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1996 Annual Report


Regulations Adopted and Proposed
The “published” date refers to the day published in the Federal Register.

Final Rules

Foreign Banks

The FDIC amended Part 346 of its regulations governing the operation of state-licensed U.S. branches of foreign banks. The amendments, required by Section 107 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, are intended to ensure that foreign banks do not receive an unfair competitive advantage over U.S. banks in domestic retail deposit taking. This final rule amends the regulations to restrict the amount and types of initial deposits to less than $100,000 that can be accepted by an uninsured state-licensed branch of a foreign bank.

Approved: Feb. 6, 1996
Published: Feb. 14, 1996

Executive Benefits

The FDIC amended Parts 303 and 359 of its regulations to prohibit troubled holding companies, banks and thrifts from making “golden parachute” payments, with certain exceptions. Golden parachutes typically are large cash payments to executives who resign just before an institution is closed or sold. The purpose of this rule is to prevent the improper disposition of an institution’s assets and to protect the safety and soundness of institutions and the federal deposit insurance funds.

Approved: Feb. 6, 1996
Published: Feb. 15, 1996

Annual Audit and Reporting Requirements

The FDIC amended Part 363 of its regulations to implement various provisions of the Riegle Community Development and Regulatory Improvement Act of 1994 and otherwise provide relief from audit and reporting requirements for certain sound and well-managed banks. The purpose of this rule is to eliminate duplicative reporting requirements, and to streamline and reformat specific procedures that independent accountants must perform to help regulators determine compliance with designated laws.

Approved: Feb. 6, 1996
Published: Feb. 21, 1996

Suspicious Activity Reports

The FDIC amended Part 353 of its regulations on the reporting of known or suspected criminal and suspicious activities by insured state nonmember banks. The rule requires the use of the uniform interagency Suspicious Activity Report (SAR) to report potential violations of federal criminal law as well as suspicious transactions related to money laundering offenses and violations of the Bank Secrecy Act. The new SAR substantially reduces the reporting burden of financial institutions by significantly increasing the reporting thresholds for offenses by non-bank employees. There also is a $5,000 threshold for reporting suspicious transactions related to money laundering and violations of the Bank Secrecy Act. Additionally, criminal referrals will be submitted to the Financial Crimes Enforcement Network of the Department of the Treasury rather than to multiple federal agencies. The other financial regulatory agencies and the Department of Treasury issued similar rules.

Approved: Feb. 6, 1996
Published: Feb. 16, 1996

Contractor Conflicts of Interest

The FDIC, with concurrence of the U.S. Office of Government Ethics, amended Part 366 of its regulations by adopting an interim rule governing contractor conflicts of interest. The interim rule implements provisions of the Resolution Trust Corporation Completion Act of 1993 requiring the FDIC to prescribe regulations to ensure that contractors meet minimum standards. The rules also prohibit contracts with certain entities.

Approved: Feb. 27, 1996 Published: Mar. 11, 1996

Administrative Procedures

The FDIC amended Part 308 of its regulations regarding Uniform Rules of Practice and Procedure. The purpose of the final rule is to clarify certain provisions and to increase the efficiency and fairness of administrative hearings. The bank and thrift regulatory agencies are required by Section 916 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to develop uniform rules and procedures for administrative hearings. The areas affected by this rulemaking are largely administrative, such as service of papers, construction of time limits and amended pleadings.

Approved: Apr. 3, 1996
Published: May 6, 1996

Community Reinvestment Act

The FDIC, with the other bank and thrift regulatory agencies, amended Part 345 of its regulations to make technical corrections to certain portions of the joint final rule regarding the Community Reinvestment Act (CRA), which promotes efforts by financial institutions to help meet the credit needs of their entire communities. This rule corrects a cross reference to Small Business Administration regulations, which were recently amended. This rule makes no substantive change to the existing regulation.

Approved: Apr. 3, 1996
Published: May 10, 1996

Standards for FDIC Employment

The FDIC amended Part 336 of its regulations concerning employee responsibilities and conduct. This rule implements requirements contained in Section 19 of the Resolution Trust Corporation Completion Act of 1993, which prohibits certain persons from being employed by or providing services to the FDIC.

Approved: May 14, 1996
Published: June 6, 1996

Agricultural Loan Loss Amortization

The FDIC, as part of its review of all rules and policy statements, removed its regulation governing agricultural loan loss amortization. This action is needed to eliminate the regulation when it becomes obsolete on January 1,1999.

Approved: June 17, 1996
Published: July 1, 1996

Securities Purchases by Family Members of FDIC Employees

The FDIC, with concurrence of the U.S. Office of Government Ethics, amended its standards for employee conduct (5 CFR Part 3201) to allow employees’ spouses and minor children to purchase otherwise prohibited securities when they are acquired as part of compensation packages in connection with employment. The amendment was made retroactive to May 25, 1995.

Approved: July 1, 1996
Published: July 9, 1996

Public Observation of Meetings

The FDIC made technical amendments to Part 311 of its regulations regarding public observation of meetings of its Board of Directors.

Approved: July 16, 1996
Published: July 24, 1996

Management Interlocks

The FDIC, together with the other bank and thrift regulatory agencies, amended Part 348 of its regulations regarding management interlocks. With certain exceptions, these rules prohibit bank management officials from simultaneously serving in a similar capacity with other financial institutions. The revisions implement statutory changes that were mandated by the Riegle Community Development and Regulatory Improvement Act of 1994 (CDRI), and also streamline and clarify the rules. CDRI removed the agencies’ broad authority to exempt otherwise impermissible interlocks and replaced it with the authority to exempt interlocks under more narrow circumstances. The Act also required a depository institution with a “grandfathered” interlock to apply for an extension of the grandfathered period if the organization wanted to keep the interlock in place.

Approved: July 16, 1996
Published: Aug. 2, 1996

Privacy Act

The FDIC made minor and technical amendments to its Privacy Act regulations (Part 310), which relate to the collection, maintenance, use and dissemination of personal information by government agencies. The amendments delete outmoded terms and otherwise update and clarify the regulations.

Approved: Aug. 13, 1996
Published: Aug. 23, 1996

Safety and Soundness

The FDIC, together with the other bank and thrift regulatory agencies, amended Part 364 of its regulations concerning standards for safety and soundness. The guidelines were amended to include asset quality and earnings standards, and were adopted pursuant to the Federal Deposit Insurance Act as amended by the CDRI. The guidelines as amended gave the agencies greater flexibility to use more comprehensive qualitative standards, rather than rigid quantitative standards.

Approved: Aug. 13, 1996
Published: Aug. 27, 1996

 

Loans in Areas Having Special Flood Hazards

The FDIC, together with the other bank and thrift regulatory agencies, the Farm Credit Administration and the National Credit Union Administration, amended Part 339 of its regulations to expand requirements for loans in areas having special flood hazards. This final rule establishes new escrow requirements for flood insurance premiums, provides authority for lenders to purchase flood insurance on behalf of a borrower who would not purchase the policy when requested (with the cost passed along to the borrower), and makes other changes to implement the National Flood Insurance Reform Act of 1994.

Approved: Aug. 13, 1996
Published: Aug. 29, 1996

Market Risk

The FDIC, together with the Federal Reserve Board and the Office of the Comptroller of the Currency, amended Part 325 of its regulations regarding risk-based capital requirements to incorporate a new measure for market risk. The new measurement covers debt and equity positions in an institution’s trading account and foreign exchange and commodity positions wherever located. The effect of the final rule is that any bank or bank holding company regulated by the agencies with significant exposure to market risk must measure that risk using its own internal “value-at-risk” model, subject to parameters contained in the rule, and hold a commensurate amount of capital.

Approved: Aug. 13, 1996
Published: Sept. 6, 1996

Applications Regarding Bank Clearing Agencies

The FDIC, as part of its regulatory relief efforts, deleted its rules pertaining to applications for a stay or review of actions of bank clearing agencies (Part 342) and replaced them with new, more concise regulations (Part 308). The changes are intended to streamline the FDIC’s regulations while main-taining uniformity among the other banking agencies and the Securities and Exchange Commission.

Approved: Aug. 13, 1996
Published: Sept. 13, 1996

Employee Disclosure Requirements

The FDIC, with the concurrence of the U.S. Office of Government Ethics (OGE), removed an interim supplemental financial disclosure regulation for FDIC employees. The OGE determined that agencies obtaining its written approval for supplemental financial disclosure forms are not required to have separate regulations.

Approved: Sept. 10, 1996
Published: Sept. 30, 1996

SAIF Assessments

The FDIC issued a final rule imposing a special assessment on institutions that pay assessments to the Savings Association Insurance Fund (SAIF), as required by the Deposit Insurance Funds Act of 1996. That Act requires that the assessment, which was calculated to be 65.7 cents for every $100 of deposits, is to be applied against SAIF-assessable deposits held as of March 31, 1995. This final rule provides for certain discounts and exemptions related to the special assessment, and for the FDIC to establish guidelines for identifying institutions classified as “weak” and thereby exempt from the special assessment. The rule also adjusts the base for computing the regular semiannual assessments paid by certain institutions, in accordance with the law.

Approved: Oct. 8, 1996
Published: Oct. 16, 1996

Civil Money Penalty

The FDIC, as required by the Debt Collection Improvement Act of 1996, amended Part 308 of its rules and regulations to increase civil money penalties by the rate of inflation using a formula prescribed by the law. Any increase in a penalty will apply only to violations that occur after November 12, 1996.

Approved: Oct. 29, 1996
Published: Nov. 12, 1996

Assessments for "Oakar" Institutions

The FDIC amended Part 327 of its regulations governing assessments by adopting provisions that pertain to so-called Oakar institutions: institutions that belong to one insurance fund but hold deposits that are treated as insured by the other insurance fund. This rule refines the procedures for determining the amount of deposits acquired and for attributing the deposits to the Bank Insurance Fund (BIF) and the SAIF. In addition, the rule eliminates weaknesses in the FDIC’s procedures for attributing deposits to the two funds, and for computing the growth of the amounts.

Approved: Nov. 26, 1996
Published: Dec. 10, 1996

SAIF Premium Rates

With the capitalization of the SAIF on September 30, 1996, the FDIC lowered the rates on assessments paid to the fund and widened the spread of the rates. The changes are intended to avoid collecting more than needed to maintain the SAIF’s capitalization at 1.25 percent of insured deposits, and improve the effectiveness of the risk-based assessment system.

Approved: Dec. 11, 1996
Published: Dec. 24, 1996

Suspension and Exclusion of Contracts

The FDIC amended Part 367 of its regulations concerning contracts and contractors pursuant to Section 12 of the Federal Deposit Insurance Act. This rule sets procedures for the suspension and/or exclusion of contractors who have violated conflicts of interest regulations or have otherwise acted in an improper manner. The rule also applies to subcontractors, key employees, management officials and affiliated business entities of FDIC contractors.

Approved: Dec. 11, 1996
Published: Dec. 30, 1996

Loans to Examiners

The FDIC amended its regulations concerning standards of ethical conduct to allow bank examiners to obtain loans from banks in the locations where they work, except for the location of the field office. Previously, it was necessary for examiners to seek credit from banks outside their regions.

Approved: Dec. 11, 1996
Published: Jan. 27, 1997

 

Proposed Rules


Government Securities Sales

The FDIC, with the Federal Reserve Board and the Office of the Comptroller of the Currency, issued for public comment a proposed rule to amend Part 368 of its regulations concerning sales of government securities by bank brokers or dealers. The proposed rule would establish standards concerning recommendations to customers and the conduct of business.

Approved: April 4, 1996
Published: April 25, 1996

Securities Disclosures

The FDIC issued for public comment a proposed rule to amend Part 335 of its regulations concerning securities of nonmember insured banks. The proposal seeks to incorporate through cross-reference the corresponding regulations of the Securities and Exchange Commission (SEC). This would ensure that the FDIC’s regulations remain substantially similar to the SEC’s regulations, as required by law.

Approved: June 17, 1996
Published: June 28, 1996

Collateralized Transactions

The FDIC, together with the other bank and thrift regulatory agencies, issued for public comment a proposed rule to amend Part 325 of its regulations concerning risk-based capital for collateralized transactions. The effect of the proposal would be to allow banks, bank holding companies and savings associations to hold less capital for certain transactions collateralized by cash or qualifying securities. The proposed rule would implement part of Section 303 of the CDRI.

Approved: June 17, 1996
Published: Aug. 16, 1996

Economically Depressed Regions

The FDIC issued for public comment a proposed rule to amend Part 357 of its regulations that designates certain economically depressed regions. The proposed change would add guidance to allow applicants to evaluate their situations before formally applying for assistance. The proposed rule also would withdraw a previously proposed amendment published in 1992.

Approved: July 16, 1996
Published: Aug. 6, 1996

Activities and Investments of Insured State Banks

The FDIC issued for public comment a proposed rule to streamline Part 362 of its regulations concerning activities and investments of insured state banks. Currently, insured state banks are required to file an application with the FDIC to engage in activities that are not permissible for national banks. The proposed rule would streamline the approval process for banks meeting certain criteria. Banks that do not meet the criteria would continue to file under the current rules.

Approved: Aug. 13, 1996
Published: Aug. 23, 1996

Fair Housing Advertising and Recordkeeping

The FDIC issued for public comment a proposed rule amending Part 338 of its regulations by giving insured state nonmember banks more flexibility in using fair housing posters and advertising slogans. It also would remove the FDIC’s recordkeeping requirements that serve as a substitute monitoring program permitted by Regulation B of the Federal Reserve Board.

Approved: Sept. 10, 1996
Published: Sept. 20, 1996

Recordkeeping and Confirmation Requirements for Securities Transactions

The FDIC proposed an amendment of Part 344 of its regulations concerning recordkeeping and confirmation requirements for securities transactions. The regulations currently in effect were issued in 1979, and the types of securities activities occurring on bank premises have changed significantly. Among other things, the proposed rule would exempt from the FDIC's recordkeeping and confirmation requirements those cases in which the customer has a direct contractual agreement with a broker/dealer whose relationship is fully disclosed to the customer. Also, the proposal would require certain financial institution directors to report personal investment transactions.

Approved: Dec. 11, 1996
Published: Dec. 24, 1996

Qualification Requirements for Certain Securities Transactions

The FDIC, together with the Office of the Comptroller of the Currency and the Federal Reserve Board, issued for public comment a proposed rule to amend Part 342 of its regulations concerning the sale of securities. The proposed rule would require banks to file a notice with the appropriate federal banking agency and establish professional qualification requirements for bank employees that are consistent with those for broker/dealers and registered representatives under the Securities Exchange Act and the rules of the securities industry’s self-regulatory organizations. The proposed rule would require bank employees to register with the appropriate banking agency, take and pass a proficiency examination to become a bank securities representative and meet continuing education requirements.

Approved: Dec. 11, 1996
Published: Dec. 30, 1996

Bonnette.jpg (17405 bytes)

Cindi Bonnette of the Division of Supervision, Chairman of an FDIC task force on new banking technology, with committee member Jay Golter of the Division of Research and Statistics.

 

Advance Notice of Proposed Rulemaking


Simplification of Deposit Insurance Rules

The FDIC asked for public comment on whether and how its deposit insurance rules (Part 330) should be clarified, simplified or streamlined. If the Board finds modifications to be warranted, it will propose specific amendments for further public comment.


Approved: May 14, 1996
Published: May 22, 1996

Neely.jpg (48414 bytes)

Joseph H. Neely, shown here being sworn in as a Board member on January 29, was later tapped by Chairman Helfer (c) to lead the agency's efforts to reduce regulatory burden. Also shown, at left, are Board members Fiechter and Hove.

 

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