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F ederal of reserve bank D allas ROBERT D. McTEER, JR. DALLAS, TEXAS PRESIDENT AND CHIEF EXECUTIVE OFFICER 75265-5906 June 8, 1998 Notice 98-41 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Expanded Examination Cycle for Certain Small Insured Institutions DETAILS The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision (collectively referred to as the agencies) have issued a final rule to expand the examination frequency cycle for certain small institutions. The final rule implements section 306 of the Riegle Community Development and Regulatory Improvement Act of 1994 (CDRI) and section 2221 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). Together, section 306 of the CDRI and section 2221 of the EGRPRA authorize the agencies to expand the eligibility for the 18-month examination cycle from the current asset size limit of $100 million to a revised limit of $250 million. The final rule became effective April 2, 1998. ATTACHMENT A copy of the Board’s notice as it appears on pages 16377-81, Vol. 63, No. 63 of the Federal Register dated April 2, 1998, 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) MORE INFORMATION For more information, please contact Ann Worthy at (214) 922-6156. For additional copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Thursday April 2, 1998 Part IX Department of the Treasury Office of the Comptroller of the Currency 12 CFR Part 4 Federal Reserve System 12 CFR Part 208 Federal Deposit Insurance Corporation 12 CFR Part 337 Department of the Treasury Office of Thrift Supervision 12 CFR Part 563 Expanded Examination Cycle for Certain Small Insured Institutions; Final Rule 16377 16378 Federal Register/Vol. 63, No. 6 3 /Thursday, April 2, 1998/Rules and Regulations DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 4 [Docket No. 97-02] RIN 1557-AB56 FEDERAL RESERVE SYSTEM 12 CFR Part 208 [Regulation H; Docket No. R-0957] FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 337 RIN 3064-AB90 DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12 CFR Part 563 [Docket No. 98-12] 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: Final rule. AGENCIES: SUMMARY: The Board of Governors of the Federal Reserve System (Board), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) (collectively, the Agencies) are adopting as a final rule their joint interim rule im plem enting section 306 of the Riegle Comm unity Development and Regulatory Improvement Act of 1994 (CDRI) and section 2221 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). Together, section 306 of CDRI and section 2221 of EGRPRA authorize the Agencies to increase the asset size of certain financial institutions that may be examined once in every 18-month period, rather than once in every 12-month period, from $100 m illion to a revised lim it of $250 m illion. This final rule makes certain institutions that have $250 m illion or less in assets eligible for the 18-month exam ination schedule. EFFECTIVE DATE: April 2, 1998. FOR FURTHER INFORMATION CONTACT: OCC: Lawrence W. Morris, National Bank Examiner, Examination Process (202) 874-4915; Ronald Schneck, Director, Special Supervision, (202) 874-4450; or Mark Tenhundfeld, Assistant Director, Legislative and Regulatory Activities, (202) 874-5090. Board: Molly Wassom, Deputy Associate Director, (202) 452—2305, or W illiam H. Tiernay, Senior Financial Analyst, (202) 872-7579, Division of Banking Supervision and Regulation. For the hearing im paired only, Telecom m unication Device for the Deaf (TDD), Diane Jenkins (202) 452—3544. FDIC: Mark A. Mellon, Counsel, Regulation and Legislation section (202) 898-3854, Legal Division, or Robert W. Walsh, Manager, Planning and Program Development section (202) 898-6911, Division of Supervision, Federal Deposit Insurance Corporation, 550 17th Street, N.W., W ashington, 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 10(d) of the Federal Deposit Insurance Act (the FDI A ct),1 w hich was added by section 111 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),2 requires that each appropriate Federal banking agency conduct a full-scope, on-site exam ination at least once during each 12-month period of every insured depository institution that the agency supervises. However, section 10(d) permits the Agencies to examine certain small insured depository institutions once during every 18-month period. As initially established by FDICIA, section 10(d) required an institution to have $100 m illion or less in total assets and its composite condition m ust have been found to be outstanding (rated 1 under the Uniform Financial Institutions Rating System (UFIRS)) at its most recent examination in order to qualify for an extended exam cycle. In addition, a qualifying institution (a) m ust not have undergone a change in control during the previous 12-month period in w hich a full-scope examination otherwise w ould have been required by section 10 of the FDI Act; (b) be well capitalized; and (c) be found by the appropriate agency to be well managed. 1Section 10(d) of the FDI Act is codified at 12 U.S.C. 1820(d). 2Pub. L. 102-242, 105 Stat. 2236. Section 306 of CDRI, w hich was enacted into law in 1994,3 m ade several am endm ents to section 10(d) that, taken together, expand the availability of the 18-month examination cycle to a larger num ber of small institutions. First, section 306 of CDRI increased to $250 m illion the asset size of institutions rated outstanding (UFIRS 1) that could be exam ined on an 18-month cycle. Second, section 306 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. Third, section 306 authorized the Agencies to increase this $100 m illion threshold to $175 m illion beginning on September 23, 1996, if the Agencies first determined that the increased am ount is consistent w ith the principles of safety and soundness for insured depository institutions. Finally, section 306 required that, to qualify for the expanded examination cycle, an insured institution m ust not be subject to a formal enforcement proceeding or order. The remaining provisions of section 10(d) of the FDI Act were unchanged. Section 2221 of EGRPRA4 further am ended section 10(d) of the FDI Act. Pursuant to section 2221, the Agencies were authorized to increase to $250 m illion the m axim um asset size of UFIRS 2-rated institutions eligible for examination on an 18-month cycle. EGRPRA also m ade the expanded examination cycle available to qualified Federal branches and agencies of foreign banks. The International Banking Act of 1978 (the IBA),5 as am ended by the Foreign Bank Supervision Enhancement Act of 1991,6 requires an examination of each U.S. branch or agency of a foreign bank once during each 12-month period. Section 2214 of EGRPRA7 am ended the IBA to provide, among other things, that each Federal or State branch or agency of a foreign bank w ill be subject to on site examination by the appropriate Federal or State banking agency as frequently as w ould a national or state bank, respectively. 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. In 1997, the Federal banking agencies issued a joint rule that was immediately •’ Pub. L. 103-325, 108 Stat. 2160. 4 Pub. L. 104-208, 110 Stat. 3009 (section 2221 is codified at 12 U.S.C. 1820(d)(10)). 5 Pub. L. 95-369, 92 Stat. 607 (codified at 12 U.S.C. 3101, etseq.). 6 Pub. L. 102-242,105 Stat. 2286, 2291, 2304 (amending, inter alia, 12 U.S.C. 3105(c)(1)(C)). 7 Section 2214(a)(3) of EGRPRA is codified at 12 U.S.C. 3105(c)(1)(C). Federal Register/Vol. 63, No. 63/Thursday, April 2, 1998/Rules and Regulations effective up on the date of publication im plem enting section 306 of CDRI and section 2221 of EGRPRA. See 62 FR 6449 (Feb. 12, 1997). The interim rule was published w ith a request for public comment. As discussed in greater detail below, the public comments generally favored adoption of the expanded exam ination cycle rule as set forth in the interim rule. Accordingly, the Agencies hereby adopt the interim rule w ith only m inor stylistic changes. Comments Received In response to the interim rule request for comment, the Agencies received a total of 16 comments, including six from banking institutions, six from Federal Reserve Banks, and four from trade associations. Most agreed that the expansion of the 18-month exam ination cycle should be applied to UFIRS 1-and 2-rated domestic institutions w ith assets of $250 m illion or less. Commenters favoring the proposed changes agreed that the application of an 18-month cycle w ould reduce regulatory burden on smaller, w ell run institutions that do not pose significant supervisory concerns. Commenters also noted that the rule is consistent w ith the Agencies’ respective approaches to performancebased regulation and supervision. One commenter suggested that a financial institution w ith a UFIRS rating of 1 or 2 should be allowed to elect either a 12-month or an 18-month exam cycle, and that each exam ination should cover, among other things, compliance issues and an examination of the financial institution’s fiduciary and data processing operations. In response, the Agencies note that the examination cycle adopted in the interim rule and finalized by this rulemaking creates the generally applicable schedule. The prim ary regulator w ill have the option, however, to examine an institution as frequently as the regulator deems appropriate. The Agencies believe that this approach is an efficient and effective use of both financial institution and examiner resources. Should a financial institution w ish to discuss particular issues w ith its prim ary regulator at a tim e other than w hen an examination is ongoing, the financial institution is encouraged to contact its regulator for assistance at any time. Final Rule Based upon further deliberations by the Agencies and the comments received, the Agencies are adopting the interim rule in final form, w ith only m inor stylistic changes. Pursuant to the final rule, a domestic national or state financial institution will be eligible for an 18-month examination schedule if the institution: (1) has total assets of $250 m illion or less; (2) is well capitalized as defined in section 38(b)(1)(A) of the FDI Act (12 U.S.C. 1831o(b)(l)(A)); (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 undergone a change in control during the previous 12-month period. The Agencies have determ ined that increasing the size lim itation of UFIRS 2-rated institutions that are eligible for an 18-month cycle is consistent w ith the safety and soundness of insured depository institutions. A longer examination cycle permits the Agencies to focus their resources on those segments of the banking and thrift industry that present the most im m ediate supervisory concern, while concom itantly reducing the regulatory burden on smaller, well run institutions that do not pose an equivalent level of supervisory concern. In lieu of the more frequent annual examinations that would otherwise be conducted for these institutions, the agencies rely upon offsite 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 m ust be m ade available in the im plem entation of this regulation to accommodate requirements for annual examinations by various states. The FDIC, Board, and OCC, w hich have jurisdiction over U.S. branches and agencies of foreign banks, are reviewing the issue of how to apply the qualifying criteria to these entities. Upon developm ent of a m ethod under w hich the 18-month examination cycle qualifying criteria can be applied to Federal branches and agencies, a separate rule w ill be issued for comment. Effective Date of Final Rule The Agencies have determ ined that there is good cause to dispense w ith a 30-day delayed effective date pursuant to 5 U.S.C. 553(d)(3). The expanded exam cycle was im m ediately effective upon publication of the interim rule in February, 1997. This final rule adopts the interim rule w ithout any substantive change. W hile the Agencies invited interested parties to com m ent on the rule at that time, each agency already has im plem ented the expanded exam cycle, and insured depository 16379 institutions already have been complying w ith the new rule for approxim ately a year. Accordingly, depository institutions w ill not require any additional time to adjust their policies or practices in order to comply w ith the rule. Delaying the effective date simply w ould create confusion on the part of the banking industry concerning the applicability of the expanded exam cycle during the time between publication and some later effective date. The Agencies also have determined, for the reasons stated in the preceding paragraph, that good cause exists to adopt an effective date that is before the first day of the calendar quarter that begins on or after the date on w hich the regulation is published, as would otherwise be required by section 302 of the CDRI. Regulatory Flexibility Act The Regulatory Flexibility Act (the Act) (5 U.S.C. 601-612) does not apply to a rulemaking where a general notice of proposed rulemaking is not required, as is the case w ith the 18-month examination cycle rulemaking. See 5 U.S.C. 603 and 604. Accordingly, the A ct’s requirements relating to an initial and final regulatory flexibility analysis are not applicable. Even if the Act were to apply, the final rule will not have a significant economic im pact on a substantial num ber of small entities. The final rule w ill reduce regulatory burdens on eligible banks and thrifts w ith assets of $250 m illion or less. In addition, those depository institutions that are not eligible for the exem ption from the statutorily prescribed 12-month examination cycle are not adversely affected by the final rule. Small Business Regulatory Enforcement Fairness Act Title II of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)8 provides generally for agencies to report rules to Congress and the General Accounting Office (GAO) for review. The reporting requirem ent is triggered w hen a Federal agency issues a final rule. The Agencies w ill file the appropriate reports w ith Congress and the GAO as required by SBREFA. The Office of Management and Budget has determ ined that the uniform rule promulgated by the Agencies does not constitute a “major rule” as defined by SBREFA. 8 Pub. L. 104-121. 16380 Federal Register/Vol. 63, No. 6 3 /Thursday, April 2, 1998/Rules and Regulations Paperwork Reduction Act In accordance w ith the Paperwork Reduction Act of 1995 (44 U.S.C. 3506), the Agencies have determ ined that no collections of information pursuant to the Paperwork Reduction Act are contained in this final rule. OCC and OTS Executive Order 12866 Statement The OCC and OTS each independently has determ ined that this final rule 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, Pub. L. 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 m andate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 m illion 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 num ber of regulatory alternatives before promulgating a rule. Because the OCC and OTS have each independently determ ined that this final rule w ill 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 im pact statement or specifically addressed the regulatory alternatives considered. As discussed in the preamble, this final rule w ill have the effect of reducing regulatory b urden on certain institutions. List of Subjects 12 CFR Part 4 Banks, banking, 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, Conflicts of interest, Corporate opportunity, Crime, Currency, Investments, Reporting and recordkeeping requirements, Savings associations, Securities, Surety bonds. Office of the Comptroller of 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 am ended as follows: PART 4— ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF INFORMATION, CONTRACTING OUTREACH PROGRAM 1. The authority citation for part 4 continues to read as follows: Authority: 12 U.S.C. 93a. S u b p art A also issu e d u n d e r 5 U.S.C. 552; 12 U.S.C. 481, 1820(d). S u b p a rt B also issu e d u n d e r 5 U.S.C. 552; E.O. 12600 (3 CFR, 1987 Com p., p. 235). S u b p a rt C also issu e d u n d e r 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. S u b p a rt D also issu e d u n d e r 12 U.S.C. 1833e. 2. In Subpart A, § 4.6 is revised 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 exam ination of every national bank at least once during each 12-month period. (b) 18-month rule fo r certain sm all institutions. The OCC may conduct a full-scope, on-site examination of a national bank at least once during each 18-month period, rather than each 12m onth period as provided in paragraph (a) of this section, if the following conditions are satisfied: (1) The bank has total assets of $250 m illion or less; (2) The bank is well capitalized as defined in part 6 of this chapter; (3) At the most recent examination, the OCC found the bank to be well managed; (4) At the most recent examination, the OCC assigned the bank a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System (copies are available at the addresses specified in § 4.14); (5) The bank currently is not subject to a formal enforcement proceeding or order by the FDIC, OCC, or Federal Reserve System; and (6) No person acquired control of the bank during the preceding 12-month period in w hich a full-scope, on-site examination w ould have been required but for this section. (c) A uthority to conduct more frequent exam inations. This section does not limit the authority of the OCC to examine any national bank as frequently as the agency deems necessary. Dated: F ebruary 25, 1998. Eugene A. Ludwig, Comptroller o f 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 continues to read as follows: Authority: 12 U.S.C. 24, 36, 92(a), 93(a), 248(a), 248(c), 3 21-338a, 371d, 461, 4 8 1 -4 8 6 , 601, 611, 1814, 1816, 1818, 1820(d)(9), 1823(j), 1828(o), 1831, 18310, 1 8 3 1 p - l, 1 8 3 1 r - l, 1835(a), 1882, 2901 -2 9 0 7 , 3105, 3310,3331-3351, a n d 3906-3909 ; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q—1 a n d 78w; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104a, 4104b, 4106 a n d 4128. 2. In Subpart A, § 208.26 is revised 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 fo r certain sm all institutions. The Federal Reserve may conduct a full-scope, on-site examination of an insured member bank 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 bank has total assets of $250 m illion or less; (2) The bank is w ell capitalized as defined in subpart B of this part (§208.33); (3) At the m ost recent examination conducted by either the Federal Reserve Federal Register/Vol. 63, No. 63/Thursday, April 2, 1998/Rules and Regulations or applicable State banking agency, the Federal Reserve found the bank to be w ell managed; (4) At the most recent exam ination conducted by either the Federal Reserve or applicable State banking agency, the Federal Reserve assigned the bank a com posite 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 bank currently is not subject to a formal enforcement proceeding or order by the FDIC, OCC, or Federal Reserve System; and (6) No person acquired control of the bank during the preceding 12-month period in w hich a full-scope, on-site exam ination w ould have been required bu t for this section. (c) A uthority to conduct more frequent exam inations. This section does not lim it the authority of the Federal Reserve to examine any insured mem ber bank as frequently as the agency deems necessary. By o rd e r of th e B oard of G overnors of th e Federal R eserve System , M arch 2 7 ,1 9 9 8 . Jennifer J. Johnson, Deputy Secretary o f 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 as follows: PART 337— UNSAFE AND UNSOUND BANKING PRACTICES 1. The authority citation for part 337 continues 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-l. 2. Section 337.12 is revised to read as follows: §337.12 Frequency of examination. (a) General. The Federal Deposit Insurance Corporation examines insured state nonm em ber 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 nonm em ber bank at least once during each 12-month period. (b) 18-month rule fo r certain sm all institutions. The FDIC may conduct a full-scope, on-site exam ination of an insured state nonm em ber bank 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 bank has total assets of $250 m illion or less; (2) The bank is well capitalized as defined in § 325.103(b)(1) of this chapter; (3) At the most recent FDIC or applicable State banking agency examination, the FDIC found the bank to be well managed; (4) At the most recent FDIC or applicable State banking agency examination, the FDIC assigned the insured state nonm em ber bank a composite rating of 1 or 2 u nd er the Uniform Financial Institutions Rating System (copies are available at the addresses specified in § 309.4 of this chapter); (5) The bank currently is not subject to a formal enforcement proceeding or order by the FDIC, OCC, or Federal Reserve System; and (6) No person acquired control of the bank during the preceding 12-month period in w hich a full-scope, on-site examination w ould have been required but for this section. (c) A uthority to conduct more frequent exam inations. This section does not lim it the authority of the FDIC to examine any insured state nonm em ber bank as frequently as the agency deems necessary. By o rd e r of th e B oard of Directors. D ated a t W ashington, DC, th is 24th day of M a rc h 1998. F ed eral D eposit In su ra n ce C orporation. Robert E. Feldm an, Executive Secretary. Office of Thrift Supervision 12 CFR CHAPTER V Authority and Issuance For the reasons set forth in the joint preamble, the OTS am ends part 563 of Chapter V of title 12 of the Code of Federal Regulations as follows: 16381 PART 563— OPERATIONS 1. The authority citation for part 563 continues 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. Section 563.171 is revised 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 requirem ents 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 fo r certain sm all institutions. The OTS may conduct a full-scope, on-site examination of a savings association 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 m illion or less; (2) The savings association is well capitalized as defined in § 565.4 of this chapter; (3) At its m ost recent examination, the OTS found the savings association to be w ell managed; (4) At its m ost recent examination, the OTS assigned the savings association a composite rating of 1 or 2, as defined in § 516.3(c) 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 w hich a full-scope, on-site exam ination w ould have been required but for this section. (c) A uthority to conduct more frequent exam inations. This section does not lim it the authority of the OTS to examine any savings association as frequently as the agency deems necessary. Dated: F eb ru ary 10, 1998. By th e Office of T hrift S upervision. Ellen Seidm an, Director. [FR Doc. 98-8 6 0 5 F iled 4 - 1 - 9 8 ; 8:45 am] BILLING CODE 4 8 10 -33 -P ; 6210 -01 -P ; 6714-01-P ; 6720-01-P