Locke Lord QuickStudy: FDIC Streamlines Change in Bank Control Regulations

On October 28, 2015, the Federal Deposit Insurance Corporation (FDIC) published in the Federal Register final rules to streamline the filing requirements and processing procedures within its regulations implementing the Change in Bank Control Act (CIBCA) for state non-member banks, state savings associations and certain parent companies thereof. The revised filing and processing regulations are a part of the FDIC’s continuing review of its regulations under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) and will become effective January 1, 2016.   

The FDIC indicates that this final rule: (1) consolidates the current requirements and procedures for CIBCA notices filed with respect to state nonmember banks, state savings associations and certain parent companies thereof; (2) rescinds the FDIC’s separate regulation governing the requirements and procedures for CIBCA notices filed with respect to state savings associations and certain parent companies thereof and rescinds any inconsistent guidance issued by the Office of Thrift Supervision (OTS) relating thereto; (3) increases consistency with other federal banking regulators by adopting the best practices of the related regulations of the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (FRB); and (4) clarifies the FDIC’s requirements and procedures based on its experience interpreting and implementing the existing regulation. 

By way of achieving the objectives outlined above, the final rule updates and adds to terminology used in the regulations, includes a rebuttable presumption of control from the CIBCA and adds a rebuttable presumption of acting in concert that is consistent with the FRB regulations. One definition added by the final rule is a definition of “voting securities,” which is derived from the FRB definition of the same term. This addition increases consistency with the OCC and FRB definitions.  

Moreover, the final rule adds rebuttable presumptions related to “acting in concert,” a concept many FRB-regulated institutions are intimately familiar with. Under the final rules, a rebuttable presumption of “acting in concert” may be found:

• with respect to a company and any controlling shareholder or management official (as defined) of that company;
• between an individual and one or more members of the individual’s immediate family (as defined); 
• between two or more companies under common control or a company and each other company it controls;
• between persons that have made or propose to make a joint filing under sections 13 or 14 of the Securities and Exchange Act of 1934;
• between a person and any trust for which the person serves as trustee or any trust for which the person is a beneficiary; and 
• between persons that are parties to any agreement, contract, understanding, relationship, or other arrangement, whether written or otherwise, regarding the acquisition, voting, or transfer of control of voting securities of a covered institution (as defined), other than through revocable proxies as described in the regulation. 

Misunderstanding the rebuttable presumptions and concepts of acting in concert and beneficial ownership are common risks investors may encounter under the CIBCA when they have no intention of holding such a position or exerting any control over the banking organization. Once investors are in those positions, options may be limited to avoid significant costs associated with filings and approvals required. Investors and current owners of banking institutions must tread carefully around these concepts and the associated ownership and control thresholds contained within the CIBCA. No company wants to find itself as an unregistered bank holding company. 

The final rule was adopted largely as proposed since no comments were received in response to the proposed rule issued November 25, 2014. A copy of the Federal Register notice can be found here. 

Locke Lord has a dedicated team of banking and financial services regulatory, compliance and litigation attorneys with significant experience handling various aspects of banking and consumer finance. Locke Lord attorneys regularly advise financial institutions on regulatory compliance matters, new product development and represent clients in regulatory enforcement matters, class actions and various lawsuits in the U.S. and abroad. Visit Locke Lord’s Financial Services Regulatory and Bank Regulatory and Transactions websites or contact the author with questions.