62835

Proposed Rules Federal Register Vol. 81, No. 177

Tuesday, September 13, 2016

This section of the FEDERAL REGISTER • Email: regs.comments@ required to present valid government- contains notices to the public of the proposed occ.treas.gov. issued photo identification and submit issuance of rules and regulations. The • Mail: Legislative and Regulatory to security screening in order to inspect purpose of these notices is to give interested Activities Division, Office of the and photocopy comments. persons an opportunity to participate in the Comptroller of the Currency, 400 7th rule making prior to the adoption of the final FOR FURTHER INFORMATION CONTACT: rules. Street SW., Suite 3E–218, mail stop 9W– Mitchell Plave, Special Counsel, 11, Washington, DC 20219. Legislative and Regulatory Activities • Hand Delivery/Courier: 400 7th Division, (202) 649–5490, or Richard DEPARTMENT OF THE TREASURY Street SW., Suite 3E–218, mail stop 9W– Cleva, Senior Counsel, Bank Activities 11, Washington, DC 20219. and Structure Division, (202) 649–5500, Office of the Comptroller of the • Fax: (571) 465–4326. or for persons who are deaf or hard of Currency Instructions: You must include hearing, TTY, (202) 649–5597, Office of ‘‘OCC’’ as the agency name and ‘‘Docket the Comptroller of the Currency, 400 7th 12 CFR Part 51 ID OCC–2016–0017’’ in your comment. Street SW., Washington, DC 20219. [Docket ID OCC–2016–0017] In general, the OCC will enter all SUPPLEMENTARY INFORMATION: comments received into the docket and RIN 1557–AE07 publish them on the Regulations.gov I. Introduction Web site without change, including any The proposed rule addresses how the Receiverships for Uninsured National business or personal information that OCC would conduct the receivership of Banks you provide such as name and address an uninsured national bank.1 The AGENCY: Office of the Comptroller of the information, email addresses, or phone proposed rule would implement the Currency, Treasury. numbers. Comments received, including provisions of the NBA that provide the ACTION: Notice of proposed rulemaking; attachments and other supporting legal framework for receiverships for request for public comment. materials, are part of the public record such institutions, 12 U.S.C. 191–200.2 and subject to public disclosure. Do not There are only a small number of SUMMARY: The Office of the Comptroller include any information in your uninsured national banks in operation of the Currency (OCC) is proposing a comment or supporting materials that today. The OCC, however, retains the rule addressing the conduct of you consider confidential or authority to grant new charters to receiverships for national banks that are inappropriate for public disclosure. entities whose business plan does not not insured by the Federal Deposit You may review comments and other call for them to obtain deposit insurance Insurance Corporation (FDIC) related materials that pertain to this if the OCC determines that the entities (uninsured banks) and for which the rulemaking action by any of the have a reasonable chance of succeeding FDIC would not be appointed as following methods: and can operate in a safe and sound receiver. The proposed rule would • Viewing Comments Electronically: manner, among other considerations. implement the provisions of the Go to www.regulations.gov. Enter Although the OCC has not placed an National Bank Act (NBA) that provide ‘‘Docket ID OCC–2016–0017’’ in the uninsured national bank into the legal framework for receiverships of Search box and click ‘‘Search.’’ Click on receivership since the Great Depression, such institutions. ‘‘Open Docket Folder’’ on the right side there are several reasons to consider DATES: Comments must be received no of the screen and then ‘‘Comments.’’ articulating a framework for such later than November 14, 2016. Comments can be filtered by clicking on receiverships now. First, since the ADDRESSES: Because paper mail in the ‘‘View All’’ and then using the filtering financial crisis of 2007–2008, regulators Washington, DC area and at the OCC is tools on the left side of the screen. have undertaken, on both a domestic subject to delay, commenters are • Click on the ‘‘Help’’ tab on the and coordinated global basis, to encouraged to submit comments Regulations.gov home page to get evaluate, discuss, and maintain through the Federal eRulemaking Portal information on using Regulations.gov. preparedness for effective governmental or email, if possible. Please use the title Supporting materials may be viewed by responses to critical financial distress. ‘‘Receiverships for Uninsured National clicking on ‘‘Open Docket Folder’’ and This focus highlights the need to Banks’’ to facilitate the organization and then clicking on ‘‘Supporting consider an appropriate resolution distribution of the comments. You may Documents.’’ The docket may be viewed framework for entities, such as submit comments by any of the after the close of the comment period in uninsured national banks, that currently following methods: the same manner as during the comment lack such a framework. Second, the Federal eRulemaking Portal— period. establishment of a framework for ‘‘Regulations.gov’’: Go to • Viewing Comments Personally: You www.regulations.gov. Enter ‘‘Docket ID may personally inspect and photocopy 1 Unlike national trust banks, all Federal savings OCC–2016–0017’’ in the Search box and comments at the OCC, 400 7th Street associations (FSAs), including FSA trust banks, are required to be insured. For this reason, this click ‘‘Search.’’ Click on ‘‘Comment SW., Washington, DC. For security proposed rule would not apply to FSAs, given that Now’’ to submit public comments. reasons, the OCC requires that visitors receiverships for FSAs would be conducted by the • Click on the ‘‘Help’’ tab on the make an appointment to inspect FDIC. Regulations.gov home page to get comments. You may do so by calling 2 The proposed rule establishes the basic receivership framework, which may be information on using Regulations.gov, (202) 649–6700 or, for persons who are supplemented over time with more detailed including instructions for submitting deaf or hard of hearing, TTY, (202) 649– guidance, for example, concerning the details of the public comments. 5597. Upon arrival, visitors will be receiver’s administration of the receivership estate.

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receivership for these uninsured the mandatory receiver only for insured these institutions are trust banks. The institutions would provide clarity to depository institutions. Thus, today the OCC may charter national banks whose market participants about how they will FDIC is the required receiver only for an operations are limited to those of a trust be treated in receivership. The proposed insured national (or state) bank.8 company and related activities (national rule would set forth a framework the Congress also subsequently amended trust bank).11 The activities of national OCC can use should an uninsured the receivership appointment provisions trust banks are similar to those of trust institution weaken and fail, be it an of the NBA, 12 U.S.C. 191, to provide departments of full-service banks. But uninsured trust bank or another that the Comptroller may appoint a unlike a trust department, they are not uninsured special purpose bank. receiver for any national bank and that, part of a larger bank that also engages in if the bank is an insured bank, the II. Background commercial banking. All but a handful receiver must be the FDIC.9 Post- of the national trust banks do not engage Statutory Authority for Receiverships FIRREA and post-FDICIA, the FDIA no in the business of receiving deposits and From the beginning of the national longer expressly addresses receiverships instead hold trust funds, which are off- banking system in 1863 until the of uninsured national banks, and there balance sheet assets that are not creation of the FDIC in 1933, are no statutory limits on the considered to be deposits and are not receiverships of national banks were Comptroller’s discretion with respect to insured by the FDIC. conducted by the Comptroller and by a whom to appoint as receiver of an National trust banks typically have receiver who was appointed by, and uninsured bank. few assets on the balance sheet, usually Based on this statutory history, it worked under the direction of, the composed of cash on deposit with an appears that today, unlike in the period Comptroller.3 The Comptroller and insured depository institution, between 1933 and 1989, the FDIA receiver had the powers and investment securities, premises and would not apply to a receivership of an responsibilities set out in the equipment, and intangible assets. These uninsured bank conducted by the OCC, receivership provisions of the NBA and banks exercise fiduciary and custody and that such a receivership would be exercised the powers available at powers, do not make loans, do not rely governed exclusively by the NBA common law for receivers.4 During this on deposit funding, and consequently provisions, the common law of time, a substantial body of case law have simple liquidity management receivers, and cases applying the developed applying the statutory programs. In view of these differences, statutes and common law to national the OCC typically requires these banks provisions and common law principles 10 bank receiverships. FIRREA and to hold capital in a specific minimum to national bank receiverships. FDICIA greatly expanded the FDIC’s In 1933, the FDIC was established amount; as a result they hold capital in powers in resolving failed insured and, among its other responsibilities, amounts that substantially exceed the depository institutions. The OCC was designated as the receiver for ‘‘well capitalized’’ standard that believes that those additional powers national banks.5 As receiver, the FDIC pertains when national banks calculate are not available to the OCC as receiver has both the powers available to their capital pursuant to the OCC’s rules of uninsured banks under the NBA. national bank receivers under the NBA in 12 CFR part 3. and additional powers provided to the Uninsured Banks Supervised by the The business model of national trust FDIC in the Federal Deposit Insurance OCC banks is to generate income in the form of fees by offering fiduciary and Act (FDIA). When the FDIC serves as As of May 2016, the OCC supervises custodial services that generally fall into receiver, it does not operate under the 52 uninsured banks. Currently, all of direction of the Comptroller, unlike the one or more of a few broad categories. 6 Some of these national trust banks focus pre-1933 non-FDIC receivers. From 8 Section 11(c)(2)(A)(ii) of the FDIA provides that 1933 through 1989, the FDIC was the FDIC ‘‘shall’’ be appointed receiver, and ‘‘shall’’ on institutional asset management, designated to be appointed receiver for accept such appointment, whenever a receiver is providing trust and custodial services appointed for the purpose of liquidation or winding for investment portfolios of pension national banks generally, both insured up the affairs of an insured Federal depository and uninsured.7 institution by the appropriate Federal banking plans, foundations and endowments, The receivership regime for national agency, notwithstanding any other provision of and other entities, often with an banks was significantly changed again Federal law. 12 U.S.C. 1821(c)(2)(A)(ii). The term investment management component. ‘‘Federal depository institution’’ includes national These firms often also offer private when Congress adopted the Financial banks. 12 U.S.C. 1813(c)(4). Institutions Reform, Recovery and 9 In 1991, in the Federal Deposit Insurance wealth management and individual Enforcement Act of 1989 (FIRREA). Corporation Improvement Act of 1991 (FDICIA), retirement savings services. These Among many other consequences, the Congress amended 12 U.S.C. 191 to provide that the services provided by national trust Comptroller may appoint the FDIC ‘‘as receiver for banks are similar to those provided by amendments to the FDIA in FIRREA any national banking association.’’ Public Law 102– resulted in the FDIC being specified as 242, section 133, 105 Stat. 2236, 2271. FDICIA also other non-bank investment management amended section 191 to set out the current grounds firms. 3 See Earle v. Penn, 178 U.S. 449 (1900); Cook for receivership. Prior to the amendment, section A few other national trust banks serve County Nat’l Bank v. United States, 107 U.S. 445 191 provided that the Comptroller may appoint a receiver for one of three grounds previously set out primarily as a fiduciary and custodian (1883). to facilitate the establishment of 4 in the statute. In October 1992, before the See 12 U.S.C. 191–200. amendment went into effect, Congress revised the Individual Retirement Accounts by 5 See Banking Act of 1933, 73d Cong., 1st Sess., language to provide that the receiver shall be the customers of an affiliated mutual fund ch. 89, section 12B(1), 48 Stat. 172 (1933). FDIC ‘‘if the national bank is an insured bank.’’ Act 6 See 12 U.S.C. 1821(c)(2)(C). of October 28, 1992, Public Law 102–550, Title XVI, complex or broker-dealer firm. While it 7 For example, before its amendment in 1989, Subtitle A, section 1609, 106 Stat. 4090 (1992). is not common, a few national trust section 11(c) of the FDIA, 12 U.S.C. 1821(c) stated 10 While the receivership operations will be banks have been established for a that, whenever the Comptroller appointed a governed by the NBA provisions, the common law special purpose within a larger financial receiver for any insured or uninsured national bank of receivers, and cases applying the statutes and or Federal branch, the Comptroller ‘‘shall appoint’’ common law to national bank receiverships, the company to accomplish a transition or the FDIC receiver for such closed bank. 12 U.S.C. grounds for appointment of a receiver in the NBA 1821(c) (1988). Federal branches were added to for a national bank, including an uninsured bank, 11 See, e.g., 12 U.S.C. 27(a); 12 CFR 5.20(l). The section 1821(c) in 1978 when Federal branches incorporate by reference the grounds for OCC also charters Federal savings associations. were created in the International Banking Act, 12 appointment in the FDIA. See 12 U.S.C. 191(a)(1) Unlike national trust banks, all Federal savings U.S.C. 3101 et seq. (referring to 12 U.S.C. 1821(c)(5)). associations are required to be insured.

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other specific purpose over a limited than 500 customers, and $1 billion or providing fiduciary services.14 In time period, such as facilitating a less in fiduciary assets. addition to national trust banks, the consolidation. The OCC has not appointed a receiver OCC also may charter other special Some national trust banks provide for an uninsured bank since shortly after purpose banks with business models custodial services. One example of this the Congress established the FDIC in that are within the business of banking. type of service is corporate trust response to the banking panics of 1930– The OCC’s rules provide that a special accounts, under which the bank 1933. Because of the fundamentally purpose bank must conduct at least one performs services for others in different business model of national of the three core banking functions, connection with their issuance, transfer, trust banks, compared to commercial namely receiving deposits, paying and registration of debt or equity and consumer banks and savings checks, or lending money.15 As part of securities. Other custody accounts may associations noted above, national trust the agency’s initiative on responsible be a holding facility for customer banks face very different types of risks. innovation in the Federal banking securities, where the bank assists National trust banks primarily face system, the OCC is considering how best institutional customers with global operational, compliance, strategic, and to implement a regulatory framework settlement and safekeeping of the reputational risks without the credit and that is receptive to responsible customer’s securities. liquidity risks that additionally impact innovation, such as advances in Many of the uninsured national trust the solvency of commercial and financial technology.16 In conjunction banks are subsidiaries or affiliates of a consumer banks. While any of these with this effort, the OCC is considering full-service insured national bank. risks can result in the precipitous failure whether a special purpose charter could Another group are affiliates of an of a bank or savings association, from a be an appropriate entity for the delivery insured state bank. In these cases where historical perspective, trust banks have of banking services in new ways. For the national trust bank is part of a bank been more likely to decline into a this reason, the OCC requests comment holding company, the bank and the weakened condition, allowing the OCC on the utility of the receivership company have decided for a variety of and the institution the time needed to structure in the proposed rule for business reasons to offer some fiduciary find other solutions for rehabilitating receivership of such a special purpose services to their customers in a separate the institution or to successfully resolve bank. the institution without the need to Question 1. Would application of the national trust bank charter. National 12 trust banks affiliated with other banks appoint a receiver. NBA’s legal framework for receiverships The OCC believes it would can vary greatly in complexity, in the of uninsured banks to such innovative nevertheless be beneficial to financial type of fiduciary or custody businesses special purpose banks raise any unique market participants and the broader they engage in, and in the amount of considerations? community of regulators for the OCC to assets under management or clarify the receivership framework for Uninsured Federal Branches and administration. Typically they maintain uninsured banks. Although the OCC Agencies a few thousand accounts for individuals conducted 2,762 receiverships pursuant or family trusts containing assets In addition to conducting to this framework in the years prior to totaling in the range of $10 billion, or receiverships for uninsured national the creation of the FDIC,13 and the in other cases maintaining as many as banks, the OCC has statutory authority associated legal issues are the subject of 10,000 corporate custody accounts to appoint and oversee a receiver for a robust body of published judicial totaling in the range of $20 billion. uninsured Federal branches and precedents, the details have not been Other uninsured national trust banks agencies (uninsured Federal widely articulated in recent 17 are not affiliated with an insured branches). While there are some jurisprudence or legal commentary. This powers and functions that overlap in depository institution, but are affiliated proposal may also facilitate synergies with an investment management firm or conducting receiverships for uninsured with the ongoing efforts of U.S. and banks and Federal branches, there are other financial services firm. These international financial regulators since national trust banks provide fiduciary differences that make receiverships for the financial crisis to enhance our Federal branches more complex. and custody services for customers of readiness to respond effectively to the the firm. National trust banks affiliated The International Banking Act of different critical financial distresses that 18 with an investment management firm or 1978 (IBA) sets forth the legal could manifest themselves framework for the establishment and other financial services firm also can unexpectedly in the diverse types of vary greatly in complexity, in the type operation of federally licensed branches financial firms presently operating in and agencies of foreign banks. Under the of fiduciary or custody businesses they the market. engage in, and in the amount of assets IBA, a receiver appointed by the under management or administration. Other Types of Uninsured National Comptroller for an uninsured Federal While these national trust banks may, in Banks branch would exercise the same rights, privileges, powers, and authority in exceptional cases, hold as much as $1 The OCC has the authority to charter trillion in fiduciary and custodial assets, conducting the receivership as it would and supervise special purpose banks in conducting a receivership for an they more commonly hold assets in the with operations limited solely to 19 $5–$50 billion range across a few uninsured bank. As such, with some thousand accounts. 12 In some instances, uninsured trust banks enter 14 12 U.S.C. 27(a); 12 CFR 5.20(e)(1), 5.20(l). into safeguard agreements with the OCC to facilitate Still other national trust banks have 15 12 CFR 5.20(e)(1). no affiliation with a larger parent early resolution through a sale, merger or liquidation, thereby avoiding the need for a 16 See OCC, Supporting Responsible Innovation in company. These independent firms receivership. These safeguard agreements are the Federal Banking System: An OCC Perspective at typically manage a few billion dollars in entered into as part of the licensing process and 2 (March 2016) available at http:// fiduciary and custodial assets across a concern operations, capital, and liquidity. www.occ.treas.gov/publications/publications-by- type/other-publications-reports/pub-responsible- few thousand accounts, while others 13 Annual Report of the Comptroller of the Currency for the Year Ended October 31, 1934 at innovation-banking-system-occ-perspective.pdf. might be described as boutique trust 33 (discussing the status of active and closed 17 12 U.S.C. 3102(j). firms, not affiliated with a larger parent receiverships under the jurisdiction of the 18 12 U.S.C. 3101 et seq. company, with a few employees, fewer Comptroller between 1865 and 1934). 19 12 U.S.C. 3102(j).

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exceptions, the provisions in the NBA III. Proposed Rule and Request for acting under either the NBA in the case for receiverships would generally apply Comment of the OCC or the FDIA in the case of 20 the FDIC ‘‘step[s] into the shoes of’’ the to receiverships for Federal branches. Overview However, the nature of an uninsured failed institution.23 Federal branch’s more typical The proposed rule, as described Under the ‘‘separate capacities’’ commercial banking type of business below, incorporates the framework set doctrine, which has long been model, the overlay of other Federal laws forth in the NBA for the Comptroller to recognized in litigation involving the appoint a receiver for an uninsured including provisions on receiverships in FDIC, it is well established that the bank, generally under the same grounds the IBA, and concerns being deliberated agency, when acting in one capacity, is for appointment of the FDIC as receiver currently on a global basis among not liable for claims against the agency for insured national banks. The 24 financial regulators about the resolution acting in its other capacity. As a uninsured bank may challenge the corollary to this doctrine, the assets the of global systemically important banks appointment in court, and the NBA make the subject of uninsured Federal agency oversees in the receivership are affords jurisdiction to the appropriate limited to the funds making up the branch resolutions a more complicated United States district court for this topic. failed bank’s estate. For these reasons, purpose. The OCC will provide the payment of claims or judgments For this reason, the scope of this public with notice of the appointment, concerning the receivership are made proposed rule does not extend to as well as instructions for submitting from the receivership estate, not from receiverships for uninsured Federal claims against the uninsured bank in the agency’s operating budget and branches. The OCC will continue receivership. The OCC may appoint any funds. reviewing the regulatory and legal person as receiver, including the OCC or The proposed rule reflects this well- issues relating to receiverships for another government agency. established understanding of the Federal branches and will confer with The receiver carries out its duties functional and legal distinctions other regulators on these issues. The under the direction of the Comptroller. between the corporate and receiver OCC may seek public input on this Under the NBA, the OCC functions in capacities. The proposed rule follows subject as part of our deliberations on two capacities. Its primary capacity is the statutory framework under the NBA, the topic in the future. that of a regulatory agency, in which the under which persons with claims OCC oversees national banks, Federal against an uninsured bank in Cost Implications of OCC Receivership savings associations, and Federal receivership would file their claims Function branches and Federal agencies, with the receiver for the failed supervising them under the charge of The OCC’s establishment of a uninsured bank, for review by the OCC. assuring the safety and soundness of, In the event the OCC denies the claim, receivership framework may also raise and compliance with laws and cost implications for the OCC. In the only remedy available to the regulations, fair access to financial claimant is to bring a judicial action addition to the OCC’s costs incidental to services, and fair treatment of customers the selection and supervision of a against the uninsured bank’s by, the institutions and other persons receivership estate and assert the claim receiver, and approval of claims against subject to its jurisdiction.21 The OCC is the receivership for a share of the de novo. A person is also free to initiate also directed by the NBA to act in a its claim by bringing an action against receiver’s liquidating dividends, the receivership capacity, under which the receiver for an uninsured national bank OCC appoints and oversees receivers for that, under Federal law, the FDIC is empowered to will, as a matter of necessity, incur uninsured banks, thereby facilitating the operate to act in two entirely separate and distinct administrative costs in performing winding down of bank operations, capacities) (citations omitted); FDIC v. Fonesca, 795 liquidation functions. As discussed assets, and accounts while minimizing F.2d 1102, 1109 (1st Cir. 1986) (stating that below, the NBA provides that the ‘‘ ‘Corporate’ FDIC and ‘Receiver’ FDIC are separate disruptions to customers and creditors and distinct legal entities’’); Jones v. FDIC, 748 F.2d receiver’s administrative expenses are to of the institution. These capacities are 1400, 1402 (10th Cir. 1984) (same). be paid first out of the assets of the separate in a way that parallels the 23 See supra, note 22. receivership, but there may be separate capacities of the FDIC which, 24 See Dababneh v. FDIC, 971 F.2d 428, 432 (10th circumstances where the receiver’s in its corporate capacity, serves as the Cir. 1992) (‘‘[b]ecause they are discrete legal entities, Corporate FDIC is not liable’’ for administrative expenses exceed those insurer of depository institutions and obligations and liabilities of the FDIC as receiver) resources. oversees state non-member banks, and, (citations omitted); accord FDIC v. Nichols, 885 F. The OCC is considering how it might in its receivership capacity, oversees the 2d 633, 636 (9th Cir. 1989) (recognizing the winding down of failed insured corporate-receiver distinction in a case involving cover these types of costs. One approach the purchase of receivership assets by FDIC in its would be to build resources to defray depository institutions. These two corporate capacity); FDIC v. Fonseca, 795 F.2d these costs into our structure for capacities are distinct both functionally 1102, 1109 (1st Cir. 1986) (refusing to address claims asserted against FDIC in its corporate collection of assessments from the and legally and reflect different public policy roles. A separate legal status capacity that were based on actions taken by the uninsured institutions we supervise, in 22 FDIC as receiver); Mill Creek Group, Inc. v. FDIC, accordance with 12 CFR part 8. Any attaches to each capacity. A receiver 136 F. Supp. 2d 36, 48 (D. Conn. 2001) (finding that change to the OCC’s assessments would FDIC in its corporate capacity could not be held 21 12 U.S.C. 1. liable for breach of a contract entered into by FDIC be set forth in a separate notice of 22 See O’Melveny & Meyers v. FDIC, 512 U.S. 79, in its receiver capacity). proposed rulemaking. 85 (1994) (finding that FDIC-Receiver ‘‘steps into The same reasoning has been applied to cases the shoes’’ of the failed institution and is ‘‘not the involving the former Resolution Trust Corporation. Question 2. The OCC requests United States’’). The O’Melveny & Meyers case See, e.g., U.S. v. Schroeder, 86 F.3d 114, 117 (8th comment on alternatives that might be concerns a choice of law question in a professional Cir. 1996) (stating that it is ‘‘well established that implemented to take account of these malpractice suit brought against the former counsel the RTC, when acting in one capacity, is not liable cost considerations. for the savings and loan. The Court concluded that for claims against the RTC acting in one of its other the FDIC as receiver asserts the rights of the failed capacities’’); see also Howerton v. Designer Homes bank in receivership, not of ‘‘FDIC-Corporate,’’ and by Georges, Inc., 950 F.2d 281, 283 (5th Cir. 1992) 20 This approach is consistent with the ‘‘national therefore state law, not Federal common law, (‘‘The RTC, in its corporate capacity, is not liable treatment’’ requirement in the IBA, 12 U.S.C. applies. See also Bullion Services v. Valley State for claims against the RTC in its capacity as 3102(b). Bank, 50 F.3d 705, 708–709 (9th Cir. 1995) (noting conservator or receiver.’’)

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the receivership estate in court for Comptroller part of the OCC’s requirement for newspaper publication, adjudication, and then submit the responsibilities, the receivership which would apply in every case. judgment to the OCC to participate in oversight role is unique and distinct Proposed § 51.4 addresses the ratable dividends of liquidation from the OCC’s role as a Federal submission of claims to the receiver for proceeds along with other approved and regulatory agency and supervisor of an uninsured bank. Under proposed adjudicated claims.25 national banks and Federal savings § 51.4(a), a person with a claim against Approved or adjudicated claims are associations. This is comparable to the the receivership may submit a claim to paid solely out of the assets of the dual capacity of the FDIC’s receivership the OCC, which would consider the uninsured bank in receivership. As function for insured depository claim and make a determination described in the proposed rule, the institutions pursuant to the FDIA. concerning its validity and approved receiver liquidates the assets of the Proposed § 51.2 also provides that the amount. This process reflects the uninsured bank, with court approval, Comptroller may require the receiver to provisions in 12 U.S.C. 193 and 194 and pays the proceeds into an account post a bond or other security and the regarding presentation of claims and as directed by the OCC. The categories receiver may hire staff and professional payment of dividends on claims that are of claims and the priority thereof for advisors, with the approval of the proved to the satisfaction of the payment are set out in the proposed Comptroller, if needed to carry out the Comptroller. Proposed § 51.4 also rule. The proposed rule also clarifies receivership. This section also identifies provides that the Comptroller would certain powers held by the receiver, and the grounds for appointment of a establish a deadline for filing claims describes the receiver’s duties in receiver for an uninsured bank and with the receiver, which could not be winding up the affairs of the uninsured notes that uninsured banks may seek earlier than 30 days after the three- bank. judicial review of the appointment, month publication of notice required by pursuant to 12 U.S.C. 191. proposed § 51.3. This provision reflects Section-by-Section Analysis Proposed § 51.3 provides that the OCC NBA case law that permitted the Proposed § 51.1 identifies the purpose would provide notice to the public of Comptroller to establish a date for filing and scope of the proposed rule and the appointment of a receiver for the claims against the receiver for a failed clarifies that the proposal would apply uninsured bank. The proposed rule bank, before this responsibility shifted to receiverships conducted by the OCC specifies that one component of this to the FDIC.27 under the NBA for national banks that notice will include publication in a Proposed § 51.4(b) clarifies that are not insured by the FDIC. The newspaper of general circulation persons with claims against an proposed rule does not extend to selected by the OCC for three uninsured bank in receivership may receiverships for uninsured Federal consecutive months, as required by 12 present their claims to a court of branches, although elements of the U.S.C. 193. As a component of the competent jurisdiction for adjudication, framework may be similar for uninsured OCC’s notice to the public about the in addition to, or as an alternative to, Federal branch receiverships, which receivership, the OCC would also filing a claim with the OCC. If would also be resolved under provisions provide instructions for creditors and successful in court, such persons would of the NBA. Proposed § 51.2 is based on other claimants seeking to submit be required to submit a copy of the final 12 U.S.C. 191 and 192 and concerns claims with the receiver for the judgment to the OCC to participate in appointment of a receiver. The proposed uninsured bank. ratable dividends of liquidation rule sets out the Comptroller’s authority The OCC believes that the purpose of proceeds along with claims against the to appoint any person, including the section 193 may be better served by bank in receivership submitted to, and OCC or another government agency, as publication through means other than approved by, the OCC. The proposed receiver for an uninsured bank and publication in a newspaper. For rule requires submission of a copy of the provides that the receiver performs its example, the OCC could provide direct court’s final judgment to the OCC. This duties subject to the approval and notice to customers and creditors of the provision is based on 12 U.S.C. 193 and direction of the Comptroller.26 If the uninsured bank, to the extent the 194. Comptroller were to appoint the OCC as uninsured bank’s records included In this regard, the receivership regime receiver, the OCC would act in a current contact information. The OCC established by the NBA differs receivership capacity with respect to the could also arrange to provide notice somewhat from the approach set out in uninsured bank in receivership, rather through electronic channels that other resolution regimes, such as the customers would typically use to than in the OCC’s supervisory capacity. bankruptcy provisions of the United contact the uninsured bank, such as the As discussed above, this dual capacity States Code and the receivership uninsured bank’s Web site. The OCC (OCC as supervisor versus OCC as provisions of the FDIA. Under those believes that an effective set of notice receivership sponsor for an uninsured resolution regimes, creditors and protocols would best be established on bank) recognizes that, while the NBA claimants must generally submit their a case-by-case basis, in light of a specific makes the receivership oversight and claims to the receivership estate for uninsured bank’s fiduciary and claims review functions of the centralized administration and custodial activities, the types of disposition, and claims that are not customers served by the bank, 25 See First Nat’l Bank of Bethel v. Nat’l submitted by the claims deadline are Pahquioque Bank, 81 U.S. 383, 401 (1871). coordination with other notice protocols barred from any participation in 26 But see 12 U.S.C. 1821(c)(6) (Comptroller may under way for any related entity that is liquidation payments. The NBA appoint the FDIC as conservator or receiver and the also undergoing resolution activity, and provisions are different in that FDIC has discretion to accept such appointment); similar factors. id. at § 1821(c)(2)(C) (FDIC ‘‘not subject to any other claimants are provided the opportunity agency’’ when acting as conservator or receiver’’). Question 3. The OCC invites comment to submit claims to the OCC for Read together, these provisions likely mean that the on the appropriate types of, and evaluation, but are not foreclosed from provision in § 51.2 concerning oversight of the channels for, notices of receiverships, as pursuing judicial resolution by filing receiver by the Comptroller would not apply to the well as how frequently to provide these FDIC acting as conservator or receiver for an litigation (or continuing a pre-existing uninsured institution, should the Comptroller notices. Commenters are also invited to appoint the FDIC and the FDIC accept such an address whether customized notice 27 See Queenan v. Mays, 90 F.2d 525, 531 (10th appointment. should be provided in addition to the Cir. 1937).

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lawsuit) in a court of competent security interest in assets of the Proposed § 51.5 sets out the order of jurisdiction against the uninsured bank uninsured bank, the OCC believes that priorities for payment of administrative in receivership. it may be in that claimant’s interest to expenses of the receiver and claims The claims filing deadline established apprise the OCC of that claim through against the uninsured bank in by the Comptroller pursuant to the claims process. While the NBA does receivership. Under this section, the proposed § 51.4(a) is the date by which not restrict the holder of a valid security OCC would pay these expenses and claimants seeking review under the interest in uninsured bank assets from claims in the following order: (1) OCC’s claims process must make their enforcing that interest through Administrative expenses of the receiver; submission. Nevertheless, a claimant applicable state law, making the OCC (2) unsecured creditors, including that has not made a submission to the aware of the claim and presenting an secured creditors to the extent their OCC by the deadline is not barred from opportunity for it to be evaluated creates claim exceeds their valid and initiating judicial claims against the an opportunity to explore whether the enforceable security interest; (3) uninsured bank in receivership solely receivership estate might negotiate an creditors of the uninsured bank, if any, by virtue of missing the claims arrangement that would provide the whose claims are subordinated to deadline.28 claimant the value of the security general creditor claims; and (4) The NBA’s receivership provisions interest in a more efficient way. Also, if shareholders of the uninsured bank. The are like the receivership regime it turns out that a portion of the claim order is based on case law and, in the established by the FDIC under the FDIA, remains unsecured, the claimant will case of the first priority for however, in that the avenue available to have presented their claim to the OCC, administrative expenses, on 12 U.S.C. a party whose claim has been denied by and would participate in ratable 196.31 the FDIC or OCC performing the dividends if the OCC approved the A creditor or other claimant with a agencies’ receivership claims functions claim. For these reasons, the OCC has security interest that was valid and is to file (or continue) a de novo judicial included language in proposed § 51.4(a) enforceable as to its terms prior to the action asserting the facts and legal referring equally to secured and appointment of the receiver is entitled theory of the claim against the unsecured claims. to exercise that security interest, outside receivership of the bank. The NBA does Proposed § 51.4(c) provides that if a the priority of distributions set out in not contemplate or support anything in person with a claim against an the proposed rule.32 If the collateral the nature of further action by the uninsured bank in receivership also has value exceeds the amount of the claim claimant in an administrative or judicial an obligation owed to the bank, the as it was immediately prior to the forum against the OCC seeking review of claim and obligation will be set off receiver’s appointment, the surplus the claim determination. against each other and only the net remains an asset of the uninsured bank, The OCC believes that the proposed balance remaining after set-off will be and the receiver may obtain it in claims process offers many claimants considered as a claim. To this end, connection with marshalling the assets advantages over other methods of claims proposed § 51.4(a) also includes (as further described in proposed resolution. In particular, for customers language referring to claims for set-off. § 51.7(a)).33 of the institution, and for holders of The right of set-off where parties have Liens arising from judicial receivables and other contractual credit mutual obligations has long been determinations after the initiation of the claims against the uninsured bank, the recognized as an equitable principle.29 receivership, as well as contractual liens extent and validity of the claim will Well-settled case law has held that a that are triggered due to the frequently be clear from the books and receivership creditor’s or other appointment of a receiver or other post- records of the bank, account statements claimant’s equitable right to a set-off is appointment events, are not enforceable. provided to customers, and similar not precluded by the ratable distribution This is because recognition of these documents. The claims process provides requirement of the NBA, provided such liens would afford these claimants a an efficient way for identification, in a set-off is otherwise legally valid.30 If, priority that is not recognized under the timely way, of the largest group of after set-off, an amount is owed to the established legal priorities described in claimants who will be eligible to creditor, the creditor may file a claim for proposed § 51.5. Similarly, a secured participate in ratable distributions of the net amount remaining as any other creditor is not entitled to a priority liquidation dividends, as described in unsecured creditor. Conversely, if, after distribution of any portion of the claim proposed § 51.8. The OCC’s public set-off, an amount is owed to the bank, that is not covered by the value of the notices of the receivership will provide the creditor does not have a claim and collateral, because the creditor is in the claimants with information on how to the net amount remaining is an asset of position of an unsecured creditor for obtain more detailed instructions for the uninsured bank, which the receiver that portion of the claim, and must submitting claims to the OCC and on may obtain in connection with participate in ratable liquidation disposition of claims. marshalling the assets (as further distributions on par with other If a claimant asserts that a claim described in proposed § 51.7(a)). unsecured creditors.34 incorporates a valid and enforceable Question 4. The OCC requests Assets held by the uninsured bank in comment on whether there are a fiduciary or custodial capacity, as 28 See First Nat’l Bank of Bethel v. Nat’l Pahquioque Bank, 81 U.S. 383, 401 (1871); additional characteristics of set-offs or 31 See Ticonic Nat’l Bank v. Sprague, 303 U.S. Queenan, 90 F.2d at 531. As noted above, it is other situations in which set-off may 406, 410–411 (1938); Merrill v. Nat’l Bank of incumbent on a claimant that pursues the judicial arise that should be included in the Jacksonville, 173 U.S. 131, 146 (1899); Scott v. route and ultimately obtains judicial relief to rule. Armstrong, 146 U.S. 499, 510 (1892); Bell v. submit the final judicial determination and award Hanover Nat’l Bank, 57 F. 821, 822 (C.C.S.D.N.Y. to the OCC, in order to participate in the OCC’s 29 1893). periodic ratable dividends of liquidation proceeds Scammon v. Kimball, 92 U.S. 362 (1876); 32 of the receivership estate. Except with respect to a Blount v. Windley, 95 U.S. 173 (1877), 177; Carr v. Ticonic Nat’l Bank v. Sprague, 303 U.S. 406, valid and enforceable security interest in specific Hamilton, 129 U.S. 252 (1889). 410–411 (1938); Bell v. Hanover Nat’l Bank, 57 F. property of the uninsured bank established as part 30 See Scott v. Armstrong, 146 U.S. 499, 510 821, 822 (C.C.S.D.N.Y. 1893). of a final judicial determination, there are no assets (1892); InterFirst Bank of Abilene, N.A. v. FDIC, 777 33 Bell v. Hanover Nat’l Bank, 57 F. 821, 822 or funds available to a successful judicial claimant F.2d 1092, 1095–1096 (5th Cir. 1985); FDIC v. (C.C.S.D.N.Y. 1893). other than the ratable dividend process set out in Mademoiselle of California, 379 F.2d 660, 663 (9th 34 Merrill v. Nat’l Bank of Jacksonville, 173 U.S. 12 U.S.C. 194 and described in proposed § 51.8. Cir. 1967). 131, 146 (1899).

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identified on the bank’s books and and custodial accounts. As described in value in adverse markets, or loss of records, are not general assets of the proposed § 51.7, the receiver would take income due to foregone reinvestments. bank. Section 51.8(b) of the proposed over the assets and operation of the Across the United States, there are rule states this, for the absence of doubt. uninsured bank, take action to realize disparate and often conflicting legal In the same vein, the claim of the on debts owed to the uninsured bank, rules restricting or conditioning customer to fiduciary or custodial assets sell the property of the bank, and transfers of an appointment of a is separate from, and not subject to, the liquidate the assets of the uninsured fiduciary for a beneficiary residing priority set out in proposed § 51.5. bank for payment of claims against the within the state. Depending on the Fiduciary and custodial customers of receivership. Proposed § 51.7(a)(1)–(5) geographic area across which the the bank have direct claims on those lists some of the major powers and uninsured bank has established assets pursuant to their fiduciary or duties for the receiver set out in 12 fiduciary relationships with its custodial account contracts. However, U.S.C. 192 and clarified by the courts, customers, and the standardization of its the priority of a fiduciary or custodial including taking possession of the books fiduciary account agreements or customer’s other claims against the and records of the bank, collecting on appointing instruments, it may be bank, if any, would remain subject to debts and claims owed to the bank, practicable for the receiver to transition the priority described in proposed selling or compromising bad or doubtful an uninsured bank’s fiduciary and § 51.5. For example, a fiduciary debts (with court approval), and selling custody accounts to a qualified customer’s claim for a refund of prepaid the bank’s real and personal property successor through the mechanisms investment management fees that were (also with court approval). provided by applicable local law. On attributable to periods after the receiver Proposed § 51.7(b) provides for the the other hand, if faced with dispersed returned the fiduciary assets to the receiver to close the uninsured bank’s customers, diverse account agreements customer, generally would be an fiduciary and custodial appointments, or appointments of different vintage, or unsecured claim covered by proposed or transfer such accounts to a successor even the absence of an applicable law of § 51.5(b). The claims process described fiduciary or custodian under 12 CFR transfer for customers in certain states, in § 51.4(b) of the proposed rule is 9.16 or other applicable Federal law. reliance on these methods may be so available to a fiduciary customer, for The uninsured banks currently in cumbersome as to effectively prevent both a direct claim on fiduciary assets, existence focus on fiduciary and accomplishment of the transfers in a as well as a receivership claim for an custodial services, so this function of timely way. In order to address these potential obligation of the bank. the receiver would be of primary Question 5. The OCC requests problems, the OCC, relying on the importance. This provision recognizes comment on whether there are other support of existing case law, is that the receiver’s power to wind up the Federal statutes regarding specific types including language in the proposed rule affairs of the uninsured bank in of claims that may be applicable to a to make it clear that the uninsured bank receivership, acting with court approval receivership of an uninsured bank receiver’s power under 12 U.S.C. 192 to to make disposition of bank assets, under the NBA and that would give sell, with court approval, the real and should properly encompass the power certain claims a different priority, such personal property of the bank includes to transfer fiduciary or custodial as claims owed to the Federal the power to transfer the bank’s appointments and any associated assets government. fiduciary accounts and related assets, Proposed § 51.6 provides that all in appropriate circumstances. subject to the approval of the court administrative expenses of the receiver Transfer of fiduciary appointments exercising jurisdiction over the for an uninsured bank will be paid out may occur under the terms of the receiver’s efforts to transfer the bank’s of the assets of the receivership before instrument creating the relationship, if assets. The proposed rule is consistent payment of claims against the it provides for transfer, or under a with case law recognizing that a receiver receivership. This reflects the fiduciary transfer statute, if one is for a national bank may properly requirements in 12 U.S.C. 196. The applicable. The OCC believes there are arrange asset purchase and liability proposed rule also states that strong public policy interests in assumption transactions to move the receivership expenses would include endeavoring to replace fiduciaries and business of a failed bank to a successor pre-receivership and post-receivership custodians expeditiously, without an on an integrated basis, as part of the obligations that the receiver determines interruption in service to their power to transfer assets, as well as are necessary and appropriate to customers, if transfer can be arranged to analogous case law concerning the facilitate the orderly liquidation or other a qualified successor, maintaining the transfer of fiduciary and custodial assets resolution of the uninsured bank in same duties and standards of care with by the FDIC, acting as receiver of failed receivership. To further illustrate the respect to the customers that previously insured depository institutions.35 kinds of expenses that section 196 pertained to their accounts at the Proposed § 51.7(c) incorporates, in affords a first priority claim on the uninsured bank in receivership. The general terms, the powers, duties, and uninsured bank’s receivership assets, alternative, given that the uninsured responsibilities of receivers for national proposed § 51.6 enumerates examples of bank must be wound down and cannot banks under the NBA and under judicial such administrative expenses, such as provide services in the future, is to stop precedents determining the authorities wages and salaries of employees, managing and reinvesting the and responsibilities of receivers for expenses for professional services, customer’s assets, stop responding to national banks. Examples of these contractual rent pursuant to an existing directions to transfer or receive assets in powers include: (1) The authority to lease or rental agreement, and payments custody, close the accounts, and seek repudiate certain contracts, including: to third-party or affiliated service instructions from the account holders or (a) Purely executory contracts, upon providers, when the receiver determines the courts regarding return of associated these expenses are of benefit to the assets. For institutional customers, this 35 See NCNB Texas National Bank v. Cowden, receivership. is likely to cause significant interruption 895 F.2d 1488 (5th Cir. 1990) (holding that the FDIC, as receiver of insolvent bank, had authority Proposed § 51.7 contains provisions of the intricate machinery of their to transfer fiduciary appointments to bridge bank describing the powers and duties of the financial operations. For individuals, it prior to the Financial Institutions Reform, Recovery, receiver and the disposition of fiduciary can potentially result in loss of asset and Enforcement Act of 1989).

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determining that the contracts would be ratable dividends. As another example, other claimants of an uninsured bank unduly burdensome or unprofitable for the ratable dividend requirement will be made solely from receivership the receivership estate,36 (b) contracts generally restricts claims against the funds, if any, paid to the OCC by the that involve fraud or bank receivership for debts that were receiver after payment of the expenses misrepresentation,37 and (c) in limited not due and owing at the appointment of the receiver. This provision is also cases, non-executory contracts that are of the receiver, and arose for the first consistent with the established contrary to public policy; 38 (2) the time as a consequence of the dichotomy of the OCC’s supervisory and authority to recover fraudulent appointment or a post-appointment receivership capacities in the NBA, as transfers; 39 and (3) the authority to event. discussed earlier. enforce collection of notes from debtors The OCC requests comment on Proposed § 51.8(b) similarly and collateral, regardless of the alternatives to the proposed rule’s recognizes that assets held by an existence of side arrangements that approach to distributing dividends, uninsured bank in a fiduciary or would otherwise defeat the under which the OCC would exercise its custodial capacity, as designated on the collectability of such notes.40 discretion under section 194 to bank’s books and records, are not part Proposed § 51.7(d) requires the determine the timing of the of the bank’s general assets and receiver to make periodic reports to the distributions on established claims. One liabilities held in connection with its OCC concerning the status and alternative would be to refrain from other business, and will not be proceedings of the receivership. paying any dividends until all claims considered a source for payment for Proposed § 51.8 contains provisions have been submitted and validated, unrelated claims of creditors and other regarding the payment of dividends on with final allowed claim amounts claimants. This provision is intended to claims against the uninsured bank and established. This approach presents the make clear that the receiver will the distribution of any remaining possibility that proven claims may be segregate identified fiduciary and proceeds to shareholders. This section delayed for a significant amount of time custodial assets and either transfer those provides that, after administrative pending more protracted resolution of assets to other fiduciaries or custodians expenses of the receivership have been other claims. For example, if there is as described in connection with paid, the OCC would make ratable ongoing litigation against the bank proposed § 51.7(b), or close the accounts dividends from available receivership regarding a claim, this waiting period and endeavor to make the associated funds based on the priority of claims in rule would mean no dividends would assets available to the accountholders or proposed § 51.5, for claims that have be made to any claimants, even those their representatives through other been proved to the OCC’s satisfaction or with well-established claims, until after means. adjudicated in a court of competent the litigation is finally resolved. Proposed § 51.8(d) provides that, after jurisdiction, as provided in 12 U.S.C. Another option would be to allow all administrative expenses and claims 194. The OCC would make payment of ongoing dividends on proven claims, have been paid in full, any remaining dividends, if any, periodically, at the subject to the receiver’s retaining a proceeds would be paid to shareholders discretion of the OCC, as the receiver percentage of the funds on hand at the in proportion to their stock ownership, liquidates the assets of the uninsured time of the distribution as a pool of also as provided in 12 U.S.C. 194. bank. dividends for catch-up distributions to a Proposed § 51.9 contains provisions The proposed rule’s inclusion of the successful plaintiff later. The OCC for termination of receiverships in ‘‘ratable dividend’’ requirement is believes it would be appropriate, under which there are assets remaining after designed to incorporate the associated such an approach, for the rule to all administrative expenses and all standards about the proper application incorporate a mechanism to balance the claims had been paid. This is the of this statutory directive, which the interests of established claimants in scenario addressed by 12 U.S.C. 197. In judiciary has articulated over the years. current payment against the interests in such a case, section 197 requires the The ratable dividend requirement future relief to others asserting more Comptroller to call a meeting of the directs the OCC to make distributions protracted claims. The OCC also has an shareholders of the bank at which the on OCC-approved claims and judicial interest in being able to seek shareholders would decide whether to awards on an equal footing, determining termination of a receivership after an continue oversight by the Comptroller, the amount of each creditor’s claim as appropriate period, in light of the assets or whether to end the receivership and it stands at the point of insolvency. As that are realistically available, the appoint a liquidating agent to continue one example, a court’s award of interest prospects of success by plaintiffs the liquidation of the remaining assets, on an unpaid debt to the date of a asserting additional claims, and similar under the direction of the board of judgment rendered in the plaintiff’s factors. Accordingly, the rule might directors and shareholders, as in a favor after the receiver was appointed commit the OCC to reserve a minimum liquidation that had commenced under does not increase the amount of the of 12 percent of funds on hand at the 12 U.S.C. 181. There may be other circumstances plaintiff’s claim for purposes of making time of distribution during the first year a distribution is made, and reduce this under which termination would take 36 Bank One Texas v. Prudential Life Ins. Co., 878 required minimum reserve to 8 percent place, such as when there are no F. Supp. 943, 964–66 (N.D. Tex. 1995). 12 months later, 4 percent after the next receivership assets remaining after 37 A. Corbin, Corbin on Contracts § 228 at 320 12 months, and eliminate the reserve completion of receivership activities. (1952) (addressing contracts voidable for fraud, requirement beyond that. Under this scenario, the receiver for an duress, or mistake). Question 6. The OCC invites comment uninsured bank has liquidated all of the 38 Cf. Fidelity Deposit Co. of Md. v. Conner, 973 F.2d 1236, 1241 (5th Cir. 1992). on these alternatives for making ratable bank’s assets, closed or transferred all 39 See Peters v. Bain, 133 U.S. 670 (1890) distributions in accordance with section fiduciary accounts to a successor (applying state substantive law to determine 194. fiduciary, paid all administrative whether to void a transfer); Rogers v. Marchant, 91 Proposed § 51.8(a)(2) recognizes the expenses, and either paid creditor F.2d 660, 663 (4th Cir. 1937). basic legal premise under the NBA claims in full and distributed the 40 D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 458 (1942). A. Corbin, Corbin on Contracts, receivership provisions and judicial remaining proceeds to shareholders, as § 228 at 320 (1952) (addressing contracts voidable interpretations thereof that any provided in § 51.8(c), or made ratable for fraud duress or mistake). dividend payments to creditors and dividends of all remaining proceeds to

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creditors as provided in § 51.8(a), but no Accordingly, the OCC certifies that the 51.4 Claims. additional assets remain in the estate. proposed rule will not have a significant 51.5 Order of priorities. Under these circumstances, the economic impact on a substantial 51.6 Administrative expenses of receiver. provisions in 12 U.S.C. 197 for number of small entities. 51.7 Powers and duties of receiver; disposition of fiduciary and custodial termination would not apply. assets. Question 7. The OCC requests OCC Unfunded Mandates Reform Act of 1995 Determination 51.8 Payment of claims and dividends to comment on whether the rule should shareholders. provide termination procedures for The OCC has analyzed the proposed 51.9 Termination of receivership. receiverships that are outside the rule under the factors in the Unfunded Mandates Reform Act of 1995 (UMRA) Authority: 12 U.S.C. 16, 93a, 191–200, circumstances addressed in 12 U.S.C. 481, 482, 1831c, and 1867. 197. (2 U.S.C. 1532). Under this analysis, the OCC considered whether the proposed § 51.1 Purpose and scope. V. Regulatory Analysis rule includes a Federal mandate that (a) Purpose. This part sets out A. Paperwork Reduction Act may result in the expenditure by state, procedures for receiverships of national Under the Paperwork Reduction Act local, and tribal governments, in the banks conducted by the Office of the (PRA) of 1995 (44 U.S.C. 3501 et seq.), aggregate, or by the private sector, of Comptroller of the Currency (OCC) the OCC may not conduct or sponsor, $100 million or more in any one year under the receivership provisions of the and, notwithstanding any other (adjusted annually for inflation). As National Bank Act (NBA). These provision of law, a person is not detailed in the SUPPLEMENTARY receivership provisions apply to required to respond to, an information INFORMATION, the OCC currently national banks that are not insured by collection unless the information supervises 52 uninsured banks, all of the Federal Deposit Insurance collection displays a valid Office of which are uninsured trust banks, and Corporation (FDIC). Management and Budget (OMB) control has not appointed a receiver for an (b) Scope. This part applies to the number. The proposed rule contains no uninsured bank since 1933. Unlike appointment of a receiver for uninsured information collection requirements commercial and consumer banks and national banks (uninsured banks) and under the PRA. savings associations, which generally the operation of a receivership after face credit and liquidity risks, national appointment of a receiver for an B. Regulatory Flexibility Act trust banks primarily face operational, uninsured bank under 12 U.S.C. 191.1 The Regulatory Flexibility Act (RFA), reputational, and strategic risks. While 5 U.S.C. 601 et seq., generally requires any of these risks could result in the § 51.2 Appointment of receiver. that, in connection with a rulemaking, precipitous failure of a bank or savings (a) In general. The Comptroller of the an agency prepare and make available association, from a historical Currency (Comptroller) may appoint for public comment a regulatory perspective, trust banks have been more any person, including the OCC or flexibility analysis that describes the likely to decline into a weakened another government agency, as receiver impact of the rule on small entities. condition, allowing the OCC and the for an uninsured bank. The receiver However, the regulatory flexibility institution the time needed to find other performs its duties under the direction analysis otherwise required under the solutions for rehabilitating the of the Comptroller and serves at the will RFA is not required if an agency institution or to successfully resolve the of the Comptroller. The Comptroller certifies that the rule will not have a institution without the need to appoint may require the receiver to post a bond significant economic impact on a a receiver. Given that we believe the or other security. The receiver, with the substantial number of small entities OCC is unlikely to place an uninsured approval of the Comptroller, may (defined in regulations promulgated by trust bank into receivership, the OCC employ such staff and enter into the Small Business Administration concludes that the proposed rule will contracts for professional services as are (SBA) to include commercial banks and not result in an expenditure of $100 necessary to carry out the receivership. savings institutions, and trust million or more by state, local, and (b) Grounds for appointment. The companies, with assets of $550 million tribal governments, or by the private Comptroller may appoint a receiver for or less and $38.5 million or less, sector, in any one year. an uninsured bank based on any of the grounds specified in 12 U.S.C. 191(a). respectively) and publishes its List of Subjects in 12 CFR Part 51 certification and a brief explanatory (c) Judicial review. If the Comptroller statement in the Federal Register Administrative practice and appoints a receiver for an uninsured together with the rule. procedure, Banks, Banking, National bank, the bank may seek judicial review The OCC currently supervises banks, Procedural rules, Receiverships, of the appointment as provided in 12 approximately 1,032 small entities. The Authority, and Issuance. U.S.C. 191(b). ■ scope of the proposed rule extends to For the reasons set forth in the § 51.3 Notice of appointment of receiver. uninsured banks. The maximum preamble and under the authority of 12 number of OCC-supervised small U.S.C. 16, 93a, 191–200, 481, 482, Upon appointment of a receiver for an uninsured banks that could be subject to 1831c, and 1867 the Office of the uninsured bank, the OCC will provide the receivership framework described in Comptroller of the Currency proposes to notice to the public of the receivership, the proposal is approximately 18.41 add a new part 51 to chapter I of title including by publication in a newspaper 12, Code of Federal Regulations as of general circulation for three 41 Consistent with the General Principles of follows: consecutive months. The notice of the Affiliation 13 CFR 121.103(a), the OCC counts the receivership will provide instructions assets of affiliated financial institutions when PART 51—RECEIVERSHIPS FOR for creditors and other claimants determining if we should classify an institution we seeking to submit claims with the supervise as a small entity. We used December 31, UNINSURED NATIONAL BANKS 2015, to determine size because a financial receiver for the uninsured bank. institution’s assets are determined by averaging the Sec. assets reported on its four quarterly financial 51.1 Purpose and scope. 1 This part does not apply to receiverships for statements for the preceding year. See footnote 8 of 51.2 Appointment of receiver. uninsured Federal branches or uninsured Federal the U.S. SBA’s Table of Size Standards. 51.3 Notice of appointment of receiver. agencies.

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§ 51.4 Claims. § 51.6 Administrative expenses of (5) Deposits all receivership funds (a) Submission of claims for receiver. collected from the liquidation of the consideration by the OCC. (1) Persons (a) Priority of administrative uninsured bank in an account who have claims against the expenses. All administrative expenses designated by the OCC. receivership for an uninsured bank may of the receiver for an uninsured bank (b) Disposition of fiduciary and present such claims, along with shall be paid out of the assets of the custodial accounts. The receiver for an supporting documentation, for bank in receivership before payment of uninsured bank closes the bank’s consideration by the OCC. The OCC will claims against the receivership. fiduciary and custodial appointments determine the validity and approve the (b) Scope of administrative expenses. and accounts or transfers some or all of amounts of such claims. Administrative expenses of the receiver such accounts to successor fiduciaries (2) The OCC will establish a date by for an uninsured bank include those and custodians, in accordance with 12 which any person seeking to present a expenses incurred by the receiver in CFR 9.16, and other applicable Federal claim against the uninsured bank for maintaining banking operations during law. (c) Other powers. The receiver for an consideration by the OCC must present the receivership, to preserve assets of uninsured bank may exercise other their claim for determination. The the uninsured bank, while liquidating or rights, privileges, and powers deadline for filing such claims will not otherwise resolving the affairs of the authorized for receivers of national be less than 30 days after the end of the uninsured bank. Such expenses include banks under the NBA and the common three-month notice period in § 51.3. pre-receivership and post-receivership obligations that the receiver determines law of receiverships as applied by the (3) The OCC will allow any claim are necessary and appropriate to courts to receiverships of national banks against the uninsured bank received on facilitate the orderly liquidation or other conducted under the NBA. or before the deadline for presenting resolution of the uninsured bank in (d) Reports to OCC. The receiver for claims if such claim is established to the receivership. an uninsured bank shall make periodic OCC’s satisfaction by the information on (c) Types of administrative expenses. reports to the OCC on the status and the uninsured bank’s books and records Administrative expenses for the receiver proceedings of the receivership. or otherwise submitted. The OCC may of an uninsured bank include: (e) Receiver subject to removal; disallow any portion of any claim by a (1) Salaries, costs, and other expenses modification of fees. (1) The creditor or claim of a security, of the receiver and its staff, and costs of Comptroller may remove and replace preference, set-off, or priority which is contracts entered into by the receiver for the receiver for an uninsured bank if, in not established to the satisfaction of the professional services relating to the Comptroller’s discretion, the OCC. performing receivership duties; and receiver is not conducting the (b) Submission of claims to a court. (2) Expenses necessary for the receivership in accordance with Persons with claims against an operation of the uninsured bank, applicable Federal laws or regulations uninsured bank in receivership may including wages and salaries of or fails to comply with decisions of the present their claims to a court of employees, expenses for professional Comptroller with respect to the conduct competent jurisdiction for adjudication. services, contractual rent pursuant to an of the receivership or claims against the Such persons must submit a copy of any existing lease or rental agreement, and receivership. final judgment received from the court payments to third-party or affiliated (2) The Comptroller may reduce the to the OCC, to participate in ratable service providers, that in the opinion of fees of the receiver for an uninsured dividends along with other proved the receiver are of benefit to the bank if, in the Comptroller’s discretion, claims. receivership, until the date the receiver the Comptroller finds the performance (c) Right of set-off. If a person with a repudiates, terminates, cancels, or of the receiver to be deficient, or the fees claim against an uninsured bank in otherwise discontinues the applicable of the receiver to be excessive, receivership also has an obligation owed contract. unreasonable, or beyond the scope of to the bank, the claim and obligation the work assigned to the receiver. will be set off against each other and § 51.7 Powers and duties of receiver; disposition of fiduciary and custodial § 51.8 Payment of claims and dividends to only the net balance remaining after set- accounts. shareholders. off shall be considered as a claim, provided such set-off is otherwise (a) Marshalling of assets. In resolving (a) Claims. (1) After the administrative legally valid. the affairs of an uninsured bank in expenses of the receivership have been receivership, the receiver: paid, the OCC shall make ratable § 51.5 Order of priorities. (1) Takes possession of the books, dividends from time to time of available The OCC will pay receivership records and other property and assets of receivership funds according to the expenses and proved claims against the the uninsured bank, including the value priority described in § 51.5, based on uninsured bank in receivership in the of collateral pledged by the uninsured the claims that have been proved to the following order of priority: bank to the extent it exceeds valid and OCC’s satisfaction or adjudicated in a enforceable security interests of a court of competent jurisdiction. (a) Administrative expenses of the claimant; (2) Dividend payments to creditors receiver; (2) Collects all debts, dues and claims and other claimants of an uninsured (b) Unsecured creditors of the belonging to the uninsured bank, bank will be made solely from uninsured bank, including secured including claims remaining after set-off; receivership funds, if any, paid to the creditors to the extent their claim (3) Sells or compromises all bad or OCC by the receiver after payment of the exceeds their valid and enforceable doubtful debts, subject to approval by a expenses of the receiver. security interest; court of competent jurisdiction; (b) Fiduciary and custodial assets. (c) Creditors of the uninsured bank, if (4) Sells the real and personal Assets held by an uninsured bank in a any, whose claims are subordinated to property of the uninsured bank, subject fiduciary or custodial capacity, as general creditor claims; and to approval by a court of competent designated on the bank’s books and (d) Shareholders of the uninsured jurisdiction, on such terms as the court records, will not be considered as part bank. shall direct; and of the bank’s general assets and

VerDate Sep<11>2014 15:25 Sep 12, 2016 Jkt 238001 PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 E:\FR\FM\13SEP1.SGM 13SEP1 Lhorne on DSK30JT082PROD with PROPOSALS Federal Register / Vol. 81, No. 177 / Tuesday, September 13, 2016 / Proposed Rules 62845

liabilities held in connection with its ACTION: Notice of proposed rulemaking regulatory evaluation, any comments other business, and will not be (NPRM). received, and other information. The considered a source for payment of street address for the Docket Office unrelated claims of creditors and other SUMMARY: We propose to adopt a new (phone: 800–647–5527) is in the claimants. airworthiness directive (AD) for all M7 ADDRESSES section. Comments will be (c) Timing of dividends. The payment Aerospace LLC Models SA226–AT, available in the AD docket shortly after of dividends, if any, under paragraph (a) SA226–T, SA226–T(B), SA226–TC, receipt. SA227–AC (C–26A), SA227–AT, of this section, on proved or adjudicated FOR FURTHER INFORMATION CONTACT: SA227–BC (C–26A), SA227–CC, SA227– claims will be made periodically, at the Andrew McAnaul, Aerospace Engineer, DC (C–26B), and SA227–TT airplanes. discretion of the OCC, as the receiver FAA, ASW–143 (c/o San Antonio This proposed AD was prompted by liquidates the assets of the uninsured MIDO), 10100 Reunion Place, Suite 650, corrosion and stress corrosion cracking bank. San Antonio, Texas 78216; phone: (210) of the pitch trim actuator upper attach (d) Distribution to shareholders. After 308–3365; fax: (210) 308–3370; email: all administrative expenses of the fittings of the horizontal stabilizer front [email protected]. spar. This proposed AD would require receiver and proved claims of creditors SUPPLEMENTARY INFORMATION: of the uninsured bank have been paid in repetitive inspections of the pitch trim full, to the extent there are receivership actuator upper attach fittings for Comments Invited assets to make such payments, any corrosion and/or cracking in the bolt We invite you to send any written remaining proceeds shall be paid to the holes and the web/flange radius with relevant data, views, or arguments about shareholders, or their legal replacement of fittings as necessary. We this proposal. Send your comments to representatives, in proportion to their are proposing this AD to prevent an address listed under the ADDRESSES stock ownership. jamming and/or loss of control of the section. Include ‘‘Docket No. FAA– horizontal stabilizer, which could result 2016–9120; Directorate Identifier 2016– § 51.9 Termination of receivership. in partial or complete loss of airplane CE–024–AD’’ at the beginning of your If there are assets remaining after full pitch control. comments. We specifically invite payment of the expenses of the receiver DATES: We must receive comments on comments on the overall regulatory, and all claims of creditors for an this proposed AD by October 28, 2016. economic, environmental, and energy uninsured bank and all fiduciary ADDRESSES: You may send comments, aspects of this proposed AD. We will accounts of the bank have been closed using the procedures found in 14 CFR consider all comments received by the or transferred to a successor fiduciary 11.43 and 11.45, by any of the following closing date and may amend this and fiduciary powers surrendered, the methods: proposed AD because of those Comptroller shall call a meeting of the • Federal eRulemaking Portal: Go to comments. shareholders of the uninsured bank, as http://www.regulations.gov. Follow the We will post all comments we provided in 12 U.S.C. 197, for the instructions for submitting comments. receive, without change, to http:// shareholders to decide the manner in • Fax: 202–493–2251. www.regulations.gov, including any which the liquidation will continue. • Mail: U.S. Department of personal information you provide. We The liquidation may continue by: Transportation, Docket Operations, M– will also post a report summarizing each (a) Continuing the receivership of the 30, West Building Ground Floor, Room substantive verbal contact we receive uninsured bank under the direction of W12–140, 1200 New Jersey Avenue SE., about this proposed AD. the Comptroller; or Washington, DC 20590. (b) Ending the receivership and • Hand Delivery: Deliver to Mail Discussion oversight by the Comptroller and address above between 9 a.m. and 5 We received reports of multiple replacing the receiver with a liquidating p.m., Monday through Friday, except SA226 and SA227 airplanes with agent to proceed to liquidate the Federal holidays. corrosion and/or stress corrosion cracks remaining assets of the uninsured bank For service information identified in in the pitch trim actuator upper attach for the benefit of the shareholders, as set this proposed AD, contact M7 fittings of the horizontal stabilizer front out in 12 U.S.C. 197. Aerospace LLC, 10823 NE Entrance spar. This condition, if not corrected, Dated: September 2, 2016. Road, San Antonio, Texas 78216; phone: could result in jamming and/or loss of (210) 824–9421; fax: (210) 804–7766; control of the horizontal stabilizer with Thomas J. Curry, Internet: http://www.elbitsystems- consequent partial or complete loss of Comptroller of the Currency. us.com; email: MetroTech@ airplane pitch control. [FR Doc. 2016–21846 Filed 9–12–16; 8:45 am] M7Aerospace.com. You may view this Related Service Information Under 1 BILLING CODE P referenced service information at the CFR Part 51 FAA, Small Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. We reviewed M7 Aerospace LLC DEPARTMENT OF TRANSPORTATION For information on the availability of Service Bulletin (SB) 226–27–081 R1, this material at the FAA, call 816–329– M7 Aerospace LLC SB 227–27–061 R1, Federal Aviation Administration 4148. and M7 Aerospace LLC SB CC7–27–033 R1, all Issued: April 13, 2016 and 14 CFR Part 39 Examining the AD Docket Revised: June 27, 2016. The service [Docket No. FAA–2016–9120; Directorate You may examine the AD docket on information describes procedures for Identifier 2016–CE–024–AD] the Internet at http:// detailed visual, liquid penetrant, www.regulations.gov by searching for ultrasound and high frequency eddy RIN 2120–AA64 and locating Docket No. FAA–2016– current inspections of the pitch trim Airworthiness Directives; M7 9120; or in person at the Docket actuator upper attach fittings for Aerospace LLC Management Facility between 9 a.m. corrosion and cracking in the bolt holes and 5 p.m., Monday through Friday, and the web/flange radius, and AGENCY: Federal Aviation except Federal holidays. The AD docket replacement if necessary. This service Administration (FAA), DOT. contains this proposed AD, the information is reasonably available

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