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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations consider the requirements of the APA
and the Riegle Community Development and Regulatory Improvement Act RCDRIA in determining the effective date of new regulations, and both of these statutory schemes generally provide for an effective date that follows the date on which the regulations are published in final form. Thus, the final rule will be effective on April 1, 2021.97
The FDIC also sought comment on whether an individual that controls the parent company of an industrial bank should be responsible for the maintenance of the industrial banks capital and liquidity at or above FDICspecified levels and for causing the parent company to comply with the written agreements, commitments, and restrictions imposed on the industrial bank. The FDIC also asked whether an individual who is the dominant shareholder of a Covered Company should be required to commit to the maintenance of appropriate capital and liquidity levels. As discussed below, 354.3b of the proposed rule provided that the FDIC may condition a grant of deposit insurance, issuance of a nonobjection to a change in control, or approval of a merger on an individual who is a controlling shareholder of a Covered Company joining as a party to the written agreements required under the rule. In such cases where the FDIC
would require the controlling shareholder to join as a party, the controlling shareholder would be required to cause the Covered Company to fulfill its obligations under the written agreements through the voting of shares, or otherwise. These obligations include, among other things, maintaining each subsidiary industrial banks capital and liquidity at such levels as the FDIC deems necessary for the safe and sound operation of the industrial bank commitment 7.
Several commenters criticized the controlling shareholder requirement.
Some commenters argued that an individual who controls or owns a parent company should not be held personally liable for maintaining the industrial banks capital or liquidity.
These commenters expressed concern that such a requirement would make it more difficult to attract shareholders and capital. As noted above, in cases commonly understood to be the date upon which a rule is effective, not the day before a rule would take effect.
97 During the period before the effective date of the final rule, the FDIC will consider pending deposit insurance applications, change in control notices, and merger applications for industrial banks on a case-by-case basis and impose conditions and requirements as appropriate and that are consistent with current practice.

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where the FDIC would require a person that controls a Covered Company to join as a party, such person would be required to vote their shares or take such other appropriate actions to cause the Covered Company to fulfill its obligations under the written agreements. The obligation to maintain the subsidiary industrial banks capital and liquidity rests with the Covered Company.
Other commenters noted that the parent company already commits in the CALMA to provide support and were concerned that requiring the parent companys shareholders to also provide a guarantee of support will drive away investors. These commenters, however, were not opposed to a requirement for the controlling shareholder to commit to vote his or her shares to comply with the CALMA. One commenter noted that the Office of the Comptroller of the Currency OCC may impose certain commitments on the controlling shareholder related to the ownership of shares and how the controlling shareholder exercises shareholder rights.
Several commenters supported the approach of imposing certain conditions at the level of the Covered Companys controlling shareholder as necessary to ensure the safety and soundness of the subsidiary industrial bank. Some commenters asserted that the FDIC
should require the dominant shareholders of a parent company to maintain appropriate levels of capital and liquidity. Another commenter argued that the choice of ownership structure should not relieve an individual from source of strength and other obligations.
The FDIC believes that in order to ensure that a Covered Company serves as a continuing source of financial strength to the subsidiary industrial bank, the FDIC may exercise its supervisory discretion to require a controlling, or dominant, shareholder of a Covered Company to join as a party to the written agreements required under the rule. An individual with controlling ownership has a direct and effective means by which to influence the major decisions of the Covered Company by voting shares or by exercising an influence as a member of the Covered Companys board of directors.
Accordingly, the FDIC is finalizing this requirement in 354.3b as proposed.
As discussed in the proposed rule, in such cases where FDIC would require the controlling shareholder to join as a party, the controlling shareholder would be required to cause the Covered Company to fulfill its obligations under the written agreements through voting
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shares, or otherwise, including to maintain the capital and liquidity levels of the subsidiary industrial bank at or above FDIC-specified levels. The FDIC
intends to make such a determination on a case-by-case basis and will consider the business plan, capital structure, risk profile, and business activities of the Covered Company.
2. Section 354.2Definitions This section of the proposed rule listed the definitions that applied to part 354. Terms that were not defined in the proposed rule that are defined in section 3 of the FDI Act had the meanings given in section 3 of the FDI Act.98
The term control was defined to mean the power, directly or indirectly, to direct the management or policies of a company or to vote 25 percent or more of any class of voting securities of a company and specifically would have included the rebuttable presumption of control at 12 CFR 303.82b1 and the presumptions of acting in concert at 12
CFR 303.82b2 99 in the same manner and to the same extent as if they applied to an acquisition of securities of a company instead of a covered institution. These definitions are nearly the same as the definitions of control in the CBCA 100 and the FDICs regulations implementing the CBCA 101 except that they would have broadened the term to apply to control of a company and not solely insured depository institutions so that the definition can accurately describe the relationship between the parent company of an industrial bank and any of its nonbank subsidiaries, which also would be affiliates of the industrial bank.
Two commenters suggested that the rule should incorporate the definition of control used in the BHCA and its implementing regulations. One trade group commenter argued that such an approach would lead to consistency in the treatment of parent companies of insured depository institutions. An industrial bank commenter suggested that aligning the proposed rules definition of control with the BHCA and the FRBs regulatory framework 102
would create a more uniform system that would make it easier for investors 98 12

U.S.C. 1813.
proposed rule erroneously referred to the presumptions set forth at 12 CFR 303.83b1 and 2. The final rule corrects that technical error to correctly refer to 303.82b1 and 2.
100 12 U.S.C. 1817j8B.
101 12 CFR 303.80 through 303.88.
102 85 FR 12398 Mar. 2, 2020; see also Regulation YFrequently Asked Questions, available at https www.federalreserve.gov/
supervisionreg/reg-y-faqs.htm.
99 The
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