Alert January 29, 2008

OTS Expands Permissible Activities of Savings and Loan Holding Companies

The OTS amended its regulations to expand the permissible activities of savings and loan holding companies (“SLHCs”).  Further, the OTS amended its regulations regarding the approval of certain acquisitions by SLHCs in order to conform the OTS regulations to the applicable statute.  The amended regulations become effective on April 1, 2008.

The OTS revised it regulations to enable SLHCs to engage in activities that the FRB has permitted for bank holding companies (“BHCs”) under section 4(c) of the Bank Holding Company Act of 1956, as amended (the “BHCA”).  Under section 10(c)(2)(F)(i) of the Home Owners’ Loan Act (the “HOLA”), SLHCs have the statutory authority to engage in such activities.  The OTS stated that SLHCs, which propose to engage in activities permitted for BHCs under section 4(c) of the BHCA, must do so in accordance with the conditions set forth in the FRB’s regulations for such activities.  Further, SLHCs seeking to commence services or activities permissible for BHCs under the FRB regulations pursuant to section 4(c) of the BHCA must seek prior approval from the OTS unless (a) the SLHC seeking to commence the activity (i) received a rating of “satisfactory” or better prior to January 1, 2008 or a composite rating of “1” or “2” thereafter, in its most recent examination, (ii) is not in a “troubled condition” (as defined in 12 CFR §563.555), and (iii) is commencing the activity de novo or (b) the activity is permissible under some authority other than section 10(c)(2)(F)(i) of the HOLA.

In addition to expanding the permissible activities of SLHCs, the OTS also amended its regulations regarding certain acquisitions by SLHCs.  Originally, under section 10(e)(1)(A)(iii) of the HOLA, SLHCs were prohibited, except in certain circumstances, from directly or indirectly acquiring more than 5% of the voting shares of a savings association that was not a subsidiary of the SLHC or more than 5% of the voting shares of another SLHC that was not a subsidiary of the acquiring SLHC.  However, the American Homeownership and Economic Opportunity Act of 2000 amended section 10(e)(1)(A)(iii) to replace the prohibition of such acquisitions with a regulatory approval requirement.  The OTS updated its regulations to reflect this approval requirement, making it consistent with the statute.  Additionally, the OTS has also set forth approval standards for applications for acquisitions submitted under that provision.