Federal savings associations with $20 billion or less prior to 2018 can elect to operate as ‘covered’ institutions under OCC rule

Federal savings associations (FSAs) that had total consolidated assets of $20 billion or less as of Dec. 31, 2017, can elect to operate as “covered” savings associations and enjoy the same rights and privileges as a national bank under a final rule issued by the Office of the Comptroller of the Currency (OCC) and set to take effect July 1.

The final rule, slated for publication Friday in the Federal Register, implements a provision of last year’s Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155) that amended the Home Owners’ Loan Act (HOLA).

OCC’s final rule states that a covered savings association has the same rights and privileges as a national bank and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations as a national bank. However, it retains its FSA charter and continues to be treated as an FSA for purposes of governance – including procedures and requirements for incorporation, charters and bylaws (e.g., form, amendments), boards of directors (e.g., elections, term of service), shareholders (e.g., meetings, voting requirements, requirements for stakeholders such as mutual members), and distribution of dividends (e.g., payment, prior approval, and other restrictions).

Additionally under the final rule, a covered savings association:

  • is treated as an FSA for purposes of consolidation, merger, dissolution, conversion (including conversion to a stock bank or another charter), conservatorship, and receivership, as well as for other purposes determined by OCC regulation;
  • may continue to operate any branch or agency that the covered savings association operates on the date an election to operate as a covered savings association takes effect; and
  • will continue to be treated as a covered savings association even if its total consolidated assets exceed $20 billion after it makes an election.

The OCC received 16 comments on its proposal, issued last September, that address a number of issues, among them the date by which an institution must be an FSA with assets of $20 billion or less in order to be eligible to elect to be a “covered” savings association. Specifically, some were concerned that institutions that converted to FSAs after Dec. 31, 2017 – such as a credit union, state savings association, or state bank – would not be able to make the election.

That date, which also applies to de novo FSAs, was included in the EGRRCPA revision to the HOLA, and the OCC said none of the commenters offered any legal argument that would support altering that.

OCC points out that an FSA in stock form could convert directly to a national bank charter, but for institutions in mutual form, a national bank charter is not available without first converting to stock form.

Federal Register notice