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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations
filing. Thus, as circumstances warrant, the FDIC may extend the three-year period or impose the restriction on a perpetual basis.
In light of the changes to paragraphs a2 and 3 above, the FDIC is also adopting a revision to the restriction on employment of a senior executive officer who is currently associated with an affiliate of the industrial bank paragraph a4. The restriction is modified in the final rule to cover a senior executive officer who is or was during the past three years associated with an affiliate of the industrial bank to prevent evasion of the restriction. As noted above, this restriction is not otherwise modified with respect to its perpetual duration.
As discussed above, proposed 354.5b has been removed to align with the change the FDIC made to 354.4c.
Several commenters requested that the FDIC clarify what is meant by a material change to the industrial banks business plan that requires the FDICs written approval prior to effecting such change. Because business plan changes or deviations may alter the facts and circumstances that supported the FDICs action on a filing in which the business plan condition was imposed, the following generally have been determined to constitute a material change in or deviation from an institutions business plan:
Increases in financial statement categories or subcategories such as types of loans, funding, revenue, or capital of 25 percent or more;
Introduction of distinctly new or different business strategies or objectives, including products or services, target markets, delivery channels, or business development strategies;
Changes to the institutions financial strategies, or the acquisition of assets, an operating entity, or the assumption of deposits or other liabilities; or Changes in organizational relationships such that the manner in which the institution implements or carries out its business strategies or objectives is impacted.
6. Section 354.6Reservation of Authority The FDIC proposed to clarify that it retains the authority to take supervisory or enforcement actions, including actions to address unsafe or unsound practices, or violations of law.
The FDIC has broad supervision, examination and enforcement powers and authorities granted to it by the FDI

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Act and other laws.123 The reservation of authority in 354.6 clarifies that, notwithstanding the final rule, the FDIC
retains the authority to exercise those powers, as it would for any insured depository institution where it is the appropriate Federal banking agency, which includes industrial banks. While the final rule establishes certain commitments and restrictions with respect to industrial banks and Covered Companies, 354.6 recognizes that the FDIC could require industrial banks and their parent companies that are not subject to Federal consolidated supervision by the FRB to enter into written agreements, provide additional commitments, or abide by additional restrictions if necessary to maintain the safety and soundness of the industrial bank. Additionally, the FDICs powers and authorities may be applied to require written commitments and/or to impose restrictions in the context of a particular industrial bank and its parent to mitigate risk and ensure the safe and sound operation of the insured depository institution, even if not in connection with a filing pursuant to this part.
The FDIC received only one comment that addressed the proposed reservation of authority, noting that the FDICs use of its discretion in applying the restrictions on industrial banks contained in 354.5, together with a reservation of its examination authority, would allow for a practical implementation of the FDICs powers.
The FDIC is adopting 354.6 as proposed. 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 and the FDICs general examination, supervision, and enforcement authorities.
7. Responses to Additional Questions In addition to the questions discussed above, the FDIC sought responses to several additional questions. In response to the FDICs question whether there were additional categories of information that the FDIC should consider in evaluating an industrial banks ability to meet the convenience and needs of the community to be served, some commenters opposed to the rule expressed concern that the CRA
requires modernization or is otherwise inadequate to ensure industrial banks are properly serving the credit needs of 123 See
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the communities in which the industrial bank operates. Two community group commenters went further indicating that the FDIC should not move forward with this rule until CRA assessment area procedures are updated.
In January of 2020, the FDIC joined the OCC in issuing a CRA proposal to modernize CRA regulations.124 On May 20, 2020, the OCC issued its CRA final rule.125 The FDIC did not move forward with a final rule following the proposal and continues to enforce its existing CRA regulation.126 More recently, on September 21, 2020, the FRB issued an ANPR to solicit public input regarding modernizing the FRBs CRA regulatory and supervisory framework.127
Modernizing CRA regulations applicable to FDIC-supervised institutions is an important endeavor, and the FDIC is considering further rulemaking in this area, which may include seeking additional public input and engaging with the other prudential regulators. For the time being, however, the FDIC will continue to operate under the existing CRA regulations, which contain provisions including public participation in strategic plans and consideration for community development activity in insured institutions broader State-wide and regional areas.
However, the statutory factor addressing convenience and needs of the community to be served is broader than the CRA. In assessing the statutory factor convenience and needs of the community to be served, the essential considerations are the deposit and credit needs of the community to be served, the nature and extent of the opportunity available to the applicant in that location, and the willingness and ability of the applicant to serve those financial needs.128 The markets to be served and the economic and competitive conditions within the markets are important to these considerations. The applicants CRA
Plan is an important part of the FDICs evaluation of the convenience and needs to be served, but it is not the only consideration. The FDIC believes the benefits to finalizing this rule are significant, and formalizing and strengthening FDICs existing supervisory processes and policies that 124 85

FR 1204.
FR 34734.
126 State savings associations will be examined by the FDIC under the CRA regulations of the OCC, 12
CFR part 25 and 12 CFR part 195, as may be amended from time to time.
127 85 FR 66410.
128 See Statement of Policy on Applications for Deposit Insurance, 63 FR 44756 Nov. 20, 1998, amended by 67 FR 79276 Dec. 27, 2002.
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