June 6, 2019

To our clients and friends:

On May 24, 2019, the Office of the Comptroller of the Currency (“OCC”) issued its final rule (which becomes effective July 1, 2019) to allow a federal savings association with total consolidated assets of $20 billion or less as of December 31, 2017 to elect to operate with national bank powers without converting to a national bank charter.  This election would allow an eligible federal savings association to exceed its statutory commercial and consumer lending limits and avoid compliance with the qualified thrift lender test.

While the final rule is welcome news for federal savings associations, significant interpretative questions remain as to how it may be utilized by a federal savings association subsidiary of a stock or mutual holding company.   Specifically, the final rule does not address whether a subsidiary savings association of a savings and loan holding company that elects to operate with national bank powers would still be required to satisfy the qualified thrift lender test, which is a statutory requirement applicable to savings and loan holding companies.  The OCC recognizes this issue and has directed all interpretative questions to the Federal Reserve.  We have discussed this with the Federal Reserve Board staff and they are currently reviewing the final rule and its possible impact on savings and loan holding companies.  However, they have not provided further guidance on this issue.

For more information, including a summary of the OCC’s final rule, please see the attached News Alert.

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