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Federal Reserve Bank
OF DALLAS
R O B E R T D. M c T E E R , J R .
DALLAS, TEXAS

P R E S ID E N T
A N D C H IE F E X E C U T I V E O F F I C E R

March 3, 1997

75265-5906

Notice 97-23

TO:

The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District

SUBJECT
Interim Rule and Request for
Comment on Interagency Changes to the
Examination Frequency Cycle
DETAILS

The Board of Governors of the Federal Reserve System, along with the Office of the
Comptroller of the Currency, Federal Deposit Insurance Corporation, and the Office of Thrift
Supervision, has issued an interim rule and requested comment on a proposal to expand the
examination frequency cycle for certain financial institutions. The interim rule became effective
January 30, 1997.
The Board must receive comments by March 31, 1997. Please address comments to
William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th Street
and Constitution Avenue, N.W., Washington, D.C. 20551. All comments should refer to Docket
No. R-0957.
ATTACHMENT

A copy of the Board’s notice as it appears on pages 6449-53, Vol. 62, No. 29, of the
Federal Register dated February 12, 1997, is attached.

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-

MORE INFORMATION

For more information, please contact Ann Worthy at (214) 922-6156. For additional
copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254.
Sincerely yours,

/f& V 1J ■
9

.

Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Rules and Regulations

6449

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12CFR Part 4
[Docket No. 97-02]
RIN 1557-AB56

FEDERAL RESERVE SYSTEM
12CFR Part 208
[Regulation H; Docket No. R-0957]

FEDERAL DEPOSIT INSURANCE
CORPORATION
112 CFR Part 337
RIN 3064-AB90

DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563
[Docket No. 96-114]
RIN 1550-AB02

Expanded Examination Cycle for
Certain Small Insured Institutions

Board of Governors of the
Federal Reserve System, Office of the
Comptroller of the Currency, Federal
Deposit Insurance Corporation, and
Office of Thrift Supervision.
ACTION: Interim rule with request for
comment.
AGENCIES:

The Board of Governors of the
Federal Reserve System (Board), the
Office of the Comptroller of the
Currency (OCC), the Federal Deposit
SUMMARY:

6450

Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Rules and Regulations

Insurance Corporation (FDIC), and the
security control room are accessible
from the courtyard entrance on 20th
Office of Thrift Supervision (OTS)
Street between Constitution Avenue and
(collectively, the Agencies) are issuing
C Street, N.W. Comments may be
this joint interim rule with request for
inspected in room MP-500 between
comment to implement section 306 of
the Riegle Community Development and 9:00 a.m. and 5:00 p.m., except as
provided in Section 261.8 of the Board’s
Regulatory Improvement Act of 1994
Rules Regarding the Availability of
(CDRI), and section 2221 of the
Information, 12 CFR 261.8.
Economic Growth and Regulatory
FDIC: Jerry L. Langley, Executive
Paperwork Reduction Act of 1996
Secretary, Federal Deposit Insurance
(EGRPRA). CDRI section 306 and
Corporation, 550 17th Street, N.W.,
EGRPRA section 2221 authorize the
Washington, D.C. 20429. Comments
Agencies to increase the asset size of
certain financial institutions that may be may be hand delivered to room F-402,
1776 F Street, N.W., Washington, D.C.
examined once in every 18-month
on business days between 8:30 a.m. and
period, rather than once in every 125:00 p.m. Comments may be sent
month period, from the current limit of
through facsimile to (202) 898-3838 or
$100 million to a revised limit of $250
million. This interim rule makes certain by Internet to comments@fdic.gov.
Comments will be available for
institutions that have $250 million or
inspection at the FDIC Public
less in assets eligible for the 18-month
Information Center, Room 100, 801 17th
examination schedule.
Furthermore, section 2214 of EGRPRA Street, N.W., Washington, D.C. on
amends the International Banking Act of business days between 9:00 a.m. and
4:30 p.m.
1978 and requires that each Federal
OTS: Manager, Dissemination Branch,
branch or agency, and each State branch
Records Management and Information
or agency, of a foreign bank be subject
to on-site examination by an appropriate Policy, Office of Thrift Supervision,
Federal banking agency or State banking 1700 G Street, N.W., Washington, D.C.
20552, Attention Docket No. 96-114.
supervisor as frequently as would a
national or a state bank, respectively, by These submissions may be handthe appropriate Federal banking agency. delivered to 1700 G Street, N.W., from
9:00 a.m. to 5:00 p.m. on business days;
Certain issues are raised regarding the
they may be sent by facsimile
manner in which the criteria established
transmission to FAX Number (202) 906by CDRI and EGRPRA for a national or
7755. Comments will be available for
state bank should be made applicable to
inspection at 1700 G Street, N.W., from
U.S. branches and agencies of foreign
9:00 a.m. until 4:00 p.m. on business
banking organizations. The method(s)
days.
by which the criteria will be applied to
FOR FURTHER INFORMATION CONTACT:
such entities is currently being
OCC: Lawrence W. Morris, National
developed.
Bank Examiner, Examination Process
DATES: This interim rule is effective on
(202) 874-4915; Ronald Schneck,
February 12,1997. Comments must be
Director, Special Supervision, (202)
received by April 14, 1997.
874-4450; or Mark Tenhundfeld,
ADDRESSES: Comments should be
Assistant Director, Legislative and
directed to:
Regulatory Activities, (202) 874-5090;
OCC: Communications Division,
Timothy M. Sullivan, Director,
Office of the Comptroller of the
International Banking and Finance,
Currency, 250 E Street S.W.,
(202) 874—
4730.
Washington, D.C. 20219, Attention:
Board: Jack P. Jennings, II, Assistant
Docket No. 97-02. Comments will be
Director, (202) 452-3053, William H.
available for public inspection and
Tiernay, Senior Financial Analyst, (202)
photocopying at the same location.
872-7579, Betsy Cross, Manager,
Comments may also be sent by facsimile Division of Banking Supervision and
transmission to (202) 874-5274 or by
Regulation, or Greg Baer, Managing
electronic mail to
Senior Counsel, (202) 452-3236, Legal
Regs.comments@occ. treas .gov.
Division.
FDIC: Mark A. Mellon, Counsel,
Board: William W. Wiles, Secretary,
Regulation and Legislation section (202)
Board of Governors of the Federal
898-3854, Legal Division, or Robert W.
Reserve System, 20th Street and
Walsh, Manager, Planning and Program
Constitution Avenue, N.W.,
Development section (202) 898-6911,
Washington, D.C. 20551, and refer to
Division of Supervision, or international
Docket No. R-0957. Comments
contact: Karen M. Walter, Review
addressed to Mr. Wiles may also be
Examiner (202) 898-3540, Division of
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 p.m., and to Supervision, Federal Deposit Insurance
Corporation, 550 17th Street, N.W.,
the security control room outside of
those hours. Both the mail room and the Washington, D.C. 20429.

OTS: Scott M. Albinson, Special
Assistant to the Executive Director,
Supervision, (202) 906-7984; or Ellen J.
Sazzman, Counsel (Banking and
Finance), Regulations and Legislation
Division, Office of the Chief Counsel,
(202) 906-7133.
SUPPLEMENTARY INFORMATION:

Background

Section 111 of the Federal Deposit
Insurance Corporation Improvement Act
of 1991, Public Law 102-242,105 Stat.
2236 (1991) (12 U.S.C. 1820(d)),
established a requirement that each
appropriate Federal banking agency
conduct a full-scope on-site
examination of each insured depository
institution that it supervises at least
once during each 12-month period.1 It
allowed an exception, however, for
certain small insured depository
institutions that are well managed and
well capitalized, permitting such
institutions to be examined once during
each 18-month period. To qualify, an
institution was required to have $100
million or less in total assets and its
composite condition must have been
found to be outstanding (rated 1 under
the Uniform Financial Institutions
Rating System (UFIRS)) at its most
recent examination. In addition,
qualifying institutions must not have
experienced a change in control during
the previous 12-month period in which
a full scope examination would have
been required by 12 U.S.C. 1820(d).
In 1994, Congress amended this
provision to expand the availability of
an 18-month examination cycle to a
broader number of small institutions.
CDRI section 306, Public Law 103-325,
108 Stat. 2160 (1994), amended section
10(d)(4) of the FDI Act to increase to
$250 million the total-asset size of
institutions rated outstanding (UFIRS 1)
that could be examined on an 18-month
cycle. CDRI section 306 also added a
provision permitting an 18-month cycle
for institutions rated satisfactory (UFIRS
2) at their most recent examination,
provided they did not exceed $100
million in total assets. CDRI also
authorized the Agencies to increase that
$100 million threshold to $175 million
beginning on September 23,1996. CDRI
further requires that to qualify for the
expanded examination cycle, the
insured institutions not be subject to a
formal enforcement proceeding or order,
and that they meet all the other criteria
of section 10(d) of the FDI Act, which
were not changed by CDRI. These
criteria require that an institution: (1) Be
1Section 111 amended section 10 of the Federal
Deposit Insurance Act (the FDI Act) by adding a
new subsection (d), codified at 12 U.S.C. 1820(d).

Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Rules and Regulations
well capitalized; (2) be well managed;
and (3) must not have experienced a
change in control during the previous
12-month period.
EGRPRA section 2221 provides that,
at any time after September 23,1996,
the Agencies, in their discretion, may
increase to $250 million the maximum
asset size of UFIRS 2-rated institutions
eligible for examination on an 18-month
cycle. CDRI requires that the Agencies
implement this provision by regulation
and that they first determine that the
increased amount is consistent with the
principles of safety and soundness for
insured depository institutions. (12
U.S.C. 1820(d)(10)).
The International Banking Act of 1978
(the IBA), as amended by the Foreign
Bank Supervision Enhancement Act of
1991, requires an examination of each
U.S. branch or agency of a foreign bank
once during each 12-month period. 12
U.S.C. 3105(c)(1)(C). EGRPRA section
2214 amended the IBA to provide that
each Federal or State branch or agency
of a foreign bank shall be subject to on­
site examination by an appropriate
Federal or State banking agency as
frequently as would a national or state
bank, respectively, by the appropriate
Federal banking agency. Consequently,
U.S. branches or agencies of foreign
banks are eligible for the 18-month cycle
provided that they meet the qualifying
criteria outlined above. The method by
which these qualifying criteria should
be applied to Federal and State branches
and agencies is currently under
consideration. The Board, the OCC and
the FDIC request comment regarding
application of these criteria to U.S.
branches and agencies of foreign banks.
The Agencies have determined that
increasing the size limitation of UFIRS
2-rated institutions that are eligible for
an 18-month cycle is generally
consistent with the safety and
soundness of insured depository
institutions assuming the absence of
other risk factors. A longer examination
cycle permits the Agencies to focus their
resources on the segments of the
banking and thrift industry that present
the most immediate supervisory
concern, while concomitantly reducing
the regulatory burden on smaller, wellrun institutions that do not pose an
equivalent level of supervisory
concerns. In lieu of the more frequent
examinations that would otherwise be
conducted for these institutions once in
every 12-month period, the Agencies
rely upon off-site monitoring tools to
identify potential problems in smaller,
well-managed institutions that present
low levels of risk. Moreover, neither the
statute nor the regulation limits, and the
Agencies therefore retain, the authority

to examine an insured depository
institution more frequently. The
Agencies that supervise state-chartered
insured institutions also recognize that
flexibility must be made available in the
implementation of this regulation to
accommodate requirements for annual
examinations by various states.
Description of the Interim Rule

This interim rule makes eligible for an
18-month examination schedule an
institution that: (1) Has total assets of
$250 million or less; (2) is well
capitalized; (3) is well managed; (4)
received a UFIRS rating of 1 or 2 at its
most recent examination; (5) is not
subject to a formal enforcement
proceeding or order; and (6) has not
experienced a change in control during
the previous 12-month period. This
interim rule increases the number of
institutions eligible for an 18-month
examination cycle by about 1,087
institutions (300 national banks, 497
nonmember banks, 105 state member
banks, and 185 savings associations),
thereby reducing the regulatory burdens
attendant to the examination process for
those institutions and freeing additional
supervisory resources to focus on
higher-risk institutions. Off-site
monitoring and the discretionary ability
to examine institutions more frequently
minimizes the supervisory risks of the
less-frequent examinations.
Furthermore, the supervisory emphasis
that the Agencies are placing on risk
management assessment provides
reasonable assurance that a “well
managed” institution has been
evaluated on its ability to identify and
monitor risk, and to deal effectively
with changes in its environment that
may occur between examinations.
The Agencies find good cause for
issuing this interim rule without prior
notice and the opportunity for comment
and for dispensing with the 30-day
delayed effective date ordinarily
prescribed by the Administrative
Procedure Act, 5 U.S.C. 551 et seq. (the
APA). This interim rule confers a
benefit on certain small insured
depository institutions by reducing the
frequency of, and therefore the
regulatory burden associated with, on­
site examinations. Making the 18-month
examination cycle effective immediately
will maximize the benefit of this burden
reduction by enabling the Agencies to
incorporate immediately the revised
examination schedule into their
planning for 1997. Conversely, this
interim rule does not increase the
frequency of examination or otherwise
increase the regulatory burden for any
insured depository institution. Thus,
those institutions that are not eligible

6451

for the exemption from the statutorily
prescribed 12-month examination cycle
are not adversely affected by the interim
rule. Under these circumstances, the
Agencies conclude that prior notice and
comment procedures are unnecessary
and would be contrary to the public
interest. 5 U.S.C. 553(b)(B).
In addition, the Agencies have
determined that, under the APA,
examination schedules are a matter of
internal agency procedure. See Donovan
v. Wollaston Alloys, Inc., 695 F.2d 1, 9
(1st Cir. 1982). Determining when an
insured financial institution is to be
examined is based, in part, on examiner
availability, the Agencies’ need to plan
examiner time in advance, and other
issues relevant to the internal operations
of the Agencies. This interim rule is a
matter of internal agency procedure
rather than a rule of substantive effect
on bank activities and authority.
Therefore, this interim rule is exempt
from the APA’s public notice
requirement. 5 U.S.C. 553(b)(3)(A).
The Agencies are nonetheless
interested in the views of the public and
are therefore requesting comment on
this interim rule, as well as how the
qualifying criteria should be applied to
the U.S. branches and agencies of
foreign banks. An interim rule for each
agency is set out below.
Regulatory Flexibility Act

An initial regulatory flexibility
analysis under the Regulatory
Flexibility Act (the RFA) is only
required whenever an agency is
required to publish a general notice of
proposed rulemaking for any proposed
rule. 5 U.S.C. 603. As noted previously,
the Agencies have determined that is
not necessary to publish a notice of
proposed rulemaking for this rule.
Accordingly, an initial regulatory
flexibility analysis is not required.
Paperwork Reduction Act

In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506),
the Agencies have determined that no
collections of information pursuant to
the Paperwork Reduction Act are
contained in this interim rule.
OCC and OTS Executive Order 12866
Statement

The OCC and OTS have each
independently determined that this
interim rule with request for comment
is not a significant regulatory action
under Executive Order 12866.
OCC and OTS Unfunded Mandates Act
of 1995 Statement

Section 202 of the Unfunded
Mandates Reform Act of 1995, Public

6452

Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Rules and Regulations

Law 104-4, 109 Stat. 48 (March 22,
1995) (Unfunded Mandates Act),
requires that an agency prepare a
budgetary impact statement before
promulgating a rule that includes a
Federal mandate that may result in the
expenditure by state, local, and tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year. If a budgetary impact
statement is required, section 205 of the
Unfunded Mandates Act also requires
an agency to identify and consider a
reasonable number of regulatory
alternatives before promulgating a rule.
Because the OCC and OTS have each
independently determined that this
interim rule will not result in
expenditures by state, local, and tribal
governments, in the aggregate, or by the
private sector, of more than $100
million in any one year, the OCC and
OTS have not prepared a budgetary
impact statement or specifically
addressed the regulatory alternatives
considered. Nevertheless, as discussed
in the preamble, this interim rule will
have the effect of reducing regulatory
burden on certain institutions.
List of Subjects

12 CFR Part 4
Freedom of information, Organization
and functions (Government agencies),
Reporting and recordkeeping
requirements.
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 337
Banks, banking, Reporting and
recordkeeping requirements, Securities.
12 CFR Part 563
Accounting, Advertising, Crime,
Currency, Investments, Reporting and
recordkeeping requirements, Savings
associations, Securities, Surety bonds.
Office of the Comptroller o f the
Currency
12 CFR CHAPTER I

Authority and Issuance

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

PART 4— ORGANIZATION AND
FUNCTIONS, AVAILABILITY AND
RELEASE OF INFORMATION,
CONTRACTING OUTREACH
PROGRAM

1. The authority citation for part 4 is
revised to read as follows:
Authority: 12 U.S.C. 93a. Subpart A also
issued un d er 5 U.S.C. 552; 12 U.S.C. 481,
1820(d). Subpart B also issued un d er 5 U.S.C.
552; E.O. 12600 (3 CFR, 1987 Comp., p. 235).
Subpart C also issued under 5 U.S.C. 301,
552; 12 U.S.C. 481, 482, 1821(o), 1821(t); 18
U.S.C. 641, 1905, 1906; 31 U.S.C. 9701.
Subpart D also issued un d er 12 U.S.C. 1833e.

2. In Subpart A, a new § 4.6 is added
to read as follows:
§4.6

Frequency of examination

(a) General. The OCC examines
national banks pursuant to authority
conferred by 12 U.S.C. 481 and the
requirements of 12 U.S.C. 1820(d). The
OCC is required to conduct a full-scope,
on-site examination of every national
bank 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 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 national bank has total assets
of $250 million or less;
(2) The national bank is well
capitalized as defined in 12 CFR part 6;
(3) At its most recent examination, the
OCC found the national bank to be well
managed;
(4) At its most recent examination, the
OCC determined that the national bank
was in outstanding or good condition,
that is, it received a composite rating of
1 or 2 under the Uniform Financial
Institutions Rating System (Copies are
available at the addresses specified in
§ 4.14 of this chapter);
(5) The national bank currently is not
subject to a formal enforcement
proceeding or order by the FDIC, OCC,
or Federal Reserve Board; and
(6) No person acquired control of the
national bank during the preceding 12month 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 as
frequently as the agency deems
necessary.

Dated: December 23, 1996.
Eugene A. Ludwig,

Comptroller of the Currency.

Federal Reserve System
12 CFR CHAPTER II

Authority and Issuance

For the reasons set forth in the joint
preamble, the Board amends part 208 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)

1. The authority citation for part 208
is revised to read as follows:
Authority: 12 U.S.C. 36, 248(a), 248(c),
321-338a, 371d, 461, 481^86, 601, 611,
1814, 1820(d)(8), 1823(j), 1828(o), 18310,
1831p— 3105, 3310, 3331-3351, and 39061,
3909; 15 U.S.C. 78b, 781(b), 781(g), 78l(i),
78o-4(c)(5), 78q, 78q-l and 78w; 31 U.S.C.
5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106
and 4128.
2. In Subpart A, a new § 208.26 is
added to read as follows:
§ 208.26

Frequency of examination.

(a) General. The Federal Reserve
examines insured member banks
pursuant to authority conferred by 12
U.S.C. 325 and the requirements of 12
U.S.C. 1820(d). The Federal Reserve is
required to conduct a full-scope, on-site
examination of every insured member
bank at least once during each 12-month
period.
(b) 18-month rule for certain small
institutions. The Federal Reserve may
conduct a full-scope, on-site
examination at least once during each
18-month period, rather than each 12month period as provided in paragraph
(a) of this section, if the following
conditions are satisfied:
(1) The insured member bank has
total assets of $250 million or less;
(2) The insured member bank is well
capitalized as defined in subpart B of
this part (§208.33);
(3) At its most recent examination, the
Federal Reserve found the insured
member bank to be well managed;
(4) At its most recent examination, the
Federal Reserve determined that the
insured member bank was in
outstanding or good condition, that is, it
received a composite rating of 1 or 2
under the Uniform Financial
Institutions Rating System (Copies are
available at the address specified in
§ 216.6 of this chapter);
(5) The insured member bank
currently is not subject to a formal
enforcement proceeding or order by the

Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / Rules and Regulations
FDIC, OCC, or Federal Reserve Board;
and
(6) No person acquired control of the
insured member bank 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
Federal Reserve to examine any insured
member bank as frequently as the
agency deems necessary.
By order of the Board of Governors of the
Federal Reserve System, January 23,1997.
William W. Wiles,

Secretary of the Board.
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 part 337 of chapter III of
title 12 of the Code of Federal
Regulations to read as follows:
PART 337— UNSAFE AND UNSOUND
BANKING PRACTICES

1. The authority citation for part 337
is revised to read as follows:
Authority: 12 U.S.C. 375a(4), 375b, 1816,
1818(a), 1818(b), 1819, 1820(d)(10), 1821(f),
1828(j)(2), 1831f, 1831f—
1.

2. A new § 337.12 is added to read as
follows:
§ 337.12

nonmember bank was in outstanding or
good condition, that is, it received a
composite rating of 1 or 2 under the
Uniform Financial Institutions Rating
System (Copies are available at the
addresses specified in § 309.4 of this
chapter);
(5) The insured state nonmember
bank currently is not subject to a formal
enforcement proceeding or order by the
FDIC, OCC, or Federal Reserve Board;
and
(6) No person acquired control of the
insured state nonmember bank 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 as frequently as the
agency deems necessary.
By order of the Board of Directors.
Dated at W ashington, DC, this 21st day of
January, 1997.
Federal Deposit Insurance Corporation.
Jerry L. Langley,

Executive Secretary.

Office of Thrift Supervision
12 CFR CHAPTER V

Authority and Issuance

For the reasons set forth in the joint
preamble, the OTS amends part 563 of
Chapter V of title 12 of the Code of
Federal Regulations as follows:

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). The FDIC is required to
conduct a full-scope, on-site
examination of every insured state
nonmember bank 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 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 insured state nonmember
bank has total assets of $250 million or
less;
(2) The insured state nonmember
bank is well capitalized as defined in 12
CFR 325.103(b)(1);
(3) At its most recent examination, the
FDIC found the insured state
nonmember bank to be well managed;
(4) At its most recent examination, the
FDIC determined that the insured state

PART 563— OPERATIONS

1. The authority citation for part 563
is revised to read as follows:
Authority: 12 U.S.C. 375b, 1462, 1462a,
1463, 1464, 1467a, 1468, 1817, 1820, 1828,
3806; 42 U.S.C. 4106.

2. § 563.171 is added to read as
follows:
§563.171

Frequency of examination.

(a) General. The OTS examines
savings associations pursuant to
authority conferred by 12 U.S.C. 1463
and the requirements of 12 U.S.C.
1820(d). The OTS is required to conduct
a full-scope, on-site examination of
every savings association at least once
during each 12-month period.
(b) 18-month rule for certain small
institutions. The OTS 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 following conditions are
satisfied:
(1) The savings association has total
assets of $250 million or less;

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(2) The savings association is well
capitalized as defined in 12 CFR 565.4;
(3) At its most recent examination, the
OTS found the savings association to be
well managed;
(4) At its most recent examination, the
OTS determined that the savings
association was in outstanding or good
condition, that is, it received a
composite rating of 1 or 2 under the
Uniform Financial Institutions Rating
System (Copies are available at the
addresses specified in § 516.1 of this
chapter);
(5) The savings association currently
is not subject to a formal enforcement
proceeding or order; and
(6) No person acquired control of the
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 OTS
to examine any savings association as
frequently as the agency deems
necessary.
Dated: November 20, 1996.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,

Director.
[FR Doc. 97-3460 Filed 2-11-97; 8:45 am]
BILLING CODES 4810-33-P 6210-01-P 6714-01-P 672001-P


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102