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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations enable affected parties to comply with the various commitments by relying on established and ongoing reports and records, to the extent possible. As such, while recognizing the difficulty in estimating the costs associated with this additional element due to the unique circumstances of each affected party, the FDIC believes the enhanced commitment should have no material impact on the estimated overall burden.
As illustrated by the preceding analysis, the final rule could pose as much as $348,000 in additional recordkeeping, reporting, and disclosure compliance costs for each Covered Company that seeks to establish or acquire an industrial bank.137 Covered Companies would also be likely to incur some regulatory costs associated with making the necessary changes to internal systems and processes. For context, the estimated $348,000
recordkeeping, reporting, and disclosure costs only comprise 0.8 percent of the median noninterest expense for the 23
existing industrial banks.138
The FDIC believes that the final rule would benefit the public by providing transparency for market participants and other interested parties.
Additionally, the FDIC believes that the final rule would benefit the public by formalizing a framework by which the FDIC would supervise industrial banks and mitigate risk to the DIF that may otherwise be presented.
It is difficult to estimate whether the final rule would serve as an incentive or disincentive for affected parties.
Decisions to establish or acquire an industrial bank depend on many considerations that the FDIC cannot accurately forecast, estimate, or model, such as future financial conditions, rates of return on capital, and innovations in the provision of financial services. The final rule would enhance transparency in the FDICs evaluation of filings, which could increase the number of applications received. However, such transparency could also serve to limit the number of applications received.
The FDIC analyzed historical trends in filings that would be subject to the final rule. Based on that analysis, and consistent with the FDICs PRA
analysis, the FDIC assumes four applications: Three deposit insurance applications, and one change in bank control notice per year, on average.
Between 2000 and 2009, the FDIC
received as many as 12 and as few as 137 $22,219.40 for all Covered Companies that seek to establish or acquire an industrial bank, and an additional $326,000 for those institutions required to adopt, implement, and adhere to a contingency plan.
138 FDIC Call Report Data, December 31, 2019.

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two deposit insurance applications from entities seeking to organize an industrial bank; between 2017 and 2019, the FDIC
received as many as four and as few as two such applications. Therefore, the FDIC believes it is reasonable to assume an annual deposit insurance application volume of four for the purpose of this analysis. In addition, the FDIC has received three change in bank control notices relating to industrial banks since 2010; therefore, the FDIC believes it is reasonable to assume an annual volume of one for the purpose of this analysis.
C. Safety and Soundness of Affected Banks The FDIC believes the final rule is consistent with supervisory approaches the FDIC has used to insulate industrial banks from risks posed by their parent companies, and that these supervisory approaches have been effective. For example, as previously noted, only two small industrial banks failed during the crisis. The FDIC believes the final rule would provide a prudentially sound framework for reaching decisions on industrial bank filings that the FDIC
receives from time to time.
D. Broad Effects on the Banking Industry To the extent that the final rule results in higher numbers of industrial banks, the increase could lead to increased competition for depositors and borrowers. The increased competition could result in one or more of: Higher yields on deposit products, lower interest rates on loan products, reduced fees, less restrictive underwriting standards, greater account opening bonuses for new customers, and other benefits. To the extent that the final rule does not result in a higher number of industrial banks, this would not be expected to lead to increased competition for depositors and borrowers.
E. Expected Effects on Consumers To the degree the final rule results in an increase in the number of industrial banks, consumers could benefit from increased competition within the banking industry. These benefits could take the form of higher rates on deposit accounts, improved access to credit with better terms or lower rates, and lower fees for banking services. To the extent that the proposed rule does not result in a higher number of industrial banks, this would not be expected to lead to potential benefits from increased competition within the banking industry. Finally, in response to comments the final rule includes a commitment for a Covered Company to
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inform the FDIC about the Covered Companys systems for protecting the security, confidentiality, and integrity of consumer and nonpublic personal information. This aspect of the final rule is expected to benefit consumers by helping to mitigate potential consumer protection risks.
F. Expected Effects on the Economy The final rules effects on the economy are likely to be modest, in line with its potential effects on the banking industry and consumers. If the final rule results in a modest increase in the number of industrial banks or improvement in the provision of banking products and services, the effects on the economy are likely to be modest.
VI. Regulatory Analysis A. Regulatory Flexibility Act The Regulatory Flexibility Act RFA
generally requires an agency, in connection with a final rule, to prepare and make available for public comment a final regulatory flexibility analysis that describes the impact of a final rule on small entities.139 However, a final regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.140 The Small Business Administration SBA has defined small entities to include banking organizations with total assets of less than or equal to $600 million.141
Generally, the FDIC considers a significant effect to be a quantified effect in excess of 5 percent of total annual salaries and benefits per institution, or 2.5 percent of total noninterest expenses. The FDIC has considered the potential impact of the final rule on small entities in accordance with the RFA. Based on its analysis and for the reasons stated below, the FDIC believes that this final rule will not have a significant economic impact on a substantial number of small entities.
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U.S.C. 601 et seq.
U.S.C. 605b.
141 The SBA defines a small banking organization as having $600 million or less in assets, where an organizations assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year. See 13 CFR
121.201 as amended, effective Aug. 19, 2019. In its determination, the SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit. 13 CFR 121.103.
Following these regulations, the FDIC uses a covered entitys affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the covered entity is small for the purposes of RFA.
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