Membership Application Process: Conversions
SECTION 9 OF THE FEDERAL RESERVE ACT and SECTION 208.3 OF REGULATION H
A state chartered bank proposing to become, or a national bank converting to a state charter and desiring to remain as, a member of the Federal Reserve System should file under these procedures. Banks in existence for less than five years and all thrifts, Edge Act Companies, and industrial banks proposing Federal Reserve membership should refer to the separate membership procedures for de novo banks. Banks seeking membership may be subject to pre-membership examination requirements. Therefore, a bank seeking membership should contact the Reserve Bank prior to submitting a final application to allow for the determination, and/or completion, of pre-membership examinations, as well as the identification of any additional information that may be required. A bank may file on a draft basis as a means to identify pre-membership examination and/or other informational requirements.
There are no publication requirements for Federal Reserve membership conversions. Information to submit - forms - number of copies Refer to form FR 2083. An original and two copies of the application should be submitted.
Pre-Membership Examination Requirements
Generally, safety and soundness and trust (if the bank has trust powers) examinations must be conducted on existing banks wishing to gain membership in the Federal Reserve System. In addition, a consumer examination may also be necessary for a converting bank if there are concerns in that area, such as previous unsatisfactory CRA and/or consumer compliance examination findings. These examinations must be completed prior to the filing of a final application. Since the examinations cannot be completed during the processing time frames of a final filing, banks may submit the initial application on a draft basis.
The examination requirements may be waived or reduced for banks meeting certain criteria.
Expedited Membership Applications
Expedited procedures are available to an "eligible bank" and a bank that cannot be determined to be an "eligible bank" because it has not yet received CAMELS, compliance, or CRA ratings, if it is controlled by a bank holding company that meets the expedited criteria under section 225.14(c) of Regulation Y. An eligible bank is defined as a member bank that:
- is well capitalized (tier 1 leverage ratio and tier 1 and total risk-based capital ratios of at least 5%, 6% and 10%, respectively);
- has a composite CAMELS rating of 1 or 2;
- has a CRA rating of "Outstanding" or "Satisfactory;"
- has a compliance rating of 1 or 2; and
- has no major unresolved supervisory issues outstanding.U
Upon request, the Reserve Bank will provide guidance as to whether a bank meets the expedited criteria. An expedited membership application requires submission of the same information as a nonexpedited membership application.
Processing time frames
For membership applications processed by the Reserve Bank on an expedited basis, the application will be acted on no later than the 15th calendar day following the Reserve Bank's receipt of a complete application, unless the Reserve Bank notifies the bank that the application is not eligible for expedited review. A nonexpedited membership application will normally be acted on by the Reserve Bank no later than 30 days following receipt of a complete application. If the membership application is referred to the Board of Governors, the application will be acted on within 60 days of receipt of a complete application, unless the Board notifies the bank that the processing period is being extended and discloses the reasons for the extension.
The following matters will be given special consideration during the review of the application:
- the bank's financial history and condition and the general character of its management;
- the adequacy of the bank's capital structure in relation to the character and condition of its assets and to its existing and prospective deposit liabilities and other corporate responsibilities and its future earnings prospects;
- the convenience and needs of the community to be served by the bank; and
- whether the bank's corporate powers are consistent with the purposes of the Federal Reserve Act.
Consummation period/information
A bank may be admitted to membership in the Federal Reserve System any time within 90 days after approval. Approval of Federal Reserve membership is subject to the following conditions:
- the bank shall at all times conduct its business and exercise its powers with due regard to safety and soundness;
- except with the permission of the Board of Governors of the Federal Reserve System, the bank shall not cause or permit any change to be made in the general character of its business or in the scope of the corporate powers it exercises at the time of admission to membership;
- the bank's capital shall be at all times adequate in relation to the character and condition of its assets and to its existing and prospective liabilities and other corporate responsibilities; and
- the bank shall comply at all times with Regulation H and any other conditions of membership prescribed by the Board.
Upon notification of approval of the membership application and acceptance of the above conditions of membership, the bank should send a certified copy of its board's resolutions to this effect. If converting from a state non-member bank, the Reserve Bank will then make arrangements to accept payment for Federal Reserve Bank stock and to issue an advice of holdings in Federal Reserve Bank stock. In addition, the bank should submit a list of current bank officers and directors, the bank's street location, and mailing address when returning the resolutions.
If the bank is owned by a bank holding company and the bank's name is changing, a Quarterly Report of Changes in Organizational Structure (FR Y-10) should also be submitted. Please note that in multi-tier bank holding company organizations, only the top-tier bank holding company is required to submit a FR Y-10.
Effective Date of Membership
A bank's membership will become effective upon such date as its Federal Reserve Bank stock is credited to its account in accordance with the Board's Regulation I. As of such date, the bank will be issued a certificate of stock of the Reserve Bank pursuant to its application for membership. However, in the case of a mutual savings bank not authorized to purchase Reserve Bank shares, the Reserve Bank shall accept a deposit on account in place of issuing shares.2 The bank's membership shall become effective on the date of such acceptance.
1 A mutual savings bank not authorized to purchase Federal Reserve Bank stock may apply for membership evidenced initially by a deposit, but if the laws under which the bank is organized are not amended at the first session of the legislature after its admission to authorize the purchase, or if the bank fails to purchase the stock within six months of the amendment, its membership shall be terminated.
2 A mutual savings bank not authorized to purchase Federal Reserve Bank stock may apply for membership evidenced initially by a deposit, but if the laws under which the bank is organized are not amended at the first session of the legislature after its admission to authorize the purchase, or if the bank fails to purchase the stock within six months of the amendment, its membership shall be terminated.
Contacts
Robert Augusta, Jr., Vice President, Regional
and Specialty Supervision
Robert.Augusta@bos.frb.org
