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    OCC Bulletin on Implementation of Covered Savings Association Rule

    July 01, 2019

    OCC published a bulletin that describes the process for a federal savings association to make an election to operate as a covered savings association by submitting a notice to the supervisory office. On May 24, 2019, OCC had issued a final rule to allow federal savings associations with total consolidated assets of USD 20 billion or less, as reported by the association to OCC on its Call Report as of December 31, 2017, to elect to operate as covered savings associations. The final rule provides these federal savings associations with additional flexibility to adapt their business model without changing their charters and establishes a streamlined election process for them to operate as covered savings associations. The final rule became effective on July 01, 2019. Additionally, OCC released frequently asked questions (FAQs) on the implementation of the final rule.

    OCC issued the final rule to implement a new section of the Home Owners' Loan Act (HOLA). The Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act amended HOLA to add a new section that allows a federal savings association to elect to operate as a covered savings association. 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. A covered savings association must comply with certain rules and regulations applicable to the powers and investments of a national bank. A covered savings association is not required to comply with the lending and investment limits in HOLA. Further, a covered savings association is not required to be a qualified thrift lender under HOLA. Finally, a covered savings association is not permitted to retain or engage in any subsidiaries, assets, or activities that are not permissible for a national bank.

    An eligible federal savings association making an election to operate as a covered savings association must follow the streamlined process established in the final rule. The rule provides that the election takes effect 60 days after the date OCC receives the notice, unless OCC notifies the association that it is not eligible to make an election. The supervisory office may notify the federal savings association in writing that the election is effective before the expiration of the sixty-day period. After an appropriate period, as determined by OCC, a covered savings association may terminate an election to operate as a covered savings association by submitting a notice to the supervisory office. If a covered savings association chooses to terminate the election, it must divest, conform, or discontinue any subsidiary, assets, or activities that are not permissible for a federal savings association. A federal savings association that has terminated its election may submit a notice to reelect to operate as a covered savings association, if at least five years have elapsed since the effective date of the termination, unless good cause exists to permit the reelection earlier.

     

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    Keywords: Americas, US, Banking, Covered Savings Associations, EGRRCP Act, HOLA, Federal Savings Associations, OCC

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