[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-10392] [[Page Unknown]] [Federal Register: May 2, 1994] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 5 [Docket No. 94-06] RIN 1557-AB27 Rules, Policies and Procedures for Corporate Activities: Merger, Consolidation, Purchase and Assumption AGENCY: Comptroller of the Currency, Treasury. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Office of the Comptroller of the Currency (OCC) is adopting final procedures for national banks to follow in merging or consolidating with Federal savings associations. This action is necessary because the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), which authorized national bank mergers and consolidations with Federal Savings associations, did not establish procedures for such transactions. To the extent appropriate, the procedures imposed here parallel the statutory and regulatory procedures governing mergers and consolidations between national banks and state-chartered financial institutions. EFFECTIVE DATE: This rule is effective on May 2, 1994. FOR FURTHER INFORMATION CONTACT: Jerome L. Edelstein, Senior Counsel, Corporate Organization and Resolutions Division, (202) 874-5300; Nancy Cody, National Bank Examiner/Senior Analyst, Bank Organization and Structure, (202) 874-5060, 250 E St. SW., Washington, DC 20219. SUPPLEMENTARY INFORMATION: Background Sections 501(a) and 502(b) of title V of the FDICIA, Public Law 102-242, amended the National Bank Act, at 12 U.S.C. 215c, and the Federal Deposit Insurance Corporation Act (FDI Act), at 12 U.S.C. 1815(d)(3), to authorize national banks, subject to certain limitations, to acquire or be acquired by Federal savings associations. Acquisitions, within the meaning of title V, include mergers and consolidations in addition to purchase and assumption transactions. Title V clearly authorizes national banks to merge or consolidate with Federal savings associations if the transaction meets the requirements set forth in title V. The authority to merge or consolidate with Federal savings associations, granted in Title V of FDICIA, supplements long-standing national bank authority to merge or consolidate with other national banks or with state chartered financial institutions, including savings associations. National banks also have had the authority to engage in purchase and assumption transactions with both Federal and state chartered depository institutions, including savings associations. The existing statutes permitting national bank consolidations and mergers provide procedures for such activities including, under Federal law at 12 U.S.C. 214(a), 214a, 215, and 215a, specific procedures for shareholder approval and dissenter's rights for mergers and consolidations between national banks and with state chartered banking institutions. The FDICIA did not address such matters for mergers and consolidations between national banks and Federal savings associations. Thus, there is significant uncertainty about procedures for national banks merging or consolidating with Federal savings associations. Purpose To address the uncertainty, the OCC, on November 3, 1992, published an interim rule with request for comment. That rule established procedures for national banks to merge or consolidate with Federal savings associations (57 FR 49639). The interim rule, to the extent appropriate, applied the statutory procedures for mergers and consolidations between national banks and with state-chartered banking institutions. The preamble to the interim rule as published at 57 FR 49639-49642 provided a complete explanation. In summary, these procedures addressed: --Approval by the board of directors of each institution proposing to engage in such a merger or consolidation; --Notice to and approval by the shareholders of such institutions; --Rights of shareholders who dissent from the proposed transaction and procedures for valuing their shares; and --Succession of the resulting institution to all property and rights of the consolidating or merging institutions. In addition, the interim rule made various technical changes to 12 CFR Sec. 5.33 governing merger, consolidation, and purchase and assumption transactions by national banks. These changes make it clear that the provisions also apply to mergers and consolidations between national banks and Federal savings associations. These provisions include: --The requirement that all participating depository institutions file relevant proxy material or information with the OCC; --The application of the OCC's policy on name changes when the resulting bank selects a new title; and --The OCC's option to examine any institution proposing to merge into or be consolidated with a national bank and to charge the applicants a fee for the examination. Another change clarifies the authority of national banks to temporarily retain nonconforming assets acquired in a merger or consolidation with another depository institution. The interim rule also provides that the OCC has no approval authority over a merger or consolidation transaction where the resulting institution is not a national bank. It requires a national bank to notify the OCC when it intends to be merged or consolidated into a depository institution with a different type of charter. This final rule, adopted by the OCC pursuant to its authority under the National Bank Act, including 12 U.S.C. 93a and 215c, finalizes the interim rule. There is one change between the final rule and the interim rule. The change, which addresses a national bank's retention of nonconforming assets acquired in a merger or consolidation with another banking institution, is discussed below. Comments on the Interim Rule The OCC received four comment letters on the interim rule--three filed on behalf of banks and one filed by the Federal Home Loan Bank of Atlanta (FHLB). The comment filed by the FHLB concerned Sec. 5.33(b)(8) of the interim rule, which states that the OCC may permit a national bank to acquire nonconforming assets through merger (or consolidation) and retain and carry those assets until they can be divested. The FHLB was concerned that FHLB stock would have to be divested although the resulting national bank intended to become an FHLB member. Subject to OCC approval, a national bank may retain FHLB stock while it takes actions necessary to become an FHLB member. The interim rule did not require divestiture of FHLB stock under these circumstances. Nevertheless, the OCC agrees that there could be confusion regarding this requirement. Therefore, in this final rule, the OCC has revised Sec. 5.33(b)(8) to reflect that the OCC may approve a national bank to hold nonconforming assets for a reasonable time until such assets can be made to conform. One bank commenter was concerned that the interim rule unintentionally required shareholder approval for branch purchases and sales between national banks and Federal savings associations. The commenter's concern arises because Sec. 5.33(b)(1) of the interim rule indicates the term merger refers to a merger, consolidation, or purchase and assumption, unless the context indicates otherwise. The provision addressing shareholder approval requirements, 12 CFR 5.33(c), however, specifically refers to mergers and consolidations, thus in context, clearly indicating that the general definition of the term ``merger'' is inapplicable and that the shareholder approval provision does not apply to branch purchases and sales. The OCC believes that Sec. 5.33 (b)(1) and (c) are sufficiently clear and, therefore, is adopting these provisions without change. The two other bank commenters raised issues beyond the scope of this rulemaking. One bank commenter dealt with the time period for processing applications for mergers, consolidations, and purchase and assumption transactions between national banks and various types of banking institutions in light of certain provisions of the FDICIA. The interim rule specifically did not address the scope or applicability of the statutory timeframes; consequently, the OCC does not believe that it is appropriate to address those issues in this final rule. The other bank commenter dealt with procedures to affect mergers and consolidations between national banks and mutual savings associations. As stated, the purpose of the interim rule was simply to apply existing statutory and regulatory procedures governing certain national bank mergers and consolidations to mergers and consolidations between national banks and Federal savings associations. The OCC will continue to process applications where mutual savings associations convert to the stock form of organization and subsequently merge or consolidate with, or convert into a national bank. Reasons for Immediate Effective Date Because statutory law currently authorizes mergers and consolidations between national banks and Federal savings associations, and because the procedures in this final rule are already in effect, the OCC finds that a delay in implementation is unnecessary. Moreover, the OCC has made only one change from the interim rule. That change, regarding retention of nonconforming assets, relieves a restriction. Thus, this final rule is being adopted effective immediately. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act, the Comptroller of the Currency certifies that this final rule will not have a significant economic impact on a substantial number of small entities. This final rule imposes only minimal costs on national banks, regardless of size. Executive Order 12866 It has been has determined that this document is not a significant regulatory action as defined in Executive Order 12866. List of Subjects in 12 CFR Part 5 Administrative practice and procedure, National banks, Reporting and recordkeeping requirements, Securities. Authority and Issuance Accordingly, the interim rule amending 12 CFR part 5, published at 57 FR 49639-49644 on November 3, 1992, is adopted as a final rule with the following change: PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES 1. The authority citation for part 5 continues to read as follows: Authority: 12 U.S.C. 1 et seq., 93a. 2. In Sec. 5.33, paragraph (b)(8) is revised to read as follows: Sec. 5.33 Merger, consolidation, purchase and assumption. * * * * * (b) * * * (8) Nonconforming assets. A national bank seeking to acquire and retain nonconforming assets in a merger shall identify those assets as required by the OCC's merger application. OCC, in its discretion, may permit the bank to retain the assets for a reasonable time to allow it to dispose of or conform the assets. Retention may be subject to conditions and an OCC determination of the carrying value of the retained assets. * * * * * Dated: April 25, 1994. Eugene A. Ludwig, Comptroller of the Currency. [FR Doc. 94-10392 Filed 4-29-94; 8:45 am] BILLING CODE 4810-33-P