[Federal Register: May 8, 2001 (Volume 66, Number 89)]
[Rules and Regulations]
[Page 23151-23153]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08my01-2]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 8
[Docket No. 01-08]
RIN 1557-AB90
Assessment of Fees
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
amending its assessment regulation to clarify that the OCC has
authority to charge a national bank when the OCC conducts a special
examination of a third party that provides services to the bank. The
rule applies in the same way to Federal branches and agencies and
District of Columbia banks.
EFFECTIVE DATE: June 7, 2001.
FOR FURTHER INFORMATION CONTACT: Mitchell E. Plave, Senior Attorney,
Legislative and Regulatory Activities Division, (202) 874-5090.
SUPPLEMENTARY INFORMATION:
Background
The OCC charters, regulates, and supervises more than 2,200
national banks, accounting for nearly 60 percent of the nation's
banking assets, as well as 58 Federal branches and agencies of foreign
banks in the United States. Its mission is to ensure a safe, sound, and
competitive national banking system that supports the citizens,
communities, and economy of the United States.
The OCC funds the activities it undertakes to carry out this
mission through assessments and fees charged to the banks it
supervises. The National Bank Act authorizes the OCC to collect
``assessments, fees, or other charges as necessary or appropriate to
carry out the responsibilities of the office of the Comptroller.'' 12
U.S.C. 482 (Supp. 1999). The statute requires that our charges ``be set
to meet the Comptroller's expenses in carrying out authorized
activities.'' Id. Under part 8 of our regulations, the OCC currently
assesses national banks and Federal branches and agencies according to
a formula based on factors that include a bank's asset size, its
condition, and whether it is the ``lead'' bank or ``non-lead'' bank \1\
among national banks in a holding company.\2\ The OCC also has the
authority to assess a fee for special examinations and investigations
of these banks. 12 CFR 8.6(a).
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\1\ A ``lead bank'' is the largest national bank controlled by a
company, based on a comparison of the total assets held by each
national bank controlled by that company as reported in each bank's
Call Report. 12 CFR 8.2(a)(6)(ii)(A).
\2\ Independent trust banks are also assessed based on the
amount of trust assets those banks manage. See 65 FR 75859 (December
5, 2000).
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In its current form, section 8.6(a) refers only to fees for a
special examination of a national bank or its affiliate.\3\ It does not
reflect the OCC's authority to assess a national bank in connection
with special examinations of any of the bank's service providers. The
Bank Service Company Act provides that performance of services for
national banks (or for other entities supervised by the OCC, including
subsidiaries subject to examination by the OCC) ``shall be subject to
regulation and examination by [the OCC] to the same extent as if such
services were being performed by the bank itself on its own premises.''
\4\
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\3\ 12 CFR 8.6(a) also permits the OCC to assess a fee for
fiduciary examinations and examinations made pursuant to 12 CFR part
5.
\4\ 12 U.S.C. 1867(c). Thus, as would be the case if the
activity were performed by the bank itself, the OCC's authority to
examine the activity does not lapse if the activity is not being
conducted at the same time the OCC undertakes an examination.
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Banks historically have used third parties to perform certain
activities--payment processing, for example. Some banks, however, have
recently entered new lines of business or introduced novel, and
potentially high-risk, products, relying substantially on third party
service providers to enable the bank to participate in or to conduct
those activities. These include, for instance, certain types of credit
card programs, sub-prime lending, check cashing, and other specialized
types of lending. In many instances, the service provider's interest
in, and connection with, these transactions are significantly greater
than that of the bank. The bank may nonetheless be exposed to higher
than normal levels of risk. This increased reliance on service
providers will result in an increased need for the OCC to examine or
investigate third party service providers in order to evaluate the
effect that third-party activities and relationships have on the safety
and soundness of the bank.\5\
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\5\ The OCC has recently noted the risks that may be associated
with using service providers in a recent Advisory Letter and urged
national banks to focus on conducting proper due diligence before
entering into third party arrangements and on maintaining effective
oversight and controls during the third party relationship. See OCC
Advisory Letter No. 2000-9, ``Third Party Risk,'' August 29, 2000.
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On December 1, 2000,\6\ we proposed to amend 12 CFR 8.6 to make
clear our authority to assess banks for our
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supervision of third party servicers. We also proposed to clarify our
authority to charge Federal branches and agencies a fee for conducting
special examinations. For the reasons described in the following
discussion, we adopt the rule substantially as proposed, with a
clarification suggested by one commenter.
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\6\ 65 FR 75196 (December 1, 2000).
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Proposed Rule and Comments Received
The proposal stated that the OCC may charge a special examination
or investigation fee to national banks when examination or
investigation of the activities of a third party service provider is
warranted by the high risk or unusual nature of the activities
conducted by the service provider for the bank, or when the OCC
believes that the bank has insufficient systems, controls, or personnel
to adequately monitor, measure, and control the risks associated with
the activity. The proposed rule also applied to Federal branches and
agencies. In addition, the proposal permitted the OCC to impose the
assessment if we examine or investigate third party providers of
services to subsidiaries subject to examination by the OCC.
The OCC received two comments on this proposal. The first, from a
trade association for community banks, suggested that the OCC identify
in advance, in the final rule, those instances in which OCC would
conduct special examinations and investigations. The commenter
suggested that this approach would provide more predictability as to
when the OCC would charge the fee that was proposed.
The circumstances under which the OCC will conduct special
examinations or investigations of third parties may differ.
Accordingly, the OCC is unable to identify in advance every situation
that may warrant use of this authority or imposition of a fee on the
bank. The final rule addresses this issue highlighted by the commenter,
however, by describing the factors the OCC will consider in determining
whether to impose fees for examination of a bank's third party service
providers. In addition, the OCC will provide banks with notice before
we begin a special examination of a service provider for which the fee
will be imposed.\7\
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\7\ Banks may indemnify themselves against this cost by
including in their contractual arrangements with service providers
terms that obligate the service provider to reimburse the bank in
the event the OCC conducts an examination or investigation of the
service provider and charges the bank the fee described here.
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The second commenter, a trade association for check cashing
centers, suggested that the proposal might discourage relationships
between their members and national banks. The commenter noted that
check cashing organizations serve local communities by making funds
available to consumers quickly. This rulemaking does not address the
merits of the check cashing business. We note that the Bank Service
Company Act provides pre-existing authority for the OCC to examine
check cashers that have entered into particular relationships with
national banks. The final rule does not alter the nature or extent of
that oversight. Rather, it clarifies the OCC's authority to assess
banks for OCC's examination of third parties so that the cost
associated with examining them is borne principally by the banks with
whom they have relationships, rather than by the national banking
system as a whole.
Final Rule
The final rule amends section 8.6(a) to state that the OCC may
assess a national bank or a Federal branch or agency a fee for the
examination or investigation of an entity that performs services for
the institution or its subsidiary and that is subject to OCC
examination and regulation pursuant to the Bank Service Company Act (12
U.S.C. 1867(c)). The fees for special exams and investigations will be
based on an hourly rate, with the hourly rate provided each year by the
OCC in its Notice of Comptroller of the Currency Fees (Notice of
Fees).\8\ The final rule also states that the factors the OCC will
consider in determining whether imposition of a fee for examination of
a bank's third party service providers is warranted are (1) the high
risk or unusual nature of the activities conducted by the service
provider for the banks; (2) the significance to the bank's operations
and income of the activities conducted by the service provider for the
banks; and (3) the extent to which the bank has sufficient systems,
controls, and personnel to adequately monitor, measure, and control
risks arising from activities conducted by the service provider for the
bank.
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\8\ See 12 CFR 8.8.
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The final rule also amends section 8.6(a) to clarify that the OCC
may charge a fee for conducting special examinations and investigations
of Federal branches and agencies of foreign banks or their affiliates.
Federal branches and agencies are subject to the same ``duties,
restrictions, penalties, liabilities, conditions, and limitations''
that apply national banks, except as otherwise specifically provided by
statute.\9\ Current section 8.6 does not address the assessment of a
fee for the special examination or investigation of Federal branches
and agencies or their affiliates. The final rule amends section 8.6 to
make our authority to assess such a fee explicit. The OCC will state
the amount of these fees in the Notice of Fees.
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\9\ 12 U.S.C. 3102(b).
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The final rule amends the title of part 8 to more accurately
reflect the scope of the regulation. While part 8 includes Federal
branches and agencies within the scope of the rule, only national banks
and District of Columbia banks are listed in the title. The final rule
removes from the title references to the types of regulated entities
covered by the regulation.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires federal agencies to
certify that a final rule will not have a significant impact on a
substantial number of small entities. See 5 U.S.C. 603, 605. On the
basis of the information currently available, the OCC is of the opinion
that this final rule is unlikely to have a significant impact on a
substantial number of small entities, within the meaning of those terms
as used in the RFA. As previously noted, a national bank would be
assessed a fee for the examination or investigation of its service
provider when the examination or investigation is warranted by the
level of risk or unusual or novel nature of the activities conducted by
the service provider for the bank, or when the OCC believes that the
bank has insufficient systems, controls, or personnel to adequately
monitor, measure, and control the risks associated with the activity.
As a result, the OCC believes that the fees will not be imposed on a
substantial number of small entities.
Executive Order 12866
The OCC has determined that this final rule is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency
prepare a budgetary impact statement before promulgating any rule
likely to result in a Federal mandate that may result in the
expenditure by State, local, and tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year. If a
budgetary impact statement is required, section 205 of the Unfunded
Mandates Act also requires an agency to identify and
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consider a reasonable number of regulatory alternatives before
promulgating a rule. The OCC has determined that the final rule will
not result in expenditures by State, local, and tribal governments, or
by the private sector, of $100 million or more in any one year.
Accordingly, this rulemaking is not subject to section 202 of the
Unfunded Mandates Act.
List of Subjects in 12 CFR Part 8
National banks.
Authority and Issuance
For reasons set forth in the preamble, the OCC amends part 8 of
Chapter I of title 12 of the Code of Federal Regulations as follows:
PART 8--ASSESSMENT OF FEES
1. The authority citation for part 8 is revised to read as follows:
Authority: 12 U.S.C. 93a, 481, 482, 1867, 3102, and 3108; 15
U.S.C. 78c and 78l; and 26 D.C. Code 102.
2. The heading of part 8 is revised to read as set forth above.
3. Section 8.6 is amended by revising the section heading and
paragraph (a) to read as follows:
Sec. 8.6 Fees for special examinations and investigations.
(a) Fees. Pursuant to the authority contained in 12 U.S.C. 481 and
482, the Office of the Comptroller of the Currency assesses a fee for:
(1) Examining the fiduciary activities of national and District of
Columbia banks and related entities;
(2) Conducting special examinations and investigations of national
banks, District of Columbia banks, and Federal branches or Federal
agencies of foreign banks;
(3) Conducting special examinations and investigations of an entity
with respect to its performance of activities described in section 7(c)
of the Bank Service Company Act (12 U.S.C. 1867(c)), if the OCC
determines that assessment of the fee is warranted with regard to a
particular bank because of the high risk or unusual nature of the
activities performed; the significance to the bank's operations and
income of the activities performed; or the extent to which the bank has
sufficient systems, controls, and personnel to adequately monitor,
measure, and control risks arising from such activities;
(4) Conducting special examinations and investigations of
affiliates of national banks, District of Columbia banks, and Federal
branches or Federal agencies of foreign banks; and
(5) Conducting examinations and investigations made pursuant to 12
CFR part 5, Rules, Policies, and Procedures for Corporate Activities.
* * * * *
Dated: April 26, 2001.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 01-11572 Filed 5-7-01; 8:45 am]
BILLING CODE 4810-33-P