[Federal Register Volume 81, Number 39 (Monday, February 29, 2016)]
[Rules and Regulations]
[Pages 10063-10070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03877]


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DEPARTMENT OF TREASURY

Office of the Comptroller of the Currency

12 CFR Part 4

[Docket ID OCC-2016-0001]
RIN 1557-AE01

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 211

[Docket No. R-1531]
RIN 7100-AE45

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 337, 347, and 390

RIN 3064-AE42


Expanded Examination Cycle for Certain Small Insured Depository 
Institutions and U.S. Branches and Agencies of Foreign Banks

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury; 
Board of Governors of the Federal Reserve System (Board); and Federal 
Deposit Insurance Corporation (FDIC).

ACTION: Joint interim final rules and request for comments.

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SUMMARY: The OCC, Board, and FDIC (collectively, the agencies) are 
jointly issuing and requesting public comment on interim final rules to 
implement section 83001 of the Fixing America's Surface Transportation 
Act (FAST Act), which was enacted on December 4, 2015. Section 83001 of 
the FAST Act permits the agencies to examine qualifying insured 
depository institutions with less than $1 billion in total assets no 
less than once during each 18-month period. Prior to enactment of the 
FAST Act, only qualifying insured depository institutions with less 
than $500 million in total assets were eligible for an 18-month on-site 
examination cycle. The interim final rules generally would allow well 
capitalized and well managed institutions with less than $1 billion in 
total assets to benefit from the extended 18-month examination 
schedule. In addition, the interim final rules make parallel changes to 
the agencies' regulations governing the on-site examination cycle for 
U.S. branches and agencies of foreign banks, consistent with the 
International Banking Act of 1978. Finally, the FDIC is integrating its 
regulations regarding the frequency of safety and soundness 
examinations for State nonmember banks and State savings associations.

[[Page 10064]]


DATES: These interim final rules are effective on February 29, 2016. 
Comments on the rules must be received by April 29, 2016.

ADDRESSES:
    OCC: Commenters are encouraged to submit comments by the Federal 
eRulemaking Portal or email, if possible. Please use the title 
``Expanded Examination Cycle for Certain Small Insured Depository 
Institutions and U.S. Branches and Agencies of Foreign Banks'' to 
facilitate the organization and distribution of the comments. You may 
submit comments by any of the following methods:
     Federal eRulemaking Portal--``regulations.gov'': Go to 
http://www.regulations.gov. Enter ``Docket ID OCC-2016-0001'' in the 
Search Box and click ``Search.'' Results can be filtered using the 
filtering tools on the left side of the screen. Click on ``Comment 
Now'' to submit public comments. Click on the ``Help'' tab on the 
Regulations.gov home page to get information on using Regulations.gov, 
including instructions for submitting public comments.
     Email: [email protected].
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Mail Stop 9W-11, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
Mail Stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2016-0001'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide, such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov. Enter ``Docket ID OCC-2016-0001'' in the Search 
box and click ``Search.'' Comments can be filtered by Agency using the 
filtering tools on the left side of the screen. Click on the ``Help'' 
tab on the Regulations.gov home page to get information on using 
Regulations.gov, including instructions for viewing public comments, 
viewing other supporting and related materials, and viewing the docket 
after the close of the comment period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC. 
For security reasons, the OCC requires visitors to make an appointment 
to inspect comments. You may do so by calling (202) 649-6700 or, for 
persons who are deaf or hard of hearing, TTY, (202) 649-5597. Upon 
arrival, visitors will be required to present a valid government-issued 
photo identification and to submit to security screening in order to 
inspect and photocopy comments.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.
    Board: You may submit comments, identified by Docket No. R-1531, by 
any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include docket 
number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Street NW.) between 9:00 a.m. and 5:00 p.m. on weekdays.
    FDIC: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web site: http://www.FDIC.gov/regulations/laws/federal/.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.
     Hand Delivered/Courier: The guard station at the rear of 
the 550 17th Street Building NW. (located on F Street), on business 
days between 7:00 a.m. and 5:00 p.m.
     Email: [email protected].
    Instructions: Comments submitted must include ``FDIC'' and ``RIN 
3064-AE42.'' Comments received will be posted without change to http://www.FDIC.gov/regulations/laws/federal/, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT:
    OCC: Deborah Katz, Assistant Director, or Melissa J. Lisenbee, 
Attorney, Legislative and Regulatory Activities Division, (202) 649-
5490; Scott Schainost, Midsize and Community Bank Supervision Liaison, 
Midsize and Community Bank Supervision, (202) 649-8173.
    Board: Division of Banking Supervision and Regulation--Richard 
Naylor, Associate Director, (202) 728-5854; Richard Watkins, Deputy 
Associate Director, (202) 452-3421; Virginia Gibbs, Manager, (202) 452-
2521; or Alexander Kobulsky, Supervisory Financial Analyst, (202) 452-
2031; and Legal Division--Laurie Schaffer, Associate General Counsel, 
(202) 452-2277; Brian Chernoff, Senior Attorney, (202) 452-2952; or 
Mary Watkins, Attorney, (202) 452-3722.
    FDIC: Thomas F. Lyons, Chief, Policy and Program Development, (202) 
898-6850, Karen J. Currie, Senior Examination Specialist, (202) 898-
3981, Timothy R. Millette, Program Specialist, Policy Branch Division 
of Risk Management and Supervision; Mark A. Mellon, Counsel, (202) 898-
3884 for revisions to 12 CFR part 337; Rodney D. Ray, Counsel, (202) 
898-3556 for revisions to 12 CFR part 347; Suzanne J. Dawley, Senior 
Attorney, (202) 898-6509 for revisions to 12 CFR part 390.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 10(d) of the Federal Deposit Insurance Act (FDI Act) 
generally requires the appropriate Federal banking agency for an 
insured depository institution (IDI) to conduct a full-scope, on-site 
examination of the institution at least once during each 12-month 
period.\1\ Prior to enactment of

[[Page 10065]]

section 83001 of the FAST Act,\2\ section 10(d)(4) of the FDI Act 
authorized the appropriate Federal banking agency to extend the on-site 
examination cycle for an IDI to at least once during an 18-month period 
if the IDI (1) had total assets of less than $500 million; (2) was well 
capitalized (as defined in 12 U.S.C.1831o (prompt corrective action)); 
(3) was found, at its most recent examination, to be well managed \3\ 
and to have a composite condition of ``outstanding'' or, in the case of 
an institution that has total assets of not more than $100 million, 
``outstanding'' or ``good;'' (4) was not subject to a formal 
enforcement proceeding or order by the FDIC or its appropriate Federal 
banking agency; and (5) had not undergone a change in control during 
the previous 12-month period in which a full-scope, on-site examination 
otherwise would have been required. Section 10(d)(10) of the FDI Act 
further gave the agencies discretionary authority to raise the size 
limit for otherwise qualifying IDIs with an ``outstanding'' or ``good'' 
composite rating from $100 million to an amount not to exceed $500 
million in total assets if the agencies determined that the higher 
limit would be consistent with the principles of safety and 
soundness.\4\
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    \1\ 12 U.S.C. 1820(d). Section 10(d) of the FDI Act was added by 
section 111 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991.
    \2\ Public Law 114-94, 129 Stat. 1312 (2015).
    \3\ Depository institutions are evaluated under the Uniform 
Financial Institutions Rating System (commonly referred to as 
``CAMELS''). CAMELS is an acronym that is drawn from the first 
letters of the individual components of the rating system: Capital 
adequacy, Asset quality, Management, Earnings, Liquidity, and 
Sensitivity to market risk. CAMELS ratings of ``1'' and ``2'' 
correspond with ratings of ``outstanding'' and ``good.'' In addition 
to having a CAMELS composite rating of ``1'' or ``2,'' an IDI is 
considered to be ``well managed'' for the purposes of section 10(d) 
of the FDI Act only if the IDI also received a rating of ``1'' or 
``2'' for the management component of the CAMELS rating at its most 
recent examination. See 72 FR 17798 (Apr. 10, 2007).
    \4\ 12 U.S.C. 1820(d)(10).
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    The Board and the FDIC, as the appropriate Federal banking agencies 
for State-chartered insured banks and savings associations, are 
permitted to conduct on-site examinations of such IDIs on alternating 
12-month or 18-month periods with the institution's State supervisor, 
if the Board or FDIC, as appropriate, determines that the alternating 
examination conducted by the State carries out the purposes of section 
10(d) of the FDI Act.\5\
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    \5\ 12 U.S.C. 1820(d)(3).
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    In addition, section 7(c)(1)(C) of the International Banking Act 
(IBA) provides that a Federal or a State branch or agency of a foreign 
bank shall be subject to on-site examination by its appropriate Federal 
banking agency or State bank supervisor as frequently as a national or 
State bank would be subject to such an examination by the agency.\6\ 
The agencies previously adopted regulations to implement the 
examination cycle requirements of section 10(d) of the FDI Act and 
section 7(c)(1)(C) of the IBA, including the extended 18-month 
examination cycle available to qualifying small institutions and U.S. 
branches and agencies of foreign banks.\7\ The agencies have also 
exercised discretion under section 10(d)(10) of the FDI Act, first, in 
1997 to extend the 18-month examination cycle for otherwise qualifying 
institutions with ``good'' composite ratings \8\ with total assets of 
$250 million or less, and again in 2007 for such institutions with 
total assets of $500 million or less.\9\
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    \6\ 12 U.S.C. 3105(c)(1)(C).
    \7\ See 12 CFR 4.6 and 4.7 (OCC), 12 CFR 208.64 and 211.26 
(Board), 12 CFR 337.12, 390.351 and 347.211 (FDIC).
    \8\ Corresponding to a CAMELS or Risk management, Operational 
controls, Compliance, and Asset quality (ROCA) rating of ``2.''
    \9\ See 62 FR 6449 (Feb. 12, 1997) (interim final rule); see 
also 63 FR 16377 (Apr. 2, 1998) (final rule); see also 72 FR 17798 
(Apr. 10, 2007) (interim final rule); see also 72 FR 54347 (Sept. 
25, 2007) (final rule).
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    Section 83001 of the FAST Act, effective on December 4, 2015, 
amended section 10(d) of the FDI Act to raise, from $500 million to $1 
billion, the total asset threshold below which an agency may apply an 
18-month (rather than a 12-month) on-site examination cycle for IDIs 
with ``outstanding'' composite ratings, and to raise, from not more 
than $100 million to not more than $200 million, the total asset 
threshold below which an agency may apply an 18-month examination cycle 
to an institution with an ``outstanding'' or ``good'' composite 
rating.\10\ Section 83001 also amended section 10(d)(10) of the FDI Act 
to authorize the appropriate Federal banking agency to increase, by 
regulation, the maximum amount limitation for IDIs with ``outstanding'' 
or ``good'' composite ratings from not more than $200 million to not 
more than $1 billion if the appropriate Federal banking agency 
determines that the higher amount would be consistent with the 
principles of safety and soundness for IDIs.\11\
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    \10\ Public Law 114-94, 129 Stat. 1312 (2015).
    \11\ Id.
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    These FAST Act amendments reduce regulatory burdens on small, well 
capitalized, and well managed institutions and allow the agencies to 
better focus their supervisory resources on those IDIs and U.S. 
branches and agencies of foreign banks that may present capital, 
managerial, or other issues of supervisory concern.

II. Description of the Interim Final Rules

    The agencies are adopting interim final rules to implement the FAST 
Act amendments to section 10(d) of the FDI Act. In particular, the 
agencies are amending their respective rules to raise, from $500 
million to $1 billion, the total asset threshold below which an 
institution that meets the criteria in section 10(d) and the agencies' 
rules may qualify for an 18-month, on-site examination cycle. In 
addition, as authorized by the FAST Act, the agencies have determined 
that it is consistent with the principles of safety and soundness to 
permit institutions with total assets of $200 million or greater and 
not exceeding $1 billion that receive a composite CAMELS or ROCA rating 
of ``1'' or ``2,'' and that meet the other qualifying criteria set 
forth in section 10(d) and the agencies' rules to qualify for an 18-
month examination cycle. The FDIC analyzed the frequency with which 
institutions rated a composite CAMELS rating of ``1'' or ``2'' failed 
within five years, versus the frequency with which institutions rated a 
composite CAMELS rating of ``3,'' ``4,'' or ``5'' failed within five 
years. FDIC analysis indicates that between 1985 and 2010 (using bank 
failure data through 2015),\12\ FDIC-insured depository institutions 
with assets less than $1 billion and a composite CAMELS rating of ``1'' 
or ``2'' had a five-year failure rate that was one-seventh as high as 
institutions with a CAMELS rating of ``3,'' ``4,'' or ``5.'' Moreover, 
the relationship between failure rates in the two ratings groups does 
not meaningfully change when the analysis is restricted to institutions 
with assets between $200 million and $500 million compared to 
institutions with assets between $500 million to $1 billion. This 
analysis suggests that extending the examination cycle for well-rated 
institutions with $500 million to $1 billion in assets by an additional 
six months, combined with the agencies' off-site monitoring activities 
and ability to examine an institution more frequently as necessary or 
appropriate, will not negatively affect the safe and sound operations 
of qualifying institutions or the ability of the agencies to 
effectively supervise and protect the safety and soundness of 
institutions with total assets of less than $1

[[Page 10066]]

billion.\13\ Furthermore, the agencies note that, in order to qualify 
for an 18-month examination cycle, any institution with total assets of 
less than $1 billion--including one with a CAMELS composite rating of 
``2''--must meet the other capital, managerial, and supervisory 
criteria set forth in section 10(d).
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    \12\ A list of failed institutions can be found on the FDIC's 
Web site at https://www.fdic.gov/bank/individual/failed/banklist.html.
    \13\ The agencies continue to reserve the right in their 
regulations to examine an IDI or U.S. branch or agency of a foreign 
bank more frequently than is required by the FDI Act or IBA. See 12 
CFR 4.6(c) and 4.7(c) (OCC), 12 CFR 208.64(c) and 211.26(c)(3) 
(Board), 12 CFR 337.12(c), 390.351(c), and 347.211(c) (FDIC).
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    Consistent with section 7(c)(1)(C) of the IBA, the agencies also 
are making conforming changes to their regulations governing the on-
site examination cycle for the U.S. branches and agencies of foreign 
banks. The interim final rules permit a U.S. branch or agency of a 
foreign bank with total assets of less than $1 billion to qualify for 
an 18-month examination cycle if the U.S. branch or agency of a foreign 
bank received a composite ROCA rating of ``1'' or ``2'' at its most 
recent examination and meets the other applicable criteria.
    The agencies estimate that the interim final rules will increase 
the number of institutions that may qualify for an extended 18-month 
examination cycle by approximately 617 institutions (371 of which are 
supervised by the FDIC, 142 by the OCC, and 104 by the Board), bringing 
the total number to 4,987 IDIs.\14\ Approximately 89 U.S. branches and 
agencies of foreign banks would be eligible for the extended 
examination cycle based on the interim final rules, an increase of 26 
(1 of which is supervised by the FDIC, 3 by the OCC, and 22 by the 
Board).\15\
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    \14\ Call report data, Sept. 30, 2015.
    \15\ Id.
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Consistent Treatment for Insured State Savings Associations Regarding 
Examination Frequency

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) provided for a substantial reorganization of the 
regulation of State and Federal savings associations and their holding 
companies.\16\ Beginning July 21, 2011, the powers, duties, and 
functions formerly performed by the Office of Thrift Supervision (OTS) 
were transferred to the FDIC, as to State savings associations, the 
OCC, as to Federal savings associations, and the Board, as to savings 
and loan holding companies. Section 316(b) of the Dodd-Frank Act \17\ 
provides the manner of treatment for all orders, resolutions, 
determinations, regulations, and advisory materials that had been 
issued, made, prescribed, or allowed to become effective by the OTS. 
Section 316(b) provides that if such materials were in effect on the 
day before the transfer date, they continue in effect and are 
enforceable by or against the appropriate successor agency until they 
are modified, terminated, set aside, or superseded in accordance with 
applicable law by such successor agency, by any court of competent 
jurisdiction, or by operation of law.
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    \16\ 12 U.S.C. 5301, et seq.
    \17\ 12 U.S.C. 5414(c).
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    Section 316(c) of the Dodd-Frank Act further directed the FDIC and 
the OCC to consult with one another and to publish a list of the 
continued OTS regulations that will be enforced by the FDIC and the 
OCC, respectively. On June 14, 2011, the FDIC's Board of Directors 
approved a ``List of OTS Regulations to be Enforced by the OCC and the 
FDIC Pursuant to the Dodd-Frank Wall Street Reform and Consumer 
Protection Act.'' This list was published by the FDIC and the OCC as a 
Joint Notice in the Federal Register on July 6, 2011.\18\
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    \18\ 76 FR 39247 (July 6, 2011).
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    Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act \19\ 
granted the OCC rulemaking authority relating to both State and Federal 
savings associations, nothing in the Dodd-Frank Act affected the FDIC's 
existing authority to issue regulations for State savings associations 
under the FDI Act and other laws as the ``appropriate Federal banking 
agency'' or under similar statutory terminology. Section 312(c) of the 
Dodd-Frank Act \20\ amended the definition of ``appropriate Federal 
banking agency'' contained in section 3(q) of the FDI Act \21\ to add 
State savings associations to the list of entities for which the FDIC 
is designated as the ``appropriate Federal banking agency.'' As a 
result, when the FDIC acts as the designated ``appropriate Federal 
banking agency'' (or under similar terminology) for State savings 
associations, as it does here, the FDIC is authorized to issue, modify, 
and rescind regulations involving such associations.
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    \19\ 12 U.S.C. 5412(b)(2)(B)(i)(II).
    \20\ 12 U.S.C. 5412(c).
    \21\ 12 U.S.C. 1813(q).
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    As noted, on June 14, 2011, operating pursuant to this authority, 
the FDIC's Board of Directors reissued and re-designated certain 
transferring regulations of the former OTS. These transferred OTS 
regulations were published as new FDIC regulations in the Federal 
Register on August 5, 2011.\22\ When the FDIC republished the 
transferred OTS regulations as new FDIC regulations, the FDIC 
specifically noted that its staff would evaluate the transferred OTS 
rules and might later recommend incorporating the transferred OTS 
regulations into other FDIC rules, amending them, or rescinding them, 
as appropriate.
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    \22\ 76 FR 47652 (Aug. 5, 2011).
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    Twelve CFR 390.351 implements the FDIC's examination requirements 
for savings associations under the authority of section 4(a) of the 
Home Owners' Loan Act (HOLA),\23\ which provides that the FDIC will 
examine State savings associations for safety and soundness and under 
section 10(d) of the FDI Act, which covers examinations of all 
IDIs.\24\
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    \23\ 12 U.S.C. 1463.
    \24\ This section was redesignated from the former OTS 
regulation at section 563.171 pursuant to the Dodd-Frank Act 
transfer of authority for State savings associations.
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    Section 390.351 requires full-scope, on-site examinations of State 
savings associations at least once each 12-month period and once each 
18-month period for a State savings association with total assets of no 
more than $500 million that is well capitalized; was assigned a CAMELS 
``1'' or ``2'' for management and was rated either a CAMELS composite 
``1'' or ``2'' on its most recent examination; is not currently under a 
formal enforcement proceeding or order by the FDIC; and has not 
undergone a change in control during the preceding 12-month period.
    Section 390.351 is substantively identical to section 337.12 and, 
therefore, redundant to section 337.12. This interim final rule 
rescinds and removes section 390.351. The amendment to section 337.12 
in the interim final rule also reflects the authority of the FDIC under 
section 4(a) of HOLA to provide for the examination and safe and sound 
operation of State savings associations. With this amendment, all FDIC-
supervised institutions, including State savings associations, will be 
subject to the requirements of 12 CFR 337.12.

Effective Date/Request for Comment

    The agencies are issuing the interim final rules without prior 
notice and the opportunity for public comment and the 30-day delayed 
effective date ordinarily prescribed by the Administrative Procedure 
Act (APA).\25\ Pursuant to section 553(b)(B) of the APA, general notice 
and the opportunity for public comment are not required with respect to 
a rulemaking when an ``agency for good cause finds (and incorporates 
the finding and a brief statement of reasons therefor in the rules 
issued) that notice and public procedure thereon are

[[Page 10067]]

impracticable, unnecessary, or contrary to the public interest.'' \26\ 
The interim final rules implement the provisions of section 83001 of 
the FAST Act, which became effective on December 4, 2015. The interim 
final rules adopt without change the statutory increase in the total 
asset ceiling for the 18-month examination cycle for CAMELS and ROCA 1-
rated institutions and also make available, pursuant to the statutory 
authority, the 18-month examination cycle for CAMELS and ROCA 2-rated 
institutions. Consistent with the underlying statute, the interim final 
rules would allow well capitalized and well managed institutions with 
under $1 billion in total assets to benefit from the statutorily 
extended 18-month examination schedule.
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    \25\ 5 U.S.C. 553.
    \26\ 5 U.S.C. 553(b)(B).
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    The agencies believe that the public interest is best served by 
implementing the statutorily amended thresholds as soon as possible. 
Immediate implementation would reduce regulatory burdens on small, well 
capitalized, and well managed institutions, while also allowing the 
agencies to better focus their supervisory resources on those 
institutions that may present capital, managerial, or other issues of 
supervisory concern. Because the affected institutions and agencies 
must plan and prepare for examinations in advance, the agencies believe 
issuing interim final rules would provide the certainty necessary to 
allow the institutions and agencies to begin scheduling according to 
the new examination cycle period. In addition, the agencies believe 
that providing a notice and comment period prior to issuance of the 
interim final rules is unnecessary because the agencies do not expect 
public objection to the regulations being promulgated, as these rules 
implement the changes specified by Congress.\27\ Moreover, because the 
interim final rules would permit an agency to conduct an on-site 
examination of an institution more frequently than once every 18 
months, the agencies retain the ability to maintain the current--or a 
more frequent--on-site examination schedule for an institution, if the 
relevant agency determines it would be necessary or appropriate.
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    \27\ All eleven commenters supported the agencies' 2007 interim 
final rules implementing section 605 of the Financial Services 
Regulatory Relief Act of 2006 (FSRRA), which revised section 10(d) 
to allow institutions with up to $500 million in total assets to 
qualify for an 18-month on-site examination cycle. Prior to the 
enactment of FSRRA, only institutions with less than $250 million 
were eligible for an 18-month on-site examination cycle. See 72 FR 
54347 (final rule); see also 72 FR 17798 (interim rule).
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    Similarly, the FDIC believes there is good cause to rescind and 
remove section 390.351 because section 337.12 will be made immediately 
applicable to both insured State savings associations and insured State 
nonmember banks. As a result, insured State savings associations will 
be provided the same burden reduction benefits and appropriate 
supervisory focus afforded to insured State nonmember banks. For these 
reasons, the agencies find there is good cause consistent with the 
public interest to issue the rules without advance notice and 
comment.\28\
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    \28\ 5 U.S.C. 553(b)(B); 553(d)(3).
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    The APA also requires a 30-day delayed effective date, except for 
(1) substantive rules which grant or recognize an exemption or relieve 
a restriction; (2) interpretative rules and statements of policy; or 
(3) as otherwise provided by the agency for good cause.\29\ The 
agencies conclude that, because the rules recognize an exemption, the 
interim final rules are exempt from the APA's delayed effective date 
requirement.\30\ Additionally, the agencies find good cause to publish 
the interim final rules with an immediate effective date for the same 
reasons set forth above under the discussion of section 553(b)(B) of 
the APA.
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    \29\ 5 U.S.C. 553(d).
    \30\ 5 U.S.C. 553(d)(1).
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    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\31\ in determining the effective 
date and administrative compliance requirements for a new regulation 
that imposes additional reporting, disclosure, or other requirements on 
IDIs, each Federal banking agency must consider any administrative 
burdens that such regulation would place on depository institutions and 
the benefits of such regulation. In addition, section 302(b) of the 
RCDRIA requires such new regulation to take effect on the first day of 
a calendar quarter that begins on or after the date on which the 
regulations are published in final form, with certain exceptions, 
including for good cause. Because the interim final rules expand 
eligibility for an 18-month, rather than 12-month on-site examination 
schedule and are burden-reducing in nature, the interim final rules do 
not impose additional reporting, disclosure, or other requirements on 
IDIs, and section 302 of the RCDRIA therefore does not apply. 
Nevertheless, the agencies have considered the administrative burdens 
that such regulations would place on depository institutions and the 
benefits of such regulations in determining the effective date and 
compliance requirements. In addition, for the same reasons set forth 
above under the discussion of section 553(b)(B) of the APA, the 
agencies find good cause would exist under section 302 of RCDRIA to 
publish these interim final rules with an immediate effective date.
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    \31\ 12 U.S.C. 4802(a).
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    While the agencies believe there is good cause to issue the rules 
without advance notice and comment and with an immediate effective 
date, the agencies are interested in the views of the public and 
request comment on all aspects of the interim final rules.

III. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \32\ requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The Federal banking agencies invite 
your comments on how to make these interim final rules easier to 
understand. For example:
---------------------------------------------------------------------------

    \32\ Pub. L. 106-102, section 722, 113 Stat. 1338, 1471 (1999).
---------------------------------------------------------------------------

     Have the agencies organized the material to suit your 
needs? If not, how could this material be better organized?
     Are the requirements in the interim final rules clearly 
stated? If not, how could the interim final rules be more clearly 
stated?
     Do the interim final rules contain language or jargon that 
is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the interim final rules easier to 
understand? If so, what changes to the format would make the interim 
final rules easier to understand?
     What else could the agencies do to make the regulation 
easier to understand?

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \33\ applies only to rules for 
which an agency publishes a general notice of proposed rulemaking 
pursuant to 5 U.S.C. 553(b). As discussed above, consistent with 
section 553(b)(B) of the APA, the agencies have determined for good 
cause that general notice and opportunity for public comment is not 
necessary. Accordingly, the RFA's requirements relating to initial and 
final regulatory flexibility analysis do not

[[Page 10068]]

apply. Nonetheless, the agencies observe that the extension of the 
periodic examination cycle for certain small institutions from 12 to 18 
months should not have a significant adverse economic impact on a 
substantial number of small entities, and, in fact, should reduce 
regulatory burdens on these entities. The agencies request comment on 
these conclusions.
---------------------------------------------------------------------------

    \33\ Pub. L. 96-354, Sept. 19, 1980, codified to 5 U.S.C. 601 et 
seq.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 \34\ states that no agency may 
conduct or sponsor, nor is the respondent required to respond to, an 
information collection unless it displays a currently valid Office of 
Management and Budget (OMB) control number. Because the interim final 
rules do not create a new, or revise an existing, collection of 
information, no information collection request submission needs to be 
made to the OMB.
---------------------------------------------------------------------------

    \34\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

VI. The Economic Growth and Regulatory Paperwork Reduction Act

    Under section 2222 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (EGRPRA),\35\ the agencies are required to 
conduct a review at least once every 10 years to identify any outdated 
or otherwise unnecessary regulations. The agencies completed the last 
comprehensive review of their regulations under EGRPRA in 2006 and are 
currently conducting the next decennial review. The burden reduction 
evidenced in these interim final rules is consistent with the 
objectives of the EGRPRA review process.
---------------------------------------------------------------------------

    \35\ Pub. L. 104-208, 110 Stat. 3009 (1996).
---------------------------------------------------------------------------

VII. OCC Unfunded Mandates Reform Act of 1995 Determination

    Consistent with section 202 of the Unfunded Mandates Reform Act of 
1995, before promulgating any final rule for which a general notice of 
proposed rulemaking was published, the OCC prepares an economic 
analysis of the final rule. As discussed above, the OCC has determined 
that the publication of a general notice of proposed rulemaking was 
unnecessary. Accordingly, the OCC has not prepared an economic analysis 
of the joint interim final rules.

List of Subjects

12 CFR Part 4

    Administrative practice and procedure, Freedom of information, 
Individuals with disabilities, Minority businesses, Organization and 
functions (Government agencies), Reporting and recordkeeping 
requirements, Women.

12 CFR Part 208

    Accounting, Agriculture, Banks, banking, Confidential business 
information, Crime, Currency, Federal Reserve System, Flood insurance, 
Mortgages, Reporting and recordkeeping requirements, Safety and 
soundness, Securities.

12 CFR Part 211

    Exports, Federal Reserve System, Foreign banking, Holding 
companies, Investments, Reporting and recordkeeping requirements.

12 CFR Part 337

    Banks, banking, Reporting and recordkeeping requirements, Savings 
associations.

12 CFR Part 347

    Authority delegations (Government agencies), Bank deposit 
insurance, Banks, banking, Credit, Foreign banking, Reporting and 
recordkeeping requirements, United States investments abroad.

12 CFR Part 390

    Administrative practice and procedure, Advertising, Aged, Civil 
rights, Conflict of interests, Credit, Crime, Equal employment 
opportunity, Fair housing, Government employees, Individuals with 
disabilities, Reporting and recordkeeping requirements, Savings 
associations.

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set forth in the joint preamble, the OCC amends 
part 4 of chapter I of title 12 of the Code of Federal Regulations as 
follows:

PART 4--ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF 
INFORMATION, CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT 
RESTRICTIONS FOR SENIOR EXAMINERS

0
1. The authority citation for part 4 is revised to read as follows:

    Authority:  5 U.S.C. 301, 552; 12 U.S.C. 1, 93a, 161, 481, 482, 
484(a), 1442, 1462a, 1463, 1464 1817(a), 1818, 1820, 1821, 1831m, 
1831p-1, 1831o, 1833e, 1867, 1951 et seq., 2601 et seq., 2801 et 
seq., 2901 et seq., 3101 et seq., 3401 et seq., 5321, 5412, 5414; 15 
U.S.C. 77uu(b), 78q(c)(3); 18 U.S.C. 641, 1905, 1906; 29 U.S.C. 
1204; 31 U.S.C. 5318(g)(2), 9701; 42 U.S.C. 3601; 44 U.S.C. 3506, 
3510; E.O. 12600 (3 CFR, 1987 Comp., p. 235).


0
2. Section 4.6 is revised to read as follows:


Sec.  4.6  Frequency of examination of national banks and Federal 
savings associations.

    (a) General. The OCC examines national banks and Federal savings 
associations pursuant to authority conferred by 12 U.S.C. 481 (with 
respect to national banks) and 1463(a)(1) and 1464 (with respect to 
Federal savings associations) and the requirements of 12 U.S.C. 1820(d) 
(with respect to national banks and Federal savings associations). The 
OCC is required to conduct a full-scope, on-site examination of every 
national bank and Federal savings association at least once during each 
12-month period.
    (b) 18-month rule for certain small institutions. The OCC may 
conduct a full-scope, on-site examination of a national bank or a 
Federal savings association at least once during each 18-month period, 
rather than each 12-month period as provided in paragraph (a) of this 
section, if the following conditions are satisfied:
    (1) The bank or Federal savings association has total assets of 
less than $1 billion;
    (2) The bank or Federal savings association is well capitalized as 
defined in part 6 of this chapter;
    (3) At the most recent examination;
    (i) The bank or Federal savings association was assigned a rating 
of 1 or 2 for management as part of the bank's or association's rating 
under the Uniform Financial Institutions Rating System; and
    (ii) The bank or Federal savings association was assigned a 
composite rating of 1 or 2 under the Uniform Financial Institutions 
Rating System;
    (4) The bank or Federal savings association currently is not 
subject to a formal enforcement proceeding or order by the FDIC, OCC, 
OTS or the Federal Reserve System; and
    (5) No person acquired control of the bank or Federal savings 
association during the preceding 12-month period in which a full-scope, 
on-site examination would have been required but for this section.
    (c) Authority to conduct more frequent examinations. This section 
does not limit the authority of the OCC to examine any national bank or 
Federal savings association as frequently as the agency deems 
necessary.

0
3. Section 4.7 is revised to read as follows:

[[Page 10069]]

Sec.  4.7  Frequency of examination of Federal agencies and branches.

    (a) General. The OCC examines Federal agencies and Federal branches 
(as these entities are defined in Sec.  28.11 (g) and (h), 
respectively, of this chapter) pursuant to the authority conferred by 
12 U.S.C. 3105(c)(1)(C). Except as noted in paragraph (b) of this 
section, the OCC will conduct a full-scope, on-site examination of 
every Federal branch and agency at least once during each 12-month 
period.
    (b) 18-month rule for certain small institutions--(1) Mandatory 
standards. The OCC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month 
period as provided in paragraph (a) of this section, if the Federal 
branch or agency:
    (i) Has total assets of less than $1 billion;
    (ii) Has received a composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance, and asset quality) 
of 1 or 2 at its most recent examination;
    (iii) Satisfies the requirements of either paragraph (b)(1)(iii)(A) 
or (B) of this section:
    (A) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, common equity tier 1, tier 1 
and total risk-based capital ratios that satisfy the definition of 
``well capitalized'' set forth at 12 CFR 6.4, respectively, on a 
consolidated basis; or
    (B) The branch or agency has maintained on a daily basis, over the 
past three quarters, eligible assets in an amount not less than 108 
percent of the preceding quarter's average third party liabilities 
(determined consistent with applicable federal and state law), and 
sufficient liquidity is currently available to meet its obligations to 
third parties;
    (iv) Is not subject to a formal enforcement action or order by the 
Federal Reserve Board, the Federal Deposit Insurance Corporation, or 
the OCC; and
    (v) Has not experienced a change in control during the preceding 
12-month period in which a full-scope, on-site examination would have 
been required but for this section.
    (2) Discretionary standards. In determining whether a Federal 
branch or agency that meets the standards of paragraph (b)(1) of this 
section should not be eligible for an 18-month examination cycle 
pursuant to this paragraph (b), the OCC may consider additional 
factors, including whether:
    (i) Any of the individual components of the ROCA rating of the 
Federal branch or agency is rated ``3'' or worse;
    (ii) The results of any off-site supervision indicate a 
deterioration in the condition of the Federal branch or agency;
    (iii) The size, relative importance, and role of a particular 
office when reviewed in the context of the foreign bank's entire U.S. 
operations otherwise necessitate an annual examination; and
    (iv) The condition of the foreign bank gives rise to such a need.
    (c) Authority to conduct more frequent examinations. Nothing in 
paragraph (a) or (b) of this section limits the authority of the OCC to 
examine any Federal branch or agency as frequently as the OCC deems 
necessary.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board amends 
parts 208 and 211 of chapter II of title 12 of the Code of Federal 
Regulations as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

0
4. The authority citation for part 208 continues to read as follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1833(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 
2901-2907, 3105, 3310, 3331-3351, 3353, and 3906-3909; 15 U.S.C. 
78b, 781(b), 78l(i), 780-4(c)(5), 78q, 78q-1, 78w, 1681s, 1681w, 
6801 and 6805, 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104b, 4106, and 
4128.


0
5. Amend Sec.  208.64 by revising paragraph (b)(1) to read as follows:


Sec.  208.64  Frequency of examination.

* * * * *
    (b) * * *
    (1) The bank has total assets of less than $1 billion;
* * * * *

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)

0
6. The authority citation for part 211 continues to read as follows:

    Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 
3101 et seq., 3901 et seq., and 5101 et seq.; 15 U.S.C. 1681s, 
1681w, 6801 and 6805.


0
7. Amend Sec.  211.26 by revising paragraph (c)(2)(i)(A) to read as 
follows:


Sec.  211.26  Examinations of offices and affiliates of foreign banks.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (A) Has total assets of less than $1 billion;
* * * * *

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

    For the reasons set forth in the joint preamble, the Board of 
Directors of the FDIC amends parts 337, 347, and 390 of chapter III of 
title 12 of the Code of Federal Regulations as follows:

PART 337--UNSAFE AND UNSOUND BANK PRACTICES

0
8. The authority citation for part 337 is revised to read as follows:

    Authority: 12 U.S.C. 375a(4), 375b, 1463(a)(1), 1816, 1818(a), 
1818(b), 1819, 1820(d), 1828(j)(2), 1831, 1831f, 5412.


0
9. Section 337.12 is revised to read as follows:


Sec.  337.12  Frequency of examination.

    (a) General. The Federal Deposit Insurance Corporation examines 
insured state nonmember banks pursuant to authority conferred by 
section 10 of the Federal Deposit Insurance Act (12 U.S.C. 1820) and 
examines insured State savings associations pursuant to authority 
conferred by section 10 of the Federal Deposit Insurance Act (12 U.S.C. 
1820) and section 4 of the Home Owners' Loan Act (12 U.S.C. 1463). The 
FDIC is required to conduct a full-scope, on-site examination of every 
insured state nonmember bank and insured State savings association at 
least once during each 12-month period.
    (b) 18-month rule for certain small institutions. The FDIC may 
conduct a full-scope, on-site examination of an insured state nonmember 
bank or insured State savings association at least once during each 18-
month period, rather than each 12-month period as provided in paragraph 
(a) of this section, if the following conditions are satisfied:
    (1) The institution has total assets of less than $1 billion;
    (2) The institution is well capitalized as defined in Sec.  
324.403(b)(1) of this chapter;
    (3) At the most recent FDIC or applicable State agency examination, 
the FDIC:
    (i) Assigned the institution a rating of 1 or 2 for management as 
part of the institution's composite rating under the Uniform Financial 
Institutions Rating System (commonly referred to as CAMELS); and

[[Page 10070]]

    (ii) Assigned the institution a composite rating of 1 or 2 under 
the Uniform Financial Institutions Rating System (copies of which are 
available at the addresses specified in Sec.  309.4 of this chapter);
    (4) The institution currently is not subject to a formal 
enforcement proceeding or order by the FDIC, OCC, or the Board of 
Governors of the Federal Reserve System; and
    (5) No person acquired control of the institution during the 
preceding 12-month period in which a full-scope, on-site examination 
would have been required but for this section.
    (c) Authority to conduct more frequent examinations. This section 
does not limit the authority of the FDIC to examine any insured state 
nonmember bank or insured State savings association as frequently as 
the agency deems necessary.

PART 347--INTERNATIONAL BANKING

0
10. The authority citation for part 347 is revised to read as follows:

    Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820(d), 1828, 
3103, 3104, 3105, 3108, 3109; Title IX, Publ. L. 98-181, 97 Stat. 
1153 (12 U.S.C. 3901 et seq.).


0
11. Amend Sec.  347.211 by revising paragraph (b)(1)(i) to read as 
follows:


Sec.  347.211  Examination of branches of foreign banks.

* * * * *
    (b) * * *
    (1) * * *
    (i) Has total assets of less than $1 billion;
* * * * *

PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT 
SUPERVISION

0
12. The authority citation for part 390 continues to read in part as 
follows:

    Authority: 12 U.S.C. 1819.
* * * * *
    Subpart S also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 
1468a; 1817; 1820; 1828; 1831e; 1831o; 1831p-1; 1881-1884; 3207; 
3339; 15 U.S.C. 78b, 78l; 78m; 78n; 78p; 78q; 78w; 31 U.S.C. 5318; 
42 U.S.C. 4106.
* * * * *


Sec.  390.351  [Removed]

0
13. Remove Sec.  390.351.

    Dated: January 21, 2016.
Thomas J. Curry,
Comptroller of the Currency.
    Board of Governors of the Federal Reserve System, February 10, 
2016.
Robert deV. Frierson,
Secretary of the Board.
    Dated: January 21, 2016.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2016-03877 Filed 2-26-16; 8:45 am]
 BILLING CODE 6714-01-P; 4810-33-P; 6210-01-P