FDIC Federal Register Citations

[Federal Register: December 27, 2002 (Volume 67, Number 249)]

[Notices]

[Page 79276-79278]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr27de02-195]

[[Page 79276]]

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FEDERAL DEPOSIT INSURANCE CORPORATION

Applications for Deposit Insurance

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final agency policy statement; amendment.

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SUMMARY: The FDIC is amending its Statement of Policy on Applications

for Deposit Insurance to reflect changes resulting from an internal

reorganization. The reorganization merged the Division of Supervision

and the Division of Compliance and Consumer Affairs. Additional changes

were made to reflect recent statutory requirements. The amended

statement of policy is intended to be read in conjunction with the

deposit insurance provisions of the FDIC's revised regulations

governing applications filed with the FDIC, which appears elsewhere in

this issue of the Federal Register.

EFFECTIVE DATE: December 27, 2002.

FOR FURTHER INFORMATION CONTACT: Division of Supervision and Consumer

Protection: Mindy West, Examination Specialist, (202/898-7221); or

Legal Division: Supervision and Legislation Branch, Robert C. Fick,

Counsel, Legal Division, (202/898-8962), FDIC, 550 17th Street, NW,

Washington, DC, 20429.

SUPPLEMENTARY INFORMATION: On June 30, 2002, the FDIC implemented an

internal reorganization. See: 67 FR 44351, July 2, 2002. The primary

purpose of the reorganization was to streamline the management and

decision making process. As part of the reorganization, several

divisions were merged. In particular, the Division of Supervision was

merged with the Division of Compliance and Consumer Affairs to create

the Division of Supervision and Consumer Protection. The reorganization

has necessitated changes to the Statement of Policy on Applications for

Deposit Insurance (Statement of Policy) to reflect the new structure,

since there are references to the former divisions and management

structure in the prior Statement of Policy.

In conjunction with the revisions to the Statement of Policy, the

FDIC is also amending 12 CFR part 303 (part 303) of the FDIC's

regulations governing application, notice and request procedures. The

amendments to part 303 reflect the FDIC's new organizational structure.

The FDIC is also removing and updating the delegations of authority

previously found in part 303 to provide greater flexibility and

efficiency when making decisions throughout the application process. As

a result of these changes, the amended Statement of Policy is intended

to be read in conjunction with the revised deposit insurance provisions

of newly-amended part 303, notice of which is published elsewhere in

this issue of the Federal Register.

Section 307(c) of the Gramm-Leach-Bliley Act (GLBA) requires the

FDIC to consult with the appropriate state insurance regulator before

making any determination relating to the initial affiliation of, or the

continuing affiliation of, a depository institution with a company

engaged in insurance activities. On December 12, 2001, the Office of

the Comptroller of the Currency, the FDIC and the Office of Thrift

Supervision published a final notice in the Federal Register (66 FR

64341) revising the Interagency Charter and Federal Deposit Insurance

Application (Application) to, in part, add an item to the form to

collect information required by GLBA. The FDIC is now amending the

Statement of Policy to conform to the recently updated Application to

include the specified information required therein. The information

that is required is the name of the affiliated insurance company, a

description of its insurance activities, a list of each state and the

lines of business in that state in which the company holds, or will

hold, an insurance license. The applicant must also indicate the state

where the company holds a resident license or charter, as applicable.

The Statement of Policy published August 20, 1998 (63 FR 44756) is

hereby amended as follows:

FDIC Statement of Policy on Applications for Deposit Insurance

* * * * *

Procedures

Forms and instructions for applying for deposit insurance may be

obtained from any FDIC regional director. Completed applications should

be filed with the appropriate FDIC office. Organizers and incorporators

(collectively, ``incorporators'') of proposed new depository

institutions should file their applications with the FDIC and the

appropriate chartering authority at the same time. Information provided

to the chartering authority that is also needed as part of the deposit

insurance application may be provided to the FDIC by appending a copy

of the information to the FDIC application. Use of the FDIC application

form is optional; however, the material submitted to the FDIC must

contain all information requested in the FDIC application form, unless

the FDIC otherwise indicates. In addition, all incorporators must sign

and submit the signature page of the FDIC's deposit insurance

application form, even if the application itself is not being used. It

is strongly recommended that a representative(s) of the organizing

group meet with the chartering authority and the FDIC prior to filing

an application to reach an understanding of the information

requirements of each agency. This practice typically facilitates

processing and eliminates unnecessary delays. Information requirements

may not be as extensive for applications sponsored by existing holding

companies or other well-established banking groups. The FDIC may take

final action prior to final action by other regulatory authorities in

cases in which the FDIC has determined that there is no material

disagreement on the action to be taken.

* * * * *

Section 307(c) of the Gramm-Leach-Bliley Act (GLBA) requires the

FDIC to consult with the appropriate State insurance regulator before

making any determination relating to the initial affiliation of, or the

continuing affiliation of, a depository institution with a company

engaged in insurance activities. As a result of this requirement,

applicants that are, or will be, affiliated with a company engaged in

insurance activities that is subject to supervision by a state

insurance regulator must submit the following information as part of

its application: (1) The name of the insurance company; (2) a

description of the insurance activities that the company is engaged in

and has plans to conduct; and (3) a list of each state and the lines of

business in that state which the company holds, or will hold, an

insurance license. Applicants must also indicate the state where the

company holds a resident license or charter, as applicable.

Proposed Depository Institutions

* * * * *

Where the proposed depository institution will be a subsidiary of

an existing bank or thrift holding company, the FDIC will consider the

financial and managerial resources of the parent organization in

assessing the overall proposal and in evaluating the statutory factors

prescribed in section 6 of the Act. In such circumstances, the

application for deposit insurance should contain a copy of any

information submitted to the holding company's primary federal

regulator. Subpart B of part 303 of the FDIC's regulations (12

[[Page 79277]]

CFR 303.20-.25) discusses certain expedited procedures that may be

available to eligible depository institutions or eligible holding

companies (as those terms are defined in the regulation).

The FDIC may conduct examinations and/or investigations to develop

essential information with respect to deposit insurance applications.

The FDIC will determine the need to conduct an investigation and its

scope. Every effort will be made to coordinate any FDIC investigation

with any investigations conducted by other regulators.

* * * * *

Statutory Factors

* * * * *

2. Adequacy of the Capital Structure

* * * * *

(b) Wholly owned subsidiary of a holding company--If the applicant

is being established as a wholly owned subsidiary of an eligible

holding company (as defined in part 303, subpart B), the FDIC will

consider the financial resources of the parent organization as a factor

in assessing the adequacy of the proposed initial capital injection. In

such cases, the FDIC may find favorably with respect to the adequacy of

capital factor, when the initial capital injection is sufficient to

provide for a Tier 1 leverage capital ratio of at least 8% at the end

of the first year of operation, based on a realistic business plan, or

the initial capital injection meets the $2 million minimum capital

standard set forth in this Statement of Policy, or any minimum

standards established by the chartering authority, whichever is

greater. The holding company shall also provide a written commitment to

maintain the proposed institution's Tier 1 leverage capital ratio at no

less than 8 % throughout the first three years of operation.

(c) Operating insured offices--If the proposal involves the

acquisition of an insured operating office or offices, the applicant

may request that the benchmark for evaluating the adequacy of capital

be an amount necessary for the newly chartered institution to be

classified as well capitalized, as defined by its primary federal

regulator. In such cases, the FDIC may find favorably with respect to

the capital factor based on a favorable finding with respect to the

following:

* * * * *

4. General Character and Fitness of the Management

* * * * *

All proposed depository institutions shall provide at least a five

member board of directors. The identity and qualifications of the

proposed full-time chief executive officer should be made known to the

FDIC as soon as possible, preferably when the application is filed with

the appropriate FDIC office. Prior to the opening of the institution,

proponents must advise the FDIC in writing of any change in the

directorate, senior active management, or a change in the ownership of

stock which would result in a shareholder owning 10% or more of the

total shares of either the depository institution or its holding

company.

* * * * *

(b) Stock benefit plans--Stock benefit plans, including stock

options, stock warrants, and other similar stock based compensation

plans will be reviewed by the FDIC and must be fully disclosed to all

potential subscribers. Participants in stock benefit plans may include

incorporators, directors, and officers. A description of any such plans

proposed must be included in the application submitted to the

appropriate FDIC office. The structure of stock benefit plans should

encourage the continued involvement of the participants and serve as an

incentive for the successful operation of the institution. Stock

benefit plans should contain no feature that would encourage

speculative or high risk activities or serve as an obstacle to or

otherwise impede the sale of additional stock to the general public.

* * * * *

(c) Background and biographical information--Proposed directors,

officers, and 10% shareholders must file financial and biographical

information in connection with the deposit insurance application. The

FDIC may request a report from the Federal Bureau of Investigation or

other investigatory agencies on these individuals. Fingerprinting of

individuals may be required. Background checks and fingerprinting may

be waived by the FDIC for individuals who are currently associated

with, or have had a recent past association with, an insured depository

institution. When the proposed depository institution is being

established as a wholly owned subsidiary of an eligible holding

company, the FDIC may waive financial information for those persons who

are being proposed as directors or officers of the applicant.

Background checks conducted by other federal financial institution

regulators in connection with charter applications are generally

adequate for the FDIC if the other regulators agree to notify the FDIC

of instances in which further investigation is warranted.

In the event any present or prospective director, officer,

employee, controlling stockholder, or agent of the applicant has been

convicted of any criminal offense involving dishonesty, breach of

trust, or money laundering, or has agreed to enter into a pretrial

diversion or similar program in connection with a prosecution of such

offense, the applicant must obtain the FDIC's written consent under

section 19 of the Act (12 U.S.C. 1829), before any such person may

serve in one or more of those capacities. Guidelines regarding section

19 applications may be obtained from the appropriate FDIC office.

* * * * *

5. Risk Presented to the Bank Insurance Fund or Savings Association

Insurance Fund

In order to resolve this factor favorably, the FDIC must be assured

that the proposed institution does not present an undue risk to the

Bank Insurance Fund or the Savings Association Insurance Fund. As a

general matter, the FDIC interprets this factor very broadly. In making

its determination, the FDIC will rely on any information available to

it, including, but not limited to the applicant's business plan. The

FDIC expects that an applicant will submit a business plan commensurate

with the capabilities of its management and the financial commitment of

the incorporators. Any significant deviation from the business plan

within the first three years of operation must be reported by the

insured depository institution to the primary federal regulator before

consummation of the change. Submission of an unsound business plan will

unfavorably impact the finding concerning this factor. An applicant's

business plan should demonstrate the following:

* * * * *

Proposed Depository Institutions Formed for the Sole Purpose of

Acquiring Assets and Assuming Liabilities of an Insured Institution in

Default

Proponents should contact the appropriate FDIC office as soon as

possible if they are interested in acquiring assets and/or assuming

liabilities of an institution in default. Due to the time constraints

involved with this type of transaction, information submissions and

applications will be abbreviated. Generally, a letter request

accompanied by copies of applications filed with

[[Page 79278]]

other federal or state regulatory authorities will be sufficient. Other

information will be requested only as needed by the FDIC.

By order of the Board of Directors.

Dated at Washington, DC, this 3rd day of December, 2002.

Federal Deposit Insurance Corporation.

Valerie J. Best,

Assistant Executive Secretary.

[FR Doc. 02-31920 Filed 12-26-02; 8:45 am]

BILLING CODE 6714-01-P