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F ederal R eserve Bank OF DALLAS ROBERT D. M C T E E R , J R . p r e s id e n t n . i 1nno D ALLAS, TEXAS October 7, 1993 A N D C H IE F E X E C U T IV E O F F IC E R 75205 5906 Notice 93-107 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT Interagency Policy Statement Regarding Branch Closings by Insured Depository Institutions DETAILS The Federal Reserve Board has announced adoption of a joint interagency policy statement regarding branch closings by insured depository institutions. The policy statement, which is effective September 21, 1993, provides guidance concerning the branch closing provisions of Section 42 of the Federal Deposit Insurance Act, specifically the requirements that insured depository institutions adopt policies for branch closings and provide notices before closing any branch. The statement: • Defines a "branch" for purposes of Section 42 as a traditional brick-and-mortar branch at which deposits are received, checks are paid, or money is lent, thereby excluding the closing of ATMs and temporary branches from Section 4 2 ’s notice requirements; • Provides that the relocation or consolidation of a branch is not a closing; • Provides that a temporary interruption of services is not a closing; • Makes clear that as long as a branch continues to meet the definition of "branch" under Section 42, a downgrading of the services is not a closing; • Allows each insured depository institution to de vise a means of allocating customers among branches and provides guidance on how this can be done, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - instead of defining who is a customer of a branch and who must be notified of a proposed closing; • Identifies the information to be included in the notice to customers and in the notice posting at the branch; and, • Provides that no branch closing has occurred when an acquiring institution operates a branch tempo rarily under an option agreement with the Federal Deposit Insurance Corporation (FDIC) or Resolution Trust Corporation (RTC), if the acquiring institu tion decides not to exercise the option and refers the branch to the FDIC or RTC. The policy statement was developed in consultation with the Office of the Comptroller of the Currency, the FDIC, and the Office of Thrift Supervision. ATTACHMENT A copy of the Bo a r d ’s notice as it appears on pages 49083-88, Vol. 58, No. 181, of the Federal Register dated September 21, 1993, is attached. MORE INFORMATION For more information, please contact Michael Johnson at (214) 922-6081. For additional copies of this B a n k ’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours Federal Register / Vol. 58, N o. 181 / Tuesday, Septem ber 21, 1993 / N otices DEPARTMENT OF THE TREASURY O ffice o f th e C om ptroller of th e C urrency [93-16] FEDERAL RESERVE SYSTEM [OoctartNo. R-0777] FEDERAL DEPOSIT INSURANCE CORPORATION R1N 3063--AA53 DEPARTMENT OF THE TREASURY O ffice of Thrift S upervision [D ocket No. 93-1571 B ranch C losing* AGENCIES: Board of Governors of the Federal Reserve System; Office of the Com ptroller of the Currency, Treasury; Federal Deposit Insurance Corporation; and Office of Thrift Supervision, Treasury. ACTION: J o in t p o lic y sta te m e n t. SUMMARY: The Board of Governors of the Federal Reserve System (Board of Governors), th e Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) (collectively "the agencies”) have adopted a joint policy statem ent regarding branch closings by insured depository institutions. The policy statem ent provides guidance concerning the branch closing provisions of section 42 of the Federal Deposit Insurance Act (FDI Act), specifically the requirem ents that insured depository institutions adopt policies for branch closings and provide notices before closing any branch. DATES: Effective September 21,1993. FOR FURTHER INFORMATION CONTACT: Board o f Governors: Oliver I. Ireland, Associate General Counsel (202/4523825), Gregory A. Baer, Senior A ttorney (202/452-3236), Legal Division; Glenn E. Loney, A ssistant Director (202/4523585), Beverly C. Sm ith, ManagerAppUcations (202/452-3946), Diane Jackins, Senior Review Examiner (202/ 452-3946), Division of Consum er and Comm unity Affairs, Board of Governors of the Federal Reserve System. For the hearing im paired only, Telecom m unication Device for the Deaf (TDD), Dorothea Thom pson (202/4523544), Board of Governors o f the Federal Reserve System , 20th and C Streets, NW., W ashington, DC 20551. OCC: Cindy L. Hausch-Bocrth, Licensing Policy and Systems Analyst, 49083 statem ent, the final policy statem ent is Bank Organization an d Structure Division (202/874-5060), Sue Auerbach, a joint docum ent. Senior Attorney, Corporate Organization Sum m ary o f F in al Policy Statem ent and Resolutions D ivision (202/874The agencies are issuing a joint final 5300), Letty A nn Shapiro, Community policy statem ent to provide guidance to Development Specialist, Community institutions in com plying w ith section Development D ivision {202/874-4930), 42 of the FDI Act. Sim ilar to the Office of the Comptroller of the agencies’ proposals, the policy Currency. statem ent defines a branch for purposes FDIC: Robert F. M iailovich, Associate of section 42, clarifies w hat constitutes Director, Division of Supervision (202/ a branch closing, and provides guidance 898-6918), Curtis L. Vaughn, Exam ination Specialist, Division of to institutions in identifying customers Supervision (202/898-6759, Joseph A. to be notified in the event of a branch DiNuzzo, Senior Attorney, Legal closing. Division (202/896-7349). Sum m ary o f Comments OTS: Larry Clark, Program Manager, The agencies received a combined Compliance and Trust (202/906-5628), total of 129 com m ent letters on the Supervision Policy; Kevin A. Corcoran, proposed policy statem ents.2 Forty-nine A ssistant Chief Counsel, Corporate and Securities Division (202/906-6902), letters were from FDIC-insured banks Chief C ounsel's Office; Jackie Durham, and savings associations, 39 from bank Project Manager, Corporate Analysis and thrift holding com panies, 32 from (202/906-6712) Supervisory Operations, bank and thrift industry trade groups, Office of Thrift Supervision, 1700 G four from state bank supervisors, tw o Street, NW., W ashington, DC 20552. from a trade group for state bank supervisors, one from another Federal SUPPLEMENTARY INFORMATION: agency, one from a city government, and Background Inform ation one from an individual. Overall, the comm ents supported the proposed Section 228 of the Federal Deposit Insurance Corporation Im provem ent Act policy statem ent and the agencies’ efforts to im plem ent the branch closing of 1991 (Pub. L. 102— 242, 105 Stat. statute w ith the least possible burden on 2236) (FDICIA) added a new section 42 the banking industry. to the Federal Deposit Insurance Act The majority of the comm ents focused (FDI A ct).1 Section 42 took effect upon on four areas about w hich the agencies enactm ent of FDICIA on December 19, had sought specific comment: the 1991. The law requires each insured proper definition of “branch” under depository institution to give 90 days section 42, particularly on w hether an prior w ritten notice of any branch autom atic teller machine, remote service closing to its prim ary Federal regulator facility, or customer-bank and to branch custom ers, to post a notice at the branch site at least 30 days com m unications term inal (collectively, prior to closing, and to develop a policy an “ATM”) constitutes a branch; w hether relocations should he w ith respect to branch closings. The considered branch closings for purposes notice to the regulator m ust include a detailed statem ent of the reasons for the of section 42; w hether an acquiring in stitutio n’s decision not to purchase a decision to close the branch and inform ation in support of those reasons. branch from the FDIC or Resolution The Board of Governors (57 FR 46168, Trust Corporation after tem porary October 7,1992), OCC (57 FR 40249, operation of such branch during an September 2,1992), FDIC (57 FR 47657, option period should constitute a October 19,1992), and OTS (57 FR branch closing under section 42; and how custom ers of a branch should be 44226, September 24,1992) each identified. A description of the proposed for com m ent a policy statem ent interpreting section 42. The comm ents is included in the discussion of these areas below. agencies worked together in preparing their proposed policy statem ents, and Discussion the statem ents were therefore 1. D efinition o f "Branch" substantially sim ilar. A lthough each of the agencies issued a separate F ederal The majority of comm ents received by R egister notice on its proposed policy the agencies focused on w hether ATMs should be deem ed outside the scope of 1 Due to an error in drafting, both section 228 and the branch closing statute. Each of these section 132 of FDICIA added a new section 39 to the FDI A ct T he section 39 of the FDI Act added by section 228 o f FDICIA w as redesignated as section 42 of th e FIX Act by -section 1602 of the H ousing a d Com m unity Developm ent A ct o f 1M 2, 106 S ta t 3672, and is codified at 11 U .& C X83H- 1. 2 in m any situations persons provided the same w ritten com m en t to m ore than one o f file agenciBs. T his total include* all com m ents received % all the agencies, in cluding th e sam e com nw nt(s) provided by one person to m ore than one agency. 49084 Federal Register / Vol. 58, No. 181 / Tuesday, Septem ber 21, 1993 / Notices com ments opposed subjecting the closing of ATMs to the requirem ents of section 42. Commenters argued that Congress could not have intended to require notice of the closing of ATMs because ATM closings do not have an adverse effect on the community; moreover, com menters argued, coverage of ATMs w ould discourage institutions from locating ATMs in lower income areas on an experim ental basis. Commenters also stated that providing notices for ATMs w ould be difficult, as ATMs are frequently located in areas, such as grocery stores, over w hich an institution has no control; thus, com menters argued that if the owner of the property were to order the ATM closed, the institution w ould be unable to comply w ith section 42. Several com menters noted that section 42 provides for inclusion of a notice in "regular account statem ents m ailed to custom ers of the branch proposed to be closed.” Assum ing that each person is the custom er of one branch, these comm enters argued that, the requirem ent of section 42 that notices be m ailed to the custom ers o£ the branch to be closed could not have been m eant to include ATMs w ithin the definition of branch, since custom er accounts are not assigned to ATMs, If, on the other hand, anyone w ho uses an ATM is to be considered a “custom er” of the ATM, com m enters noted that the bank w ould be required to notify persons who were not even custom ers of the bank, but h ad merely used the ATM. O ther com m enters provided a further reason w hy an interpretation of branch that excludes ATMs w ould better reflect the statutory intent. If ATMs were included w ithin the definition of branch, then converting a full service brick-and-m ortar branch to an ATM, and thereby depriving the neighborhood of significant banking services, w ould not constitute a branch closing, since there w ould continue to be a “branch.” If ATMs w ere not considered branches, such an action w ould constitute a branch closing and section 42 w ould apply. As to w hat definition of "branch” should be used, one com m enter stated that the common m eaning of “branch” is an office w here em ployees of the bank may be found and banking business is handled by a natural person. Several comm enters noted that by using the phrase “prem ises o f the b ranch” in requiring a posted notice, Congress clearly intended to cover only traditional brick-and-m ortar branches, that is, those w ith prem ises. As one com m enter noted, the dictionary definition of “prem ises” defines the term as "a tract o f land w ith building thereon or as a building or a part of a building usually w ith its appurtenances (as grounds).” The com m enter argued that an ATM is a fixture, and not a building. Along sim ilar lines, a trade group recom m ended defining a branch as a detached, full-service facility staffed by employees. The agencies have concluded that the appropriate definition of “branch” for purposes of section 42 is a traditional brick-and-m ortar branch, and any sim ilar banking facility, at w hich deposits are received or checks paid or money lent. Thus, for example, notice pursuant to section 42 w ould not be required for the closing of an ATM or tem porary branch. Institutions that are in doubt about the coverage of a particular closing should consult the appropriate Federal banking agency. The agencies believe that this interpretation is consistent w ith the intent and plain language of section 42. In enacting section 42, Congress appears to have been interested in protecting customers from the loss of full service facilities. See S. Rep. 1 0 2 -1 6 7 ,162d Cong., 1st Sess. 113 (1991) {"The threat of a branch closure is particularly common and pronounced in under served, iower-income neighborhoods. W ithout full banking services, it is difficult for a com m unity to attract new business and economic activity.") An interpretation of “branch” as including only traditional brick-andm ortar branches excludes temporary branches and ATMs and thereby avoids problem s w ith a broader definition that could not have been intended by Congress. For example, if tem porary branches were to be included w ithin the definition of "branch,” costly notifications that serve no purpose w ould be required. As one comm enter pointed out, an institution that established a tem porary branch at a fair, convention, college registration or sim ilar event w ould be required to rem ain at the (possibly vacant) site for 90 days after the event ended. In the case of such facilities, it is obvious to the institution’s customers that the facility is tem porary. No custom er is likely to be surprised by the disappearance of such facilities, and Congress could n ot have intended to require a 90 day notice for institutions th at w ere never to be opened for 90 days. As noted in the comm ents, ATMs also present problem s w ith an expansive definition, as those w ho use ATMs frequently dp not bank w ith the institution that operates the ATM. Furtherm ore, the agencies are particularly concerned th at un d er an interpretation th at included ATMs w ithin the definition of "branch,” an institution could downgrade a brickand-m ortar branch to an ATM and not have closed a branch for purposes of section 42. Such a result w ould appear to be at odds w ith the purpose of section 42. Interpreting section 42 to cover traditional brick-and-m ortar branches is also consistent w ith the plain language of section 42. As noted by the com menters, the term "branch” is undefined in section 42, and is not defined elsew here in the FDI Act. A lthough section 3(o) of the FDI Act does define the term “domestic branch,” 3 Congress chose not to use that term in section 4 2 / An indication of Congressional intent in the language of section 42 can be found in section 42(b)(2)(A), w hich requires the posting of a notice on “the prem ises of the branch to be closed.” Thus, for purposes of section 42, a branch is som ething that has "prem ises.” As noted by the commenters, prem ise is defined for this purpose as "a tract of land w ith the buildings thereon.” * The use of this term indicates that in using the term "branch,” Congress intended section 42 to apply to traditional brick-and-m ortar branches—those that have “ premises.” 2. Relocations The regulations of the Board of Governors and OTS each provide that an institution that proposes to relocate a branch or m ain office only a short distance need not subm it an application seeking approval of the relocation. The two agencies’ regulations and standards differ, b u t both rely on some consideration of the distance of the move. See 12 CFR 208.9 (Board); 12 CFR 545.95 (OTS). On the other hand, neither the FDIC nor the OCC has a short-distance exception to its application requirem ents for branch relocation 3 Section 3(o) of th e FBI A ct states that a "dom estic branch” includes “any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State of the U nited States or in any Territory of the U nited States, Puerto Rico, Guam, Am erican Samoa, th e T rust Territory of th e Pacific Islands, or the Virgin Islands at w hich deposits are received or checks paid or m oney len t.” 12 U.S.C. 1813(o). * This is in contrast to at least one other provision of the FDI Act w here Congress used th e term "dom estic branch” in requiring FDIC approval for certain applications. 12 U.S.C. 1828(d). Although the proposed policy statem ents of th e Board of Governors, the OCC and the FDIC proposed th at the definition of "dom estic branch" be used as the definition of "branch" in section 42, th e agencies^ believe th at it is m ore in keeping w ith th e language and legislative in ten t of th e statute to u se the foregoing definition of branch to im plem ent the requirem ents of section 42. »See Webster’s Ninth New Collegiate Dictionary : 928 (1986). Federal Register / Vol. 58, No. 181 / Tuesday, Septem ber 21, 1993 / N otices applications. As discussed in the proposals, section 18(d) of the FDI Act requires state nonm em ber banks to obtain FDIC approval before relocating a branch. Section 36 of the N ational Bank Act requires OCC approval before a national bank relocates a branch. In their notices, the agencies proposed that a short-distance relocation not be considered a branch closing for purposes o f section 42. All the comm ents received on the issue agreed that branch relocations should be deemed outside the scope of the branch closing statute. Several persons com m ented that relocations in the same service area or com m unity should not be considered to be a closing. Comments received by the OCC and FDIC noted that those agencies’ existing application and notice requirem ents for branch relocations satisfy the underlying purpose of the branch closing statute and argued that deem ing the branch closing notice requirem ents to apply to branch relocations w ould be redundant w ith the requirem ents of existing law and regulations. The final policy statem ent contains a common m ethod of determ ining if a “relocation” has occurred for purposes of section 42 and makes clear th at a relocation does not constitute a branch closing. A relocation is distinguished from the contem poraneous closing of one branch and opening of another. U nder the policy statem ent a relocation has occurred if the new branch and the closed branch are w ithin the same im m ediate neighborhood and the nature of the business and the custom ers served by the branch are substantially unaffected by the move. Generally, relocations w ill be found to have occurred only w hen short distances are involved: For example, moves across the street, around the com er, or a block or two away. Moves of less than 1000 feet w ill generally be considered to be relocations. La less densely populated areas, w here “neighborhoods” extend farther and a longer move w ould not substantially affect the nature of the business or the custom ers served by the branch, a relocation may occur over significantly longer distances. Institutions that are in doubt about w hether a relocation or closing has occurred should consult the appropriate federal banking agency. The agencies have also concluded that a consolidation of branches can be treated as a relocation, as opposed to a branch closing, for purposes of section 42. Consolidation can be expected to occur after a merger, w here the acquiring institution and the institution being acquired m aintained branches a short distance apart. 49085 w ith the FDIC and RTC allow the The agencies believe that if a consolidation of branches meets the test acquiring institution to rem ain in the for relocation, then the branch may be branch for a period of tim e after the treated as having been relocated rather option period; th is extra tim e allows an than closed for purposes of section 42. institution that decides not to acquire a The agencies believe that customers branch to w ind down its operations in have not been deprived of banking an orderly way. This occupancy period services in these situations. One generally lasts for 180 days. The joint com m enter noted that such a final policy statem ent provides that an consolidation w ould not affect the acquiring institution that occupies but nature of the business or the customers declines to exercise an option to served. M oreover, as another com m enter purchase a branch may rem ain in the noted, such an interpretation w ould branch during the occupancy period avoid penalizing an institution for prescribed by the RTC or FDIC in elim inating a costly duplication of connection w ith the option, up to a services. maximum of 180 days from the date of One com m enter suggested that the the failure of the bank or the expiration agencies review branch relocations for of the option period, w hichever is later, institutions w ith less than satisfactory w ithout triggering the notice CRA ratings, and two commenters requirem ents in section 42. suggested that branch closings be One com m enter argued that section subject to an application process w ith an opportunity for public comment. The 42 should not apply to the closing of a branch after the sale of a bank under a agencies do not believe such review or divestiture order issued by an agency com ment is required by section 42. pursuant to the prom pt corrective action 3. O ccupation o f Branch During an regime of section 38 of the FDI Act. The O ption Period com m enter felt that the delay in closing occasioned by section 42 could Section 42 applies only to branch jeopardize the transaction. A nother closings by insured depository institutions. The agencies stated in their com m enter asked that the agencies not apply section 42 w hen an institution proposed policy statem ents that when acquires a bank in governm ent an acquiring institution declines to conservatorship and closes branches in exercise an option to purchase a branch connection w ith the transaction. and that branch is subsequently closed, However, the agencies believe that the closing is, in effect, attributable to because, in these cases, an insured the FDIC or RTC acting as receiver and depository institution and not the not to the institution. Thus, the government (in its role as receiver of a agencies’ proposed policy statem ents failed institution) is closing the provided that declining to exercise an branches, the closing is attributable to option to purchase a branch from the the institution, and the agencies do not government during an option period have the authority to relieve the closing does not constitute a branch closing, institution of its obligations under and this position is unchanged in the section 42. final policy statement.® The agencies received 36 com ments The agencies also believe that on w hether the section 42 requirem ents branches closed in connection w ith should apply in this context. All transactions involving failing supported the agencies’ position that institutions (including expedited branch closing provisions should not mergers) are not attributable to the apply in such situations involving failed government. Thus, the exception depository institutions. explained above for branch closings in One issue regarding the m echanics of the context of a failed institution cannot such options was raised by two be used in the failing institution com m enters that h ad recently context. The fact that a consolidation of experienced mergers. They criticized branches over a short distance may be the proposal because it only allow ed the found to be a relocation and not a institution to rem ain in the branch branch closing, however, should reduce during the option period, w hich they regulatory burden w ith regard to failing said was generally 30 to 90 days. These institution transactions. That is, com m enters pointed out that contracts acquiring institutions may consolidate existing branches w ith branches « Pursuant to a typical acquisition agreem ent w ith acquired from the failing institution the FDIC or RTC, the acquirer of a failed institution w ithout having to com ply w ith the may tem porarily operate one or m ore branches of the failed institu tion during the acquirer’s option requirem ents of section 42 as long as the period—th at is, during the period the acquirer has consolidation m eets the test for a to decide w hether it w ill purchase or lease the relocation sfet forth in the policy branch. (Typically, option periods under FDIC and statement. RTC contracts range betw een 90 and 180 days.) 49086 Federal Register / VoL 58, No. 181 / Tuesday, September 21, 1993 / Notices 4 D eterm ining Custom ers o f a Branch . The com m enters generally supported the agencies’ proposal to perm it each institution to identify a given branch's custom ers based on a good faith system of allocating custom ers among branches, and to indicate th at one reasonable m eans of allocating custom ers is by w here they opened th eir deposit or loan accounts. O ne com m enter n oted that banks have historically determ ined each branch’s custom er base by the accounts opened at th e office. T he final policy statem ent continues to allow each institution to allocate custom ers in a reasonable way, and further clarifies that, in certain cases, such an allocation may result in a branch not having any custom ers to notify in th e event of a closing. In th at event, only the notice to the appropriate agency and the posting of a notice on the prem ises w ould be required. A few com m enters sought further guidance in this area, but the agencies believe that each institution should be responsible for identifying customers, 5. Branch Closings as a R esult o f Merger, C onsolidation, or O ther Form o f A cquisition The agencies proposed that either party to a transaction such as a merger or consolidation could provide th e notices required by section 42. Several com m enters questioned w ho w ould be responsible if no notice w ere given. To avoid confusion and a resultant failure to provide th e required notice, th e final policy statem ent clarifies that the acquiring o r resulting institution is ultim ately responsible for ensuring that the required notices are given. 6. Regulatory Burden Several letters com plained about the financial and other com pliance burdens im posed upon depository institutions by the requirem ents of section 42. The agencies are very sym pathetic to th is concern and, thus, have attem pted to produce a policy statem ent that is consistent w ith th e in ten t of the branch closing statute and m inim izes burden to the industry. T he agencies note that depository institutions are bound to com ply w ith the explicit requirem ents of section 42. 7. Interruption o f Service The agencies proposed th at section 42 w ould not apply to an in terru p tio n o f service caused by an event beyond th e in stitu tio n 's control (e.g., n atu ral catastrophe), u n less th e in stitu tio n closed o r d id not reopen th e branch follow ing th e incident. A few com m enters o g u e d th at th e posting o f th e notice in cases w here th e branch w ould n o t reopen could m ean—and w ould have m eant in th e case o f b ran d ies destroyed by H urricane A ndrew —th at an in stitu tio n w ould h a re to p ost a notice am id a p ile o f rubble. T he agencies believe th a t th e notice should be p asted w henever feasible, but acknow ledge th at th ere w ill be tim es w hen the posting cm th e prem ises is not practical. O ther com m enters asked that the agencies find a broader range o f causes of branch closing to be beyond an institution’s control and th u s not requiring a notice u n d er section 42. Specifically, com m enters asked th at the loss of a lease be found to be beyond the institution’s control. The agencies have decided n ot to expand the list of exam ples of w hat constitutes a condition beyond an institution’s control. The agencies believe that the term s of a lease are a factor that is w ithin an institution’s control.7 8. R elationship to State Law A state bankers association pointed out that state law may require branch closing notices and policies, and asked that the agencies determ ine that com pliance w ith state law w ould satisfy section 42. The agencies do not believe that it is appropriate to analyze various state law s ta r th is purpose, b ut the agencies have am ended th e policy statem ent to note: (1) If a notice >rovided to custom ers pursuant to state aw contains the inform ation required by section 42 and is provided w ith prior notice that is consistent w ith the requirem ents of section 42, then a second notice need not be sent; and (2) if a notice sent to a state supervisor contains th e inform ation required by section 42 an d provides prior notice that is consistent w ith the requirem ents of section 42, then the institution may provide a copy of that notice to its federal regulator in lieu of a separate notice. ! 9. R eduction o f Services The final policy statem ent continues to provide that a change in services a t a branch w ill not be considered a branch closing as long as th e facility continues to constitute a branch for purposes o f section 42. In this context, the agencies note that a branch th at reduces its services to th at o f an ATM w ould be deem ed to have closed the branch for purposes of section 42. This is because, as discussed above, for 7 T he agencies recognised th a t institutioos th at entered in to leasee p rio r to enactm ent o f FDICIA w ould n o t h a re been able to take the provisions o f section 42 in to consideration, aod th e agendas issued tatnrim gniAm ce. purposes o f th e branch closing statutes an ATM is n o t considered a branch. 10. Branch Closing Policy T he agencies’ proposals differed w ith respect to th e ir provisions regarding branch closing policies. T he OCC and OTS included in their proposed policy statem ents a list of item s that an institution might w ant to consider including in its policy statem ent; the goal w as to provide guidance to institutions in adopting th e ir policies. T he Board of Governors and th e FDIC did n o t include such a list. Because section 42 does not prescribe th e contents of a branch closing policy and does not delegate to the agencies that authority, all the agencies have decided to om it any list o f suggested Items. Thus, the final policy statem ent retains the requirem ent of a w ritten policy appropriate to the size and needs o f the institution, b u t does not prescribe any suggested contents of th at policy. Policy Statem ent o f B oard o f G overnors o f th e F ederal R eserve System , Office of th e C om ptroller o f th e C urrency, F ederal D eposit In su ran ce C orporation, an d Office o f T hrift S upervision C oncerning B ranch Closing N otices and Policies Purpose T his policy statem ent provides guidance to insured depository institutions concerning requirem ents that an institution provide p rior notice o f any branch closing and establish internal policies for branch closings. Background The Federal Deposit Insurance Corporation Im provem ent Act of 1991 (Pub. L. 102-242.105 Stat. 2236) (FDICIA) was enacted on December 19, 1991. Section 228 of the FDICIA adds a new section 42 to the Federal Deposit Insurance A ct (FDI Act) (12 U.S.C. 183 1 r-l] that im poses notice requirem ents on insured depository institutions that in ten d to d o se branches.1 The provision became effective on December 19,1991. T he law requires an insured depositary in stitu tio n to subm it a notice of any proposed branch d o sin g to th e appropriate Federal banking agency no later th an 90 days p rio r to th e date o f the proposed branch closing. T he required n otice m ust in clu d e a detailed statem ent of th e reasons for th e decision to close th e branch an d statistical or i An insured depository institution w en* any bank or seringa association, aa (M b»d in aactkas 3 of the FDI Act, the deposit* of which am insured by the FDIC Federal Register / Vol. 58, No. 181 / Tuesday, Septem ber 21, 1993 / N otices other inform ation in support of such not substantially affect the nature of the reasons. business or custom ers served. Generally, The law also requires an insured relocations w ill be found to have depository institution to notify its occurred only w hen short distances are custom ers of the proposed closing. The involved: for example, moves across the institution m ust m ail the notice to the street, around the com er, or a block or custom ers of the branch proposed to be two away. Moves of less than 1000 feet closed at least 90 days prior to the w ill generally be considered to be proposed closing. The institution also relocations. In less densely populated m ust post a notice to custom ers in a areas, w here neighborhoods extend conspicuous m anner on the prem ises of farther and a long move w ould not the branch proposed to be closed at least significantly affect the nature of the 30 days p rior to the proposed closing. business or the custom ers served by the A dditionally, the law requires each branch, a relocation may occur over institution to adopt policies regarding substantially longer distances. closings of branches of the institution. Institutions that are in doubt about w hether a relocation or closing has A pplicability occurred should consult the appropriate Section 42 applies to the closing of a Federal banking agency. "branch” by an insured depository Consolidations of branches are institution. The agencies consider a considered relocations if the branches “branch” for purposes of section 42 to are located w ithin the same be a traditional brick-and-m ortar neighborhood and the nature of the branch, or any sim ilar banking facility, at w hich deposits are received or checks business or custom ers served is not affected. Thus, for exam ple, a paid or m oney lent. Thus, for example, notice pursuant to section 42 w ould not consolidation of two branches on the same block following a merger w ould be required for the closing of an ATM not constitute a branch closing. The or tem porary branch. Institutions that same standards apply to consolidations are in doubt about the coverage of a as to relocations. particular closing should consult the Changes of services at a branch are appropriate Federal banking agency. not considered a branch closing, An institution m ust file a oranch provided that the rem aining facility closing notice w henever it closes a constitutes a branch (as defined branch, including w hen the closing herein). 2 occurs in the context of a merger, In addition, section 42 does not apply consolidation or other form of when a branch ceases operation but is acquisition. Transactions subject to not closed by an institution. Thus, the expedited approval u nd er the Bank law does not apply to: Merger Act (12 U.S.C. 1828) m ust also • A tem porary interruption of file a branch closing notice. The service caused by an event beyond the responsibility for filing the notice lies in stitutio n’s control [e.g., a natural w ith the acquiring or resulting catastrophe), if the insured depository institution, b ut either party to such a institution plans to restore branching transaction may give the notice. Thus, for example, the purchaser m ay give the services at the site in a tim ely m anner; a • Transferring back to the FDIC or notice prior to consum m ation of the transaction w here the purchaser intends Resolution Trust Corporation, pursuant to the term s of an acquisition agreement, to close a branch following a branch of a failed bank or savings consum m ation, or the seller m ay give association operated on an interim basis the notice because it intends to close a in connection w ith the acquisition of all branch at or prior to consum m ation. In or part of a failed bank or savings the latter exam ple, if the transaction association, so long as the transfer were to close ahead of schedule, the occurs w ithin the option period or purchaser, if authorized by the w ithin an occupancy period, n o t to appropriate federal banking agency, could operate the branch to com plete 2 T he agencies note th at w here, after a reduction com pliance w ith the 90-day in services, th e resulting facility no longer qualifies requirem ent w ithout the need for an as a branch, section 42 w ould apply. T hus, notices additional notice. of branch closing w ould be required if an in stitu tio n w ere to replace a traditional brick-andThe law does no t apply to mergers, m ortar branch w ith an ATM. consolidations, or other acquisitions, a Section 42 w ould apply, how ever, if the including branch sales, th at do not in stitu tio n w ere closed or d id no t reopen the branch result in any branch closings. In follow ing the incident. A lthough prior notice w ould addition, the law does n o t apply w here n o t be possible in such a case, the institution sho u ld notify th e custom ers o f the branch and the a branch is relocated. For purposes of appropriate federal banking agency in the m anner th is policy statem ent, a branch specified by section 42 to th e extent possible and relocation is a m ovem ent w ith in the as soon as possible after th e decision to close the same im m ediate neighborhood th at does branch has been m ade. 49087 exceed 180 days, provided in the agreement. N otice o f Branch Closing to the A gency The law requires an insured depository institution to give notice of any proposed branch closing to the appropriate Federal banking agency no later than 90 days prior to the date of the proposed branch closing. The required notice m ust include the following: • Identification of the branch to be closed; • The proposed date of closing; • A detailed statem ent of the reasons for the decision to close the branch; and • Statistical or other inform ation in support of such reasons consistent w ith the institution’s w ritten policy for branch closings. If an institution believes certain inform ation included in the notice is confidential in nature, the institution should prepare such inform ation separately and request confidential treatm ent. The agency w ill decide w hether to treat such inform ation confidentially under the Freedom of Inform ation Act (5 U.S.C. 552), If a notice provided to a state supervisory agency pursuant to state law contains the inform ation outlined above, then the institution may provide a copy of that notice to the appropriate federal banking agency in satisfaction of section 42, provided th at the notice is filed at least 90 days prior to the date of the branch closing. N otice o f Branch Closing to Customers The law requires an insured depository institution that proposes to close a branch to provide notice of the proposed closing to the custom ers of the branch. A custom er of a branch is a patron of an institution w ho has been identified w ith a particular branch by such institution through use, in good faith, of a reasonable m ethod for allocating custom ers to specific branches. An institution that allocates custom ers to its branches based on w here a custom er opened h is or her deposit or loan account w ill be presum ed to have reasonably identified each custom er of a branch. The agencies recognize th at use of this m eans of allocation, and perhaps others, may result in certain branches no t being assigned any custom ers, b u t believe that th is result is perm issible so long as the m eans of allocation is reasonable; if such a branch is closed, then notification to the appropriate agency and posting of a notice on the branch prem ises w ill suffice. Finally, an institution need n o t change its recordkeeping system in order to make 49088 Federal Register / Vol. 58, No. 181 / Tuesday. September 21, 1993 / Notices a reasonable determ ination of w h o fs a custom er of a branch. Under section 42, an institution m ust include a custom er notice at least 90 days in advance o f th e proposed closing in at least one of th e regular account statem ents m ailed to custom ers, o r in a separate m ailing. If the branch closing occurs after the proposed date of closing, no additional notice is required to be m ailed to custom ers (or provided to the appropriate federal b a n tin g agency) if th e institution acted in good faith in projecting the date for closing and in subsequently delaying the closing. The m ailed custom er notice should state th e location of the branch to be closed and th e proposed date of closing, and either identify w here custom ers may obtain service following th e closing date or provide a telephone num ber for custom ers to call to determ ine such alternative sites. If a notice o f branch closing provided to custom ers pursuant to state law contains this inform ation, then a separate notice need not be sent, provided that th e notice is sent at least 90 days prior to the closing. Under section 42, an institution also m ust post notice to branch custom ers in a conspicuous m anner on th e branch prem ises at least 30 days p rior to the proposed closing. T his notice should state the proposed date o f closing and identify w here custom ers may obtain service following that date o r provide a telephone num ber for custom ers to call to determ ine such alternative sites. An institution may revise th e notice to extend the projected date o f closing w ithout triggering a new 30-day notice period. In some situations, an institution, in its discretion and to expedite transactions, m ay m ail and post notices to custom ers o f a proposed branch closing that is contingent upon an event. For example, in th e case o f a proposed merger o r acquisition, an institution may notify custom ers of its in ten t to close a branch upon approval by die appropriate Federal banking agency of the proposed m erger o r acquisition. Policies fo r Branch Closings T he law requires all in su red depository institution s to ad o p t policies for branch closings. Each in stitu tio n w ith (me or m ore branches m ust adopt such a policy. If an in stitu tio n currently has no b ran d ies, it m ust adopt a policy for branch d a tin g before it establishes its first branch. T he policy should b e in w riting an d m eet th e ris e an d se e d s of the institution. Each branch d o ain g policy adopted pursuant to section 42 sh o u ld in clude factors for determ ining w h ich branch to d o se a n d w hich custom ers to notify, and procedures for providing the notices required by the statute. Com pliance As part of each Com munity Reinvestment Act (CRA) exam ination, the Federal banking agendas w ill exam ine for com pliance w ith section 42 of FDICIA to determ ine w hether the institution has adopted a branch d o sing policy and w hether the institution provided the required notices w hen it closed a branch. If an institution fails to com ply w ith section 42, the appropriate federal banking agency may make adverse findings in the CRA evaluation or take appropriate enforcem ent action. By order of the Board o f Governors o f the Federal Reserve System. Dated: Septem ber 9,1993. W illiam W. W iles, Secretary o f the Board. Dated: Septem ber 8,1993. Eugene A. Ludwig, Comptroller o f the Currency. Dated: A ugust 10,1993. Hoyle L. Robinson, Executive Secretary, Federal Deposit Insurance Corporation. By th e Office of T hrift Supervison. Dated: A ugust 11,1993. Jonathan L. Fiechter, Acting Director. [FR Doc. 93-22847 Filed 9-20-83; &45 am) B ru n o coos s a to -e t-* , «•*# -** -*, 6720- 01 - * •*