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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)
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