The proposed regime would also require a national bank to notify its IEC in writing before engaging in certain derivatives transactions. This requirement would be consistent with previous interpretations of the OCC which, in the context of confirming the eligibility of a derivatives activity that a bank has attempted to undertake, required the bank to inform its EIC of the details of the bank`s business and management practices in carrying out that particular derivative activity as a financial intermediary. Like all authorized banking activities, derivatives trading is subject to all other applicable laws and regulations as well as regulatory standards of safety and soundness. The OCC also proposes to move § 7.4003 as a new § 7.1027 to Subpart A of Part 7. This change would place it in the same subsection as other interpretations regarding branching and non-branching functions, thus improving the organization of Part 7. Article 7.4004 provides that a National Bank or its operating subsidiary may carry on deposit-making activities at a location other than the Bank`s principal establishment or branch, and also provides that a deposit agent (DPO) may request deposits, provide information on deposit products and assist individuals in completing application forms and related documents for opening a deposit account. Section 7.4004 explicitly states that a DPO is not a branch until the site receives deposits, makes withdrawals or grants loans. He goes on to say that all deposit and withdrawal operations of a banking customer using a DPO must be carried out by the customer either in person at the head office or at a branch of the bank, or by mail, wire transfer or similar transfer method. Finally, this article specifies that a national bank may use the services of persons who are not employed in the production of deposits. As with § 7.4003, the OCC proposes to move § 7.4004 as a new § 7.1028 to subsection A of Part 7 in order to place it in the same subsection as other interpretations concerning branching and non-branching functions.
This amendment would improve the organization of Part 7. The OCC is not proposing any amendments to this section other than a non-substantive amendment to its wording. Under the proposed provision, the reporting procedures and requirements set out in proposed Article 7.1030(d)(2) would be the same for hedging and financial intermediation activities. The proposed provision would require that the written notice contain information substantially similar to that referred to in interpretative letter 1160. In particular, the written notice, beginning in printed form on page 40808, must contain a detailed description of the proposed activity, including the relevant underlying asset(s); the expected start date of the activity; and a detailed description of the Bank`s risk management system (policies, processes, personnel and control systems) to identify, measure, monitor and manage business risks. The proposed rule does not include the requirement in interpretive letter 1160 that the bank filing the notice identify an interpretive letter from the CCO confirming the eligibility of transactions with the underlying and hedging activities. Once the proposed rule is completed, derivatives hedging and financial intermediation activities will be conducted under the Regulation without reference to previous interpretations by the CCO. Therefore, the OCC considers that it is not necessary for a national bank to pre-interpret the CCO. The OCC believes that this framework could ultimately reduce the compliance burden associated with domestic bank derivatives. Section 7.1026 Payment System Memberships.
The OCC has long recognized the power of national banks to become members of payment systems. [45] Similarly, the OTS precedent allows federal savings associations to join payment systems. [46] In 2014, the OCC issued a legal interpretation letter clarifying that national banks may join payment systems with the authorisation of the OCC, even if the SNB would be exposed to potentially unlimited liability as a member of the payment system. [47] This interpretative letter also described the procedure for approving this accession. In a subsequent interpretative letter, the OCC amended the procedure to remove the licensing requirement. [48] In order to provide greater clarity to national banks, the OCC proposes to add a new § 7.1026 to Part 7, which would codify the current procedure for joining a payment system. The OCC also proposes to apply this section to federal savings associations to ensure equal treatment of federal savings banks. The OCC continues to help national banks and federal savings associations fulfill their crucial role in payment systems, including as members and architects. The proposal reminds national banks and savings bank associations of their responsibility to ensure that membership of the payment system is secure and sound. Obligation to notify. The OCC`s interpretations often involve a process whereby the SNB informs its EIC of the commercial and management practices that the bank will use as financial intermediation when conducting derivatives transactions.
Consistent with previous interpretative letters relating to derivatives hedging or financial intermediation activities, proposed paragraph 7.1020(d) would require a national bank to notify its IEC in writing before commencing any activity using derivatives relating to assets in which a domestic bank could not invest directly. The former OTS and its predecessor, the Federal Home Loan Bank Board, allowed a federal savings association to take a share of profits, income, or income in exchange for a loan, as this does not conflict with the Federal Savings Association`s lending authority under the HOLA[21] in order to maintain parity with the commercial lending practices of national banks. [22] In addition, the former OTS allowed a Federal Savings Association to purchase warrants incidental to its authority to issue loans secured for commercial, corporate or commercial purposes under HOLA, and applied the same restrictions on the exercise of these warrants as domestic banks. [23] By amending § 7.1006 to include the Bundessparkassen, the proposed rule would codify these interpretations in order to clarify this power and ensure greater equality with national banks.
