PART 7—ACTIVITIES AND OPERATIONS Authority: 12 U.S.C. 1 et seq., Source: 61 FR 4862, Feb. 9, 1996, unless otherwise noted. Subpart A—National Bank and Federal Savings Association Powers § 7.1000 Activities that are part of, or incidental to, the business of banking. (a) Purpose. (b) Restrictions and conditions on activities. (c) Activities that are part of the business of banking. (i) Whether the activity is the functional equivalent to, or a logical outgrowth of, a recognized banking activity; (ii) Whether the activity strengthens the bank by benefiting its customers or its business; (iii) Whether the activity involves risks similar in nature to those already assumed by banks; and (iv) Whether the activity is authorized for State-chartered banks. (2) The weight accorded each factor set out in paragraph (c)(1) of this section depends on the facts and circumstances of each case. (d) Activities that are incidental to the business of banking. (i) Whether the activity facilitates the production or delivery of a bank's products or services, enhances the bank's ability to sell or market its products or services, or improves the effectiveness or efficiency of the bank's operations, in light of risks presented, innovations, strategies, techniques and new technologies for producing and delivering financial products and services; and (ii) Whether the activity enables the bank to use capacity acquired for its banking operations or otherwise avoid economic loss or waste. (2) The weight accorded each factor set out in paragraph (d)(1) of this section depends on the facts and circumstances of each case. [85 FR 83726, Dec. 22, 2020] § 7.1001 National bank acting as general insurance agent. Pursuant to 12 U.S.C. 92, a national bank may act as an agent for any fire, life, or other insurance company in any place the population of which does not exceed 5,000 inhabitants. This section is applicable to any office of a national bank when the office is located in a community having a population of less than 5,000, even though the principal office of such bank is located in a community whose population exceeds 5,000. [85 FR 35374, June 10, 2020] § 7.1002 National bank and Federal savings association acting as finder. (a) In general. et seq (b) Permissible finder activities National banks. (i) Communicating information about providers of products and services, and proposed offering prices and terms to potential markets for these products and services; (ii) Communicating to the seller an offer to purchase or a request for information, including forwarding completed applications, application fees, and requests for information to third-party providers; (iii) Arranging for third-party providers to offer reduced rates to those customers referred by the national bank; (iv) Providing administrative, clerical, and record keeping functions related to the national bank's finder activity, including retaining copies of documents, instructing and assisting individuals in the completion of documents, scheduling sales calls on behalf of sellers, and conducting market research to identify potential new customers for retailers; (v) Conveying between interested parties expressions of interest, bids, offers, orders, and confirmations relating to a transaction; (vi) Conveying other types of information between potential buyers, sellers, and other interested parties; (vii) Establishing rules of general applicability governing the use and operation of the finder service, including rules that: (A) Govern the submission of bids and offers by buyers, sellers, and other interested parties that use the finder service and the circumstances under which the finder service will pair bids and offers submitted by buyers, sellers, and other interested parties; and (B) Govern the manner in which buyers, sellers, and other interested parties may bind themselves to the terms of a specific transaction; and (viii) Acting as an electronic finder pursuant to § 7.5002(a)(1). (2) Federal savings associations. (i) Referring customers to a third party; and (ii) Providing services and products to customers indirectly through a third-party discount program. (c) Limitation. (d) Advertisement and fee. [85 FR 83727, Dec. 22, 2020] § 7.1003 Money lent by a national bank at banking offices or at facilities other than banking offices. (a) In general. (1) From the lending national bank or its operating subsidiary; or (2) At a facility that is established by the lending national bank or its operating subsidiary. (b) Receipt of national bank funds representing loan proceeds. (c) Services on equivalent terms to those offered customers of unrelated banks. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83727, Dec. 22, 2020] § 7.1004 Establishment of a loan production office by a national bank. (a) In general. (b) Services of other persons. [85 FR 83727, Dec. 22, 2020] § 7.1005 [Reserved] § 7.1006 Loan agreement providing for a national bank or Federal savings association share in profits, income, or earnings or for stock warrants. A national bank or Federal savings association may take as consideration for a loan a share in the profit, income, or earnings from a business enterprise of a borrower. A national bank or Federal savings association also may take as consideration for a loan a stock warrant issued by a business enterprise of a borrower, provided that the bank or savings association does not exercise the warrant. The share or stock warrant may be taken in addition to, or in lieu of, interest. The borrower's obligation to repay principal, however, may not be conditioned upon the value of the profit, income, or earnings of the business enterprise or upon the value of the warrant received. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83728, Dec. 22, 2020] § 7.1007 National Bank Acceptances. A national bank is not limited in the character of acceptances it may make in financing credit transactions. Bankers' acceptances may be used for such purpose, since the making of acceptances is an essential part of banking authorized by 12 U.S.C. 24. § 7.1008 Preparation by a national bank of income tax returns for customers or public. A national bank may assist its customers in preparing their tax returns, either gratuitously or for a fee. [68 FR 70131, Dec. 17, 2003] § 7.1009 [Reserved] § 7.1010 Postal services by national banks and Federal savings associations. (a) In general. (b) Postal regulations. see [85 FR 83728, Dec. 22, 2020] § 7.1011 National bank acting as payroll issuer. A national bank may disburse to an employee of a customer payroll funds deposited with the bank by that customer. The bank may disburse those funds by direct payment to the employee, by crediting an account in the employee's name at the disbursing bank, or by forwarding funds to another institution in which an employee maintains an account. § 7.1012 Establishment, operation, or use of a messenger service by a national bank. (a) Definition. (b) Pick-up and delivery of items constituting nonbranching activities. (c) Pick-up and delivery of items constituting branching functions by a messenger service established by a third party. (2) The OCC reviews whether a messenger service is established by a third party on a case-by-case basis, considering all of the circumstances. However, a messenger service is clearly established by a third party if: (i) A party other than the national bank owns or rents the messenger service and its facilities and employs the persons who provide the service; (ii)(A) The messenger service retains the discretion to determine in its own business judgment which customers and geographic areas it will serve; or (B) If the messenger service and the bank are under common ownership or control, the messenger service actually provides its services to the general public, including other depository institutions, and retains the discretion to determine in its own business judgment which customers and geographic areas it will serve; (iii) The messenger service maintains ultimate responsibility for scheduling, movement, and routing; (iv) The messenger service does not operate under the name of the bank, and the bank and the messenger service do not advertise, or otherwise represent, that the bank itself is providing the service, although the bank may advertise that its customers may use one or more third party messenger services to transact business with the bank; (v) The messenger service assumes responsibility for the items during transit and for maintaining adequate insurance covering thefts, employee fidelity, and other in-transit losses; and (vi) The messenger service acts as the agent for the customer when the items are in transit. The bank deems items intended for deposit to be deposited when credited to the customer's account at the bank's main office, one of its branches, or another permissible facility, such as a back-office facility that is not a branch. The bank deems items representing withdrawals to be paid when the items are given to the messenger service. (3) A national bank may defray all or part of the costs incurred by a customer in transporting items through a messenger service. Payment of those costs may only cover expenses associated with each transaction involving the customer and the messenger service. The national bank may impose terms, conditions, and limitations that it deems appropriate with respect to the payment of such costs. (d) Pickup and delivery of items pertaining to branching activities where the messenger service is established by the national bank. [61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60098, Nov. 4, 1999; 85 FR 83728, Dec. 22, 2020] § 7.1014 Sale of money orders at nonbanking outlets by a national bank. A national bank may designate bonded agents to sell the bank's money orders at nonbanking outlets. The responsibility of both the bank and its agent should be defined in a written agreement setting forth the duties of both parties and providing for remuneration of the agent. The bank's agents need not report on sales and transmit funds from the nonbanking outlets more frequently than at the end of the third business day following receipt of the funds. § 7.1015 National bank and Federal savings association investments in small business investment companies. (a) National banks. see e.g., e.g., (b) Federal savings associations. (c) Qualifying SBIC. (1) Already organized and has obtained a license from the Small Business Administration; or (2) In the process of being organized. (d) SBIC wind-down. [85 FR 83728, Dec. 22, 2020] § 7.1016 Independent undertakings issued by a national bank or Federal savings association to pay against documents. (a) In general. 1 1 (b) Safety and soundness considerations Terms. (i) The independent character of the undertaking should be apparent from its terms (such as terms that subject it to laws or rules providing for its independent character); (ii) The undertaking should be limited in amount; (iii) The undertaking should: (A) Be limited in duration; or (B) Permit the national bank or Federal savings association to terminate the undertaking either on a periodic basis (consistent with the bank's or savings association's ability to make any necessary credit assessments) or at will upon either notice or payment to the beneficiary; or (C) Entitle the national bank or Federal savings association to cash collateral from the applicant on demand (with a right to accelerate the applicant's obligations, as appropriate); and (iv) The national bank or Federal savings association either should be fully collateralized or have a post-honor right of reimbursement from the applicant or from another issuer of an independent undertaking. Alternatively, if the national bank's or Federal savings association's undertaking is to purchase documents of title, securities, or other valuable documents, the bank or savings association should obtain a first priority right to realize on the documents if the bank or savings association is not otherwise to be reimbursed. (2) Additional considerations in special circumstances. (i) In the event that the undertaking is to honor by delivery of an item of value other than money, the national bank or Federal savings association should ensure that market fluctuations that affect the value of the item will not cause the bank or savings association to assume undue market risk; (ii) In the event that the undertaking provides for automatic renewal, the terms for renewal should be consistent with the national bank's or Federal savings association's ability to make any necessary credit assessments prior to renewal; (iii) In the event that a national bank or Federal savings association issues an undertaking for its own account, the underlying transaction for which it is issued must be within the bank's or savings association's authority and comply with any safety and soundness requirements applicable to that transaction. (3) Operational expertise. (4) Documentation. (c) Coverage. [61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 68 FR 70131, Dec. 17, 2003; 73 FR 22241, Apr. 24, 2008; 85 FR 83728, Dec. 22, 2020] § 7.1017 National bank as guarantor or surety on indemnity bond. (a) A national bank may lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor (including, pursuant to 12 CFR 28.4, guaranteeing the deposits and other liabilities of its Edge corporations and Agreement corporations and of its corporate instrumentalities in foreign countries), if: (1) The bank has a substantial interest in the performance of the transaction involved (for example, a bank, as fiduciary, has a sufficient interest in the faithful performance by a cofiduciary of its duties to act as surety on the bond of such cofiduciary); or (2) The transaction is for the benefit of a customer and the bank obtains from the customer a segregated deposit that is sufficient in amount to cover the bank's total potential liability. A segregated deposit under this section includes collateral: (i) In which the bank has perfected its security interest (for example, if the collateral is a printed security, the bank must have obtained physical control of the security, and, if the collateral is a book entry security, the bank must have properly recorded its security interest); and (ii) That has a market value, at the close of each business day, equal to the bank's total potential liability and is composed of: (A) Cash; (B) Obligations of the United States or its agencies; (C) Obligations fully guaranteed by the United States or its agencies as to principal and interest; or (D) Notes, drafts, or bills of exchange or bankers' acceptances that are eligible for rediscount or purchase by a Federal Reserve Bank; or (iii) That has a market value, at the close of each business day, equal to 110 percent of the bank's total potential liability and is composed of obligations of a State or political subdivision of a State. (b) In addition to paragraph (a) of this section, a national bank may guarantee obligations of a customer, subsidiary or affiliate that are financial in character, provided the amount of the bank's financial obligation is reasonably ascertainable and otherwise consistent with applicable law. [61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 73 FR 22241, Apr. 24, 2008] § 7.1018 National bank automatic payment plan accounts. A national bank may, for the benefit and convenience of its savings depositors, adopt an automatic payment plan under which a savings account will earn dividends at the current rate paid on regular savings accounts. The depositor, upon reaching a previously designated age, receives his or her accumulated savings and earned interest in installments of equal amounts over a specified period. § 7.1020 Purchase of open accounts by a national bank. (a) General. (b) Export transactions. § 7.1021 Financial literacy programs not branches of national banks. A financial literacy program is a program the principal purpose of which is to be educational for members of the community. The premises of, or a facility used by, a school or other organization at which a national bank participates in a financial literacy program is not a branch for purposes of 12 U.S.C. 36 provided the bank does not establish and operate the premises or facility. The OCC considers establishment and operation in this context on a case by case basis, considering the facts and circumstances. However, the premises or facility is not a branch of the national bank if the safe harbor test in § 7.1012(c)(2) applicable to messenger services established by third parties is satisfied. The factor discussed in § 7.1012(c)(2)(i) can be met if bank employee participation in the financial literacy program consists of managing the program or conducting or engaging in financial education activities provided the school or other organization retains control over the program and over the premises or facilities at which the program is held. [85 FR 83729, Dec. 22, 2020] § 7.1022 National banks' authority to buy and sell exchange, coin, and bullion. (a) In this section, industrial or commercial metal (b) Scope of authorization. (c) Buying and selling metal as part of or incidental to the business of banking. (d) Other authorities not affected. (e) Nonconforming holdings. [81 FR 96360, Dec. 30, 2016, as amended at 85 FR 83729, Dec. 22, 2020] § 7.1023 Federal savings associations, prohibition on industrial or commercial metal dealing or investing. (a) In this section, industrial or commercial metal (b) Federal savings associations may not deal or invest in industrial or commercial metal. (c) Other authorities not affected. (d) Nonconforming holdings. [81 FR 96360, Dec. 30, 2016, as amended at 85 FR 83729, Dec. 22, 2020] § 7.1024 National bank or Federal savings association ownership of property. (a) Investment in real estate necessary for the transaction of business In general. (2) Type of real estate. (i) Premises that are owned and occupied (or to be occupied, if under construction) by the national bank or Federal savings association, or its respective branches or consolidated subsidiaries; (ii) Real estate acquired and intended, in good faith, for use in future expansion; (iii) Parking facilities that are used by customers or employees of the national bank or Federal savings association, or its respective branches or consolidated subsidiaries; (iv) Residential property for the use of officers or employees of the national bank or Federal savings association who are: (A) Located in remote areas where suitable housing at a reasonable price is not readily available; or (B) Temporarily assigned to a foreign country, including foreign nationals temporarily assigned to the United States; and (v) Property for the use of national bank or Federal savings association officers, employees, or customers, or for the temporary lodging of such persons in areas where suitable commercial lodging is not readily available, provided that the purchase and operation of the property qualifies as a deductible business expense for Federal tax purposes. (3) Permissible means of holding. e.g., (ii) A Federal savings association also may acquire and hold banking premises through a service corporation in accordance with 12 CFR 5.59. (b) Fixed assets. (c) Investment in banking premises Investment limitation. (2) Premises approval. (ii) A Federal savings association that invests in banking premises through a service corporation must comply with the quantitative limitations in 12 CFR 5.37(d) and, to the extent applicable, 12 CFR 5.59. (3) Option to purchase. (d) Future national bank or Federal savings association expansion. (e) Transition. [80 FR 28470, May 18, 2015. Redesignated and amended at 85 FR 83726, 83729, Dec. 22, 2020] § 7.1025 Tax equity finance transactions by national banks and Federal savings associations. (a) Tax equity finance transactions. (b) Definitions. (1) Appropriate OCC supervisory office (2) Capital and surplus (3) Tax equity finance transaction (c) Functional equivalent of a loan. (1) The structure of the transaction is necessary for making the tax credits or other tax benefits available to the national bank or Federal savings association; (2) The transaction is of limited tenure and is not indefinite, including retaining a limited investment interest that is required by law to obtain continuing tax benefits or needed to obtain the expected rate of return; (3) The tax benefits and other payments received by the national bank or Federal savings association from the transaction repay the investment and provide the expected rate of return at the time of underwriting; (4) Consistent with paragraph (c)(3) of this section, the national bank or Federal savings association does not rely on appreciation of value in the project or property rights underlying the project for repayment; (5) The national bank or Federal savings association uses underwriting and credit approval criteria and standards that are substantially equivalent to the underwriting and credit approval criteria and standards used for a traditional commercial loan; (6) The national bank or Federal savings association is a passive investor in the transaction and is unable to direct the affairs of the project company; and (7) The national bank or Federal savings association appropriately accounts for the transaction initially and on an ongoing basis and has documented contemporaneously its accounting assessment and conclusion. (d) Conditions on tax equity finance transactions. (1) The national bank or Federal savings association cannot control the sale of energy, if any, from the project; (2) The national bank or Federal savings association limits the total dollar amount of tax equity finance transactions undertaken pursuant to this section to no more than five percent of its capital and surplus, unless the OCC determines, by written approval of a written request by the national bank or Federal savings association to exceed the five percent limit, that a higher aggregate limit will not pose an unreasonable risk to the national bank or Federal savings association and that the tax equity finance transactions in the national bank's or Federal savings association's portfolio will not be conducted in an unsafe or unsound manner; provided, however, that in no case may a national bank or Federal savings association's total dollar amount of tax equity finance transactions undertaken pursuant to this section exceed 15 percent of its capital and surplus; (3) The national bank or Federal savings association has provided written notification to the appropriate OCC supervisory office, prior to engaging in each tax equity finance transaction that includes its evaluation of the risks posed by the transaction; (4) The national bank or Federal savings association can identify, measure, monitor, and control the associated risks of its tax equity finance transaction activities individually and as a whole on an ongoing basis to ensure that such activities are conducted in a safe and sound manner; and (5) The national bank or Federal savings association obtains a legal opinion or has other good faith, reasoned bases for making a determination that tax credits or other tax benefits are available before engaging in a tax equity finance transaction. (e) Applicable legal requirements. [85 FR 83729, Dec. 22, 2020] § 7.1026 National bank and Federal savings association payment system memberships. (a) In general. (b) Definitions. (1) Appropriate OCC supervisory office (2) Member (3) Open-ended liability (4) Operational loss (5) Payment system (c) Notice requirements Prior notice required. (2) After-the-fact notice. (d) Content of notice In general. (i) Has complied with the safety and soundness review requirements in paragraph (e)(1) of this section; and (ii) Will comply with the safety and soundness review and notification requirements in paragraphs (e)(2) and (3) of this section. (2) Payment system with limits on liability or no liability. (i) The rules of the payment system do not impose liability for operational losses on members; or (ii) The national bank's or Federal savings association's liability for operational losses is limited by the rules of the payment system to specific and appropriate limits that do not exceed the lower of: (A) The legal lending limit under 12 CFR part 32; or (B) The limit set for the bank or savings association by the OCC. (e) Safety and soundness procedures. (i) Identify and evaluate the risks posed by membership in the payment system, taking into account whether the liability of the bank or savings association is limited; and (ii) Ensure that it can measure, monitor, and control the risks identified pursuant to paragraph (e)(1)(i) of this section. (2) After joining a payment system, a national bank or Federal savings association must manage the risks of the payment system on an ongoing basis. This ongoing risk management must: (i) Identify and evaluate the risks posed by membership in the payment system, taking into account whether the liability of the bank or savings association is limited; and (ii) Measure, monitor, and control the risks identified pursuant to paragraph (e)(2)(i) of this section. (3) If the national bank or Federal savings association identifies risks during the ongoing risk management required by paragraph (e)(2) of this section that raise safety and soundness concerns, such as a material change to the bank's or savings association's liability or indemnification responsibilities, the national bank or Federal savings association must: (i) Notify the appropriate OCC supervisory office as soon as the safety and soundness concern is identified; and (ii) Take appropriate actions to remediate the risk. (4) A national bank or Federal savings association that believes its open-ended liability is otherwise limited ( e.g., (i) Prior to joining the payment system, the bank or savings association obtains a written legal opinion that: (A) Describes how the payment system allocates liability for operational losses; and (B) Concludes the potential liability for operational losses for the national bank or Federal savings association is in fact limited to specific and appropriate limits that do not exceed the lower of: ( 1 ( 2 (ii) There are no material changes to the liability or indemnification requirements applicable to the bank or savings association since the issuance of the written legal opinion. (f) Safety and soundness considerations. (i) Does the processing occur on a real-time gross settlement basis or provide reasonable assurance ( e.g., (ii) How does the payment system's rules limit its liability to members? (iii) Does the payment system have insurance coverage and/or self-insurance arrangements to cover operational losses? (iv) Do the payment system's rules provide an unambiguous pro-rata loss allocation methodology under its indemnity provisions and does the methodology provide members the opportunity to reduce or eliminate liability exposure by decreasing or ceasing use of the payment system? (v) Do the payment system's rules provide for unambiguous membership withdrawal procedures that do not require the prior approval of the system? (vi) Does the payment system have appropriate admission and continuing participation requirements for system participants? Such requirements should address, among other things: (A) The participants' access to sufficient financial resources to meet obligations arising from participation; (B) The adequacy of participants' operational capacities to meet obligations arising from participation; and (C) The adequacy of the participants' own risk management processes. (vii) Does the payment system have processes and controls in place to verify and monitor on an ongoing basis the compliance of each participant with admission and participation requirements? (viii) Does the payment system have written policies and procedures for addressing participant failures to meet ongoing participation requirements? (ix) Are the payment system's rules relating to the system's emergency authorities unambiguous and may they be amended or otherwise altered without prior notification to all members and an opportunity to withdraw? (x) Is the payment system governed by uniform, comprehensive and clear legal standards in its operating jurisdiction that address payment and/or settlement activities? (xi) Is the payment system subject to and in compliance (or observance) with the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions (CPSS—IOSCO) Principles for Financial Market Infrastructures? (xii) Is the payment system designated as a systemically important financial market utility (SIFMU) by the Financial Stability Oversight Counsel (FSOC) or is it the international or foreign equivalent? (xiii) Does the payment system provide members with information relevant to governance, risk management practices, and operations in a timely manner and with sufficient transparency and particularity for the bank to ascertain with reasonable certainty the bank's level of risk exposure to the system? (xiv) Is the payment system operated by or subject to oversight of a central bank or regulatory authority? (xv) Is the payment system legally organized as a not-for-profit enterprise or is it owned and operated by a government entity? (xvi) Does the payment system have appropriate systems and controls for communicating to members in a timely manner about material events that relate to or could result in potential operational losses, e.g. (xvii) Has the payment system ever exercised its authority under indemnification provisions? (2) A national bank or Federal savings association should consider, at a minimum, the following characteristics of its risk management program when conducting an analysis required by paragraph (e) of this section: (i) Does the bank or savings association have appropriate board supervision and managerial and staff expertise? (ii) Does the bank or savings association have comprehensive policies and operating procedures with respect to its risk identification, measurement and management information systems that are routinely reviewed? (iii) Does the bank or savings association have effective risk controls and processes to oversee and ensure the continuing effectiveness of the risk management process? The program should include a formal process for approval of payment system memberships as well as ongoing monitoring and measurement of activity against predetermined risk limits. (iv) Does the bank or savings association's membership evaluation process include assessments and analyses of: (A) The credit quality of the entity; (B) The entity's risk management practices; (C) Settlement and default procedures of the entity; (D) Any default or loss-sharing precedents and any other applicable limits or restrictions of the entity; (E) Key risks associated with joining the entity; and (F) The incremental effect of additional memberships in aggregate exposure to payment system risk? (v) Does the bank or savings association's risk management program include policies and procedures that identify and estimate the level of potential operational risks, at both inception of membership and on an on-going basis? (vi) Does the bank or savings association have auditing procedures to ensure the integrity of risk measurement, control and reporting systems? (vii) Does the program include mechanisms to monitor, estimate, and maintain control over the bank or savings association's potential liabilities for operational losses on an ongoing basis. This should include: (A) Limits and other controls with respect to each identified risk factor; (B) Reports generated throughout the processes that accurately present the nature and level(s) of risk taken and demonstrate compliance with approved polices and limits; and (C) Identification of the business unit and/or individuals responsible for measuring and monitoring risk exposures, as well as those individuals responsible for monitoring compliance with policies and risk exposure limits. (viii) Does a bank or savings association with memberships in multiple payment systems have the ability to monitor and report aggregate risk exposures and measurement against risk limits both at the sponsoring business line level and the total exposure organizationally? [85 FR 83730, Dec. 22, 2020] § 7.1027 Establishment and operation of a remote service unit by a national bank. A remote service unit (RSU) is an automated or unstaffed facility, operated by a customer of a bank with at most delimited assistance from bank personnel, that conducts banking functions such as receiving deposits, paying withdrawals, or lending money. A national bank may establish and operate an RSU pursuant to 12 U.S.C. 24(Seventh). An RSU includes an automated teller machine, automated loan machine, automated device for receiving deposits, personal computer, telephone, other similar electronic devices, and drop boxes. An RSU may be equipped with a telephone or tele-video device that allows contact with bank personnel. An RSU is not a “branch” within the meaning of 12 U.S.C. 36(j), and is not subject to State geographic or operational restrictions or licensing laws. [85 FR 83731, Dec. 22, 2020] § 7.1028 Establishment and operation of a deposit production office by a national bank. (a) In general. (b) Services of other persons. [85 FR 83732, Dec. 22, 2020] § 7.1029 Combination of national bank loan production office, deposit production office, and remote service unit. A location at which a national bank operates a loan production office (LPO), a deposit production office (DPO), and a remote service unit (RSU) is not a “branch” within the meaning of 12 U.S.C. 36(j) by virtue of that combination. Since an LPO, DPO, or RSU is not, individually, a branch under 12 U.S.C. 36(j), any combination of these facilities at one location does not create a branch. The RSU at such a combined location must be primarily operated by the customer with at most delimited assistance from bank personnel. [85 FR 83732, Dec. 22, 2020] § 7.1030 Permissible derivatives activities for national banks. (a) Authority. (b) Definitions. (1) Customer-driven (2) Perfectly-matched e.g., (3) Portfolio-hedged (4) Physical hedging physically-hedged (5) Physical settlement physically-settled (6) Transitory title transfer (7) Underlying (c) In general. (1) Derivatives transactions with payments based on underlyings a national bank is permitted to purchase directly as an investment; (2) Derivatives transactions with any underlying to hedge the risks arising from bank-permissible activities; (3) Derivatives transactions as a financial intermediary with any underlying that are customer-driven, cash-settled, and either perfectly-matched or portfolio-hedged; (4) Derivatives transactions as a financial intermediary with any underlying that are customer-driven, physically-settled by transitory title transfer, and either perfectly-matched or portfolio-hedged; and (5) Derivatives transactions as a financial intermediary with any underlying that are customer-driven, physically-hedged, and either portfolio-hedged or hedged on a transaction-by-transaction basis, and provided that: (i) The national bank does not take physical delivery of any commodity by receipt of physical quantities of the commodity on bank premises; and (ii) Physical hedging activities meet the requirements of paragraph (e) of this section. (d) Notice procedure. (i) Engaging in derivatives hedging activities pursuant to paragraph (c)(2) of this section; (ii) Expanding the bank's derivatives hedging activities pursuant to paragraph (c)(2) of this section to include a new category of underlying for derivatives transactions; (iii) Engaging in customer-driven financial intermediation derivatives activities pursuant to paragraph (c)(3), (4), or (5) of this section; and (iv) Expanding the bank's customer-driven financial intermediation derivatives activities pursuant to paragraph (c)(3), (4), or (5) of this section to include any new category of underlyings. (2) The notice pursuant to paragraph (d)(1) of this section must be submitted in writing at least 30 days before the national bank commences the activity and include the following information: (i) A detailed description of the proposed activity, including the relevant underlyings; (ii) The anticipated start date of the activity; and (iii) A detailed description of the bank's risk management system (policies, processes, personnel, and control systems) for identifying, measuring, monitoring, and controlling the risks of the activity. (e) Additional requirements for physical hedging activities. (2) The physical hedging activities must offer a cost-effective means to hedge risks arising from permissible banking activities. (3) The national bank must not take anticipatory or maintain residual positions in the underlying except as necessary for the orderly establishment or unwinding of a hedging position. (4) The national bank must not acquire equity securities for hedging purposes that constitute more than 5 percent of a class of voting securities of any issuer. (5) With respect to physical hedging involving commodities: (i) A national bank's physical position in a particular physical commodity (including, as applicable, delivery point, purity, grade, chemical composition, weight, and size) must not be more than 5 percent of the gross notional value of the bank's derivatives that are in that particular physical commodity and allow for physical settlement within 30 days. Title to commodities acquired and immediately sold by a transitory title transfer does not count against the 5 percent limit; (ii) The physical position must more effectively reduce risk than a cash-settled hedge referencing the same commodity; and (iii) The physical position hedges a physically-settled customer-driven commodity derivative transaction(s). (f) Safe and sound banking practices. [85 FR 83732, Dec. 22, 2020] Subpart B—Corporate Practices § 7.2000 National bank corporate governance. (a) In general. (b) Other sources of guidance. (c) Continued use of former holding company State. (d) Request for OCC staff position. (1) The name of the national bank; (2) Citation to the State statutes or regulations involved; (3) A discussion as to whether a similarly situated State bank is subject to or may adopt the corporate governance provision; (4) Identification of all Federal banking statutes or regulations that are on the same subject as, or otherwise have a bearing on, the subject of the proposed State corporate governance provision; and (5) An analysis of how the proposed practice is not inconsistent with applicable Federal statutes or regulations and is not inconsistent with bank safety and soundness. [61 FR 4862, Feb. 9, 1996, as amended at 79 FR 15641, Mar. 21, 2014; 80 FR 28471, May 18, 2015; 85 FR 83733, Dec. 22, 2020] § 7.2001 National bank adoption of anti-takeover provisions. (a) In general. (b) State anti-takeover provisions that are not inconsistent with Federal banking statutes or regulations. (1) Restrictions on business combinations with interested shareholders. (2) Poison pill. (3) Requiring all shareholder actions to be taken at a meeting. (4) Limits on shareholders' authority to call special meetings. (i) Only the board of directors, and not the shareholders, have the right to call special meetings of the shareholders; or (ii) If shareholders have the right to call special meetings, a high percentage of shareholders is needed to call the meeting. (5) Shareholder removal of a director only for cause. (c) State anti-takeover provisions that are inconsistent with Federal banking statutes or regulations. (1) Supermajority voting requirements. (2) Restrictions on a shareholder's right to vote all the shares it owns. (d) Bank safety and soundness In general. (i) The bank is less than adequately capitalized (as defined in 12 CFR part 6); (ii) The bank is in troubled condition (as defined in 12 CFR 5.51(c)(7)); (iii) Grounds for the appointment of a receiver under 12 U.S.C. 191, as determined by the OCC, are present; or (iv) The bank is otherwise in less than satisfactory condition, as determined by the OCC. (2) Exception. (i) The bank is not subject to any of the conditions in paragraph (d)(1) of this section; and (ii) The bank includes, in its articles of association or its bylaws, as applicable pursuant to paragraph (f) of this section, a limitation that would make the provisions ineffective if: (A) The conditions in paragraph (d)(1) of this section exist; or (B) The OCC otherwise directs the bank not to follow the provision for supervisory reasons. (e) Case-by-case review OCC determination. (i) Inconsistent with Federal banking statutes or regulations, notwithstanding paragraph (b) of this section; or (ii) Inconsistent with bank safety and soundness other than as provided in paragraph (d) of this section. (2) Review. (f) Method of adoption for anti-takeover provisions Board and shareholder approval. (2) Documentation. [85 FR 83733, Dec. 22, 2020] § 7.2002 National bank director or attorney as proxy. Any person or group of persons, except the national bank's officers, clerks, tellers, or bookkeepers, may be designated to act as proxy for shareholder voting. The national bank's directors or attorneys may act as proxy for shareholder voting if they are not also employed as an officer, clerk, teller or bookkeeper of the bank. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83734, Dec. 22, 2020] § 7.2003 National bank shareholder meetings; Board of directors meetings. (a) Notice of shareholders' meetings. (b) Annual meeting for election of directors. (c) Virtual participation at shareholder meetings In general. (2) Procedures. (d) Virtual participation at board of directors meetings. [85 FR 83734, Dec. 22, 2020] § 7.2004 Honorary national bank directors or advisory boards. A national bank may appoint honorary or advisory members of a board of directors to act in advisory capacities without voting power or power of final decision in matters concerning the business of the bank. Any listing of honorary or advisory directors must distinguish between them and the bank's board of directors or indicate their advisory status. § 7.2005 Ownership of stock necessary to qualify as director of a national bank. (a) In general. (b) Qualifying equity interest Minimum required equity interest. (i) The value of the common or preferred stock held by a national bank director is valued as of the date purchased or the date on which the individual became a director, whichever value is greater. (ii) In the case of a company that owns more than one national bank, a director may use his or her equity interest in the controlling company to satisfy, in whole or in part, the equity interest requirement for any or all of the controlled national banks. (iii) Upon request, the OCC may consider whether other interests in a company controlling a national bank constitute an interest equivalent to $1,000 par value of national bank stock. (2) Joint ownership and tenancy in common. (3) Shares in a living trust. (4) Other arrangements Shares held through retirement plans and similar arrangements. (ii) Shares held subject to buyback agreements. (iii) Assignment of right to dividends or distributions. (iv) Execution of proxy. (c) Non-qualifying ownership. (1) Shares pledged by the holder to secure a loan. However, all or part of the funds used to purchase the required qualifying equity interest may be borrowed from any party, including the bank or its affiliates; (2) Shares purchased subject to an absolute option vested in the seller to repurchase the shares within a specified period; and (3) Shares deposited in a voting trust where the depositor surrenders: (i) Legal ownership (depositor ceases to be registered owner of the stock); (ii) Power to vote the stock or to direct how it must be voted; or (iii) Power to transfer legal title to the stock. [61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 85 FR 83734, Dec. 22, 2020] § 7.2006 Cumulative voting in election of national bank directors. When electing national bank directors, a shareholder must have as many votes as the number of directors to be elected multiplied by the number of the shareholder's shares. If permitted by the national bank's articles of association, the shareholder may cast all these votes for one candidate or distribute the votes among as many candidates as the shareholder chooses. If, after the first ballot, subsequent ballots are necessary to elect directors, a shareholder may not vote shares that he or she has already fully cumulated and voted in favor of a successful candidate. [61 FR 4862, Feb. 9, 1996, as amended at 73 FR 22241, Apr. 24, 2008; 85 FR 83734, Dec. 22, 2020] § 7.2007 Filling vacancies and increasing board of directors of a national bank other than by shareholder action. (a) Increasing board of directors. (b) Vacancies. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020] § 7.2008 Oath of national bank directors. (a) Administration of the oath. (1) A notary public, including one who is a director but not an officer of the national bank; or (2) Any person, including one who is a director but not an officer of the national bank, having an official seal and authorized by the State to administer oaths. (b) Execution of the oath. www.occ.gov. (c) Filing and recordkeeping. [61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60099, Nov. 4, 1999; 82 FR 8104, Jan. 23, 2017; 85 FR 80470, Dec. 11, 2020; 85 FR 83735, Dec. 22, 2020] § 7.2009 Quorum of a national bank board of directors; proxies not permissible. A national bank must provide in its articles of association or bylaws that for the transaction of business, a quorum of the board of directors is at least a majority of the entire board then in office. A national bank director may not vote by proxy. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020] § 7.2010 National bank directors' responsibilities. The business and affairs of a national bank must be managed by or under the direction of the board of directors. The board of directors should refer to OCC published guidance for additional information regarding responsibilities of directors. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020] § 7.2011 National bank compensation plans. Consistent with safe and sound banking practices and the compensation provisions of 12 CFR part 30, a national bank may adopt compensation plans, including, among others, the following: (a) Bonus and profit-sharing plans. (b) Pension plans. (c) Employee stock option and stock purchase plans. § 7.2012 President as director of a national bank. Pursuant to 12 U.S.C. 76, the person serving as, or in the function of, president of a national bank, regardless of title, must be a member of the board of directors. A director other than the person serving as, or in the function of, president may be elected chairman of the board. [85 FR 83735, Dec. 22, 2020] § 7.2013 Fidelity bonds covering national bank officers and employees. (a) Adequate coverage. (b) Factors. (1) Internal auditing safeguards employed; (2) Number of employees; (3) Amount of deposit liabilities; and (4) Amount of cash and securities normally held by the bank or savings association. [61 FR 4862, Feb. 9, 1996, as amended at 82 FR 8104, Jan. 23, 2017] § 7.2014 Indemnification of national bank and Federal savings association institution-affiliated parties. (a) Indemnification under State law. (b) Administrative proceedings or civil actions initiated by Federal banking agencies. (c) Written agreement required for advancement. (d) Insurance premiums. [85 FR 83735, Dec. 22, 2020] § 7.2015 National bank cashier. A national bank's bylaws, board of directors, or a duly designated officer may assign some or all of the duties previously performed by the bank's cashier to its president, chief executive officer, or any other officer. § 7.2016 Restricting transfer of national bank stock and record dates; stock certificates. (a) Restricting transfer of stock and record dates Conditions for stock transfer. (2) Record dates. (b) Bank stock certificates. (i) The name and location of the bank; (ii) The name of the holder of record of the stock represented thereby; (iii) The number and class of shares which the certificate represents; (iv) If the bank issues more than one class of stock, the respective rights, preferences, privileges, voting rights, powers, restrictions, limitations, and qualifications of each class of stock issued (unless incorporated by reference to the articles of association); (v) Signatures of the president and cashier of the bank, or such other officers as the bylaws of the bank provide; and (vi) The seal of the bank. (2) The requirements of paragraph (b)(1)(v) of this section may be met through the use of electronic means or by facsimile. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83735, Dec. 22, 2020] § 7.2019 Loans secured by a national bank's own shares. (a) Permitted agreements, relating to bank shares. (1) Not to pledge, give away, transfer, or otherwise assign such shares; (2) To pledge such shares at the request of the bank when necessary to prevent loss; and (3) To leave such shares in the bank's custody. (b) Use of capital notes and debentures. § 7.2021 National bank preemptive rights. A national bank in its articles of association must grant or deny preemptive rights to the bank's shareholders. Any amendment to a national bank's articles of association which modifies such preemptive rights must be approved by a vote of the holders of two-thirds of the bank's outstanding voting shares. § 7.2022 National bank voting trusts. The shareholders of a national bank may establish a voting trust under the applicable law of a State selected by the participants and designated in the trust agreement, provided the implementation of the trust is consistent with safe and sound banking practices. [61 FR 4862, Feb. 9, 1996, as amended at 85 FR 83736, Dec. 22, 2020] § 7.2023 National bank reverse stock splits. (a) Authority to engage in reverse stock splits. (b) Legitimate corporate purpose. (1) Reduce the number of shareholders in order to qualify as a Subchapter S corporation; and (2) Reduce costs associated with shareholder communications and meetings. [64 FR 60099, Nov. 4, 1999] § 7.2024 Staggered terms for national bank directors and size of bank board. (a) Staggered terms. (b) Maximum term. (c) Number of directors. [68 FR 70131, Dec. 17, 2003, as amended at 85 FR 83736, Dec. 22, 2020] § 7.2025 Capital stock-related activities of a national bank. (a) In general. (b) Issuance of previously approved and authorized common stock. (c) Issuance, repurchase, and redemption of preferred stock pursuant to certain procedures. (d) Share repurchase programs. (e) Preferred Stock Features. [85 FR 83736, Dec. 22, 2020] Subpart C—National Bank and Federal Savings Association Operations § 7.3000 National bank and Federal savings association operating hours and closings. (a) Operating hours. (b) Emergency closings declared by the Comptroller. i.e., e.g., (c) Emergency and ceremonial closings declared by a State or State official. (d) Liability. (e) Definition. [85 FR 83736, Dec. 22, 2020] § 7.3001 Sharing national bank or Federal association space and employees. (a) Sharing space. (1) Consistent with § 7.1024, lease excess space on national bank or Federal savings association premises to one or more other businesses (including other financial institutions); (2) Share space jointly held with one or more other businesses; or (3) Offer its services in space owned by or leased to other businesses. (b) Sharing employees. (1) A national bank or Federal savings association employee may act as agent for the other business; or (2) An employee of the other business may act as agent for the national bank or Federal savings association. (c) Supervisory conditions. (1) The other business is conspicuously, accurately, and separately identified; (2) Shared employees clearly and fully disclose the nature of their agency relationship to customers of the national bank or Federal savings association and of the other businesses so that customers will know the identity of the national bank, Federal savings association, or other business that is providing the product or service; (3) The arrangement does not constitute a joint venture or partnership with the other business under applicable State law; (4) All aspects of the relationship between the national bank or Federal savings association and the other business are conducted at arm's length, unless a special arrangement is warranted because the other business is a subsidiary of the national bank or Federal savings association; (5) Security issues arising from the activities of the other business on the premises are addressed; (6) The activities of the other business do not adversely affect the safety and soundness of the national bank or Federal savings association; (7) The shared employees or the entity for which they perform services are duly licensed or meet qualification requirements of applicable statutes and regulations pertaining to agents or employees of such other business; and (8) The assets and records of the parties are segregated. (d) Other legal requirements. (1) The national bank or Federal savings association must ensure compliance with all applicable statutory and regulatory provisions governing national bank or Federal savings association transactions with these persons or entities; (2) The parties must comply with all applicable fiduciary duties; and (3) The parties, if they are in competition with each other, must consider limitations, if any, imposed by applicable antitrust laws. (e) Transition. [80 FR 28471, May 18, 2015, as amended at 85 FR 83737, Dec. 22, 2020] Subpart D—Preemption § 7.4000 Visitorial powers with respect to national banks. (a) General rule. (2) For purposes of this section, visitorial powers include: (i) Examination of a bank; (ii) Inspection of a bank's books and records; (iii) Regulation and supervision of activities authorized or permitted pursuant to federal banking law; and (iv) Enforcing compliance with any applicable Federal or state laws concerning those activities, including through investigations that seek to ascertain compliance through production of non-public information by the bank, except as otherwise provided in paragraphs (a), (b), and (c) of this section. (3) Unless otherwise provided by Federal law, the OCC has exclusive visitorial authority with respect to the content and conduct of activities authorized for national banks under Federal law. (b) Exclusion. Cuomo Clearing House Assn., L. L. C., (c) Exceptions to the general rule. (1) Exceptions authorized by Federal law. (i) Inspect the list of shareholders, provided that the official is authorized to assess taxes under state authority (12 U.S.C. 62; this section also authorizes inspection of the shareholder list by shareholders and creditors of a national bank); (ii) Review, at reasonable times and upon reasonable notice to a bank, the bank's records solely to ensure compliance with applicable state unclaimed property or escheat laws upon reasonable cause to believe that the bank has failed to comply with those laws (12 U.S.C. 484(b)); (iii) Verify payroll records for unemployment compensation purposes (26 U.S.C. 3305(c)); (iv) Ascertain the correctness of Federal tax returns (26 U.S.C. 7602); (v) Enforce the Fair Labor Standards Act (29 U.S.C. 211); and (vi) Functionally regulate certain activities, as provided under the Gramm-Leach-Bliley Act, Pub. L. 106-102, 113 Stat. 1338 (Nov. 12, 1999). (2) Exception for courts of justice. (3) Exception for Congress. (d) Report of examination. [61 FR 4862, Feb. 9, 1996, as amended at 64 FR 60100, Nov. 4, 1999; 69 FR 1904, Jan. 13, 2004; 76 FR 43565, July 21, 2011] § 7.4001 Charging interest by national banks at rates permitted competing institutions; charging interest to corporate borrowers. (a) Definition. (b) Authority. (c) Effect on state definitions of interest. (d) Usury. (e) Transferred loans. [61 FR 4862, Feb. 9, 1996, as amended at 66 FR 34791, July 2, 2001; 85 FR 33536, June 2, 2020] § 7.4002 National bank non-interest charges and fees. (a) Definition. Charge (b) Authority to impose charges and fees. (c) Considerations. (2) Decisions regarding charging non-interest charges and fees, including their amounts, the method of calculating them, whether to enter into business relationships or lines of business, and whether they are set by or in consultation with third parties, are business decisions to be made by each national bank, in its discretion, according to sound banking judgment and safe and sound banking principles. A national bank establishes non-interest charges and fees in accordance with safe and sound banking principles if it employs a decision-making process through which it considers the following factors, among others: (i) The cost incurred by the national bank in providing the service; (ii) The deterrence of misuse by customers of banking services; (iii) The enhancement of the competitive position of the national bank in accordance with its business plan and marketing strategy; (iv) The use of third parties to provide or facilitate the provision of a product or service; and (v) The maintenance of the safety and soundness of the national bank. (d) Interest. (e) State law. (f) National bank as fiduciary. [66 FR 34791, July 2, 2001, as amended at 91 FR 22995, Apr. 29, 2026] § 7.4006 [Reserved] § 7.4007 Deposit-taking by national banks. (a) Authority of national banks. (b) Applicability of state law. (1) Abandoned and dormant accounts; 3 3 Anderson Nat'l Bank Luckett, Id. (2) Checking accounts; (3) Disclosure requirements; (4) Funds availability; (5) Savings account orders of withdrawal; (6) State licensing or registration requirements (except for purposes of service of process); and (7) Special purpose savings services; 4 4 (c) State laws that are not preempted. Barnett Bank of Marion County, N.A. Nelson, Florida Insurance Commissioner, et al. (1) Contracts; (2) Torts; (3) Criminal law; 5 5 Easton Iowa, Id. (4) Rights to collect debts; (5) Acquisition and transfer of property; (6) Taxation; (7) Zoning; and (8) Any other law that the OCC determines to be applicable to national banks in accordance with the decision of the Supreme Court in Barnett Bank of Marion County, N.A. Nelson, Florida Insurance Commissioner, et al. [69 FR 1916, Jan. 13, 2004, as amended at 76 FR 43565, July 21, 2011] § 7.4008 Lending by national banks. (a) Authority of national banks. (b) Standards for loans. (c) Unfair and deceptive practices. (d) Applicability of state law. (1) Licensing, registration (except for purposes of service of process), filings, or reports by creditors; (2) The ability of a creditor to require or obtain insurance for collateral or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices; (3) Loan-to-value ratios; (4) The terms of credit, including the schedule for repayment of principal and interest, amortization of loans, balance, payments due, minimum payments, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan; (5) Escrow accounts, impound accounts, and similar accounts; (6) Security property, including leaseholds; (7) Access to, and use of, credit reports; (8) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents; (9) Disbursements and repayments; and (10) Rates of interest on loans. 6 6 See (e) State laws that are not preempted. Barnett Bank of Marion County, N.A. Nelson, Florida Insurance Commissioner, et al., (1) Contracts; (2) Torts; (3) Criminal law; 7 7 supra Easton Iowa, (4) Rights to collect debts; (5) Acquisition and transfer of property; (6) Taxation; (7) Zoning; and (8) Any other law that the OCC determines to be applicable to national banks in accordance with the decision of the Supreme Court in Barnett Bank of Marion County, N.A. Nelson, Florida Insurance Commissioner, et al., [69 FR 1916, Jan. 13, 2004, as amended at 76 FR 43565, July 21, 2011] § 7.4009 [Reserved] § 7.4010 Applicability of state law and visitorial powers to Federal savings associations and subsidiaries. (a) In accordance with section 1046 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 25b), Federal savings associations and their subsidiaries shall be subject to the same laws and legal standards, including regulations of the OCC, as are applicable to national banks and their subsidiaries, regarding the preemption of state law. (b) In accordance with section 1047 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 1465), the provisions of section 5136C(i) of the Revised Statutes regarding visitorial powers apply to Federal savings associations and their subsidiaries to the same extent and in the same manner as if they were national banks or national bank subsidiaries. [76 FR 43566, July 21, 2011] Subpart E—National Bank Electronic Activities Source: 67 FR 35004, May 17, 2002, unless otherwise noted. § 7.5000 Scope. This subpart applies to a national bank's use of technology to deliver services and products consistent with safety and soundness. § 7.5001 Electronic activities that are incidental to the business of banking. In addition to the electronic activities specifically permitted in § 7.5004 (sale of excess electronic capacity and by-products) and § 7.5006 (incidental non-financial data processing), the OCC has determined that the following electronic activities are incidental to the business of banking, pursuant to § 7.1000. This list of activities is illustrative and not exclusive; the OCC may determine that other activities are permissible pursuant to this authority. (a) Website development where incidental to other banking services; (b) Internet access and email provided on a non-profit basis as a promotional activity; (c) Advisory and consulting services on electronic activities where the services are incidental to customer use of electronic banking services; and (d) Sale of equipment that is convenient or useful to customer's use of related electronic banking services, such as specialized terminals for scanning checks that will be deposited electronically by wholesale customers of banks under the Check Clearing for the 21st Century Act, Public Law 108-100 (12 U.S.C. 5001-5018) (the Check 21 Act). [85 FR 83737, Dec. 22, 2020] § 7.5002 Furnishing of products and services by electronic means and facilities. (a) Use of electronic means and facilities. (1) Acting as an electronic finder by: (i) Establishing, registering, and hosting commercially enabled web sites in the name of sellers; (ii) Establishing hyperlinks between the bank's site and a third-party site, including acting as a “virtual mall” by providing a collection of links to web sites of third-party vendors, organized by-product type and made available to bank customers; (iii) Hosting an electronic marketplace on the bank's Internet web site by providing links to the web sites of third-party buyers or sellers through the use of hypertext or other similar means; (iv) Hosting on the bank's servers the Internet web site of: (A) A buyer or seller that provides information concerning the hosted party and the products or services offered or sought and allows the submission of interest, bids, offers, orders and confirmations relating to such products or services; or (B) A governmental entity that provides information concerning the services or benefits made available by the governmental entity, assists persons in completing applications to receive such services or benefits and permits persons to transmit their applications for such services or benefits; (v) Operating an Internet web site that permits numerous buyers and sellers to exchange information concerning the products and services that they are willing to purchase or sell, locate potential counter-parties for transactions, aggregate orders for goods or services with those made by other parties, and enter into transactions between themselves; (vi) Operating a telephone call center that provides permissible finder services; and (vii) Providing electronic communications services relating to all aspects of transactions between buyers and sellers; (2) Providing electronic bill presentment services; (3) Offering electronic stored value systems; (4) Safekeeping for personal information or valuable confidential trade or business information, such as encryption keys; and (5) Issuing electronic letters of credit within the scope of 12 CFR 7.1016. (b) Applicability of guidance and requirements not affected. (c) State laws. [61 FR 4862, Feb. 9, 1996, as amended at 73 FR 22242, Apr. 24, 2008] § 7.5003 Composite authority to engage in electronic activities. Unless otherwise prohibited by Federal law, a national bank may engage in an electronic activity that is comprised of several component activities if each of the component activities is itself part of or incidental to the business of banking or is otherwise permissible under Federal law. § 7.5004 Sale of excess electronic capacity and by-products. (a) A national bank may, in order to optimize the use of the bank's resources or avoid economic loss or waste, market and sell to third parties electronic capacities legitimately acquired or developed by the bank for its banking business. (b) With respect to acquired equipment or facilities, legitimate excess electronic capacity that may be sold to others can arise in a variety of situations, including the following: (1) Due to the characteristics of the desired equipment or facilities available in the market, the capacity of the most practical optimal equipment or facilities available to meet the bank's requirements exceeds its present needs; (2) The acquisition and retention of additional capacity, beyond present needs, reasonably may be necessary for planned future expansion or to meet the expected future banking needs during the useful life of the equipment; (3) Requirements for capacity fluctuate because a bank engages in batch processing of banking transactions or because a bank must have capacity to meet peak period demand with the result that the bank has periods when its capacity is underutilized; and (4) After the initial acquisition of capacity thought to be fully needed for banking operations, the bank experiences either a decline in level of the banking operations or an increase in the efficiency of the banking operations using that capacity. (c) Types of electronic capacity in equipment or facilities that banks may have legitimately acquired and that may be sold to third parties if excess to the bank's needs for banking purposes include: (1) Data processing services; (2) Production and distribution of non-financial software; (3) Providing periodic back-up call answering services; (4) Providing full Internet access; (5) Providing electronic security system support services; (6) Providing long line communications services; and (7) Electronic imaging and storage. (d) A national bank may sell to third parties electronic by-products legitimately acquired or developed by the bank for its banking business. Examples of electronic by-products that banks may have legitimately acquired that may be sold to third parties if excess to the bank's needs include: (1) Software acquired (not merely licensed) or developed by the bank for banking purposes or to support its banking business; and (2) Electronic databases, records, or media (such as electronic images) developed by the bank for or during the performance of its permissible data processing activities. § 7.5005 National bank acting as digital certification authority. (a) It is part of the business of banking under 12 U.S.C. 24(Seventh) for a national bank to act as a certificate authority and to issue digital certificates verifying the identity of persons associated with a particular public/private key pair. As part of this service, the bank may also maintain a listing or repository of public keys. (b) A national bank may issue digital certificates verifying attributes in addition to identity of persons associated with a particular public/private key pair where the attribute is one for which verification is part of or incidental to the business of banking. For example, national banks may issue digital certificates verifying certain financial attributes of a customer as of the current or a previous date, such as account balance as of a particular date, lines of credit as of a particular date, past financial performance of the customer, and verification of customer relationship with the bank as of a particular date. (c) When a national bank issues a digital certificate relating to financial capacity under this section, the bank shall include in that certificate an express disclaimer stating that the bank does not thereby promise or represent that funds will be available or will be advanced for any particular transaction. § 7.5006 Data processing. (a) Eligible activities. (b) Other data. (c) Software for performance of authorized banking functions. [61 FR 4862, Feb. 9, 1996, as amended at 73 FR 22242, Apr. 24, 2008] § 7.5007 Correspondent services. It is part of the business of banking for a national bank to offer as a correspondent service to any of its affiliates or to other financial institutions any service it may perform for itself. The following list provides examples of electronic activities that banks may offer correspondents under this authority. This list is illustrative and not exclusive; the OCC may determine that other activities are permissible pursuant to this authority. (a) The provision of computer networking packages and related hardware; (b) Data processing services; (c) The sale of software that performs data processing functions; (d) The development, operation, management, and marketing of products and processing services for transactions conducted at electronic terminal devices; (e) Item processing services and related software; (f) Document control and record keeping through the use of electronic imaging technology; (g) The provision of Internet merchant hosting services for resale to merchant customers; (h) The provision of communication support services through electronic means; and (i) Digital certification authority services. § 7.5008 Location of a national bank conducting electronic activities. A national bank shall not be considered located in a State solely because it physically maintains technology, such as a server or automated loan center, in that state, or because the bank's products or services are accessed through electronic means by customers located in the state. § 7.5009 Location under 12 U.S.C. 85 of national banks operating exclusively through the Internet. For purposes of 12 U.S.C. 85, the main office of a national bank that operates exclusively through the Internet is the office identified by the bank under 12 U.S.C. 22(Second) or as relocated under 12 U.S.C. 30 or other appropriate authority. § 7.5010 Shared electronic space. National banks that share electronic space, including a co-branded web site, with a bank subsidiary, affiliate, or another third-party must take reasonable steps to clearly, conspicuously, and understandably distinguish between products and services offered by the bank and those offered by the bank's subsidiary, affiliate, or the third-party.