News Column

Comptroller of Currency Adopts Final Rule on Assessment Fees

July 10, 2014



Targeted News Service

WASHINGTON, July 10 -- The U.S. Office of Comptroller of Currency published the following rule in the Federal Register:

Assessment of Fees

A Rule by the Comptroller of the Currency on 07/09/2014

Publication Date: Wednesday, July 09, 2014

Agencies: Department of the Treasury

Office of the Comptroller of the Currency

Dates: Effective August 8, 2014.

Effective Date: 08/08/2014

Entry Type: Rule

Action: Final rule.

Document Citation: 79 FR 38769

Page: 38769 -38772 (4 pages) CFR: 12 CFR 8

Agency/Docket Number: Docket ID. OCC-2014-0009

RIN: 1557-AD82

Document Number: 2014-16017

Shorter URL: https://federalregister.gov/a/2014-16017

Action

Final Rule.

Summary

The Office of the Comptroller of the Currency (OCC) is adopting a final rule to increase assessments for national banks and Federal savings associations (FSAs) with assets of more than $40 billion. The increase will range between 0.32 percent and approximately 14 percent, depending on the total assets of the institution as reflected in its June 30, 2014, Consolidated Report of Condition and Income (Call Report). The average increase in assessments for affected banks and FSAs will be 12 percent. The final rule will not increase assessments for banks or FSAs with $40 billion or less in total assets. The OCC will implement the increase in assessments by issuing an amended Notice of Office of the Comptroller of the Currency Fees and Assessments (Notice of Fees), which will become effective as of the semiannual assessment due on September 30, 2014. In conjunction with the increase in assessments, the final rule updates the OCC's assessment rule to conform with section 318 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which reaffirmed the authority of the Comptroller of the Currency (the Comptroller) to set the amount of, and methodology for, assessments. The final rule also makes technical and conforming changes to the assessment rule.

DATES:

Effective August 8, 2014.

FOR FURTHER INFORMATION CONTACT:

Gary Crane, Deputy Chief Financial Officer, Financial Management, (202) 649-5540, or Mitchell Plave, Special Counsel, or Henry Barkhausen, Attorney, Legislative and Regulatory Activities Division, (202) 649-5490, for persons who are deaf or hard of hearing, TTY, (202) 649-5597.

SUPPLEMENTARY INFORMATION:

I. Background

The National Bank Act [1] and the Home Owners' Loan Act [2] authorize the Comptroller to recover the costs of the OCC's operations through assessments, fees, and other charges on national banks and FSAs. [3] The Comptroller sets assessments, fees, and other charges to meet the OCC's expenses in carrying out its supervisory activities. [4] In setting assessments, the Comptroller has broad authority to consider variations among institutions, including the nature and scope of the activities of the entity, the amount and type of assets that the entity holds, the financial and managerial condition of the entity, and any other factor the Comptroller determines is appropriate. [5]

The OCC collects assessments from national banks and FSAs in accordance with 12 CFR part 8. Under part 8, the base assessment for banks and FSAs is calculated using a table with eleven categories, or brackets, each of which comprises a range of asset-size values. The assessment for each bank and FSA is the sum of a base amount, which is the same for every national bank and FSA in its asset-size bracket, plus a marginal amount, which is computed by applying a marginal assessment rate to the amount in excess of the lower boundary of the asset-size bracket. [6] The marginal assessment rate declines as asset size increases, reflecting economies of scale in bank examination and supervision.

The OCC's annual Notice of Fees sets forth the marginal assessment rates applicable to each asset-size bracket for each year, as well as other assessment components and fees. [7] Under part 8, the OCC may adjust the marginal rates to account for inflation. [8] The OCC may issue an interim or amended Notice of Fees if the Comptroller determines that it is necessary to meet the OCC's supervisory obligations. [9]

In recent years, marginal assessment rates for most national banks have been relatively stable. [10] Since the enactment of the Dodd-Frank Act, [11] however, the OCC's responsibilities have expanded and changed in several important ways. These include assuming responsibility for the supervision of FSAs and the need to devote appropriate resources to the implementation of the Dodd-Frank Act, as well as supervising compliance with its requirements. The Dodd-Frank Act and other post-crisis reforms have also increased the level and complexity of OCC supervisory activities, especially with respect to large institutions. We have recently reviewed the marginal rates applicable to national banks and FSAs with over $40 billion in assets and believe that an adjustment beyond an increase for inflation is appropriate in light of our increased supervisory responsibilities.

II. Description of the Proposed Rule and Comments Received

Increase in marginal rates. The OCC published a proposed rule in the Federal Register on April 28, 2014 to amend 12 CFR part 8 and increase assessments through an amended Notice of Fees. [12] The proposal called for the marginal assessment rate for banks and FSAs with more than $40 billion in assets to increase by 14.5 percent, beginning September 30, 2014. Under the proposal, the effective increase in assessments for banks and FSAs with more than $40 billion in assets would range from 0.32 percent to 14 percent, depending on the total assets of the institution as reflected on its June 30, 2014, Call Report, with an average increase in assessments for affected banks and FSAs of 12 percent. As proposed, the rule would not increase assessment rates for banks and FSAs with $40 billion or less in total assets. Most banks and FSAs have assets of $40 billion or less and, therefore, would not be affected by the increase in assessments.

The proposed increase in marginal assessment rates primarily reflects changes in the OCC's supervisory responsibilities arising out of the Dodd-Frank Act, which generally requires additional OCC supervisory resources for large banks and FSAs. The proposed increase for large banks and FSAs also reflects the fact the OCC did not raise marginal rates on the assets of large banks and FSAs in excess of $40 billion between 1995 and 2013. [13] In addition, the proposed increase for large banks and FSAs represents a relatively small percentage of return on assets (ROA) that the increase in assessments would represent for these institutions. Finally, the proposal reflects the OCC's supervisory judgment that a rate increase would strain the limited resources of community banks and FSAs and would be unwarranted for these smaller institutions, in light of the fact that many of the OCC's enhanced responsibilities are directed toward large institutions.

Conforming amendments to part 8. The proposal included a conforming amendment to 12 CFR part 8 to make it consistent with the proposed increase in assessments and an amendment to part 8 to add a reference to section 318 of the Dodd-Frank Act, which reaffirmed the Comptroller's broad discretion to set assessments and to determine the assessment methodology. The proposal also included an update to 12 CFR 8.8 to reflect the current title of the Notice of Fees.

Comments on the proposed rule. The OCC received two comments on the proposed rule. The first commenter, a trade association for community banks, supported the proposed rule and commended the OCC for focusing the increase in assessments on large banks and FSAs. In this commenter's opinion, it is appropriate for larger and more complex banks and FSAs to bear the burden of the higher assessments, given that the supervision of those institutions, particularly with respect to Dodd-Frank Act implementation, is more resource intensive than supervision of community banks. The commenter also stated that a rate increase for community banks would strain the limited resources of those institutions.

The second commenter, a trade association for midsize banks, which the commenter defined as banks with between $10 billion and $50 billion in assets, agreed that the proposed increase in assessments focused appropriately on large banks and FSAs, but urged the OCC to make changes to the final rule. Specifically, the commenter suggested that the threshold for the increase in assessments be raised from $40 billion to $50 billion to avoid raising assessments for banks the commenter considers midsize. The commenter also suggested that the OCC consider alternative metrics for assessments, such as the complexity of a bank or FSA's operations, and the costs of regulatory compliance, particularly with the Dodd-Frank Act, as a percentage of a bank's ROA. The OCC will consider whether these alternative metrics would be appropriate components of the assessment structure in future reviews of the assessment system.

The final rule retains the $40 billion threshold for the assessment increase for several reasons. First, banks and FSAs with more than $40 billion in assets typically have complex banking operations and therefore require significant supervisory resources. [14] Second, the assessment increase for banks and FSAs between $40 billion and $50 billion is relatively small, with a range of .20% for a $41 billion asset institution to 1.77% for a $50 billion asset institution. [15] This is because, with asset-size brackets, fees increase with asset size. Third, the great majority of midsize banks and FSAs has assets under $40 billion, and therefore will not be affected by the assessment increase. [16] For these reasons, the OCC continues to view the $40 billion threshold as an appropriate proxy for increased supervisory costs and an appropriate threshold for increased assessments.

III. Description of the Final Rule

The final rule adopts the proposed increase to marginal rates without change. Under the final rule, marginal assessment rates for national banks and FSAs with assets of more than $40 billion will increase by 14.5 percent and will be effective for the assessment due on September 30, 2014. Marginal rates for banks and FSAs with $40 billion or less in assets will remain the same as set out in the 2014 Notice of Fees, published on December 12, 2013. The final rule continues the OCC's present assessment methodology and does not change the asset bracket table in 12 CFR 8.2(a). The revised marginal rates for national banks and FSAs with over $40 billion in assets are reflected in the following table:

Revised General Assessment Fee Schedule

If the amount of total balance-sheet assets (consolidated domestic and foreign subsidiaries) is (millions): .....The semiannual assessment will be:

Over .....But not over .....This amount .....Plus .....Of excess over (millions)

Column A .....Column B .....Column C .....Column D .....Column E

$ 0 .....$ 2 .....$ 5,997 .....0.000000000 .....$ 0

2 .....20 .....5,997 .....0.000236725 .....2

20 .....100 .....10,258 .....0.000189379 .....20

100 .....200 .....25,408 .....0.000123092 .....100

200 .....1,000 .....37,717 .....0.000104156 .....200

1,000 .....2,000 .....121,041 .....0.000085218 .....1,000

2,000 .....6,000 .....206,259 .....0.000075749 .....2,000

6,000 .....20,000 .....509,255 .....0.000064454 .....6,000

20,000 .....40,000 .....1,411,611 .....0.000048553 .....20,000

40,000 .....250,000 .....2,382,671 .....0.000037936 .....40,000

250,000 ..........10,349,260 .....0.000037556 .....250,000

The final rule amends 12 CFR part 8 to make it consistent with the proposal to increase the marginal assessment rates. Specifically, the final rule revises 12 CFR 8.2(a)(4) to recognize that the OCC may increase the marginal rates in amounts that exceed the rate of inflation, as under the current proposal. In addition, the final rule revises 12 CFR 8.2 to reflect section 318 of the Dodd-Frank Act, which reaffirmed the Comptroller's broad discretion to set assessments and to determine the assessment methodology. The final rule also updates 12 CFR 8.8 to make a technical change to reflect the current title of the notice of fees.

[*Federal RegisterVJ 2014-07-09]

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