Banking and Finance Law Daily OCC proposes revised premises requirements for banks, savings associations
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Tuesday, January 5, 2021

OCC proposes revised premises requirements for banks, savings associations

By Charles A. Menke, J.D.

The proposed rule would clarify the standards for determining when real estate is necessary for the transaction of an institution’s business.

The Office of the Comptroller of the Currency has issued a notice of proposed rulemaking to amend its regulations on national bank or Federal savings association ownership of real property. The proposal would codify permissibility standards for real estate used as national bank or Federal savings association premises, and includes the implementation of an occupancy test and excess capacity standards that would allow national banks and Federal savings associations to better ascertain whether an acquisition or holding of real estate is permissible. Comments on the proposal are due within 45 days after publication in the Federal Register.

The OCC noted that it has customarily deferred to court cases and published OCC precedent to cover the field of requirements for national bank and Federal savings association ownership of premises. However, while the precedent-based approach has provided flexibility, it is also limited. Among other things, the OCC pointed out that changes in the commercial real estate market has presented difficulties in applying premises precedent as "[r]ecent years having seen the growth of mixed-use developments combining office space with retail space, residential space, and other uses not typically found in a traditional office building." In addition, "with the development of robust teleconferencing and the arrival of the COVID-19 pandemic, many companies are moving towards offsite, shared, or virtual work spaces." As a result, "[i]t is increasingly difficult for national banks and Federal savings associations to rely on precedent focusing on traditional office arrangements to determine whether and to what extent they may own mixed-use developments, install amenities to compete with those offered by other industries (including technology companies), or make use of alternative work arrangements."

According to the OCC, the proposal would codify and clarify a transparent and consistent set of principles for national bank and Federal savings association premises that meet the needs of modern national banks and Federal savings associations while also ensuring consistent application of and adherence to the limitations of 12 USC 29, which governs national bank ownership of real estate, as well as the Home Owners Loan Act. The NPR would also consolidate the OCC’s rule on sharing national bank or Federal savings association space and employees with the rule covering ownership of property. Although the OCC has proposed to continue covering national bank and Federal savings association charters under the same regulation, because different statutory regimes cover each charter, the OCC has requested comments on whether to apply different requirements to national banks and Federal savings associations.

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