PART 163—SAVINGS ASSOCIATIONS—OPERATIONS Authority: 12 U.S.C. 1, 93a, 1462a, 1463, 1464, 1467a, 1817, 1820, 1828, 1831o, 3806, 5101 et seq., Source: 76 FR 49047, Aug. 9, 2011, unless otherwise noted. Subpart A—Accounts § 163.4 [Reserved] § 163.5 Securities: Statement of non-insurance. Every security issued by a Federal savings association must include in its provisions a clear statement that the security is not insured by the Federal Deposit Insurance Corporation. Subpart B—Operation and Structure § 163.27 Advertising. No Federal savings association shall use advertising (which includes print or broadcast media, displays or signs, stationery, and all other promotional materials), or make any representation which is inaccurate in any particular or which in any way misrepresents its services, contracts, investments, or financial condition. § 163.33 Directors, officers, and employees. (a) Directors Requirements. (i) A majority of the directors must not be salaried officers or employees of the savings association or of any subsidiary thereof. (ii) Not more than two of the directors may be members of the same immediate family. (iii) Not more than one director may be an attorney with a particular law firm. (2) Prospective application. (b) [Reserved] § 163.36 Tying restriction exception. For applicable rules, see regulations of the Board of Governors of the Federal Reserve System. § 163.39 [Reserved] § 163.47 Pension plans. (a) General. (b) Funding. (c) Plan amendment. Provided, (1) Any such increase shall be for a period and amount determined by the sponsor's board of directors, but in no event shall it exceed the annual increase in the Consumer Price Index published by the Bureau of Labor Statistics; and (2) No increase shall be granted unless: (i) Anticipated charges to net income for future periods have first been found by such board of directors to be reasonable and are documented by appropriate resolution and supporting analysis; and (ii) The increase will not reduce the association's regulatory capital below its regulatory capital requirement. (d) Termination. (e) Records. (1) Plan description; (2) Schedule of participants and beneficiaries; (3) Schedule of participants and beneficiaries' rights and obligations; (4) Plan's financial statements; and (5) Except for defined contribution plans, an opinion signed by an enrolled actuary (as defined by the Employee Retirement Income Security Act of 1974) affirming that actuarial assumptions in the aggregate are reasonable, take into account the plan's experience and expectations, and represent the actuary's best estimate of the plan's projected experiences. [76 FR 49047, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020] Subpart C—Securities and Borrowings § 163.74 Mutual capital certificates. (a) General. (b) Eligibility Requirements. (c) Application form; supporting information. (d) Charter amendment. (e) Filing requirements. (f) Supervisory objection. (g) Limitation on offering period. (h) Reports. (i) Requirements as to mutual capital certificates Form of certificate. (i) Shall bear on its face, in bold-face type, the following legend: “This security is not a savings account or a deposit and it is not insured by the United States or any agency or fund of the United States”; and (ii) Shall clearly state that the certificate is subject to the requirements of § 163.74(i)(2). (2) Legal requirements. (i) Be subordinate to all claims against the association having the same priority as savings accounts, savings certificates, debt obligations or any higher priority; (ii) Not be eligible for use as collateral for any loan made by the issuing association; (iii) Constitute a claim in liquidation not exceeding the face value plus accrued dividends of the certificates, on the general reserves, surplus and undivided profits of the association remaining after the payment in full of all savings accounts, savings certificates and debt obligations; (iv) Be entitled to the payment of dividends, which may be fixed, variable, participating, or cumulative, or any combination thereof, only if, when and as declared by the association's board of directors out of funds legally available for that purpose, provided that no dividend may be declared or paid without the approval of the appropriate Federal banking agency if such payment would cause the association to fail to meet its regulatory capital requirements under 12 CFR part 3 if a Federal savings association, or 12 CFR part 324 or part 390, subpart Z, as applicable, if a state savings association, and provided further that no dividend may be paid if such payment would constitute a violation of 12 U.S.C. 1828(b); (v) Not be redeemable, except: where the dollar weighted average term of each issue of mutual capital certificates to be redeemed is seven years or more and redemption is to be made pursuant to a redemption schedule; in the event of a merger, consolidation or reorganization approved by the appropriate Federal banking agency; or where the funds for redemption are raised by the issuance of mutual capital certificates approved pursuant to this section, or in conjunction with the issuance of capital stock pursuant to part 192 of this chapter: Provided, And Provided further, (vi) Not have preemptive rights; (vii) Not have voting rights, except that an association may provide for voting rights if: (A) The savings association fails to pay dividends for a minimum of three consecutive dividend periods, and then the holders of the class or classes of mutual capital certificates granted such voting rights, and voting as a single class, with one vote for each outstanding certificate, may elect by a majority vote a maximum of one-third of the association's board of directors, the directors so elected to serve until the next annual meeting of the association succeeding the payment of all current and past dividends; (B) Any merger, consolidation, or reorganization (except in a supervisory case) is sought to be authorized, where the issuing association is not the survivor, provided that the regulatory capital of the resulting association available for payment of any class of mutual capital certificate on liquidation is less than the regulatory capital available for such class prior to the merger, consolidation, or reorganization; (C) Action is sought to be authorized which would create any class of mutual capital certificates having a preference or priority over an outstanding class or classes of mutual capital certificates; (D) Any action is sought to be authorized which would adversely change the specific terms of any class of mutual capital certificates; (E) Action is sought to be authorized which would increase the number of a class of mutual capital certificates, or the number of a class of mutual capital certificates ranking prior to or on parity with another class of mutual capital certificates; or (F) Action is sought which would authorize the issuance of an additional class or classes of mutual capital certificates without the association having met specific financial standards; (viii) Not constitute an obligation of the association and shall confer no rights which would give rise to any claim of or action for default; (ix) Not be convertible into any account, security, or interest, except that mutual capital certificates may be surrendered in exchange for preferred stock issued in connection with the conversion of the issuing savings association to the stock form pursuant to part 192 of this chapter, provided that the preferred stock shall have substantially the same voting rights, designations, preferences and relative, participating optional, or other special rights, and qualifications, limitations, and restrictions, as the mutual capital certificates exchanged for the preferred stock. (x) Provide for charging of losses after the exhaustion of all other items in the regulatory capital account. [76 FR 49047, Aug. 9, 2011, as amended at 79 FR 11314, Feb. 28, 2014; 84 FR 56376, Oct. 22, 2019] § 163.76 Offers and sales of securities at an office of a Federal savings association. (a) A Federal saving association may not offer or sell debt or equity securities issued by the association or an affiliate of the association at an office of the association; except that equity securities issued by the association or an affiliate in connection with the association's conversion from the mutual to stock form of organization in a conversion approved pursuant to part 192 of this chapter may be offered and sold at the association's offices: Provided, (1) The OCC does not object on supervisory grounds to the offer and sale of the securities at the offices of the association; (2) No commissions, bonuses, or comparable payments are paid to any employee of the savings association or its affiliates or to any other person in connection with the sale of securities at an office of a savings association; except that compensation and commissions consistent with industry norms may be paid to securities personnel of registered broker-dealers; (3) No offers or sales are made by tellers or at the teller counter, or by comparable persons at comparable locations; (4) Sales activity is conducted in a segregated or separately identifiable area of the savings association's offices apart from the area accessible to the general public for the purposes of making or withdrawing deposits; (5) Offers and sales are made only by regular, full-time employees of the savings association or by securities personnel who are subject to supervision by a registered broker-dealer; (6) An acknowledgment, in the form set forth in paragraph (c) of this section, is signed by any customer to whom the security is sold in the savings association's offices prior to the sale of any such securities; (7) A legend that the security is not a deposit or account and is not Federally insured or guaranteed appears conspicuously on the security and in all offering documents and advertisements for the securities; the legend must state in bold or other prominent type at least as large as other textual type in the document that “This security is not a deposit or account and is not Federally insured or guaranteed”; and (8) The savings association will be in compliance with its current capital requirements upon completion of the conversion stock offering. (b) Securities sales practices, advertisements, and other sales literature used in connection with offers and sales of securities by Federal savings associations shall be subject to § 16.32 of this chapter. (c) Offers and sales of securities of a savings association or its affiliates in any office of the savings association must use a one-page, unambiguous, certification in substantially the following form: FORM OF CERTIFICATION I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY [ insert name of savings association If anyone asserts that this security is Federally insured or guaranteed, or is as safe as an insured deposit, I should call the Office of the Comptroller of the Currency. I further certify that, before purchasing the [ description of security being offered name of issuer, name of savings association and affiliation to issuer (if different) The offering circular that I received contains disclosure concerning the nature of the security being offered and describes the risks involved in the investment, including: [ List briefly the principal risks involved and cross reference certain specified pages of the offering circular where a more complete description of the risks is made. Signature: Date: (d) For purposes of this section, an “office” of an association means any premises used by the association that are identified to the public through advertising or signage using the association's name, trade name, or logo. [76 FR 49047, Aug. 9, 2011, as amended at 85 FR 42643, July 14, 2020] § 163.80 Borrowing limitations. (a) General. (b) Amount of borrowing. (c) Security. (d) Required statement for all securities evidencing outside borrowings. This security is not a savings account or a deposit and it is not insured by the United States or any agency or fund of the United States. (e) Filing requirements for outside borrowings with maturities in excess of one year. (i) Principal amount of the securities; (ii) Anticipated interest rate range and price range at which the securities are to be sold; (iii) Minimum denomination; (iv) Stated and average effective maturity; (v) Mandatory and optional prepayment provisions; (vi) Description, amount, and maintenance of collateral if any; (vii) Trustee provisions if any; (viii) Events of default and remedies of default; (ix) Any provisions which restrict, conditionally or otherwise, the operations of the association. (2) The appropriate Federal banking agency shall have 10 business days after receipt of such filing to object to the issuance of such securities. The appropriate Federal banking agency shall object if the terms or covenants of the proposed issue place unreasonable burdens on, or control over, the operations of the association. If no objection is taken, the savings association shall have 120 calendar days within which to issue such securities. (f) Note accounts. [76 FR 49047, Aug. 9, 2011, as amended at 79 FR 11314, Feb. 28, 2014; 84 FR 56376, Oct. 22, 2019; 85 FR 42643, July 14, 2020] Subparts D-E [Reserved] Subpart F—Financial Management Policies § 163.170 Examinations and audits; appraisals; establishment and maintenance of records. (a) Examinations and audits. (b) Appraisals. (2) The OCC may obtain at any time, at its expense, such appraisals of any of the assets, including the security therefore, of a savings association, affiliate, or service corporation as the OCC deems appropriate. (c) Establishment and maintenance of records. (d) Change in location of records. (1) By resolution authorized the transfer or maintenance; and (2) Sent a certified copy of the resolution to the OCC. (e) Use of data processing services for maintenance of records. § 163.171 [Reserved] § 163.172 Financial derivatives. (a) Definition. (b) Permissible financial derivatives transactions. (c) Board of directors' responsibilities. (2) Before a savings association may engage in any transaction involving a financial derivative, your board of directors must establish written policies and procedures governing authorized financial derivatives. The board of directors should review applicable guidance issued by the OCC on establishing a sound risk management program. (3) The board of directors must periodically review: (i) Compliance with the policies and procedures established under paragraph (c)(2) of this section; and (ii) The adequacy of these policies and procedures to ensure that they continue to be appropriate to the nature and scope of the savings association's operations and existing market conditions. (4) The board of directors must ensure that management establishes an adequate system of internal controls for transactions involving financial derivatives. (d) Management responsibilities. (2) Management must ensure that financial derivatives activities are conducted in a safe and sound manner and should review applicable guidance issued by the OCC on implementing a sound risk management program. (e) Recordkeeping requirement. [76 FR 49047, Aug. 9, 2011, as amended at 82 FR 8110, Jan. 23, 2017] § 163.176 Interest-rate-risk-management procedures. Federal savings associations shall take the following actions: (a) The board of directors or a committee thereof shall review the savings association's interest-rate-risk exposure and devise a policy for the savings association's management of that risk. (b) The board of directors shall formally adopt a policy for the management of interest-rate risk. The management of the savings association shall establish guidelines and procedures to ensure that the board's policy is successfully implemented. (c) The management of the savings association shall periodically report to the board of directors regarding implementation of the savings association's policy for interest-rate-risk management and shall make that information available upon request to the OCC. (d) The savings association's board of directors shall review the results of operations at least quarterly and shall make such adjustments as it considers necessary and appropriate to the policy for interest-rate-risk management, including adjustments to the authorized acceptable level of interest-rate risk. Subpart G—Reporting and Bonding § 163.180 Suspicious Activity Reports and other reports and statements. (a) [Reserved] (b) False or misleading statements or omissions. (1) Make any written or oral statement to the appropriate Federal banking agency or to an agent, representative or employee of the appropriate Federal banking agency that is false or misleading with respect to any material fact or omits to state a material fact concerning any matter within the jurisdiction of the appropriate Federal banking agency or (2) Make any such statement or omission to a person or organization auditing a savings association or otherwise preparing or reviewing its financial statements concerning the accounts, assets, management condition, ownership, safety, or soundness, or other affairs of the association. (c) [Reserved] (d) Suspicious Activity Reports Purpose and scope. (2) Definitions. (i) FinCEN (ii) Institution-affiliated party (iii) SAR (3) SARs required. (i) Insider abuse involving any amount. (ii) Violations aggregating $5,000 or more where a suspect can be identified. (iii) Violations aggregating $25,000 or more regardless of potential suspects. (iv) Transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act. (A) The transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any law or regulation or to avoid any transaction reporting requirement under Federal law; (B) The transaction is designed to evade any regulations promulgated under the Bank Secrecy Act; or (C) The transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction. (4) Service corporations. (5) Time for reporting. (6) Reports to state and local authorities. (7) Exception. (8) Retention of records. (9) Notification to board of directors Generally. (ii) Suspect is a director or executive officer. (10) Compliance. (11) Obtaining SARs. (12) Confidentiality of SARs. (i) Prohibition on disclosure by savings associations or service corporations. (A) Director, Litigation Division, Office of the Comptroller of the Currency or the appropriate FDIC region, as appropriate and (B) The Financial Crimes Enforcement Network (FinCEN). (ii) Rules of construction. (A) The disclosure by a savings association or service corporation, or any director, officer, employee or agent of a savings association or service corporation of: ( 1 ( 2 ( i ( ii (B) The sharing by a savings association or service corporation, or any director, officer, employee, or agent of a savings association or service corporation, of a SAR, or any information that would reveal the existence of a SAR, within the corporate organizational structure of the savings association or service corporation, for purposes consistent with title II of the Bank Secrecy Act as determined by regulation or in guidance. (iii) Prohibition on disclosure by the appropriate Federal banking agency. (iv) Limitation on liability. (13) Safe harbor. (e) Adjustable-rate mortgage indices Reporting obligation. (2) Data to be reported. (3) Applicable indices. (f) Exemptions. (2) The OCC will respond in writing to the Federal savings association or service corporation that submits a request pursuant to paragraph (f)(1) of this section after considering whether the exemption is consistent with the factors in paragraph (f)(1) of this section. Any exemption granted by the OCC under paragraph (f)(1) of this section will continue for the time specified by the OCC. (3) The OCC may extend the period of time or may revoke an exemption granted under paragraph (f)(1) of this section. Exemptions or extensions may be revoked in the sole discretion of the OCC. Before revoking an exemption, the OCC will provide written notice to the Federal savings association or service corporation of the OCC's intention to revoke an exemption. Such notice will include the basis for the revocation and will provide an opportunity for the Federal savings association or service corporation to submit a response to the OCC. The OCC will consider any response before deciding whether or not to revoke an exemption and provide written notice to the Federal savings association or service corporation of the OCC's final decision to revoke an exemption. (4) With respect to requests for exemptions that will also require relief from the requirements of applicable regulations issued by the Department of the Treasury at 31 CFR chapter X, upon receiving approval from both the OCC and FinCEN, the requestor will be relieved of its obligations under this section to the extent stated in such approvals. [76 FR 49047, Aug. 9, 2011, as amended at 82 FR 8111, Jan. 23, 2017; 85 FR 42643, July 14, 2020; 87 FR 15332, Mar. 18, 2022] § 163.200 Conflicts of interest. If you are a director, officer, or employee of a Federal savings association, or have the power to direct its management or policies, or otherwise owe a fiduciary duty to a Federal savings association: (a) You must not advance your own personal or business interests, or those of others with whom you have a personal or business relationship, at the expense of the savings association; and (b) You must, if you have an interest in a matter or transaction before the board of directors: (1) Disclose to the board all material nonprivileged information relevant to the board's decision on the matter or transaction, including: (i) The existence, nature and extent of your interests; and (ii) The facts known to you as to the matter or transaction under consideration; (2) Refrain from participating in the board's discussion of the matter or transaction; and (3) Recuse yourself from voting on the matter or transaction (if you are a director). § 163.201 Corporate opportunity. (a) If you are a director or officer of a Federal savings association, or have the power to direct its management or policies, or otherwise owe a fiduciary duty to a Federal savings association, you must not take advantage of corporate opportunities belonging to the savings association. (b) A corporate opportunity belongs to a Federal savings association if: (1) The opportunity is within the corporate powers of the savings association or a subsidiary of the savings association; and (2) The opportunity is of present or potential practical advantage to the savings association, either directly or through its subsidiary. (c) The OCC will not deem you to have taken advantage of a corporate opportunity belonging to the Federal savings association if a disinterested and independent majority of the savings association's board of directors, after receiving a full and fair presentation of the matter, rejected the opportunity as a matter of sound business judgment.