• Federal Thrifts May Consider Charter Conversion as Transfer Date Approaches
  • July 6, 2011
  • Law Firm: Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P. - Washington Office
  • On July 21, 2011, the Office of Thrift Supervision (OTS) will be eliminated, and supervisory and regulatory authority over federally chartered savings institutions will be transferred to the Office of the Comptroller of the Currency (OCC).

    On that date, the OCC will assume all functions and authority from the OTS relating to federal thrifts and the FDIC will assume all functions and authority from the OTS relating to state thrifts. The Federal Reserve will acquire supervisory and rulemaking authority over all savings and loan holding companies, and also become the supervisor of all subsidiaries of savings and loan holding companies other than depository institutions (the federal thrift subsidiaries of savings and loan holding companies will be supervised by the OCC). As a result of these changes, the OCC will become the primary federal regulator for all national banks and federal thrifts, and the Federal Reserve will be the primary federal regulator for all depository institution holding companies. The FDIC will continue to oversee the deposit insurance fund and retain its resolution authority over depository institutions.

    With the looming substitution of the OCC as their primary federal regulator, federal thrifts may wish to give serious consideration to converting from a federal to a state charter, thereby becoming subject to supervisory and rulemaking authority of their state regulator. Many small federal savings institutions may view this as an important regulatory shift due to concerns about the OCC’s ability to understand their business and its more stringent attitude on loan classification. Further, Dodd-Frank removed certain historical advantages of a federal thrift charter, and leveled the playing field between national banks and federal thrifts by subjecting federal thrifts to the weaker national bank preemption standard with respect to various types of consumer protection laws. Federally chartered savings institutions may find significant advantages in having a local regulator of their commercial bank or savings bank, which lives in, and understands their markets. Additionally, federal thrifts may realize a decrease in annual regulatory assessments under a state regulatory regime.

    It is important to note that The Home Owners’ Loan Act, as amended (HOLA), the primary statute governing the establishment, operation, and regulation of federal thrifts and savings and loan holding companies, will survive under Dodd-Frank from and after the transfer date with relatively few changes. Also, although Dodd-Frank preserves to the OCC the power to grant new federal thrift charters, other aspects of Dodd-Frank diminish the historical benefits of the federal thrift charter and level the playing field between national banks and thrifts, as discussed above.