Regulations Implementing the Change in Bank Control Act

FEDERAL DEPOSIT INSURANCE CORPORATION <CFR>12 CFR Part 303</CFR> <RIN>RIN 3064-AG04</RIN> <SUBJECT>Regulations Implementing the Change in Bank Control Act</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Deposit Insurance Corporation. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Federal Deposit Insurance Corporation (FDIC) is proposing to amend its filing requirements and processing procedures for notices filed under the Change in Bank Control Act (CBCA) by removing the exemption from the notice requirement for acquisitions of voting securities of a depository institution holding company with an FDIC-supervised subsidiary institution for which the Board of Governors of the Federal Reserve System (FRB) reviews a notice under the CBCA and by making conforming definitional changes. The FDIC also seeks information and comment regarding its approach to change in control notices under the CBCA with regard to persons who may be directly or indirectly exercising control over an FDIC-supervised institution. The FDIC is committed to developing an interagency approach to change in control notices with the FRB and the Office of the Comptroller of the Currency. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received by October 18, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit comments, identified by RIN 3064-AG04, by any of the following methods • <E T="03">Agency website: https://www.fdic.gov/resources/regulations/federal-register-publications/.</E> Follow instructions for submitting comments on the FDIC's website. • <E T="03">Email: Comments@fdic.gov.</E> Include “Change in Bank Control Act/RIN 3064-AG04” in the subject line of the message. • <E T="03">Mail:</E> James P. Sheesley, Assistant Executive Secretary, Attention: Change in Bank Control Act—RIN 3064-AG04, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. • <E T="03">Hand Delivery:</E> Comments may be hand-delivered to the guard station at the rear of the 550 17th Street NW, building (located on F Street NW) on business days between 7:00 a.m. and 5:00 p.m. eastern time. • <E T="03">Public Inspection:</E> Comments received, including any personal information provided, may be posted without change to <E T="03">https://www.fdic.gov/resources/regulations/federal-register-publications/.</E> Commenters should submit only information that the commenter wishes to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of this document will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Annmarie Boyd, Senior Counsel, 202-898-3714, <E T="03">aboyd@fdic.gov;</E> Gregory S. Feder, Counsel, 202-898-8724, <E T="03">gfeder@fdic.gov;</E> Nicholas A. Simons, Senior Attorney, 202-898-6785, <E T="03">nsimons@fdic.gov;</E> Legal Division; Derek Sturtevant, Senior Review Examiner, 202-898-3693, <E T="03">dsturtevant@fdic.gov;</E> Division of Risk Management Supervision, 550 17th Street NW, Washington, DC 20429. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Policy Objectives</HD> The policy objective of the proposed rule is to ensure appropriate review of transactions that would result in control over FDIC-supervised institutions by allowing the FDIC to disapprove of a proposed acquisition if the proposed transaction would fail to satisfy any of the statutory factors enumerated in the CBCA. <SU>1</SU> <FTREF/> Under the FDIC's current regulations, an entity is exempt from a notification requirement when the FRB reviews a notice under the CBCA. However, recent developments in equity markets may be contributing to elevated risk of excessive indirect control or concentration of ownership in FDIC-supervised institutions. Therefore, the FDIC is proposing to amend its regulations governing change in control notifications to remove the current exemption in order to ensure appropriate review of certain transactions, increasing the likelihood that all the statutory factors in the CBCA are met, and reducing the likelihood that certain transactions would result in an adverse effect on the Deposit Insurance Fund (DIF). The FDIC recognizes the importance of interagency collaboration and consistency with respect to the review of transactions under the CBCA and is committed to engaging in dialogue and coordination with the FRB and Office of the Comptroller of the Currency to develop an interagency approach to the issues discussed in this proposal. <SU>2</SU> <FTREF/> The FDIC is also seeking public comment on all aspects of this proposal, including steps that may be taken on an interagency basis to coordinate CBCA notice review. <FTNT> <SU>1</SU>  12 U.S.C. 1817(j)(7). </FTNT> <FTNT> <SU>2</SU>  The FDIC's commitment includes following standard notice and comment rulemaking practices should an interagency approach be developed and adopted. </FTNT> <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. The Change in Bank Control Act</HD> The Change in Bank Control Act, section 7(j) of the Federal Deposit Insurance Act (FDI Act), generally provides that no person, <SU>3</SU> <FTREF/> acting directly or indirectly, or in concert with other persons, may acquire control of an insured depository institution (IDI) unless the person has provided the appropriate Federal banking agency (AFBA)  <SU>4</SU> <FTREF/> prior written notice of the proposed transaction and the AFBA has not disapproved the transaction within 60 days, as may be extended. <SU>5</SU> <FTREF/> “Control” for purposes of the CBCA means “the power, directly or indirectly, to direct the management or policies of an insured depository institution or to vote 25 per centum or more of any class of voting securities of an insured depository institution.”  <SU>6</SU> <FTREF/> The proposed acquisition may be completed upon receipt of written notice that the AFBA does not disapprove of the acquisition or if the AFBA fails to act on a substantially complete prior notice within the statutory time period. <FTNT> <SU>3</SU>  12 CFR 303.81(g) defines “person” as “an individual, corporation, limited liability company (LLC), partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, voting trust, or any other form of entity; and includes each party to a voting agreement and any group of persons acting in concert.” </FTNT> <FTNT> <SU>4</SU>  12 U.S.C. 1813(q). </FTNT> <FTNT> <SU>5</SU>  12 U.S.C. 1817(j). The AFBA may, in its discretion, extend an additional 30 days the period during which such a disapproval may be issued. The period of disapproval may be extended two additional times for not more than 45 days each time in certain circumstances. <E T="03">See</E> 12 U.S.C. 1817(j)(1)(A) through (D). </FTNT> <FTNT> <SU>6</SU>  12 U.S.C. 1817(j)(8)(B). </FTNT> An AFBA may disapprove a proposed acquisition if it is unable to satisfactorily resolve one or more of the statutory factors enumerated in the CBCA. <SU>7</SU> <FTREF/> An AFBA may disapprove of a proposed acquisition if the acquisition would result in a monopoly or may substantially lessen competition and the anticompetitive effects are not clearly outweighed by the public interest; the financial condition of any acquiring person or the future prospects of the institution is such as might jeopardize the financial stability of the institution or prejudice the interests of its depositors; the competence, experience, or integrity of any acquiring person or any proposed management would not be in the best interests of the depositors or the public; any acquiring person neglects, fails, or refuses to furnish the AFBA with all required information; or the AFBA determines that the proposed transaction would result in an adverse effect on the DIF. <FTNT> <SU>7</SU>  12 U.S.C. 1817(j)(7). </FTNT> <HD SOURCE="HD2">B. FDIC Rules and Regulation—Part 303</HD> Subpart E of 12 CFR part 303 of the FDIC Rules and Regulations (subpart E)  <SU>8</SU> <FTREF/> implements the CBCA and sets forth the FDIC's filing requirements and processing procedures for notices filed pursuant to the CBCA (notices). <SU>9</SU> <FTREF/> Subpart E requires notice to the FDIC before any person, acting directly or indirectly, alone or in concert with others, acquires control of a “covered institution,” unless the acquisition is exempt. The FDIC is the AFBA for insured State nonmember banks and insured State savings associations. <SU>10</SU> <FTREF/> Because the CBCA applies to direct or indirect acquisitions of control, for purposes of the CBCA, the FDIC also may review a notice for an acquisition of control of any company that directly or indirectly controls an insured State nonmember bank or an insured State savings association. <SU>11</SU> <FTREF/> Subpart E therefore defines “covered institution” to include an insured State nonmember bank, an insured State savings association, and any company that controls, directly or indirectly, an insured State nonmember bank or an insured State savings association and exempts certain h ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 58k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━