[65 FR 4895, February 22, 2000]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Chapter I
[Docket No. 00-02]
RIN 1557-AB76
Electronic Banking
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
undertaking a review of its regulations with a view toward identifying
changes or additions to its rules that would facilitate national banks'
use of new technologies. This advance notice of proposed rulemaking
(ANPR) solicits comment on a wide range of issues arising from national
bank involvement in electronic activities.
DATES: Comments must be received by April 3, 2000.
ADDRESSES: Please send your comments to: Office of the Comptroller of
the Currency, Communications Division, 250 E Street, SW, Washington, DC
20219, Attention: Docket No. 00-02. You may inspect and photocopy
comments at the same location. In addition, you may fax your comments
to (202) 874-5274 or electronic mail them to
regs.comments@occ.treas.gov.
FOR FURTHER INFORMATION CONTACT: Stuart Feldstein, Assistant Director,
or Karl Betz, Attorney, Legislative and Regulatory Activities, at (202)
874-5090; James Gillespie, Assistant Chief Counsel, at (202) 874-5200;
or Clifford Wilke, Director, Bank Technology, at (202) 874-5920.
SUPPLEMENTARY INFORMATION:
Background
Technological developments are dramatically altering the ways in
which national banks conduct their business. Telecommunications
advances offer banks faster and more efficient communication and data
transmission. Improvements in computer hardware and software are
opening up new banking applications. These rapid developments in new
technologies are causing banks to reevaluate existing delivery channels
and business practices and to develop new products and services in
order to reach new customers, better serve existing customers, and take
advantage of cost efficiencies.
The explosive growth of the Internet also is prompting banks to
reconsider business strategies and adopt alternative distribution and
marketing systems. The recent chartering of Internet-only banks that
operate without a conventional brick and mortar physical presence and
the use of the Internet by existing banks to establish transactional
World Wide Web (Web) sites \1\ present new opportunities and challenges
for national banks.
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\1\ As of mid-September 1999, 541 national banks had
transactional Web sites.
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The OCC has already taken a number of steps to facilitate national
banks' use of developing technology, including the Internet. For
example, in 1996, we revised our data processing regulation to reflect
the fact that banks today use technology to engage in a range of
electronic activities. 61 FR 4849 (Feb. 9, 1996). As revised, the
regulation authorizes national banks to conduct through electronic
means or facilities any activity that they are otherwise authorized to
conduct and permits banks to sell excess electronic capacities acquired
or developed in good faith for banking purposes. 12 CFR 7.1019.
The OCC has also recently issued a comprehensive handbook that
addresses the risks presented by Internet banking activities.
Comptroller's Handbook, Other Income Producing Activities, Internet
Banking (Oct. 1999) (Handbook).\2\ The Handbook describes procedures
for examining Internet banking activities in national banks. It also
provides guidance to national banks that are conducting, or
considering, Internet banking activities by outlining business and
technical issues associated with offering banking products and services
through the Internet. The Handbook follows previous OCC guidance on
electronic banking issues, including certification authority systems,
technology risk management, retail personal computer banking, Web
privacy statements, cyber-terrorism, reporting computer-related crime,
and consumer compliance.\3\
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\2\ This Handbook and others in the Comptroller's Handbook
series are available on the OCC's Web site at www.occ.treas.gov.
\3\ OCC Advisory Letter No. 97-9, ``Reporting Computer-Related
Crimes'' (Nov. 19, 1997); OCC Advisory Letter No. 99-6, ``Guidance
to National Banks on Web Site Privacy Statements'' (May 4, 1999);
OCC Bulletin 98-3, ``Technology Risk Management'' (Feb. 4, 1998);
OCC Bulletin 98-31, ``Guidance on Electronic Financial Services and
Consumer Compliance'' (July 30, 1998); OCC Bulletin 98-38,
``Technology Risk Management: PC Banking'' (Aug. 24, 1998); OCC
Bulletin 99-9, ``Infrastructure Threats from Cyber-Terrorists''
(Mar. 5, 1999); OCC Bulletin 99-20, ``Certification Authority
Systems'' (May 6, 1999). All of these issuances are available on the
OCC's Web site at www.occ.treas.gov.
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In addition, on a case-by-case basis, the OCC reviews specific bank
uses of technology. To date, we have approved a number of Internet
applications, including transactional Web sites, commercial Web site
hosting services, a virtual mall, an electronic marketplace for non-
financial products, and Internet access services.\4\ The OCC also has
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permitted national banks to engage in a number of electronic payment
systems activities. For example, we have allowed national banks to
provide electronic bill payment and presentment services, stored value
systems, electronic data interchange (EDI) services, and to dispense
prepaid alternate media (such as stamps and prepaid phone cards) from
automated teller machines (ATMs).\5\ Finally, the OCC has authorized
national banks to offer additional technology-based services, such as
digital certification authority services and electronic correspondent
banking services.\6\
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\4\ OCC Interpretive Letter No. 742, [1996-1997 Transfer Binder]
Fed. Banking L. Rep. (CCH) para. 81-106 (Aug. 19, 1996) (allowing a
national bank to offer Internet banking services); OCC Conditional
Approval No. 253 (Aug. 20, 1997) (chartering a national bank to
deliver products and services to customers primarily through
electronic means); Interpretive Letter No. 856, [1998-1999 Transfer
Binder] Fed. Banking L. Rep. (CCH) para. 81-313 (Mar. 5, 1999)
(permitting a national bank to host commercially enabled Web sites
for small retailers); Interpretive Letter No. 875 (Oct. 31, 1999)
(to be published in the January 2000 issue of ``Interpretations and
Actions'') (opining that a national bank may offer a bank-hosted set
of Web pages with a collection of links to third party Web sites
organized according to product type so that bank customers can shop
for a range of financial and non-financial products and services via
these links to third party vendors); OCC Corporate Decision No. 99-
35 (Oct. 20, 1999) (permitting a national bank operating subsidiary
to provide links to merchant processing-related third party vendors
on its Internet site); OCC Corporate Decision No. 97-60 (July 1,
1997) (authorizing a national bank to operate a Web site providing
consumers and dealers with detailed information on used cars offered
by third party sellers that meet purchaser preferences); OCC
Interpretive Letter No. 742, [1996-1997 Transfer Binder] Fed.
Banking L. Rep. (CCH) para. 81-106 (Aug. 19, 1996) (permitting a
national bank to provide full Internet access service in connection
with its Internet banking services and, incidental to that, the
national bank may sell good faith excess capacity in access service
to persons who are not Internet banking customers). In addition to
being available through the Federal Banking Law Reporter (CCH), most
of the OCC staff opinions and decisions cited in this ANPR are
available on the OCC's Web site. The OCC published redacted versions
of these letters and decisions in its monthly publication
``Interpretations and Actions.'' Beginning with the May 1996 issue,
the OCC's Web site provides electronic access to issues of
``Interpretations and Actions.'' See www.occ.treas.gov.
\5\ OCC Conditional Approval No. 304 (Mar. 5, 1999) (stating
that electronic bill presentment is part of the business of
banking); OCC Conditional Approval No. 332 (Oct. 18, 1999) (allowing
national bank subsidiaries to invest in an electronic interbank
switch to support electronic bill presentment services over the
Internet); OCC Conditional Approval No. 220 (Dec. 2, 1996)
(concluding that the creation, sale and redemption of electronic
stored value in exchange for dollars is part of the business of
banking); OCC Interpretive Letter No. 732, [1995-1996 Transfer
Binder] Fed. Banking L. Rep. (CCH) para. 81-049 (May 10, 1996)
(opining that EDI services are ``part of or incidental to business
of banking''); OCC Interpretive Letter No. 718, [1995-1996 Transfer
Binder] Fed. Banking L. Rep. (CCH) para. 81-033 (Mar. 14, 1996)
(finding that a national bank may dispense alternate media, such as
prepaid phone cards, public transportation system tickets, and
promotional and advertising materials, from ATM machines).
\6\ OCC Conditional Approval No. 267 (Jan. 12, 1998) (allowing a
national bank to act as a certification authority to enable
subscribers to generate digital signatures that verify the identity
of a sender of an electronic message); OCC Conditional Approval No.
339 (Nov. 16, 1999) (permitting national banks to invest in a
multiple bank venture to establish an entity that will support a
multiple bank certification authority system); OCC Interpretive
Letter No. 754, [1996-1997 Transfer Binder] Fed. Banking L. Rep.
(CCH) para.81-118 (Nov. 6, 1996) (approving a national bank
operating subsidiary that sells computer network services and
related hardware to other financial institutions as a correspondent
banking service).
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We periodically review and reevaluate our regulations to ensure
that they encourage national banks' efficiency and competitiveness,
consistent with safety and soundness. The purpose of this ANPR is to
invite public comment on a wide range of issues involving national bank
involvement in electronic banking to determine whether the OCC's
regulations should be revised to remove regulatory impediments and
unnecessary burdens, if any, to bank use of technology, or add new
provisions that would facilitate national banks' use of new
technologies. Based on the comments we receive, we may propose specific
revisions to our rules for comment or issue additional supervisory
guidance.\7\
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\7\ Section 729 of the Gramm-Leach-Bliley Act (GLBA) requires
the OCC and the other Federal banking agencies to conduct a study of
banking regulations pertaining to the delivery of financial services
and make recommendations on adapting existing regulations to on-line
banking and lending. A report to Congress detailing these
recommendations is due by November 12, 2001. Public Law 106-102,
section 729, 113 Stat. 1338 (Nov. 12, 1999). The OCC will not delay
making changes to its rules or supervisory policies during the
pendency of the Sec. 729 study and report. Commenters' responses to
this ANPR will, however, help the OCC formulate recommendations for
legislative action or for actions that may appropriately be
undertaken on an interagency basis.
We also note that on November 29, 1999, President Clinton issued
a memorandum for the heads of executive departments and agencies
announcing an initiative to update laws and regulations developed
before the advent of the Internet that may have unintended negative
effects on electronic commerce. The memorandum asks each Federal
agency to identify any provision of law administered by such agency,
or any regulation issued by such agency, that may impose a barrier
to electronic transactions, and to recommend how such laws or
regulations may be modified to allow electronic commerce to proceed
while ensuring that consumers and the general public continue to
enjoy the same degree of protection that they do under current law.
Memorandum on Facilitating the Growth of Electronic Commerce, Nov.
29, 1999, 35 Weekly Comp. Pres. Doc. 2457-2458 (Dec. 6, 1999).
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Issues for Comment
The following discussion identifies some areas where modification
of the OCC's regulations or supervisory policies may be useful to
national banks that provide financial services electronically.
Commenters are invited to respond to the questions presented and to
offer comments or suggestions on any other issues related to electronic
banking that are not specifically mentioned here, including whether OCC
initiatives other than regulatory changes are appropriate.\8\
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\8\ Not within the scope of this ANPR are privacy issues, which
are being addressed on an interagency basis pursuant to Title V of
the GLBA, and issues concerning the Community Reinvestment Act.
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1. Electronic Banking in General: How Should the OCC Adapt its
Regulations or Supervisory Policies To Facilitate National Banks' Use
of Electronic Technology, Consistent With Safety and Soundness?
Recognizing the fluid, fast-evolving nature of bank use of
technology, the OCC wants to ensure that its regulations are flexible
enough to address emerging trends and new banking activities. To this
end, we invite commenters to describe how national banks want to use
new technologies and how these technologies will impact the ways in
which national banks operate under the OCC's current regulations. For
example, are there specific regulations that the OCC should modify
because they impede the use of developing technology?
Technology also enables national banks to reach nationwide markets
for the financial products and services they provide. Are there areas
where conducting electronic banking activities could particularly
benefit from a single set of standards that can be applied uniformly on
a nationwide basis?
Electronic banking activities of all forms expose banks to new
combinations of risks from different sources. Through the issuance of
the Internet Banking Handbook and other supervisory guidance, the OCC
is working to identify, and educate national banks about, the risks
presented by electronic banking and to ensure that its regulations
appropriately address these risks. We invite comment on whether
existing OCC regulations adequately address the risks presented by
current or future electronic banking activities. Are there areas where
banks would benefit from additional clarification in our rules or in
other guidance on the risks associated with electronic banking
activities? For example, are banks experiencing problems related to the
permissibility, validity, and enforceability of electronic
transactions? What could the OCC do to provide greater legal certainty
in these or other areas?
Electronic banking also provides consumers with more convenient
access to a wider variety of financial services. Studies indicate that
a significant percentage of households in the United States will do
their banking online as a growing number of consumers conduct their
banking and other financial transactions through automated teller
machines and over the Internet. We invite comment on whether there are
specific areas in which regulatory changes are needed to enhance
consumer acceptance of, confidence in, or access to, electronic
banking.
2. Adapting Existing Law to Electronic Banking: What Statutes That the
OCC Administers Could Be Interpreted More Flexibly To Accommodate New
Technologies?
Internet banking raises legal issues with respect to how the OCC
should construe references in existing law to the ``location'' of a
national bank. A number of statutes applicable to national banks refer
to the state or place where the bank is ``located'' or use similar
terms. \9\ In some of these
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statutes, the activities and operations of a national bank depend on
the laws of the state in which the bank is located.
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\9\ E.g., 12 U.S.C. 24 (Eighth) (charitable contributions), 29
(real estate holding period), 72 (directors' residency requirement),
75 (impact of legal holiday on shareholders' meeting), 85 (allowable
interest rate), 90 (pledging security for deposits of state funds),
92 (insurance sales), 92a (fiduciary powers), 95 (state-declared
bank holidays), 182 (publication of notice of voluntary
liquidation), 214a & 214c (national bank conversions and mergers
into state banks) & 215a (national bank and state bank mergers into
national banks); 28 U.S.C. 1348 (citizenship of state for federal
court jurisdiction).
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Generally, for many of these statutes, banks have been considered
located in a state where they have a main office or a branch. For some
statutes, only the main office is considered. For others, a bank has
been considered located in a state with a non-branch office, as well as
the states of its main office and branches. Moreover, the determination
of the bank's location focuses on the location of the bank's offices
and activities, not the location of the bank's customers.
We invite comment on whether new developments in bank technology
require the OCC to address how ``location'' applies in the context of
activities conducted via the Internet. Specifically, is the
determination of ``location'' for purposes of the statutes an
impediment to national banks conducting all or part of their operations
on the Internet? If so, should we further clarify our regulations on
this issue? Is there a uniform approach to ``location'' that works for
all the relevant statutes or should we address each statute separately?
3. Operational Issues: How Can the OCC Enhance the Operational
Flexibility of Banks Engaging in Electronic Banking, Consistent With
Safety and Soundness?
A. Marketing Access Arrangements
The rapid growth of electronic commerce has resulted in many
marketing arrangements involving providing bank customers with access
to providers of retail or financial services through hypertext links on
the bank's Web site. Under some marketing arrangements, the bank is the
dominant brand and refers its customers to non-bank third parties for
additional products and services not provided by the bank directly. In
other cases, the non-bank is the dominant brand and it uses a bank to
provide its customers with access to bank services while minimizing the
bank's brand.
It is well settled that a national bank may lease excess space on
bank premises to other businesses and share space jointly with other
businesses, subject to certain conditions. These conditions, which are
currently set forth in the OCC's regulation governing the sharing of
space and employees, are intended to minimize customer confusion about
the nature of the products offered and promote the safe and sound
operation of the bank. See 12 CFR 7.3001.
We invite comment on whether the OCC should issue a regulation
similar to Sec. 7.3001 that would apply to these types of electronic
marketing arrangements. Commenters are specifically requested to
address whether any or all of the supervisory conditions set forth in
Sec. 7.3001(c) are relevant in the electronic banking context and
whether other conditions intended to minimize customer confusion should
apply to these arrangements.
B. Branching
National banks may receive deposits and pay withdrawals in a
variety of ways that are not subject to geographical restrictions or
the need to apply for branch certification. For example, it is well
settled that national banks may arrange to have their customers use
ATMs established by third parties in order to undertake transactions
with the bank. In 1996, Congress passed legislation permitting national
banks to establish ATMs and remote service units (RSUs) without
geographical limits or the need to seek approval to establish these
types of facilities. \10\
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\10\ The OCC recently defined an RSU as ``an automated facility,
operated by a customer of a bank, that conducts banking functions,
such as receiving deposits, paying withdrawals, or lending money.''
The term RSU includes ATMs, automated loan machines, and automated
devices for receiving deposits, and may be equipped with a telephone
or televideo device that allows contact with bank personnel. 64 FR
60,092, 60,100 (Nov. 4, 1999) (adding 12 CFR 7.4003).
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Both Congress, through legislation, and the OCC, through
interpretation, also permit national banks to arrange for their
customers to undertake banking transactions with the national bank
through offices of affiliated banks and thrifts without implicating
branching restrictions. Additionally, the OCC has established
guidelines to enable national banks and their customers to transact
business with each other through messenger services without implicating
branching restrictions. Of course, national banks and their customers
can transact business electronically without raising branching
concerns.
The OCC seeks comment on whether these forms of delivery systems
are flexible enough to permit technology-based banks to serve the
transaction-related needs of their retail, as well as their commercial,
customers. Specifically, are existing regulations sufficient to permit
customers of technology-based banks to make deposits in the bank by
cash or check in an efficient and expeditious manner? Additionally, are
there other types of transactions that banks are considering where
geographical restrictions create impediments or that could benefit from
the development of alternative delivery systems not within the scope of
branching restrictions?
Dated: January 21, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-2199 Filed 2-1-00; 8:45 am]
BILLING CODE 4810-33-P