 327.34  Application of AADAs.

    This section interprets the meaning of the phrase ``an insured 
depository institution's `adjusted attributable deposit amount' for any 
semiannual period'' as used in the introductory text of 
Sec. 327.32(a)(3).
    (a) In general. The phrase ``for any semiannual period'' refers to 
the current semiannual period: that is, the period for which the 
assessment is due, and for which an institution's adjusted attributable 
deposit amount (AADA) is computed.
    (b) Quarterly components of AADAs. An AADA for a current semiannual 
period consists of 2 quarterly AADA components. The first quarterly AADA 
component for the current period is determined with respect to the first 
quarter of the prior semiannual period, and the second quarterly AADA 
component for the current period is determined with respect to the 
second quarter of the prior period.
    (c) Application of AADAs. The value of an AADA that is to be applied 
to a quarterly assessment base in accordance with Sec. 327.32(a)(2) is 
the value of the quarterly AADA component for the corresponding quarter.
    (d) Initial AADAs. If an AADA for a current semiannual period has 
been generated in a transaction that has occurred in the second calendar 
quarter of the prior semiannual period, the first quarterly AADA 
component for the current period is deemed to have a value of zero.
    (e) Transition rule. Paragraphs (b), (c) and (d) of this section 
shall apply to any AADA for any semiannual period beginning on or after 
July 1, 1997.
[61 FR 64984, Dec. 10, 1996]



Sec. 327.35  Grandfathered AADA elements.

    This section explains the meaning of the phrase ``total of the 
amounts determined under paragraph (a)(3)(iii)'' in 
Sec. 327.32(a)(3)(ii). The phrase ``total of the amounts determined 
under paragraph (a)(3)(iii)'' refers to the aggregate of the increments 
of growth determined in accordance with Sec. 327.32(a)(3)(iii). Each 
such increment is deemed to be computed in accordance with the 
contemporaneous provisions and interpretations of such section. 
Accordingly, any increment of growth that is computed with respect to a 
semiannual period has the value appropriate to the proper calculation of 
the institution's assessment for the semiannual period immediately 
following such semiannual period.
[61 FR 64984, Dec. 10, 1996]



Sec. 327.36  Growth computation.

    This section interprets various phrases used in the computation of 
growth as prescribed in Sec. 327.32(a)(3)(iii).
    (a) Annual rate. The annual rate of growth of deposits refers to the 
rate, which may be expressed as an annual percentage rate, of growth of 
an institution's deposits over any relevant interval. A relevant 
interval may be less than a year.
    (b) Growth; increase; increases. Except as provided in paragraph (c) 
of this section, references to ``growth'', ``increase'', and 
``increases'' may generally include negative values as well as positive 
ones.
    (c) Growth of deposits. ``Growth of deposits'' does not include any 
decrease in an institution's deposits representing deposits transferred 
to another insured depository institution, if the transfer occurs on or 
after July 1, 1996.
    (d) Quarterly determination of growth. For the purpose of computing 
assessments for semiannual periods beginning on July 1, 1997, and 
thereafter, the rate of growth of deposits for a semiannual period, and 
the amount by which the sum of the amounts specified in 
Sec. 327.32(a)(3)(i) and (ii) would have grown during a semiannual 
period, is to be determined by computing such rate of growth and such 
sum of amounts for each calendar quarter within the semiannual period.
[61 FR 64984, Dec. 10, 1996]



Sec. 327.37  Attribution of transferred deposits.

    This section explains the attribution of deposits to the BIF and the 
SAIF

[[Page 214]]

when one insured depository institution (acquiring institution) acquires 
deposits from another insured depository institution (transferring 
institution). For the purpose of determining whether the assumption of 
deposits (assumption transaction) constitutes a transaction undertaken 
pursuant to section 5(d)(3) of the Federal Deposit Insurance Act (12 
U.S.C. 1815(d)(3)), and for the purpose of computing the adjusted 
attributable deposit amounts, if any, of the acquiring and the 
transferring institutions after the transaction:
    (a) Transferring institution--(1) Transfer of primary-fund deposits. 
To the extent that the aggregate volume of deposits that is transferred 
by a transferring institution in a transaction, or in a related series 
of transactions, does not exceed the volume of deposits that is insured 
by its primary fund (primary-fund deposits) immediately prior to the 
transaction (or, in the case of a related series of transactions, 
immediately prior to the initial transaction in the series), the 
transferred deposits shall be deemed to be insured by the institution's 
primary fund. The primary institution's volume of primary-fund deposits 
shall be reduced by the aggregate amount so transferred.
    (2) Transfer of secondary-fund deposits. To the extent that the 
aggregate volume of deposits that is transferred by the transferring 
institution in a transaction, or in a related series of transactions, 
exceeds the volume of deposits that is insured by its primary fund 
immediately prior to the transaction (or, in the case of a related 
series of transactions, immediately prior to the initial transaction in 
the series), the following volume of the deposits so transferred shall 
be deemed to be insured by the institution's secondary fund (secondary-
fund deposits): the aggregate amount of the transferred deposits minus 
that portion thereof that is equal to the institution's primary-fund 
deposits. The transferring institution's volume of secondary-fund 
deposits shall be reduced by the volume of the secondary-fund deposits 
so transferred.
    (b) Acquiring institution. The deposits shall be deemed, upon 
assumption by the acquiring institution, to be insured by the same fund 
or funds in the same amount or amounts as the deposits were so insured 
immediately prior to the transaction.
[61 FR 64984, Dec. 10, 1996]



PART 328--ADVERTISEMENT OF MEMBERSHIP--Table of Contents




Sec.
328.0  Scope.
328.1  Official signs.
328.2  Mandatory requirements with regard to the official sign and its 
          display by banks.
328.3  Mandatory requirements with regard to the official advertising 
          statement and manner of use by banks.
328.4  Mandatory requirements with regard to the display of the official 
          savings association sign by insured savings associations.

    Authority:  12 U.S.C. 1819; 12 U.S.C. 1828(a), as amended by sec. 
221, Pub. L. 101-73, 103 Stat. 183.



Sec. 328.0  Scope.

    The regulation contained in this part describes the official signs 
of the FDIC and prescribes their use by insured depository institutions. 
It also prescribes the official advertising statement insured banks must 
include in their advertisements. Insured banks which maintain offices 
that are not insured in foreign countries are not required to include 
the advertising statement in advertisements published in foreign 
countries. For purposes of this part 328, the term insured bank includes 
a foreign bank having an insured branch.
[54 FR 33670, Aug. 16, 1989]



Sec. 328.1  Official signs.

    (a) Official bank sign. The official sign referred to in this 
paragraph (bank sign) shall be 7' by 3' in size and of the following 
design:

[[Page 215]]

[GRAPHIC] [TIFF OMITTED] TC23SE91.000

The symbol of the Corporation shall be that portion of the official bank 
sign represented by the letters and the Corporation seal contained upon 
the official bank sign.
    (b) Official savings association sign. The official sign referred to 
in this paragraph (savings association sign) shall be 5\1/8\' in 
diameter and of the following design:
[GRAPHIC] [TIFF OMITTED] TC23SE91.001

[54 FR 33670, Aug. 16, 1989, as amended at 57 FR 45977, Oct. 6, 1992]



Sec. 328.2  Mandatory requirements with regard to the official sign and its display by banks.

    (a) Insured banks to display official sign. Each insured bank shall 
continuously display an official bank sign or an official savings 
association sign at each station or window where insured deposits are 
usually and normally received in its principal place of business and in 
all its branches, except on automatic service facilities including 
automated teller machines, cash dispensing machines, point-of-sale 
terminals, and other electronic facilities where deposits are received. 
However, no bank becoming an insured bank shall be required to display 
such an official sign until twenty-one (21) days after its first day of 
operation as an insured bank. An official sign may be displayed by an 
insured bank prior to the date display is required. Additional bank 
signs or savings association signs may be displayed in other locations 
within an insured bank in other sizes, colors, or materials. An insured 
bank may display an official sign at a remote service facility, provided 
that if there are any noninsured institutions which share in the remote 
service facility, any insured bank which displays the official bank sign 
must clearly show that the sign refers only to a designated insured bank 
or banks.
    (b) Obtaining official signs. (1) Any insured bank may procure 
official bank signs with black letters on a gold background or official 
savings association signs with black letters, stars, and eagle, on a 
gold background, from the Corporation for official use at no charge. The 
Corporation shall furnish to banks an order blank for use in procuring 
the official signs. Any bank which promptly, after the receipt of the 
order blank, fills it in, executes it, and properly directs and forwards 
it to

[[Page 216]]

the Federal Deposit Insurance Corporation, Washington, DC 20429, shall 
not be deemed to have violated this regulation on account of not 
displaying an official sign, or signs, unless the bank shall omit to 
display such official sign or signs after receipt thereof.
    (2) Official signs or signs reflecting variations in size, colors, 
or materials may be procured by insured banks from commercial suppliers.
    (c) Receipt of deposits at same teller's station or window as 
noninsured bank or institution. An insured bank is forbidden to receive 
deposits at any teller's station or window except a remote service 
facility as defined in Sec. 303.0(b)(18) of this chapter, where any 
noninsured insitution receives deposits or similar liabilities.
    (d) Required changes in official sign. The Corporation may require 
any insured bank, upon at least 30 days' written notice, to change the 
wording of its official signs in a manner deemed necessary for the 
protection of depositors or others.
[54 FR 33670, Aug. 16, 1989, as amended at 57 FR 45977, Oct. 6, 1992]



Sec. 328.3  Mandatory requirements with regard to the official advertising statement and manner of use by banks.

    (a) Insured banks to include official advertising statement in all 
advertisements except as provided in paragraph (c) of this section. Each 
insured bank shall include the official advertising statement, 
prescribed in paragraph (b) of this section, in all of its 
advertisements except as provided in paragraph (c) of this section.
    (1) An insured bank is not required to include the official 
advertising statement in its advertisements until thirty (30) days after 
its first day of operation as an insured bank.
    (2) In cases where the Board of Directors of the Federal Deposit 
Insurance Corporation shall find the application to be meritorious, that 
there has been no neglect or willful violation in the observance of the 
section and that undue hardship will result by reason of its 
requirements, the Board of Directors may grant a temporary exemption 
from its provision to a particular bank upon its written application 
setting forth the facts. For the procedure to be followed in making such 
application see Sec. 303.8 of this chapter.
    (3) In cases where advertising copy not including the official 
advertising statement is on hand on the date the requirements of this 
section become operative, the insured bank may cause the official 
advertising statement to be included by use of a rubber stamp or 
otherwise.
    (4) When a foreign bank has both insured and noninsured U.S. 
branches, the bank must identify which branches are insured and which 
branches are not insured in all of its advertisements requiring the use 
of the official advertising statement.
    (b) Official advertising statement. The official advertising 
statement shall be in substance as follows: ``Member of the Federal 
Deposit Insurance Corporation''. The word ``the'' or the words ``of 
the'' may be omitted. The words ``This bank is a'' or the words ``This 
institution is a'' or the name of the insured bank followed by the words 
``is a'' may be added before the word ``member''. The short title 
``Member of FDIC'' or ``Member FDIC'' or a reproduction of the 
``symbol'' may be used by insured banks at their option as the official 
advertising statement. The official advertising statement shall be of 
such size and print to be clearly legible. Where it is desired to use 
the ``symbol'' of the Corporation as the official advertising statement, 
and the ``symbol'' must be reduced to such proportions that the small 
lines of type and the Corporation seal therein are indistinct and 
illegible, the Corporation seal in the letter C and the two lines of 
small type may be blocked out or dropped.
    (c) Types of advertisements which do not require the official 
advertising statement. The following is an enumeration of the types of 
advertisements which need not include the official advertising 
statement:
    (1) Statements of condition and reports of condition of an insured 
bank which are required to be published by State or Federal law;
    (2) Bank supplies such as stationery (except when used for circular 
letters), envelopes, deposit slips, checks, drafts, signature cards, 
deposit passbooks, certificates of deposit, etc.;

[[Page 217]]

    (3) Signs or plates in the banking office or attached to the 
building or buildings in which the banking offices are located;
    (4) Listings in directories;
    (5) Advertisements not setting forth the name of the insured bank;
    (6) Display advertisements in bank directory, provided the name of 
the bank is listed on any page in the directory with a symbol or other 
descriptive matter indicating it is a member of the Federal Deposit 
Insurance Corporation;
    (7) Joint or group advertisements of banking services where the 
names of insured banks and noninsured banks or institutions are listed 
and form a part of such advertisements;
    (8) Advertisements by radio which do not exceed thirty (30) seconds 
in time;
    (9) Advertisements by television, other than display advertisements, 
which do not exceed thirty (30) seconds in time;
    (10) Advertisements which are of the type or character making it 
impractical to include thereon the official advertising statement 
including, but not limited to, promotional items such as calendars, 
matchbooks, pens, pencils, and key chains;
    (11) Advertisements which contain a statement to the effect that the 
bank is a member of the Federal Deposit Insurance Corporation, or that 
the bank is insured by the Federal Deposit Insurance Corporation, or 
that its deposits or depositors are insured by the Federal Deposit 
Insurance Corporation to the maximum of $100,000 for each depositor;
    (12) Advertisements relating to the making of loans by the bank or 
loan services;
    (13) Advertisements relating to safekeeping box business or 
services;
    (14) Advertisements relating to trust business or trust department 
services;
    (15) Advertisements relating to real estate business or services;
    (16) Advertisements relating to armored car services;
    (17) Advertisements relating to service charges or analysis charges;
    (18) Advertisements relating to securities business or securities 
department services;
    (19) Advertisements relating to travel department business, 
including traveler's checks on which the bank issuing or causing to be 
issued the advertisement is not primarily liable;
    (20) Advertisements relating to savings bank life insurance.
    (d) Outstanding billboard advertisements. Where an insured bank has 
billboard advertisements outstanding which are required to include the 
official advertising statement and has direct control of such 
advertisements either by possession or under the terms of a contract, it 
shall, as soon as it can consistent with its contractual obligations, 
cause the official advertising statement to be included therein.
    (e) Official advertising statement in non-English language. The non-
English equivalent of the official advertising statement may be used in 
any advertisement: Provided, That the translation has had the prior 
written approval of the Corporation.

(Sec. 3(m), 9, 64 Stat. 881; 12 U.S.C. 1813(m), 1819)
[32 FR 10189, July 11, 1967, as amended at 45 FR 23645, Apr. 8, 1980; 46 
FR 37876, July 23, 1981. Redesignated and amended at 54 FR 33670, Aug. 
16, 1989]



Sec. 328.4  Mandatory requirements with regard to the display of the official savings association sign by insured savings associations.

    (a) Insured savings associations to display official savings 
association sign. Each insured savings association shall continuously 
display an official savings association sign at each station or window 
where insured deposits are usually and normally received in its 
principal place of business and at all of its branches, except on 
automatic service facilities including automated teller machines, cash 
dispensing machines, point-of-sale terminals, and other electronic 
facilities where deposits are received. However, no savings association 
becoming an insured savings association as a result of the enactment of 
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 
or otherwise, shall be required to display an official savings 
association sign until twenty-one (21) days after its first day of 
operation as an insured savings association. The official savings 
association sign may be displayed by any insured savings association 
prior to the

[[Page 218]]

date display is required. Additional savings association signs in other 
sizes, colors, or materials, may be displayed in other locations within 
an insured savings association. An insured savings association may 
display the official savings association sign at a remote service 
facility, provided that if there are any noninsured institutions which 
share in the remote service facility, any insured savings association 
which displays the sign must clearly show that the official savings 
association sign refers only to a designated insured savings association 
or associations.
    (b) Obtaining official savings association signs. (1) Any insured 
savings association may procure official savings association signs with 
black letters, stars, and eagle, on a gold background from the 
Corporation for official use at no charge. The Corporation shall furnish 
to savings associations an order blank for use in procuring the official 
savings association sign. Any savings association which promptly, after 
the receipt of the order blank, fills it in, executes it, and properly 
directs and forwards it to the Federal Deposit Insurance Corporation, 
Washington, DC 20429, shall not be deemed to have violated this 
regulation on account of not displaying an official savings association 
sign, or signs, unless the savings association shall omit to display 
such official sign or signs after receipt thereof.
    (2) Official savings association signs or signs reflecting 
variations in size, colors, or materials may be procured by insured 
savings associations from commercial suppliers.
    (c) Receipt of deposits at same teller's station or window as 
noninsured institution. An insured savings association is forbidden to 
receive deposits at any teller's station or window except a remote 
service facility as defined in Sec. 303.0(b)(18) of this chapter, where 
any noninsured institution receives deposits or similar liabilities.
    (d) Required changes in official sign. The Corporation may require 
any insured savings association upon at least 30 days' written notice, 
to change the wording of its official signs in a manner deemed necessary 
for the protection of depositors or others.
    (e) Display of official bank sign by insured savings association 
prohibited. An insured savings association shall not display the bank 
sign at its principal place of business or at any of its branches.
[54 FR 33672, Aug. 16, 1989, as amended at 57 FR 45977, Oct. 6, 1992]



PART 329--INTEREST ON DEPOSITS--Table of Contents




Sec.
329.0  Scope.
329.1  Definitions.
329.2  Payment of interest.
329.101  Transfers not included within the six transfers allowed for 
          nondemand deposits pursuant to Sec. 329.1(b)(3).
329.102  Deposits described in Sec. 329.1(b)(3).
329.103  Premiums.
329.104  Ten-day grace period.

    Authority:  12 U.S.C. 1819, 1828(g) and 1832(a).

    Source:  51 FR 10808, Mar. 31, 1986, unless otherwise noted.



Sec. 329.0  Scope.

    This part applies to any deposit which is payable by a bank within 
the States of the United States or the District of Columbia, or which is 
directly or indirectly accessible by check, draft, or order payable 
within the States of the United States or the District of Columbia, 
which check, draft or order is drawn on an account maintained at a bank 
office located within the States of the United States or the District of 
Columbia. An international banking facility time deposit, as defined by 
the Board of Governors of the Federal Reserve System in Sec. 204.8(a)(2) 
of this title, is not a deposit within the meaning of this part.



Sec. 329.1  Definitions.

    (a) The term bank includes:
    (1) Any State bank, as defined in section 3(a) of the Federal 
Deposit Insurance Act, 12 U.S.C. 1813(a), the deposits in which are 
insured by the Corporation, and which is not a member of the Federal 
Reserve System;
    (2) Any State branch of a foreign bank, the deposit obligations in 
which branch are insured by the Corporation; and
    (3) Any noninsured bank in a State if the total amount of time and 
savings deposits held in all such banks in the

[[Page 219]]

State, plus the total amount of deposits, shares, and withdrawable 
accounts held in all building and loan, savings and loan, and homestead 
associations (including cooperative banks) in the State which are not 
members of a Federal home loan bank, is more than 20 per centum of the 
total amount of such deposits, shares, and withdrawable accounts held in 
all banks and building and loan, savings and loan, and homestead 
associations (including cooperative banks) in the State.
    (b) The term demand deposit includes:
    (1) Any deposit that has a maturity or required-notice period of 
less than seven days;
    (2) Any deposit regarding which the bank does not reserve the right 
to require at least seven days' written notice prior to withdrawal or 
transfer of any funds from the account; or
    (3) Any other deposit from which, under the terms of the deposit 
contract, the depositor is authorized to make, during any month or 
statement cycle of at least four weeks, more than six transfers by means 
of a preauthorized or automatic transfer or telephonic (including data 
transmission) agreement, order or instruction, which transfers are made 
to another account of the depositor at the same bank, to the bank 
itself, or to a third party:
    Provided, That any deposit specified in this paragraph (b)(3) will 
be deemed to be a demand deposit if more than three of the six 
authorized transfers are authorized to be made by check, draft, debit 
card or similar order made by the depositor;
    And provided further, That no deposit specified in this paragraph 
(3) will be deemed to be a demand deposit if the entire beneficial 
interest of the deposit is held by a depositor identified in paragraph 
(2) of section 2(a) of Pub. L. 93-100 (12 U.S.C. 1832(a)(2)).\1\
---------------------------------------------------------------------------

    \1\ Paragraph (1) of 12 U.S.C. 1832(a) authorizes banks to let 
certain depositors make withdrawals from interest-bearing deposits by 
negotiable or transferable instruments for the purpose of making 
transfers to third parties--i.e., to hold deposits commonly called NOW 
accounts.
    Paragraph (2) of 12 U.S.C. 1832(a) provides: ``Paragraph (1) shall 
apply only with respect to deposits or accounts which consist solely of 
funds in which the entire beneficial interest is held by one or more 
individuals or by an organization which is operated primarily for 
religous, philanthropic, charitable, educational, political, or other 
similar purposes and which is not operated for profit, and with respect 
to deposits of public funds by an officer, employee, or agent of the 
United States, any State, county, municipality, or political subdivision 
thereof, the District of Columbia, the Commonwealth of Puerto Rico, 
American Samoa, Guam, any territory or possession of the United States, 
or any political subdivision thereof.
---------------------------------------------------------------------------

    (c) The term interest means any payment to or for the account of any 
depositor as compensation for the use of funds constituting a deposit. A 
bank's absorption of expenses incident to providing a normal banking 
function or its forbearance from charging a fee in connection with such 
a service is not considered a payment of interest.
[51 FR 10808, Mar. 31, 1986, as amended at 53 FR 47523, Nov. 23, 1988]



Sec. 329.2  Payment of interest.

    No bank shall, directly or indirectly, by any device whatsoever, pay 
interest on any demand deposit.



Sec. 329.101  Transfers not included within the six transfers allowed for nondemand deposits pursuant to Sec. 329.1(b)(3).

    This interpretive rule describes certain transfers that are not 
included as any of the six transfers allowed pursuant to 
Sec. 329.1(b)(3).
    (a) Transfers from a deposit described in Sec. 329.1(b)(3) that are 
made to the bank are not deemed to be included within the six transfers 
permitted for a nondemand deposit by that paragraph (3) when the 
transfers are made for the purpose of repaying loans and associated 
expenses at the bank (as originator or servicer). This exemption does 
not apply to transfers to the bank that are made for the purpose of 
repaying loans that are made by the bank to the depositor's demand 
account for the purpose of covering overdrafts.
    (b) Transfers from a deposit described in Sec. 329.1(b)(3) that are 
made to another account of the same depositor at the bank are not deemed 
to be included within the six transfers permitted for a nondemand 
deposit by that paragraph

[[Page 220]]

(3) when the transfers are made by mail, messenger, automated teller 
machine or in person.
    (c) Withdrawals from a deposit described in Sec. 329.1(b)(3) are not 
deemed to be included within the six transfers permitted for a nondemand 
deposit by that paragraph (3) when the withdrawals are made by mail, 
messenger, telephone (via check mailed to the depositor), automated 
teller machine, or in person.



Sec. 329.102  Deposits described in Sec. 329.1(b)(3).

    This interpretive rule explains the second proviso of 
Sec. 329.1(b)(3).
    (a) No deposit described in Sec. 329.1(b)(3) that is held by an 
organization that is not organized for profit and that is described in 
paragraphs 501(c) (3) through (13) and (19) and section 528 of the 
Internal Revenue Code of 1954 (26 U.S.C. 501(c) (3) through (13) and 
(19), and 528) is deemed to be a demand deposit. Actual Internal Revenue 
Service documentation of the organization's tax-exempt status is not 
required; it is merely an aid in making the determination.
    (b) No deposit described in Sec. 329.1(b)(3) that is held by a 
depositor identified in section 2(a)(2) of Pub. L. 93-100 (12 U.S.C. 
1832(a)(2))--whether the deposit is used for business purposes or 
otherwise--is deemed to be a demand deposit.
    (c) No deposit described in Sec. 329.1(b)(3) that represents funds 
held in a fiduciary capacity (whether the fiduciary is a natural person 
or otherwise) is deemed to be a demand deposit if all the beneficiaries 
of the account are natural persons.



Sec. 329.103  Premiums.

    This interpretive rule describes certain payments that are not 
deemed to be interest as defined in Sec. 329.1(c).
    (a) Premiums, whether in the form of merchandise, credit, or cash, 
given by a bank to the holder of a deposit will not be regarded as 
interest as defined in Sec. 329.1(c) if:
    (1) The premium is given to the depositor only at the time of the 
opening of a new account or an addition to an existing account;
    (2) No more than two premiums per deposit are given in any twelve-
month interval; and (3) the value of the premium (in the case of 
merchandise, the total cost to the bank, including shipping, 
warehousing, packaging, and handling costs) does not exceed $10 for a 
deposit of less than $5,000 or $20 for a deposit of $5,000 or more.
    (b) The costs of premiums may not be averaged.
    (c) A bank may not solicit funds for deposit on the basis that the 
bank will divide the funds into several accounts for the purpose of 
enabling the bank to pay the depositor more than two premiums within a 
twelve-month interval on the solicited funds.
    (d) The bank must retain sufficient information for examiners to 
determine that the requirements of this section have been satisfied.
    (e) Notwithstanding paragraph (a) of this section, any premium that 
is not, directly or indirectly, related to or dependent on the balance 
in a demand deposit account and the duration of the account balance 
shall not be considered the payment of interest on a demand deposit 
account and shall not be subject to the limitations in paragraph (a) of 
this section.
[51 FR 10808, Mar. 31, 1986, as amended at 62 FR 40732, July 30, 1997]



Sec. 329.104  Ten-day grace period.

    This interpretive rule provides for 10-day grace periods during 
which interest may be paid on a deposit without violating Sec. 329.2.
    (a) During the ten calendar days following the maturity of a time 
deposit, the bank may continue to pay interest on the matured deposit at 
the contract rate of the deposit, or at any lesser rate, if the deposit 
contract provides for such post-maturity interest. The payment of such 
post-maturity interest will not be regarded as the payment of interest 
on a demand deposit.
    (b) If a time deposit is renewed within ten calendar days after 
maturity, the renewed deposit may be dated back to the maturity date of 
the matured deposit and may draw interest from that date. The payment of 
such additional interest will not be regarded as the payment of interest 
on a demand deposit.
    (c) If a time or savings deposit is renewed within ten days after 
expiration

[[Page 221]]

of the period of notice given with respect to its repayment, the renewed 
deposit may draw interest from the date such notice period expired. The 
payment of such additional interest will not be regarded as the payment 
of interest on a demand deposit.



PART 330--DEPOSIT INSURANCE COVERAGE--Table of Contents




Sec.
330.1  Definitions.
330.2  Authority and purpose.
330.3  General principles.
330.4  Recognition of deposit ownership and recordkeeping requirements.
330.5  Single ownership accounts.
330.6  Accounts held by an agent, nominee, guardian, custodian or 
          conservator.
330.7  Joint ownership accounts.
330.8  Revocable trust accounts.
330.9  Accounts of a corporation, partnership or unincorporated 
          association.
330.10  Accounts held by a depository institution as the trustee of an 
          irrevocable trust.
330.11  Irrevocable trust accounts.
330.12  Retirement and other employee benefit plan accounts.
330.13  Bank investment contracts.
330.14  Public unit accounts.
330.15  Notice to depositors.
330.16  Effective dates.

    Authority:  12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 
1819[Tenth], 1820(f), 1821(a), 1822(c).

    Source:  55 FR 20122, May 15, 1990, unless otherwise noted.



Sec. 330.1  Definitions.

    For the purposes of this part:
    (a) Act means the Federal Deposit Insurance Act (12 U.S.C. 1811 et 
seq.).
    (b) Default has the same meaning as provided under section 3(x) of 
the Act (12 U.S.C. 1813(x)).
    (c) Deposit has the same meaning as provided under section 3(l) of 
the Act (12 U.S.C. 1813(l)).
    (d) Deposit account records means account ledgers, signature cards, 
certificates of deposit, passbooks, corporate resolutions authorizing 
accounts in the possession of the insured depository institution and 
other books and records of the insured depository institution, including 
records maintained by computer, which relate to the insured depository 
institution's deposit taking function, but does not mean account 
statements, deposit slips, items deposited or cancelled checks.
    (e) FDIC means the Federal Deposit Insurance Corporation.
    (f) Insured deposit has the same meaning as that provided under 
subsection 3(m)(1) of the Act (12 U.S.C. 1813(m)(1)).
    (g) Insured depository institution is any depository institution 
whose deposits are insured pursuant to the Act, including a foreign bank 
having an insured branch.
    (h) Insured branch means a branch of a foreign bank any deposits in 
which are insured in accordance with the provisions of the Act.
    (i) Natural person means a human being.
    (j) Trust funds means funds held by an insured depository 
institution as trustee pursuant to any irrevocable trust established 
pursuant to any statute or written trust agreement.
    (k) Trust estate means the determinable and beneficial interest of a 
beneficiary or principal in trust funds but does not include the 
beneficial interest of an heir or devisee in a decedent's estate.
[55 FR 20122, May 15, 1990, as amended at 58 FR 29963, May 25, 1993]



Sec. 330.2  Authority and purpose.

    Section 311 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991 (FDICIA), Pub. L. 102-242, 105 Stat. 2236, amended sections 
3, 7 and 11 of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 
1813, 1817 and 1821, which govern the amount of deposit insurance 
provided by the FDIC. Section 311 of FDICIA deleted the provision in 
section 3 of the Federal Deposit Insurance Act which authorized the FDIC 
to clarify and define, by regulation, the extent of deposit insurance 
coverage resulting from subsections 3(m)(1), 3(p), 7(i) and 11(a) of the 
FDI Act, 12 U.S.C. 1813(m)(1), 1813(p), 1817(i) and 1821(a) and to 
define the terms used in those sections. However, FDICIA did not change 
the FDIC's authority, in section 9 [Tenth] of the FDI Act, to prescribe 
by its Board of Directors such rules and regulations as it may deem 
necessary to carry out the provisions of the FDI Act or of any other law 
which it has the responsibility of administering or enforcing (except to 
the

[[Page 222]]

extent that authority to issue such rules and regulations has been 
expressly and exclusively granted to any other regulatory agency). 
Moreover, in section 302(d) of FDICIA, Congress added a new subsection 
to section 10 of the FDI Act which provides that except to the extent 
that authority under the FDI Act is conferred on any of the Federal 
banking agencies other than the Corporation, the Corporation may 
prescribe regulations to carry out the FDI Act and by regulation define 
terms as necessary to carry out the FDI Act. The purpose of the 
regulations in this part is to clarify the rules and define the terms 
employed in affording deposit insurance coverage under the Act and 
provide rules for the recognition of deposit ownership in various 
circumstances.
[58 FR 29963, May 25, 1993]



Sec. 330.3  General principles.

    (a) Ownership rights and capacities. The insurance coverage provided 
by the Act and the regulations in this part is based upon the ownership 
rights and capacities in which deposit accounts are maintained at 
insured depository institutions. All deposits in an insured depository 
institution which are maintained in the same right and capacity (by or 
for the benefit of a particular depositor or depositors) shall be added 
together and insured in accordance with the regulations in this part. 
Deposits maintained in different rights and capacities, as recognized 
under this part, shall be insured separately from each other.
    (b) Deposits maintained in separate insured depository institutions 
or in separate branches of the same insured depository institution. Any 
deposit accounts maintained by a depositor at one insured depository 
institution are insured separately from, and without regard to, any 
deposit accounts that the same depositor maintains at any other 
separately chartered and insured depository institution, even if two or 
more separately chartered and insured depository institutions are 
affiliated through common ownership. The deposit accounts of a depositor 
maintained in the same right and capacity at different branches or 
offices of the same insured depository institution are not separately 
insured; rather they shall be added together and insured in accordance 
with the regulations in this part.
    (c) Deposits maintained by foreigners and deposits denominated in 
foreign currency. The availability of deposit insurance is not limited 
to citizens and residents of the United States. Any person or entity 
that maintains deposits in an insured depository institution is entitled 
to the deposit insurance provided by the Act and the provisions of this 
part. In addition, deposits denominated in a foreign currency shall be 
insured in accordance with the provisions of this part. Deposit 
insurance for such deposits shall be determined and paid in the amount 
of United States dollars that is equivalent in value to the amount of 
the deposit denominated in the foreign currency as of close of business 
on the date of default of the insured depository institution. The 
exchange rates to be used for such conversions are the 12 PM rates (the 
noon buying rates for cable transfers) quoted for major currencies by 
the Federal Reserve Bank of New York on the date of default of the 
insured depository institution, unless the deposit agreement specifies 
that some other widely recognized exchange rates are to be used for all 
purposes under that agreement, in which case, the rates so specified 
shall be used for such conversions.
    (d) Deposits in insured branches of foreign banks. Deposits in an 
insured branch of a foreign bank which are payable by contract in the 
United States shall be insured in accordance with the provisions of this 
part, except that any deposits to the credit of the foreign bank, or any 
office, branch, agency or any wholly owned subsidiary of the foreign 
bank, shall not be insured. All deposits held by a depositor in the same 
right and capacity in more than one insured branch of the same foreign 
bank shall be added together for the purpose of determining the amount 
of deposit insurance.
    (e) Deposits payable solely outside of the United States. Any 
obligation of an insured depository institution which is payable solely 
at an office of such institution located outside the States of

[[Page 223]]

the United States, the District of Columbia, Puerto Rico, Guam, the 
Commonwealth of the Northern Mariana Islands, American Samoa, the Trust 
Territory of the Pacific Islands, and the Virgin Islands, is not a 
deposit for the purposes of this part.
    (f) International banking facility deposits. An ``international 
banking facility time deposit,'' as defined by the Board of Governors of 
the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or in 
any successor regulation, is not a deposit for the purposes of this 
part.
    (g) Continuation of separate deposit insurance after merger of 
insured depository institutions. Whenever the liabilities of one or more 
insured depository institutions for deposits shall have been assumed by 
another insured depository institution, whether by merger, 
consolidation, other statutory assumption, or contract:
    (1) The insured status of the institutions whose liabilities have 
been so assumed terminates on the date of receipt by the FDIC of 
satisfactory evidence of such assumption, and
    (2) The separate insurance of deposits so assumed continues for six 
months from the date such assumption takes effect or, in the case of a 
time deposit, the earliest maturity date after the six-month period.

In the case of time deposits which mature within six months of the date 
such deposits are assumed and which are renewed at the same dollar 
amount (either with or without accrued interest having been added to the 
principal amount) and for the same term as the original deposit, the 
separate insurance is applicable to the renewed deposits until the first 
maturity date after the six-month period. Time deposits that mature 
within six months of the deposit assumption and that are renewed on any 
other basis, or that are not renewed and thereby become demand deposits, 
are separately insured only until the end of the six-month period.
    (h) Application of state or local law to deposit insurance 
determinations. In general, deposit insurance is for the benefit of the 
owner or owners of funds on deposit. However, while ownership under 
state law of deposited funds is a necessary condition for deposit 
insurance, ownership under state law is not sufficient for, or decisive 
in, determining deposit insurance coverage. Deposit insurance coverage 
is also a function of the deposit account records of the insured 
depository institution, of recordkeeping requirements, and of other 
provisions of this part, which, in the interest of uniform national 
rules for deposit insurance coverage, are controlling for purposes of 
determining deposit insurance coverage.
    (i) Determination of the amount of a deposit--(1) General rule. The 
amount of a deposit is the balance of principal and interest 
unconditionally credited to the deposit account as of the date of 
default of the insured depository institution, plus the ascertainable 
amount of interest to that date, accrued at the contract rate (or the 
anticipated or announced interest or dividend rate), which the insured 
depository institution in default would have paid if the deposit had 
matured on that date and the insured depository institution had not 
failed. In the absence of any such announced or anticipated interest or 
dividend rate, the rate for this purpose shall be whatever rate was paid 
in the immediately preceding payment period.
    (2) Discounted certificates of deposit. The amount of a certificate 
of deposit sold by an insured depository institution at a discount from 
its face value is its original purchase price plus the amount of accrued 
earnings calculated by compounding interest annually at the rate 
necessary to increase the original purchase price to the maturity value 
over the life of the certificate.
    (3) Waiver of minimum requirements. In the case of a deposit with a 
fixed payment date, fixed or minimum term, or a qualifying or notice 
period that has not expired as of such date, interest thereon to the 
date of closing shall be computed according to the terms of the deposit 
contract as if interest had been credited and as if the deposit could 
have been withdrawn on such date without any penalty or reduction in the 
rate of earnings.

[[Page 224]]



Sec. 330.4  Recognition of deposit ownership and recordkeeping requirements.

    (a) Recognition of deposit ownership--(1) Evidence of deposit 
ownership. In determining the amount of insurance available to each 
depositor, the FDIC shall presume that deposited funds are actually 
owned in the manner indicated on the deposit account records of the 
insured depository institution. If the FDIC, in its sole discretion, 
determines that the deposit account records of the insured depository 
institution are clear and unambiguous, those records shall be considered 
binding on the depositor, and no other records shall be considered, as 
to the manner in which the funds are owned. If the deposit account 
records are ambiguous or unclear as to the manner in which the funds are 
owned, then the FDIC may, in its sole discretion, consider evidence 
other than the deposit account records of the insured depository 
institution for the purpose of establishing the manner in which the 
funds are owned. Notwithstanding the foregoing, if the FDIC has reason 
to believe that the insured depository institution's deposit account 
records misrepresent the actual ownership of deposited funds and such 
misrepresentation would increase deposit insurance coverage, the FDIC 
may consider all available evidence and pay claims for insured deposits 
on the basis of the actual rather than the misrepresented ownership.
    (2) Recognition of deposit ownership in custodial accounts. In the 
case of custodial deposits, the interest of each beneficial owner may be 
determined on a fractional or percentage basis. This may be accomplished 
in any manner which indicates that where the funds of an owner are 
commingled with other funds held in a custodial capacity and a portion 
thereof is placed on deposit in one or more insured depository 
institutions without allocation, the owner's insured interest in such a 
deposit in any one insured depository institution would represent, at 
any given time, the same fractional share as his or her share of the 
total commingled funds.
    (b) Recordkeeping requirements--(1) Disclosure of fiduciary 
relationships. The deposit account records of an insured depository 
institution must expressly disclose, by way of specific references, the 
existence of any fiduciary relationship including, but not limited to, 
relationships involving a trustee, agent, nominee, guardian, executor or 
custodian, pursuant to which funds in an account are deposited and on 
which a claim for insurance coverage is based. No claim for insurance 
coverage based on a fiduciary relationship will be recognized if no 
fiduciary relationship is evident from the deposit account records of 
the insured depository institution.
    (2) Details of fiduciary relationships. If the deposit account 
records of an insured depository institution disclose the existence of a 
relationship which might provide a basis for additional insurance, the 
details of the relationship and the interests of other parties in the 
account must be ascertainable either from the deposit account records of 
the insured depository institution or from records maintained, in good 
faith and in the regular course of business, by the depositor or by some 
person or entity that has undertaken to maintain such records for the 
depositor.
    (3) Multi-tiered fiduciary relationships. In deposit accounts where 
there are multiple levels of fiduciary relationships, there are two 
alternative methods of satisfying paragraphs (b)(1) and (b)(2) of this 
section so as to obtain insurance coverage for the interests of the true 
beneficial owners of a deposit account.
    (i) One method is to: (A) Expressly indicate, on the deposit account 
records of the insured depository institution, the existence of each and 
every level of fiduciary relationships; and
    (B) Disclose, at each level, the name(s) and interest(s) of the 
person(s) on whose behalf the party at that level is acting.
    (ii) An alternative method is to: (A) Expressly indicate, on the 
deposit account records of the insured depository institution, that the 
depositor is acting in a fiduciary capacity on behalf of certain persons 
or entities who may, in turn, be acting in a fiduciary capacity for 
others;
    (B) Disclose the existence of additional levels of fiduciary 
relationships in records, maintained in good faith

[[Page 225]]

and in the regular course of business, by parties at subsequent levels; 
and
    (C) Disclose, at each of the levels, the name(s) and interest(s) of 
the person(s) on whose behalf the party at that level is acting.

No person or entity in the chain of parties will be permitted to claim 
that they are acting in a fiduciary capacity for others unless the 
possible existence of such a relationship is revealed at some previous 
level in the chain.
    (4) Exceptions to recordkeeping requirements--(i) Deposits evidenced 
by negotiable instruments. If any deposit obligation of an insured 
depository institution is evidenced by a negotiable certificate of 
deposit, negotiable draft, negotiable cashier's or officer's check, 
negotiable certified check, negotiable traveler's check, letter of 
credit or other negotiable instrument, the FDIC will recognize the owner 
of such deposit obligation for all purposes of claim for insured 
deposits to the same extent as if his or her name and interest were 
disclosed on the records of the insured depository institution;
    Provided, That the instrument was in fact negotiated to such owner 
prior to the date of default of the insured depository institution. The 
owner must provide affirmative proof of such negotiation, in a form 
satisfactory to the FDIC, to substantiate his or her claim. Receipt of a 
negotiable instrument directly from the insured depository institution 
in default shall, in no event, be considered a negotiation of said 
instrument for purposes of this provision.
    (ii) Deposit obligations for payment of items forwarded for 
collection by depository institution acting as agent. Where an insured 
depository institution in default has become obligated for the payment 
of items forwarded for collection by a depository institution acting 
solely as agent, the FDIC will recognize the holders of such items for 
all purposes of claim for insured deposits to the same extent as if 
their name(s) and interest(s) were disclosed as depositors on the 
deposit account records of the insured depository institution, when such 
claim for insured deposits, if otherwise payable, has been established 
by the execution and delivery of prescribed forms. The FDIC will 
recognize such depository institution forwarding such items for the 
holders thereof as agent for such holders for the purpose of making an 
assignment to the FDIC of their rights against the insured depository 
institution in default and for the purpose of receiving payment on their 
behalf.



Sec. 330.5  Single ownership accounts.

    (a) Individual accounts. Funds owned by a natural person and 
deposited in one or more deposit accounts in his or her own name shall 
be added together and insured up to $100,000 in the aggregate. If more 
than one natural person has the right to withdraw funds from an 
individual account (excluding persons who have the right to withdraw by 
virtue of a Power of Attorney) the account shall be treated as a joint 
ownership account and shall be insured in accordance with the provisions 
of Sec. 330.7 of this part, unless the deposit account records clearly 
indicate, to the satisfaction of the FDIC, that the funds are owned by 
one individual and that other signatories on the account are merely 
authorized to withdraw funds on behalf of the owner.
    (b) Sole proprietorship accounts. (1) Funds owned by a business 
which is a sole proprietorship and deposited in one or more deposit 
accounts in the name of the business, shall be treated as the individual 
account(s) of the person who is the sole proprietor, added to any other 
individual accounts of that person, and insured up to $100,000 in the 
aggregate.
    (2) The term sole proprietorship means a form of business in which 
one person owns all the assets of the business, in contrast to a 
partnership or corporation.
    (c) Single-name accounts containing community property funds. 
Community property funds deposited into one or more deposit accounts in 
the name of one member of a husband-wife community shall be treated as 
the individual account(s) of the named member, added to any other 
individual accounts of that person, and insured up to $100,000 in the 
aggregate.
    (d) Accounts of a decedent and accounts held by executors or 
administrators of a decedent's estate. Funds held in the name of a 
decedent or in the name of the executor, administrator, or other

[[Page 226]]

personal representative of his or her estate and deposited into one or 
more deposit accounts shall be added together and insured up to $100,000 
in the aggregate. Such deposit insurance shall be separate from any 
insurance coverage provided for the individual deposit accounts of the 
executor, administrator, other personal representative or the 
beneficiaries of the estate.



Sec. 330.6  Accounts held by an agent, nominee, guardian, custodian or conservator.

    (a) Agency or nominee accounts. Funds owned by a principal or 
principals and deposited into one or more deposit accounts in the name 
of an agent, custodian or nominee shall be insured to the same extent as 
if deposited in the name of the principal(s). When such funds are 
deposited by an insured depository institution acting as a trustee of an 
irrevocable trust, the insurance coverage shall be governed by the 
provisions of Sec. 330.10 of this part.
    (b) Guardian, custodian or conservator accounts. Funds held by a 
guardian, custodian, or conservator for the benefit of his or her ward, 
or for the benefit of a minor under the Uniform Gifts to Minors Act, and 
deposited into one or more accounts in the name of the guardian, 
custodian or conservator shall, for purposes of this part, be deemed to 
be agency or nominee accounts and shall be insured in accordance with 
paragraph (a) of this section.
    (c) Accounts held by fiduciaries on behalf of two or more persons. 
Funds held by an agent, nominee, guardian, custodian, conservator or 
loan servicer, on behalf of two or more persons jointly, shall be 
treated as a joint ownership account and shall be insured in accordance 
with the provisions of Sec. 330.7 of this part.
    (d) Mortgage servicing accounts. Accounts maintained by a mortgage 
servicer, in a custodial or other fiduciary capacity, which are 
comprised of payments by mortgagors of principal and interest, shall be 
added together and insured in the amount of up to $100,000 for the 
interest of each owner (mortgagee, investor or security holder) in such 
accounts. Accounts maintained by a mortgage servicer, in a custodial or 
other fiduciary capacity, which are comprised of payments by mortgagors 
of taxes and insurance premiums shall be added together and insured in 
the amount of up to $100,000 for the ownership interest of each 
mortgagor in such accounts.
    (e) Custodial accounts for American Indians. Paragraph (a) of this 
section shall not apply to any interest an individual American Indian 
may have in funds deposited by the Bureau of Indian Affairs of the 
United States Department of the Interior (the BIA) on behalf of that 
person pursuant to 25 U.S.C. 162(a), or by any other disbursing agent of 
the United States on behalf of that person pursuant to similar 
authority, in an insured depository institution. The interest of each 
American Indian in all such accounts maintained at the same insured 
depository institution shall be added together and insured, up to 
$100,000, separately from any other accounts maintained by that person 
in the same insured depository institution.
    (f) Annuity Contract Accounts. Funds held by an insurance company or 
other corporation in a deposit account for the sole purpose of funding 
life insurance or annuity contracts and any benefits incidental to such 
contracts, shall be insured in the amount of up to $100,000 per 
annuitant, provided that, pursuant to a state statute:
    (1) The corporation establishes a separate account for such funds; 
and
    (2) The account cannot be charged with the liabilities arising out 
of any other business of the corporation; and
    (3) The account cannot be invaded by other creditors of the 
corporation in the event that the corporation becomes insolvent and its 
assets are liquidated.

Such insurance coverage shall be separate from the insurance provided 
for any other accounts maintained in a different right and capacity by 
the corporation or the annuitants at the same insured depository 
institution.
[55 FR 20122, May 15, 1990, as amended at 60 FR 7709, Feb. 9, 1995]



Sec. 330.7  Joint ownership accounts.

    (a) Separate insurance coverage. Qualifying joint accounts, whether 
owned as joint tenants with right of survivorship, as tenants in common 
or as tenants by the entirety, shall be insured

[[Page 227]]

separately from any individually owned (single ownership) deposit 
accounts maintained by the co-owners. Qualifying joint accounts in the 
names of both husband and wife which are comprised of community property 
funds shall be added together and insured up to $100,000, separately 
from any funds deposited into accounts bearing their individual names.
    (b) Determination of insurance coverage. All qualifying joint 
accounts owned by the same combination of individuals shall first be 
added together and insured up to $100,000 in the aggregate. The 
interests of each co-owner in all qualifying joint accounts, whether 
owned by the same or different combinations of persons, shall then be 
added together and the total shall be insured up to $100,000.
    (c) Qualifying joint accounts. (1) A joint deposit account shall be 
deemed to be a qualifying joint account, for purposes of this section, 
only if:
    (i) All co-owners of the funds in the account are natural persons; 
and
    (ii) Each co-owner has personally signed a deposit account signature 
card; and
    (iii) Each co-owner possesses withdrawal rights on the same basis.
    (2) The requirement of paragraph (c)(1)(ii) of this section shall 
not apply to certificates of deposit, to any deposit obligation 
evidenced by a negotiable instrument, or to any account maintained by an 
agent, nominee, guardian, custodian or conservator on behalf of two or 
more persons.
    (3) All deposit accounts that satisfy the criteria in paragraph 
(c)(1) of this section, and those accounts that come within the 
exception provided for in paragraph (c)(2) of this section, shall be 
deemed to be jointly owned provided that, in accordance with the 
provisions of Sec. 330.4(a) of this part, the FDIC determines that the 
deposit account records of the insured depository institution are clear 
and unambiguous as to the ownership of the accounts. If the deposit 
account records are ambiguous or unclear as to the manner in which the 
deposit accounts are owned, then the FDIC may, in its sole discretion, 
consider evidence other than the deposit account records of the insured 
depository institution for the purpose of establishing the manner in 
which the funds are owned. The signatures of two or more persons on the 
deposit account signature card or the names of two or more persons on a 
certificate of deposit or other deposit instrument shall be conclusive 
evidence that the account is a joint account unless the deposit records 
as a whole are ambiguous and some other evidence indicates, to the 
satisfaction of the FDIC, that there is a contrary ownership capacity.
    (d) Nonqualifying joint accounts. A deposit account held in two or 
more names which is not a qualifying joint account, for purposes of this 
section, shall be treated as being owned by each named owner, as an 
individual, corporation, partnership, or unincorporated association, as 
the case may be, and the actual ownership interest of each individual or 
entity in such account shall be added to any other single ownership 
accounts of such individual or other accounts of such entity, and shall 
be insured in accordance with the provisions of this part governing the 
insurance of such accounts.
    (e) Determination of interests. (1) The interests of the co-owners 
of qualifying joint accounts, held as tenants in common, shall be deemed 
equal, unless otherwise stated in the insured depository institution's 
deposit account records.
    (2) The rule set forth in paragraph (e)(1) of this section shall 
apply regardless of whether the conjunction ``and'' or ``or'' is used in 
the title of a joint deposit account, even when both terms are used, 
such as in the case of a joint deposit account with three or more co-
owners.
[55 FR 20122, May 15, 1990, as amended at 60 FR 7710, Feb. 9, 1995]



Sec. 330.8  Revocable trust accounts.

    (a) General rule. Funds owned by an individual and deposited into 
any account commonly referred to as a tentative or ``Totten'' trust 
account, ``payable-on-death'' account, revocable trust account, or 
similar account evidencing an intention that upon the death of the 
owner, the funds shall belong to such owner's spouse, or to one or more 
children or grandchildren of the owner, shall be insured in the

[[Page 228]]

amount of up to $100,000 in the aggregate as to each such named 
beneficiary, separately from any other accounts of the owner or the 
beneficiaries. Such intention must be manifested in the title of the 
account using commonly accepted terms such as, but not limited to, ``in 
trust for,'' ``as trustee for,'' ``payable-on-death to,'' or any acronym 
therefor, and the beneficiaries of the account must be specifically 
named in the deposit account records of the insured depository 
institution. The settlor of a revocable trust account shall be presumed 
to own the funds deposited into the account.
    (b) Interests of nonqualifying beneficiaries. If a named beneficiary 
of such an account is not a spouse, child, or grandchild of one or more 
owners, the funds corresponding to that beneficiary, who is not within 
the qualifying degree of kinship, shall be treated as individually owned 
(single ownership) accounts of such owner(s), aggregated with any other 
single ownership accounts of such owners, and insured up to $100,000 per 
owner.
    (c) Joint revocable trust accounts. Where an account described in 
paragraph (a) of this section is established by more than one owner and 
held for the benefit of others, some or all of whom are within the 
qualifying degree of kinship, the respective interests of each owner 
(which shall be deemed equal unless otherwise stated in the insured 
depository institution's deposit account records) held for the benefit 
of each qualifying beneficiary shall be separately insured up to 
$100,000. However, where a husband and a wife establish a revocable 
trust account naming themselves as the sole beneficiaries, such account 
shall not be insured according to the provisions of this section but 
shall instead be insured in accordance with the provisions of Sec. 330.7 
of this part.
    (d) Definition of children and grandchildren. For the purpose of 
establishing the qualifying degree of kinship set forth in paragraph (a) 
of this section, the term children includes any natural-born, adopted 
and step-children of the owner and the term grandchildren includes 
natural-born, adopted, or step-children of any of the owner's children.



Sec. 330.9  Accounts of a corporation, partnership or unincorporated association.

    (a) Corporate accounts. (1) The deposit accounts of a corporation 
engaged in any independent activity shall be added together and insured 
up to $100,000 in the aggregate. If a corporation has divisions or units 
which are not separately incorporated, the deposit accounts of those 
divisions or units shall be added to any other deposit accounts of the 
corporation. If a corporation maintains deposit accounts in a 
representative or fiduciary capacity, such accounts shall not be treated 
as the deposit accounts of the corporation but shall be treated as 
fiduciary accounts and insured in accordance with the provisions of 
Sec. 330.6 of this part.
    (2) Notwithstanding any other provision of this part, any trust or 
other business arrangement which has filed or is required to file a 
registration statement with the Securities and Exchange Commission 
pursuant to section 8 of the Investment Company Act of 1940 or that 
would be required so to register but for the fact it is not created 
under the laws of the United States or a state or but for sections 2(b), 
3(c)(1), or 6(a)(1) of that act shall be deemed to be a corporation for 
purposes of determining deposit insurance coverage.
    (b) Partnership accounts. The deposit accounts of a partnership 
engaged in any independent activity shall be added together and insured 
up to $100,000 in the aggregate. Such insurance coverage shall be 
separate from any insurance provided for individually owned (single 
ownership) accounts maintained by the individual partners. A partnership 
shall be deemed to exist, for purposes of this paragraph, any time there 
is an association of two or more persons or entities formed to carry on, 
as co-owners, an unincorporated business for profit.
    (c) Unincorporated association accounts. The deposit accounts of an 
unincorporated association engaged in any independent activity shall be 
added together and insured up to $100,000 in the aggregate, separately 
from the accounts of the person(s) or

[[Page 229]]

entity(ies) comprising the unincorporated association. An unincorporated 
association shall be deemed to exist, for purposes of this paragraph, 
whenever there is an association of two or more persons formed for some 
religious, educational, charitable, social or other noncommercial 
purpose.
    (d) Definition of independent activity. A corporation, partnership 
or unincorporated association shall be deemed to be engaged in an 
independent activity, for purposes of this section, if the entity is 
operated primarily for some purpose other than to increase deposit 
insurance. The deposit accounts of an entity which is not engaged in an 
independent activity shall be deemed to be owned by the person or 
persons owning the corporation or comprising the partnership or 
unincorporated association, and, for deposit insurance purposes, the 
interest of each person in such a deposit account shall be added to any 
other deposit accounts individually owned by that person and insured up 
to $100,000 in the aggregate.



Sec. 330.10  Accounts held by a depository institution as the trustee of an irrevocable trust.

    (a) Separate insurance coverage. Trust funds held by an insured 
depository institution in its capacity as trustee of an irrevocable 
trust, whether held in its trust department, held or deposited in any 
other department of the fiduciary institution, or deposited by the 
fiduciary institution in another insured depository institution, shall 
be insured up to $100,000 of each owner or beneficiary represented. This 
insurance shall be separate from, and in addition to, the insurance 
provided for any other deposits of the owners or the beneficiaries.
    (b) Determination of interests. The insurance for funds held by an 
insured depository institution in its capacity as trustee of an 
irrevocable trust shall be determined in accordance with the following 
rules:
    (1) Allocated funds of a trust estate. If trust funds of a 
particular trust estate are allocated by the fiduciary and deposited, 
the insurance with respect to such trust estate shall be determined by 
ascertaining the amount of its funds allocated, deposited and remaining 
to the credit of the claimant as fiduciary at the insured depository 
institution in default.
    (2) Interest of a trust estate in unallocated trust funds. If funds 
of a particular trust estate are commingled with funds of other trust 
estates and deposited by the fiduciary institution in one or more 
insured depository institutions to the credit of the depository 
institution as fiduciary, without allocation of specific amounts from a 
particular trust estate to an account in such institution(s), the 
percentage interest of that trust estate in the unallocated deposits in 
any institution in default is the same as that trust estate's percentage 
interest in the entire commingled investment pool.
    (c) Limitation on applicability. This section shall not apply to 
deposits of trust funds belonging to a trust which is classified as a 
corporation under Sec. 330.9(b) of this part.
[55 FR 20122, May 15, 1990, as amended at 58 FR 29963, May 25, 1993; 60 
FR 7710, Feb. 9, 1995]



Sec. 330.11  Irrevocable trust accounts.

    (a) General rule. Funds representing the non-contingent trust 
interest(s) of a beneficiary deposited into one or more deposit accounts 
established pursuant to one or more irrevocable trust agreements created 
by the same settlor(s) (grantor(s)) shall be added together and insured 
up to $100,000 in the aggregate. Such insurance coverage shall be 
separate from the coverage provided for other accounts maintained by the 
settlor(s), trustee(s) or beneficiary(ies) of the irrevocable trust(s) 
at the same insured depository institution. Each trust interest in any 
irrevocable trust established by two or more settlors shall be deemed to 
be derived from each settlor pro rata to his or her contribution to the 
trust.
    (b) Treatment of contingent trust interests. In the case of any 
trust in which certain trust interests do not qualify as non-contingent 
trust interests, the funds representing those interests shall be added 
together and insured up to $100,000 in the aggregate. Such insurance 
coverage shall be in addition to the coverage provided for the funds

[[Page 230]]

representing non-contingent trust interests which are insured pursuant 
to paragraph (a) of this section.
    (c) Definitions of trust interest and non-contingent trust interest. 
For the purposes of this section:
    (1) The term trust interest means the interest of a beneficiary in 
an irrevocable express trust (other than an employee benefit plan) 
created either by written trust instrument or by statute, but does not 
include any interest retained by the settlor.
    (2) The term non-contingent trust interest means a trust interest 
capable of determination without evaluation of contingencies except for 
those covered by the present worth tables and rules of calculation for 
their use set forth in Sec. 20.2031-7 of the Federal Estate Tax 
Regulations (26 CFR 20.2031-7) or any similar present worth or life 
expectancy tables which may be adopted by the Internal Revenue Service.
    (d) Commingled accounts of bankruptcy trustees. Whenever a 
bankruptcy trustee appointed under Title 11 of the United States Code 
commingles the funds of various bankruptcy estates in the same account 
at an insured depository institution, the funds of each Title 11 
bankruptcy estate will be added together and insured for up to $100,000, 
separately from the funds of any other such estate.
[55 FR 20122, May 15, 1990, as amended at 60 FR 7710, Feb. 9, 1995]



Sec. 330.12  Retirement and other employee benefit plan accounts.

    (a) ``Pass-through'' insurance. Except as provided in paragraph (b) 
of this section, any deposits of an employee benefit plan or of any 
eligible deferred compensation plan described in section 457 of the 
Internal Revenue Code of 1986 (26 U.S.C. 457) in an insured depository 
institution shall be insured on a ``pass-through'' basis, in the amount 
of up to $100,000 for the non-contingent interest of each plan 
participant, provided that the FDIC's recordkeeping requirements, as 
outlined in Sec. 330.4, are satisfied.
    (b) Exception. ``Pass-through'' insurance shall not be provided 
pursuant to paragraph (a) of this section with respect to any deposit 
accepted by an insured depository institution which, at the time the 
deposit is accepted, may not accept brokered deposits pursuant to 
section 29 of the Act unless, at the time the deposit is accepted:
    (1) The institution meets each applicable capital standard; and
    (2) The depositor receives a written statement from the institution 
indicating that such deposits are eligible for insurance coverage on a 
``pass-through'' basis.
    (c) Aggregation--(1) Multiple plans. Funds representing the non-
contingent interests of a beneficiary in an employee benefit plan, or 
eligible deferred compensation plan described in section 457 of the 
Internal Revenue Code of 1986, which are deposited in one or more 
deposit accounts shall be aggregated with any other deposited funds 
representing such interests of the same beneficiary in other employee 
benefit plans, or eligible deferred compensation plans described in 
section 457 of the Internal Revenue Code of 1986, established by the 
same employer or employee organization.
    (2) Certain retirement accounts. (i) Deposits in an insured 
depository institution made in connection with the following types of 
retirement plans shall be aggregated and insured in the amount of up to 
$100,000 per participant:

    (A) Any individual retirement account described in section 408(a) of 
the Internal Revenue Code of 1986 (26 U.S.C. 408(a));
    (B) Any eligible deferred compensation plan described in section 457 
of the Internal Revenue Code of 1986; and
    (C) Any individual account plan defined in section 3(34) of the 
Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1002) and any 
plan described in section 401(d) of the Internal Revenue Code of 1986 
(26 U.S.C. 401(d)), to the extent that participants and beneficiaries 
under such plans have the right to direct the investment of assets held 
in individual accounts maintained on their behalf by the plans.

    (ii) The provisions of this paragraph (c) shall not apply with 
respect to the deposits of any employee benefit plan, or eligible 
deferred compensation plan described in section 457 of the Internal 
Revenue Code of 1986, which is not entitled to ``pass-through'' 
insurance pursuant to paragraph (b) of this section. Such deposits shall 
be aggregated and

[[Page 231]]

insured in the amount of $100,000 per-plan.
    (d) Determination of interests--(1) Definded contribution plans. The 
value of an employee's non-contingent interest in a defined contribution 
plan shall be deemed to be the employee's account balance as of the date 
of default of the insured depository institution, regardless of whether 
said amount was derived, in whole or in part, from contributions of the 
employee and/or the employer to the account.
    (2) Defined benefit plans. The value of an employee's non-contingent 
interest in a defined benefit plan shall be deemed to be the present 
value of the employee's interest in the plan, evaluated in accordance 
with the method of calculation ordinarily used under such plan, as of 
the date of default of the insured depository institution.
    (3) Amounts taken into account. For the purposes of applying the 
rule under paragraph (c)(2) of this section, only the present vested and 
ascertainable interests of each participant in an employee benefit plan 
or ``457 Plan,'' excluding any remainder interest created by, or as a 
result of, the plan, shall be taken into account in determining the 
amount of deposit insurance accorded to the deposits of the plan.
    (e) Treatment of contingent interests. In the event that employee' 
interests in an employees benefit plan are not capable of evaluation in 
accordance with the rules contained in this section, or an account 
established for any such plan includes amounts for future participants 
in the plan, payment by the FDIC with respect to all such interests 
shall not exceed $100,000 in the aggregate.
    (f) Overfunded pension plan deposits. Any portion(s) of an employee 
benefit plan's deposits which are not attributable to the interests of 
the beneficiaries under the plan shall be deemed attributable to the 
overfunded portion of the plan's assets and shall be aggregated and 
insured up to $100,000, separately from any other deposits.
    (g) Definitions of ``depositor'', ``employee benefit plan'', 
``employee organizations'' and ``non-contingent interest''. Except as 
otherwise indicated in this section, for purposes of this section:
    (1) The term depositor means the person(s) administering or managing 
an employee benefit plan.
    (2) The term employee benefit plan has the same meaning given to 
such term in section 3(3) of the Employee Retirement Income Security Act 
of 1974 (ERISA) (29 U.S.C. 1002) and includes any plan described in 
section 401(d) of the Internal Revenue Code of 1986.
    (3) The term employee organization means any labor union, 
organization, employee representation committee, association, group, or 
plan, in which employees participate and which exists for the purpose, 
in whole or in part, of dealing with employers concerning an employee 
benefit plan, or other matters incidental to employment relationships; 
or any employees' beneficiary association organized for the purpose, in 
whole or in part, of establishing such a plan.
    (4) The term non-contingent interest means an interest capable of 
determination without evaluation of contingencies except for those 
covered by the present worth tables and rules of calculation for their 
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
(26 CFR 20.2031-7) or any similar present worth or life expectancy 
tables as may be published by the Internal Revenue Service.
    (h) Disclosure of capital status--(1) Disclosure upon request. An 
insured depository institution shall, upon request, provide a clear and 
conspicuous written notice to any depositor of employee benefit plan 
funds of the institution's leverage ratio, Tier 1 risk-based capital 
ratio, total risk-based capital ratio and prompt corrective action (PCA) 
capital category, as defined in the regulations of the institution's 
primary federal regulator, and whether, in the depository institution's 
judgment, employee benefit plan deposits made with the institution, at 
the time the information is requested, would be eligible for ``pass-
through'' insurance coverage under paragraphs (a) and (b) of this 
section. Such notice shall be provided within five business days after 
receipt of the request for disclosure.
    (2) Disclosure upon opening of an account. (i) An insured depository 
institution shall, upon the opening of any account comprised of employee 
benefit

[[Page 232]]

plan funds, provide a clear and conspicuous written notice to the 
depositor consisting of: an accurate explanation of the requirements for 
pass-through deposit insurance coverage provided in paragraphs (a) and 
(b) of this section; the institution's PCA capital category; and a 
determination of whether or not, in the depository institution's 
judgment, the funds being deposited are eligible for ``pass-through'' 
insurance coverage.
    (ii) An insured depository institution shall provide the notice 
required in paragraph (h)(2)(i) of this section to depositors who have 
employee benefit plan deposits with the insured depository institution 
on July 1, 1995 that, at the time such deposits were placed with the 
insured depository institution, were not eligible for pass-through 
insurance coverage under paragraphs (a) and (b) of this section. The 
notice shall be provided to the applicable depositors within ten 
business days after July 1, 1995.
    (3) Disclosure when ``pass-through'' coverage is no longer 
available. Whenever new, rolled-over or renewed employee benefit plan 
deposits placed with an insured depository institution would no longer 
be eligible for ``pass-through'' insurance coverage, the institution 
shall provide a clear and conspicuous written notice to all existing 
depositors of employee benefit plan funds of its new PCA capital 
category, if applicable, and that new, rolled-over or renewed deposits 
of employee benefit plan funds made after the applicable date shall not 
be eligible for ``pass-through'' insurance coverage under paragraphs (a) 
and (b) of this section. Such written notice shall be provided within 10 
business days after the institution receives notice or is deemed to have 
notice that it is no longer permitted to accept brokered deposits under 
section 29 of the Act and the institution no longer meets the 
requirements in paragraph (b) of this section.
    (4) Definition of ``employee benefit plan''. For purposes of this 
paragraph, the term employee benefit plan has the same meaning as 
provided under paragraph (g)(2) of this section but also includes any 
eligible deferred compensation plans described in section 457 of the 
Internal Revenue Code of 1986 (26 U.S.C. 457).
[58 FR 29964, May 25, 1993; 58 FR 40688, July 29, 1993; 60 FR 7710, Feb. 
9, 1995]



Sec. 330.13  Bank investment contracts.

    (a) General rule. Any liability arising under any insured depository 
institution investment contract between any insured depository 
institution and any employee benefit plan which expressly permits 
benefit-responsive withdrawals or transfers shall not be treated as an 
``insured deposit'' and thus shall not be entitled to deposit insurance.
    (b) Definitions. For purposes of paragraph (a) of this section:
    (1) Benefit-responsive withdrawals or transfers means any withdrawal 
or transfer of funds (consisting of any portion of the principal and any 
interest credited at a rate guaranteed by the insured depository 
institution investment contract) during the period in which any 
guaranteed rate is in effect, without substantial penalty or adjustment, 
to pay benefits provided by the employee benefit plan or to permit a 
plan participant or beneficiary to redirect the investment of his or her 
account balance. This term excludes penalty-free withdrawals from 
employee benefit plan deposits which are based on penalty-free 
withdrawals of funds from an employee benefit plan that are permitted or 
required pursuant to the Employee Retirement Income Security Act of 1974 
or the Internal Revenue Code.
    (2) Employee benefit plan: (i) Has the meaning given to such term in 
section 3(3) of the Employee Retirement Income Security Act of 1974 
(ERISA) (29 U.S.C. 1002); and
    (ii) Includes any plan described in section 401(d) of the Internal 
Revenue Code of 1986 (26 U.S.C. 401(d)); and
    (iii) Excludes any deferred compensation plan described in section 
457 of the Internal Revenue Code of 1986 (26 U.S.C. 457).
    (3) Substantial penalty or adjustment means, in the case of a 
deposit having an original term which exceeds one year, all interest 
earned on the amount withdrawn from the date of deposit or for six 
months, whichever is less; or, in the case of a deposit having an 
original term of one year or less, all interest

[[Page 233]]

earned on the amount withdrawn from the date of deposit or three months, 
whichever is less.
[58 FR 29964, May 25, 1993]



Sec. 330.14  Public unit accounts.

    (a) Extent of insurance coverage--(1) Accounts of the United States. 
Each official custodian of funds of the United States lawfully 
depositing such funds in an insured depository institution shall be 
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.
    (2) Accounts of a state, county, municipality or political 
subdivision. Each official custodian of funds of any state of the United 
States, or any county, municipality, or political subdivision thereof, 
lawfully depositing such funds in an insured depository institution in 
the state comprising the public unit or wherein the public unit is 
located (including any insured depository institution having a branch in 
said state) shall be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.

In addition, each such official custodian depositing such funds in an 
insured depository institution outside of the state comprising the 
public unit or wherein the public unit is located, shall be insured in 
the amount of up to $100,000 in the aggregate for all deposits, 
regardless of whether they are time, savings or demand deposits.
    (3) Accounts of the District of Columbia. Each official custodian of 
funds of the District of Columbia lawfully depositing such funds in an 
insured depository institution in the District of Columbia (including an 
insured depository institution having a branch in the District of 
Columbia) shall be separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.

In addition, each such official custodian depositing such funds in an 
insured depository institution outside of the District of Columbia shall 
be insured in the amount of up to $100,000 in the aggregate for all 
deposits, regardless of whether they are time, savings or demand 
deposits.
    (4) Accounts of the Commonwealth of Puerto Rico and other government 
possessions and territories. Each official custodian of funds of the 
Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, the 
Trust Territory of the Pacific Islands, Guam, or The Commonwealth of the 
Northern Mariana Islands, or of any county, municipality, or political 
subdivision thereof lawfully depositing such funds in an insured 
depository institution in Puerto Rico, the Virgin Islands, American 
Samoa, the Trust Territory of the Pacific Islands, Guam, or The 
Commonwealth of the Northern Mariana Islands, respectively, shall be 
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.

In addition, each such official custodian depositing such funds in an 
insured depository institution outside of the commonwealth, possession 
or territory comprising the public unit or wherein the public unit is 
located, shall be insured in the amount of up to $100,000 in the 
aggregate for all deposits, regardless of whether they are time, savings 
or demand deposits.
    (5) Accounts of an Indian tribe. Each official custodian of funds of 
an Indian tribe (as defined in 25 U.S.C. 1452(c)), including an agency 
thereof having official custody of tribal