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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10658
October 8, 1993
~
|
Interagency Policy Statem ent R egarding B ranch Closings
by Insured Depository Institutions
To All State Member Banks in the Second Federal
Reserve District, and Others Concerned:
The following is from the text of a statement issued by the Board of Governors of the Federal Reserve System
announcing the adoption of a joint interagency policy statement concerning branch closings by insured depository
institutions:
The policy statement 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 service 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 devise a means of allocating customers among branches and provides
guidance on how this can be done, 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 temporarily under
an option agreement with the Federal Deposit Insurance Corporation (“FDIC”) or Resolution Trust Corporation
(“RTC”), if the acquiring institution 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.
Printed on the following pages is the text of the Interagency Statement. Questions regarding this matter may
be directed to Janice A. Oser, Supervising Examiner, Compliance Examinations Department (Tel. No. 212-720-8136)
or Jay B. Bernstein, Staff Director, Domestic Banking Applications Division (Tel. No. 212-720-5861). Notices filed
pursuant to Section 42 of the Federal Deposit Insurance Act should be directed to the Domestic Banking Applications
Division.
W
illiam
J M
.
cD o n o u g h ,
President.
Federal Register / Vol. 58, No. 181 / Tuesday, September 21, 1993 / Notices
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
[93-16]
FEDERAL RESERVE SYSTEM
[Docket No. R-0777]
FEDERAL DEPOSIT INSURANCE
CORPORATION
RIN 3063-AA53
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
[Docket No. 93-157]
Branch Closings
Board of Governors of the
Federal Reserve System; Office of the
Comptroller of the Currency, Treasury;
Federal Deposit Insurance Corporation;
and Office of Thrift Supervision,
Treasury.
ACTION: Joint policy s t a t e m e n t
AGENCIES:
The Board of Governors of the
Federal Reserve System (Board of
Governors), the Office of the
Comptroller of the Currency (OCC), the
Federal Deposit Insurance Corporation
(FDIC), ana the Office of Thrift
Supervision (OTS) (collectively “the
agencies”) have adopted a joint policy
statement regarding branch closings by
insured depository institutions. The
policy statement provides guidance
concerning the branch closing
provisions of section 42 of the Federal
Deposit Insurance Act (FDI Act),
specifically the requirements that
insured depository institutions adopt
policies for branch closings and provide
notices before closing any branch.
DATES: Effective September 21,1993.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
B oard o f G overnors: O liver I. Ireland,
Associate General Counsel (202/4523625), Gregory A. Baer, Senior Attorney
(202/452-3236), Legal Division; Glenn
E. Loney, Assistant Director (202/4523585), Beverly C, Smith, ManagerApplications (202/452-3946), Diane
Jackins, Senior Review Examiner (202/
452-3946), Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System. For the
hearing impaired only,
Telecommunication Device for the Deaf
(TDD), Dorothea Thompson (202/4523544), Board of Governors of the Federal
Reserve System, 20th and C Streets,
NW.t Washington, DC 20551.
OCC: Cindy L. Hausch-Booth,
Licensing Policy and Systems Analyst,
Bank Organization and Structure
Division (202/874-5060), Sue Auerbach,
Senior Attorney, Corporate Organization
and Resolutions Division (202/8745300), Letty Ann Shapiro, Community
Development Specialist, Community
Development Division (202/874—
4930),
Office of the Comptroller of the
Currency.
FD IC: Robert F. Miailovich, Associate
Director, Division of Supervision (202/
898-6918), Curtis L. Vaughn,
Examination Specialist, Division of
Supervision (202/898-6759, Joseph A.
DiNuzzo, Senior Attorney, Legal
Division (202/898-7349).
O TS: Larry Clark, Program Manager,
Compliance and Trust (202/906-5628),
Supervision Policy; Kevin A. Corcoran,
Assistant Chief Counsel, Corporate and
Securities Division (202/906-6962),
Chief Counsel's Office; Jackie Durham,
Project Manager, Corporate Analysis
(202/906-6712) Supervisory Operations,
Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
Background Information
Section 228 of the Federal Deposit
Insurance Corporation Improvement Act
of 1991 (Pub. L. 102-242,105 S tat
2236) (FDIOA) added a new section 42
to the Federal Deposit Insurance Act
(FDI Act).1 Section 42 took effect upon
enactment of FDIOA on December 19,
1991. The law requires each insured
depository institution to give 90 days
prior written notice of any branch
closing to its primary Federal regulator
and to branch customers, to post a
notice at the branch site at least 30 days
prior to closing, and to develop apolicy.
with respect to branch closings. The
notice to the regulator must include a
detailed statement of the reasons for the
decision to close the branch and
information in support of those reasons.
The Board of Governors (57 FR 46168,
October 7,1992), OCC (57 FR 40249,
September 2,1992), FDIC (57 FR 47657
October 19,1992), and OTS (57 FR
44226, September 24,1992) each
proposed for comment a policy
statement interpreting section 42. The
agencies worked together in preparing
their proposed policy statements, and
the statements were therefore
substantially similar. Although each of
the agencies issued a separate Federal
Register notice on its proposed policy
1Due to an error in drafting, both section 228 and
section 132 of FDIOA added a new section 39 to
the FDI A c t The section 3 9 of the FDI A ct added
by section 228 of FDIOA was redesignated as
section 42 of the FDI Act by section 1602 o f the
Housing and Community Development A ct of 1992,
106 S ta t 3672. and is codified at 12 U.S.C. 1 8 3 H 1.
49083
statement, the final policy statement is
a joint document.
Summary of Final Policy Statement
The agencies are issuing a joint final
policy statement to provide guidance to
institutions in complying with section
42 of the FDI Act. Similar to the
agencies’ proposals, the policy
statement defines a branch for purposes
of section 42, clarifies what constitutes
a branch closing, and provides guidance
to institutions in identifying customers
to be notified in the event of a branch
closing.
Summary of Comments
%
The agencies received a combined
total of 129 comment letters on the
proposed policy statements.2 Forty-nine
letters were from FDIC-insured banks
and savings associations, 39 from bank
and thrift holding companies, 32 from
bank and thrift industry trade groups,
four from state bank supervisors, two
from a trade group for state bank
supervisors, one from another Federal
agency, one from a city government, and
one from an individual Overall the
comments supported the proposed
policy statement and the agencies’
efforts to implement the branch closing
statute with the least possible burden on
the banking industry.
The majority of the comments focused
on four areas about which the agencies
had sought specific comment: the
proper definition of “branch” under
section 42, particularly on whether an
automatic teller machine, remote service
facility, or customer-bank
communications terminal (collectively,
an "ATM”) constitutes a branch;
whether relocations should be
considered branch dosings for purposes
of section 42; whether an acquiring
institution’s decision not to purchase a
branch from the FDIC or Resolution
Trust Corporation after temporary
operation of such branch during an
option period should constitute a
branch closing under section 42; and
how customers of a branch should be
identified. A description of the
comments is included in the discussion
of these areas below.
Discussion
1 . D efinition o f “B ran ch ”
The majority of comments received by
the agencies focused on whether ATMs
should be deemed outside the scope of
the branch closing statute. Each of these
. 2 in many situations parsons provided the same
written comment to more than one of the agencies.
This total includes all comments received by all the
agendas, including the same comment!s) provided
by one person to more than one agency.
49084
Federal Register / Vol. 58, No. 181 / Tuesday, September 21, 1993 / Notices
comments opposed subjecting the
closing of ATMs to the requirements 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, commenters argued, coverage
of ATMs would discourage institutions
from locating ATMs in lower income
areas on an experimental basis.
Commenters also stated that providing
notices for ATMs would be difficult, as
ATMs are frequently located in areas,
such as grocery stores, over which an
institution has no control; thus,
commenters argued that if the owner of
the property were to order the ATM
closed, the institution would be unable
to comply with section 42.
Several commenters noted that
section 42 provides for inclusion of a
notice in "regular account statements
mailed to customers of the branch
proposed to be closed." Assuming that
eacn person is the customer of one
branch, these commenters argued that
the requirement of section 42 that
notices be mailed to the customers of
the branch to be closed could not have
been meant to include ATMs within the
definition of branch, since customer
accounts are not assigned to ATMs. If,
on the other hand, anyone who uses an
ATM is to be considered a."customer”
of the ATM, commenters noted that the
bank would be required to notify
persons who were not even customers of
the bank, but had merely used the ATM.
Other commenters provided a further
reason why an interpretation of branch
that excludes ATMs would better reflect
the statutory intent. If ATMs were
included within the definition of
branch, then converting a full service
brick-and-mortar branch to an ATM,
and thereby depriving the neighborhood
of significant banking services, would
not constitute a branch closing, since
there would continue to be a "branch."
If ATMs were not considered branches,
such an action would constitute a
branch closing and section 42 would
apply.
As to what definition of “branch”
should be used, one commenter stated
that the common meaning of "branch”
is an office where employees of the bank
may be found and banking business is
handled by a natural person. Several
commenters noted that by using the
phrase "premises of the branch" in
requiring a posted notice, Congress
clearly intended to cover only
traditional brick-and-mortar branches,
that is, those with premises. As one
commenter noted, the dictionary
definition of "premises" defines the
term as "a tract of land with building
thereon or as a building or a part of a
building usually with its appurtenances
(as grounds).” The commenter argued
that an ATM is a fixture, and not a
building. Along similar lines, a trade
group recommended 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-mortar branch, and .°ny
similar banking facility, at which
deposits are received or checks paid or
money lent. Thus, for example, notice
pursuant to section 42 would not be
required for the closing of an ATM or
temporary 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 with 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 ,102d
Cong., 1st Sess. 113 (1991) ("The threat
of a branch closure is particularly
common and pronounced in underserved, lower-income neighborhoods.
Without full banking services, it is
difficult for a community to attract new
business and economic activity.")
An interpretation of "branch" as
including only traditional brick-andmortar branches excludes temporary
branches and ATMs and thereby avoids
problems with a broader definition that
could not have been intended by
Congress. For example, if temporary
branches were to be included within the
definition of "branch,” costly
notifications that serve no purpose
would be required. As one commenter
pointed out, an institution that
established a temporary branch at a fair,
convention, college registration or
similar event would be required to
remain 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 temporary. No customer is
likely to be surprised by the
disappearance of such facilities, and
Congress could not have intended to
require a 90 day notice for institutions
that were never to be opened for 90
days.
As noted in the comments, ATMs also
present problems with an expansive
definition, as those who use ATMs
frequently do not bank with the
institution that operates the ATM.
Furthermore, the agencies are
particularly concerned that under an
interpretation that included ATMs
within the definition of "branch,” an
institution could downgrade a brickand-mortar branch to an ATM and not
have closed a branch for purposes of
section 42. Such a result would appear
to be at odds with the purpose of section
42.
Interpreting section 42 to cover
traditional brick-and-mortar branches is
also consistent with the plain language
of section 42. As noted by the
commenters, the term "branch" is
undefined in section 42, and is not
defined elsewhere in the FDI Act.
Although section 3(o) of the FDI Act
does define the term "domestic
branch," 3 Congress chose not to use that
term in section 42.3 An indication of
4
Congressional intent in the language of
section 42 can be found in section
42(b)(2)(A), which requires the posting
of a notice on "the premises of the
branch to be closed." Thus, for purposes
of section 42, a branch is something that
has "premises." As noted by the
commenters, premise is defined for this
purpose as "a tract of land with 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-mortar
branches—those that have “premises.”
2. R elocations
The regulations of the Board of
Governors and OTS each provide that
an institution that proposes to relocate
a branch or main office only a short
distance need not submit an application
seeking approval of the relocation. The
two agencies’ regulations and standards
differ, but both rely on some
consideration of the distance of the
move. S ee 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
requirements for branch relocation
3 Section 3(o) of the FDI Act states that a
"domestic branch" includes "any branch bank,
branch office, branch agency, additional office, or
any branch place of business located in any State
of the United States or in any Territory of the
United States, Puerto Rico, Guam, American Samoa,
the Trust Territory of the Pacific Islands, or the
Virgin Islands at which deposits are received or
checks paid or money le n t" 12 U.S.C. 1813(o).
4 This is in contrast to at least one other provision
of the FDI A ct where Congress used the term
"domestic branch" in requiring FDIC approval for
certain applications. 12 U.S.C. 1828(d). Although
the proposed policy statements of the Board of
Governors, the OCC and the FDIC proposed that the
definition of "domestic branch" be used as the
definition of “branch” in section 42, the agencies
believe that it is more in keeping with the language
and legislative intent of the statute to use the
foregoing definition of branch to implement the
requirements of section 42.
3See Webster’s Ninth New Collegiate Dictionary
928 (1988).
Federal Register / Vol. 58, No. 181 / Tuesday, September 21, 1993 / Notices
applications. As discussed in the
proposals, section 18(d) of the FDI Act
requires state nonmember banks to
obtain FDIC approval before relocating a
branch. Section 36 of the National 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 of section 42. All the
comments received on the issue agreed
that branch relocations should be
deemed outside the scope of the branch
closing statute. Several persons
commented that relocations in the same
service area or community should not
be considered to be a closing. Comments
received by the OCC and FDIC noted
that those agencies’ existing application
and notice requirements for branch
relocations satisfy the underlying
purpose of the branch closing statute
and argued that deeming the branch
closing notice requirements to apply to
branch relocations would be redundant
with the requirements of existing law.
and regulations.
The final policy statement contains a
common method of determining if a
"relocation” has occurred for purposes
of section 42 and makes clear that a
relocation does not constitute a branch
closing. A relocation is distinguished
from the contemporaneous closing of
one branch and opening.of another.
Under the policy statement a relocation
has occurred if the new branch and the
closed branch are within the same
immediate neighborhood and the nature
of the business and the customers
served by the branch are substantially
unaffected by the move. Generally,
relocations will be found to have
occurred only when short distances are
involved: For example, moves across the
street, around the corner, or a block or
two away. Moves of less than 1000 feet
will generally be considered to be
relocations. La less densely populated
areas, where "neighborhoods” extend
farther and a longer move would not
substantially affect the nature of the
business or the customers served by the
branch, a relocation may occur over
significantly longer distances.
Institutions that are in doubt about
whether 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, where the
acquiring institution and the institution
being acquired maintained branches a
short distance apart.
49085
with the FDIC and RTC allow the
The agencies believe that if a
consolidation of branches meets the test acquiring institution to remain in the
for relocation, then the branch may be
branch for a period of time after the
treated as having been relocated rather
option period; this extra time allows an
than closed for purposes of section 42.
institution that decides not to acquire a
The agencies believe that customers
branch to wind 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
commenter noted that such a
final policy statement provides that an
consolidation would not affect the
acquiring institution that occupies but
nature of the businessf or the customers
declines to exercise an option to
served. Moreover, as another commenter purchase a branch may remain in the
noted, such an interpretation would
branch during the occupancy period
avoid penalizing an institution for
prescribed by the RTC or FDIC in
eliminating a costly duplication of
connection with the option, up to a
services.
maximum of 180 days from the date of
One commenter suggested thaFthe
the failure of the bank or the expiration
agencies review branch relocations for
of the option period, whichever is later,
institutions with less than satisfactory
without triggering the notice
CRA ratings, and two commenters
requirements in section 42.
suggested that branch closings be
One commenter argued that section
subject to an application process with
42 should not apply to the closing of a
an opportunity for public comment. The
branch after the sale of a bank under a
agencies do not believe such review or
divestiture order issued by an agency
comment is required by section 42.
pursuant to the prompt corrective action
3. O ccupation o f B ranch D uring an
regime of section 38 of the FDI Act. The
Option P eriod
commenter felt that the delay in closing
occasioned by section 42 could
Section 42 applies only to branch
jeopardize the transaction. Another
closings by insured depository
institutions. The agencies stated in their commenter asked that the agencies not
apply section 42 when an institution
proposed policy statements that when
acquires a bank in government
an acquiring institution declines to
conservatorship and closes branches in
exercise an option to purchase a branch
connection with 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 statements
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.6
The agencies received 36 comments
The agencies also believe that
on whether the section 42 requirements branches closed in connection with
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 mechanics of
the context of a failed institution cannot
such options was raised by two
be used in the failing institution
commenters that had recently
context. The fact that a consolidation of
experienced mergers. They criticized
branches over a short distance may be
the proposal because it only allowed the
found to be a relocation and not a
institution to remain in the branch
branch closing, however, should reduce
during the option period, which they
regulatory burden with regard to failing
said was generally 30 to 90 days. These
institution transactions. That is,
commenters pointed out that contracts
acquiring institutions may consolidate
existing branches with branches
« Pursuant to a typical acquisition agreement with
acquired from the failing institution
the FDIC or RTC, the acquirer of a failed institution
without having to comply with the
may temporarily operate one or more branches of
the failed institution during the acquirer’s.option
requirements of section 42 as long as the
period— that is, during the period the acquirer has
consolidation meets the test for a
to decide whether it will purchase or lease the
relocation set forth in the policy
branch. (Typically, option periods under FDIC and
statement.
RTC contracts range between 90 and 180 days.)
49086
Fed eral R egister / VoL 58, No. 181 / Tuesday, September 21, 1993 / Notices
4. D eterm ining C ustom ers o f a B ran ch
The commenters generally supported
the agencies’ proposal to permit each
institution to identify a given branch's
customers based on a good faith system
of allocating customers among branches,
and to indicate that one reasonable
means of allocating customers is by
where they opened their deposit or loan
accounts. One commenter noted that
banks have historically determined each
branch’s customer base by the accounts
opened at the office. The final policy
statement continues to allow each*
institution to allocate customers in a
reasonable way, and further clarifies
that, in certain cases, such an allocation
may result in a branch not having any
customers to notify in the event of a
closing. In that event, only the notice to
the appropriate agency and the posting
of a notice on the premises would be
reqruired.
A few commenters sought further
guidance in this area, but the agencies
believe that each institution should be
responsible for identifying customers.
would not reopen could mean—and
would have meant in the case of
branches destroyed by Hurricane
Andrew—that an institution would have
to post a notice amid a pile of rubble.
The agencies believe that the notice
should be posted whenever feasible, but
acknowledge that there will be times
when the posting on the premises is not
practical.
Other commenters asked that the
agencies find a broader range of causes
of branch closing to be beyond an
institution’s control and thus not
requiring a notice under section 42.
Specifically, commenters asked that the
loss of a lease be found to be beyond the
institution’s control. The agencies have
decided not to expand the list of
examples of what constitutes a
condition beyond an institution’s
control. The agencies believe that the
terms of a lease are a factor that is
within an institution’s control.?
8. R elationship to State Law
purposes of the branch closing statutes
an ATM is not considered a branch.
10. B ran ch C losing P olicy
The agencies’ proposals differed with
respect to their provisions regarding
branch closing policies. The OCC and
OTS included in their proposed policy
statements a list of items that an
institution might want to consider
including in its policy statement; the
goal was to provide guidance to
institutions in adopting their policies.
The Board of Governors and the FDIC
did not include such a list. Because
section 42 does not prescribe the
contents of a branch closing policy and
does not delegate to the agencies that
authority, all the agencies have decided
to omit any list of suggested items.
Thus, the final policy statement retains
the requirement of a written policy
appropriate to the size and needs of the
institution, but does not prescribe any
suggested contents of that policy.
P l c S a e e to Boardo Gover o s
oiy t tmn f
f
nr
A state bankers association pointed
o t eF d r lR s r eS s e ,O f c o
f h e e a e e v y t m fie f
out that state law may require branch
5. B ran ch C losings as a R esult o f
t eC m t o l ro t eC r e c ,
h oprle f h urny
closing notices and policies, and asked
M erger, C onsolidation, o r O ther F orm o f
F d r lD p s tI s r n eC r o a i n
eea eoi n u a c oprto,
that the agencies determine that
A cquisition
andO f c o T r f S p r i i n
fie f hit u e v s o
compliance with state law would satisfy
Co c r i gBranchC o i gN t c sand
nenn
lsn oie
The agencies proposed that either
section 42. The agencies do not believe
Plce
oiis
party to a transaction such as a merger
that it is appropriate to analyze various
or consolidation could provide the
state laws for this purpose, but the
P u rp ose
notices required by section 42. Several
agencies have amended the policy
This policy statement provides
commenters questioned who would be
statement to note: (1) If a notice
responsible if no notice were given. To
provided to customers pursuant to state guidance to insured depository
institutions concerning requirements
avoid confusion and a resultant failure
law contains the information required
to provide the required notice, the final
by section 42 and is provided with prior that an institution provide prior notice
of any branch closing and establish
policy statement clarifies that the
notice that is consistent with the
internal policies for branch dosings.
acquiring or resulting institution is
requirements of section 42, then a
ultimately responsible for ensuring that
second notice need not be sent; and (2)
B a ck gro un d
the required notices are given.
if a notice sent to a state supervisor
The Federal Deposit Insurance
contains the information required by
6. R egulatory B u rd en
section 42 and provides prior notice that Corporation Improvement Act of 1991
Several letters complained about the
(Pub. L. 102-242,105 Stat. 2236)
is consistent with the requirements of
financial and other compliance burdens
(FDICIA) was enacted on December 19,
section 42, then the institution may
imposed upon depository institutions
1991. Section 228 of the FDICIA adds a
provide a copy of that notice to its
by the requirements of section 42. Hie
new section 42 to the Federal Deposit
federal regulator in lieu of a separate
agencies are very sympathetic to this
Insurance Act (FDI Act) (12 U.S.C.
notice.
concern and, thus, have attempted to
1831r-l) that imposes notice
produce a policy statement that is
9. R eduction o f S erv ices
requirements on insured depository
consistent with the intent of the branch
institutions that intend to close
Hie final policy statement continues
closing statute and minimizes burden to
branches.* The provision became
to provide that a change in services at
the industry. The agencies note that
effective on December 19,1991.
a branch will not be considered a
depository institutions are bound to
The law requires an insured
branch closing as long as the facility
comply with the explicit requirements
depository institution to submit a notice
continues to constitute a branch for
of section 42.
of any proposed branch dosing to the
purposes of section 42. In this context,
appropriate Federal banking agency no
7. Interrup tio n o f S erv ice
the agencies note that a branch that
later than 90 days prior to the date of
The agencies proposed that section 42 reduces its services to that of an ATM
the proposed branch closing. The
would be deemed to have closed the
would not apply to an interruption of
required notice must indude a detailed
branch for purposes of section 42. This
service caused by an event beyond the
statement of the reasons for the decision
is because, as discussed above, for
institution’s control (e.g., natural
to close the branch and statistical or
catastrophe), unless the institution
7 The agencies recognised that institotions that
closed or did not reopen the branch
7 An Insured depository institution mean* any
entered into leases prior to enactment ofFDICIA
following the incident A few
bank or savings association, as defined in section
would not have been rirle to take the provisions of
commenters argued that the posting of
section 4 2 into consideration, and die agencies
3 of the FDI Act, the deposits of which are insured
the notice in cases where the branch
issued interim guidance.
by the FDIC.
Federal Register / Vol. 58, No. 181 / Tuesday, September 21, 1993 / Notices
other information in support of such
not substantially affect the nature of the
reasons.
business or customers served. Generally,
The law also requires an insured
relocations will be found to have
depository institution to notify its
occurred only when short distances are
customers of the proposed closing. The
involved: for example, moves across the
institution must mail the notice to the
street, around the comer, or a block or
customers of the branch proposed to be
two away. Moves of less than 1000 feet
closed at least 90 days prior to the
will generally be considered to be
proposed closing. The institution also
relocations. In less densely populated
must post a notice to customers in a
areas, where neighborhoods extend
conspicuous manner on the premises of farther and a long move would not
the branch proposed to be closed at least significantly affect the nature of the
30 days prior to the proposed closing.
business or the customers served by the
Additionally, 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
whether a relocation or closing has
Applicability
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 within the same
be a traditional brick-and-mortar
neighborhooc^and the nature of the
branch, or any similar banking facility,
at which deposits are received or checks business or customers served is not
affected. Thus, for example, a
paid or money lent. Thus, for example,
notice pursuant to section 42 would not consolidation of two branches on the
same block following a merger would
be required for the closing of an ATM
not constitute a branch closing. The
or temporary 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 must file a branch
provided that the remaining facility
closing notice whenever it closes a
constitutes a branch (as defined
branch, including when the closing
herein).*
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 under the Bank
law does not apply to:
Merger Act (12 U.S.C. 1828) must also
• A temporary interruption of
file a branch closing notice. The
service caused by an event beyond the
responsibility for filing the notice lies
institution’s control (e.g., a natural
with the acquiring or resulting
catastrophe), if the insured depository
institution, but either party to such a
institution plans to restore branching
transaction may give the notice. Thus,
for example, the purchaser may give the services at the site in a timely manner; *
• Transferring back to the FDIC or
notice prior to consummation of the
transaction where the purchaser intends Resolution Trust Corporation, pursuant
to the terms of an acquisition agreement,
to close a branch following
a branch of a failed bank or savings
consummation, or the seller may give
association operated on an interim basis
the notice because it intends to close a
in connection with the acquisition of all
branch at or prior to consummation. In
or part of a failed bank or savings
the latter example, if the transaction
association, so long as the transfer
were to close ahead of schedule, the
occurs within the option period or
purchaser, if authorized by the
w ith in an occupancy period, not to
appropriate federal banking agency,
could operate the branch to complete
a The agencies note that where, after a reduction
compliance with the 90-day
in services, the resulting facility no longer qualifies
requirement without the need for an
as a branch, section 42 would apply. Thus, notices
additional notice.
of branch closing would be required if an
institution were to replace a traditional brick-andThe law does not apply to mergers,
mortar branch with an ATM.
consolidations, or other acquisitions,
s Section 42 would apply, however, if the
including branch sales, that do not
institution were closed or did not reopen the branch
result in any branch closings. In
following the incident Although prior notice would
addition, the law does not apply where
not be possible in such a case, the institution
should notify the customers of the branch and the
a branch is relocated. For purposes of
appropriate federal hanking agency in the manner
this policy statement, a branch
specified by section 42 to the extent possible and
relocation is a movement within the
as soon as possible after the decision to close the
same immediate neighborhood that does branch has been made.
49087
exceed 180 days, provided in the
agreement.
N otice o f B ranch C losing to th e A gen cy
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 must include the
following:
• Identification of the branch to be
closed;
• The proposed date of closing;
• A detailed statement of the reasons
for the decision to close the branch; and
• Statistical or other information in
support of such reasons consistent with
the institution’s written policy for
branch closings..
If an institution believes certain
information included in the notice is
confidential in nature, the institution
should prepare such information
separately and request confidential
treatment. The agency will decide
whether to treat such information
confidentially under the Freedom of
Information Act (5 U.S.C. 552).
If a notice provided to a state
supervisory agency pursuant to state
law contains the information outlined
above, then the institution may provide
a copy of that notice to the appropriate
federal banking agency in satisfaction of
section 42, provided that the notice is
filed at least 90 days prior to the date
of the branch closing.
N otice o f B ra n ch C losing to C ustom ers
The law requires an insured
" depository institution that proposes to
close a branch to provide notice of the
proposed closing to the customers of the
branch. A customer of a branch is a
patron of an institution who has been
identified with a particular branch by
such institution through use, in good
faith, of a reasonable method for
allocating customers to specific
branches. An institution that allocates
customers to its branches based on
where a customer opened his or her
deposit or loan account will be
presumed to have reasonably identified
each customer of a branch. The agencies
recognize that use of this means of
allocation, and perhaps others, may
result in certain branches not being
assigned any customers, but believe that
this result is permissible so long as the
means of allocation is reasonable; if
such a branch is closed, then
notification to the appropriate agency
and posting of a notice on the branch
premises will suffice. Finally, an
institution need not change its
recordkeeping system in order to make
49088
Federal Register / Vol. 58, No. 181 / Tuesday, September 21, 1993 / Notices
a reasonable determination of who is a
customer of a branch.
Under section 42, an institution must
include a customer notice at least 90
days in advance of the proposed closing
in at least one of the regular account
statements mailed to customers, or in a
separate mailing. If the branch closing
occurs after the proposed date of
closing, no additional notice is required
to be mailed to customers (or provided
to the appropriate federal banking
agency) if the institution acted in good
faith in projecting the date for closing
and in subsequently delaying the
closing.
The mailed customer notice should
state the location of the branch to be
closed and the proposed date of closing,
and either identify where customers
may obtain service following the closing
date or provide a telephone number for
customers to call to determine such
alternative sites. If a notice of branch
closing provided to customers pursuant
to state law contains this information,
then a separate notice need not be sent,
provided that the notice is sent at least
90 days prior to the closing.
Under section 42, an institution also
must post notice to branch customers in
a conspicuous manner on the branch
premises at least 30 days prior to the
proposed closing. This notice should
state the proposed date of closing and
identify where customers may obtain
service following that date or provide a
telephone number for customers to call
to determine such alternative sites. An
institution may revise the notice to
extend the projected date of closing
without triggering a new 30-day notice
period.
In some situations, an institution, in
its discretion and to expedite
transactions, may mail and post notices
to customers of a proposed branch
closing that is contingent upon an event.
For example, in the case of a proposed
merger or acquisition, an institution
may notify customers of its intent to
close a branch upon approval by the
appropriate Federal banking agency of
the proposed merger or acquisition.
P olicies fo r B ran ch Closings
The law requires all insured
depository institutions to adopt policies
for branch closings. Each institution
with one or more branches must adopt
such a policy. If an institution currently
has no branches, it must adopt a policy
for branch closing before it establishes
its first branch. The policy should be in
writing and meet the size and needs of
the institution.
Each branch closing policy adopted
pursuant to section 42 should include
factors for determining which branch to
close and which customers to notify,
and procedures for providing the
notices required by the statute.
C om pliance
As part of each Community
Reinvestment Act (CRA) examination,
the Federal banking agencies will
examine for compliance with section 42
of FDICIA to determine whether the
institution has adopted a branch closing'
policy and whether the institution
provided the required notices when it
closed a branch. If an institution fails to
comply with section 42, the appropriate
federal banking agency may make
adverse findings in the CRA evaluation
or take appropriate enforcement action.
By order of the Board of Governors of the
Federal Reserve System.
Dated: September 9 ,1 9 9 3 .
W illiam W. Wiles,
Secretary o f the Board.
Dated: September 8 ,1 9 9 3 .
Eugene A. Ludwig,
Comptroller o f the Currency.
Dated: August 1 0 ,1 9 9 3 .
Hoyle L. Robinson,
Executive Secretary , Federal Deposit
Insurance Corporation.
By the Office of Thrift Supervison.
Dated: August 1 1 ,1 9 9 3 .
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 9 3 -2 2 8 4 7 Filed 9 -2 0 -9 3 ; 8:45 am]
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•720-01-4*
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