B-199210.OM, MAR 2, 1981

B-199210.OM: Mar 2, 1981

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GGD - JIM GRACE: THIS IS IN RESPONSE TO YOUR REQUEST FOR OUR OPINION ON WHETHER AND TO WHAT EXTENT EXISTING FEDERAL LEGISLATION GOVERNING THE EXAMINATION OF COMMERCIAL BANKING INSTITUTIONS BY THE FEDERAL BANK SUPERVISORY AGENCIES PERMITS THE SUPERVISORY AGENCIES TO SHARE EXAMINERS. WE HAVE FOUND NO AUTHORITY FOR THE FEDERAL BANK SUPERVISORY AGENCIES TO SHARE EXAMINERS. MOST FEDERAL STATUTES PROVIDING EXAMINATION AUTHORITY ARE SPECIFIC ONLY IN AUTHORIZING EXAMINATIONS TO BE CONDUCTED BY THE EXAMINERS OF THE PARTICULAR AGENCY IN QUESTION. IT IS OUR OPINION. ONE EXCEPTION IS FOUND IN 12 U.S.C. 481. THE OTHER EXCEPTION IS 12 U.S.C. 1725(C)(5). AN ANALYSIS OF OUR CONCLUSIONS AS TO THE AUTHORITIES APPLICABLE TO EACH AGENCY IS ATTACHED.

B-199210.OM, MAR 2, 1981

SUBJECT: LEGAL OPINION ON MATTERS RELATED TO REVIEW OF THE FEDERAL STRUCTURE FOR REGULATING COMMERCIAL BANKS (FILE B-199210; CODE 233040)

TEAM LEADER, GGD - JIM GRACE:

THIS IS IN RESPONSE TO YOUR REQUEST FOR OUR OPINION ON WHETHER AND TO WHAT EXTENT EXISTING FEDERAL LEGISLATION GOVERNING THE EXAMINATION OF COMMERCIAL BANKING INSTITUTIONS BY THE FEDERAL BANK SUPERVISORY AGENCIES PERMITS THE SUPERVISORY AGENCIES TO SHARE EXAMINERS.

WITH TWO EXCEPTIONS, WE HAVE FOUND NO AUTHORITY FOR THE FEDERAL BANK SUPERVISORY AGENCIES TO SHARE EXAMINERS. MOST FEDERAL STATUTES PROVIDING EXAMINATION AUTHORITY ARE SPECIFIC ONLY IN AUTHORIZING EXAMINATIONS TO BE CONDUCTED BY THE EXAMINERS OF THE PARTICULAR AGENCY IN QUESTION. IT IS OUR OPINION, THEREFORE, THAT LEGISLATION WOULD BE NEEDED IN MOST CASES TO AUTHORIZE THE FEDERAL BANK SUPERVISORY AGENCIES TO SHARE EXAMINERS.

ONE EXCEPTION IS FOUND IN 12 U.S.C. 481, WHICH SPECIFICALLY AUTHORIZES THE COMPTROLLER OF THE CURRENCY TO EXAMINE FOREIGN OPERATIONS OF STATE MEMBER BANKS UPON REQUEST FROM THE FEDERAL RESERVE BOARD. THE OTHER EXCEPTION IS 12 U.S.C. 1725(C)(5), WHICH APPEARS TO PERMIT THE FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION TO USE THE SERVICES OF EXAMINERS FROM OTHER AGENCIES WITH THE CONSENT OF SUCH AGENCIES.

AN ANALYSIS OF OUR CONCLUSIONS AS TO THE AUTHORITIES APPLICABLE TO EACH AGENCY IS ATTACHED.

ATTACHMENT

REVIEW OF THE FEDERAL STRUCTURE FOR REGULATING COMMERCIAL BANKS

DIGEST:

THERE IS NO AUTHORITY IN MOST CASES FOR FEDERAL BANK SUPERVISORY AGENCIES TO SHARE EXAMINERS OR OTHERWISE EXAMINE FINANCIAL INSTITUTIONS NOT UNDER THEIR RESPECTIVE JURISDICTIONS. EXCEPTION EXISTS UNDER 12 U.S.C. 481 FOR OCC EXAMINATIONS OF FOREIGN OPERATIONS OF STATE MEMBER BANKS UPON REQUEST OF FRS. ALSO, PROVISION IN 12 U.S.C. 1725(C)(5) APPEARS TO AUTHORIZE EXAMINATION ON BEHALF OF FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION BY OTHER SUPERVISORY AGENCIES.

SHARING OF BANK EXAMINERS BY OCC, FRS, AND FDIC.

THE OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC), THE FEDERAL RESERVE SYSTEM (FRS), AND THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) HAVE STATUTORY AUTHORITY TO CONDUCT BANK EXAMINATIONS. THE OCC'S AUTHORITY IS FOUND IN 12 U.S.C. 481; FRS' IN 12 U.S.C. 248 AND 1844(C); AND THE FDIC'S IN 12 U.S.C. 1820.

WITH RESPECT TO OCC, 12 U.S.C. 481 PROVIDES:

"THE COMPTROLLER OF THE CURRENCY, WITH THE APPROVAL OF THE SECRETARY OF THE TREASURY, SHALL APPOINT EXAMINERS WHO SHALL EXAMINE EVERY NATIONAL BANK AS OFTEN AS THE COMPTROLLER SHALL DEEM NECESSARY *** PROVIDED, THAT IN MAKING THE EXAMINATION OF ANY NATIONAL BANK THE EXAMINERS SHALL INCLUDE SUCH EXAMINATION OF THE AFFAIRS OF ALL ITS AFFILIATES OTHER THAN MEMBER BANKS AS SHALL BE NECESSARY TO DISCLOSE FULLY THE RELATIONS BETWEEN SUCH BANK AND SUCH AFFILIATES AND THE EFFECT OF SUCH RELATIONS UPON THE AFFAIRS OF SUCH BANK ***.

"*** THE EXAMINERS *** MAKING THE EXAMINATIONS OF NATIONAL BANKING ASSOCIATIONS AND AFFILIATES THEREOF *** SHALL BE EMPLOYED BY THE COMPTROLLER OF THE CURRENCY WITH THE APPROVAL OF THE SECRETARY OF THE TREASURY; ***. THE COMPTROLLER OF THE CURRENCY, UPON THE REQUEST OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, IS AUTHORIZED TO ASSIGN EXAMINERS APPOINTED UNDER THIS SECTION TO EXAMINE FOREIGN OPERATIONS OF STATE BANKS WHICH ARE MEMBERS OF THE FEDERAL RESERVE SYSTEM."

UNDER SECTION 481, OCC IS AUTHORIZED TO EXAMINE ALL NATIONAL BANKS AND THEIR AFFILIATES, AND TO EXAMINE FOREIGN OPERATIONS OF STATE MEMBER BANKS UPON REQUEST FROM THE FRS. FN1 MEMBER BANKS OF THE FRS ARE OTHERWISE SPECIFICALLY EXCLUDED FROM OCC'S EXAMINATION AUTHORITY UNDER 12 U.S.C. 481. BASED ON THE FOREGOING IT APPEARS THAT OCC LACKS AUTHORITY TO EXAMINE ANY FINANCIAL INSTITUTIONS OTHER THAN THOSE NAMED IN 12 U.S.C. 481. FN2 THUS, WE FIND NO BASIS FOR OCC EXAMINERS TO BE USED BY THE FRS OR THE FDIC TO EXAMINE BANKS UNDER THE SUPERVISORY JURISDICTION OF THE FRS OR FDIC.

LIKEWISE WE FIND NO AUTHORITY FOR OCC TO USE THE EXAMINERS OF THE FRS AND FDIC TO CONDUCT EXAMINATIONS OF NATIONAL BANKS PURSUANT TO 12 U.S.C. 481. AS NOTED ABOVE, SECTION 481 PROVIDES THAT:

"*** THE EXAMINERS *** MAKING THE EXAMINATIONS OF NATIONAL BANKING ASSOCIATIONS AND AFFILIATES THEREOF *** AND OTHER PERSONS WHOSE SERVICES MAY BE REQUIRED IN CONNECTION WITH SUCH EXAMINATIONS *** SHALL BE EMPLOYED BY THE COMPTROLLER OF THE CURRENCY ***."

THIS LANGUAGE EXPRESSLY REQUIRES THAT OCC-EMPLOYED EXAMINERS CONDUCT THE EXAMINATIONS AUTHORIZED UNDER SECTION 481. A STATUTE THAT MANDATES A THING TO BE DONE IN A GIVEN MANNER NORMALLY IMPLIES THAT IT SHALL NOT BE DONE IN ANY OTHER MANNER. BOTANY WORSTED MILLS V. UNITED STATES, 278 U. S. 282 (1929); RALEIGH AND G. R. CO. V. REID, 80 U. S. 269 (1871).

THIS IMPLICATION SEEMS VALID HERE WHEN CONTRASTED WITH CONGRESSIONAL ACTIONS IN OTHER CONTEXTS. CONGRESS HAS BEEN MORE SPECIFIC IN AUTHORIZING CERTAIN FEDERAL AGENCIES TO USE EXAMINERS OR AGENTS FROM OTHER AGENCIES. THUS AGENTS OF THE CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY, AND AGENTS OF THE IMMIGRATION AND NATURALIZATION SERVICE (INS), DEPARTMENT OF JUSTICE, HAVE BEEN "CROSS DESIGNATED" TO PERFORM THE FUNCTIONS OF THE OTHER AGENCY AT BORDER AREAS. SEE, E.G., UNITED STATES V. THOMPSON, 475 F.2D 1359, 1361-63 (5TH CIR. 1973). IN THE CASE OF INS, THIS PRACTICE IS BASED ON THE ATTORNEY GENERAL'S AUTHORITY UNDER 8 U.S.C. 1103:

"*** TO CONFER OR IMPOSE UPON ANY EMPLOYEE OF THE UNITED STATES, WITH THE CONSENT OF THE HEAD OF THE DEPARTMENT OR OTHER INDEPENDENT ESTABLISHMENT UNDER WHOSE JURISDICTION THE EMPLOYEE IS SERVING, ANY OF THE POWERS, PRIVILEGES, OR DUTIES CONFERRED OR IMPOSED BY THIS CHAPTER OR REGULATIONS ISSUED THEREUNDER UPON OFFICERS OR EMPLOYEES OF THE SERVICE. ***"

IN THE CASE OF THE CUSTOMS SERVICE, SUCH AUTHORITY IS BASED ON THE STATUTORY DEFINITION OF "OFFICER OF THE CUSTOMS" AND "CUSTOMS OFFICER" AS INCLUDING "*** ANY AGENT OR OTHER PERSON AUTHORIZED BY LAW OR DESIGNATED BY THE SECRETARY OF THE TREASURY TO PERFORM ANY DUTIES OF AN OFFICER OF THE CUSTOMS SERVICE." 19 U.S.C. 1401(I).

THE EXAMINATION AUTHORITY OF THE FRS IS PROVIDED IN 12 U.S.C. 248 AND 12 U.S.C. 1844(C). SECTION 248 OF TITLE 12 PROVIDES THAT:

"THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SHALL BE AUTHORIZED AND EMPOWERED:

"(A) TO EXAMINE AT ITS DISCRETION THE ACCOUNTS, BOOKS, AND AFFAIRS OF EACH FEDERAL RESERVE BANK AND OF EACH MEMBER BANK AND TO REQUIRE SUCH STATEMENTS AND REPORTS AS IT MAY DEEM NECESSARY. ***"

SECTION 248(A) THUS AUTHORIZES THE FEDERAL RESERVE BOARD TO EXAMINE FEDERAL RESERVE BANKS AND MEMBER BANKS OF THE FRS, WHICH INCLUDES NATIONAL AND STATE MEMBER BANKS. HOWEVER, WE FIND NO EXPRESS OR IMPLIED AUTHORITY UNDER SECTION 248(A) FOR THE BOARD TO EXAMINE INSTITUTIONS OTHER THAN THESE BANKS, AND WE HAVE FOUND NO OTHER STATUTORY BASIS FOR SUCH AUTHORITY.

FOR PURPOSES OF ENFORCING THE PROVISIONS OF THE BANK HOLDING COMPANY ACT, AS AMENDED, 12 U.S.C. 1841 ET SEQ., SECTION 1844(C) OF TITLE 12 PROVIDES THAT:

"(C) THE BOARD FROM TIME TO TIME MAY REQUIRE REPORTS UNDER OATH TO KEEP IT INFORMED AS TO WHETHER THE PROVISIONS OF THIS CHAPTER AND SUCH REGULATIONS AND ORDERS ISSUED THEREUNDER HAVE BEEN COMPLIED WITH; AND THE BOARD MAY MAKE EXAMINATIONS OF EACH BANK HOLDING COMPANY AND EACH SUBSIDIARY THEREOF, THE COST OF WHICH SHALL BE ASSESSED AGAINST, AND PAID BY, SUCH HOLDING COMPANY. THE BOARD SHALL, AS FAR AS POSSIBLE, USE THE REPORTS OF EXAMINATIONS MADE BY THE COMPTROLLER OF THE CURRENCY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, OR THE APPROPRIATE STATE BANK SUPERVISORY AUTHORITY FOR THE PURPOSES OF THIS SECTION."

THUS THE BOARD IS AUTHORIZED TO EXAMINE "EACH SUBSIDIARY" OF THE BANK HOLDING COMPANIES UNDER ITS JURISDICTION. SUCH SUBSIDIARIES AS DEFINED IN THE ACT, WOULD INCLUDE ANY NATIONAL BANK, INSURED OR UNINSURED STATE MEMBER BANK, OR INSURED OR UNINSURED STATE NON-MEMBER BANK. SEE 12 U.S.C. 1841(D).

THIS EXAMINATION AUTHORITY CLEARLY OVERLAPS THE AUTHORITY OF OCC AND FDIC, BUT IT IS GRANTED FOR AN ENTIRELY DIFFERENT PURPOSE. EVEN THOUGH A BANK EXAMINATION CONDUCTED FOR PURPOSES OF THE BANK HOLDING COMPANY ACT MAY NOT DIFFER SUBSTANTIALLY FROM AN EXAMINATION CONDUCTED FOR FEDERAL DEPOSIT INSURANCE PURPOSES, SECTION 1844(C) DOES NOT AUTHORIZE THE BOARD TO CONDUCT THE LATTER TYPE OF EXAMINATION. WE DO NOT BELIEVE THAT AN EXPRESS GRANT OF AUTHORITY FOR THE FEDERAL RESERVE BOARD TO EXAMINE THESE AFFILIATE BANKS FOR PURPOSES OF ENFORCING THE BANK HOLDING COMPANY ACT IMPLIES AUTHORITY FOR FRS TO EXAMINE SUCH BANKS ON BEHALF OF OCC OR FDIC FOR INSURANCE OR OTHER PURPOSES.

IN ADDITION, WHILE THE OCC HAS AUTHORITY (12 U.S.C. 481) TO EXAMINE FOREIGN OPERATIONS OF FRS MEMBER BANKS AND FDIC IS AUTHORIZED TO EXAMINE INSURED MEMBER BANKS (12 U.S.C. 1820), WE HAVE FOUND NO LEGAL AUTHORITY OTHERWISE PERMITTING THESE OR OTHER FINANCIAL REGULATORY AGENCIES TO EXAMINE MEMBER BANKS ON BEHALF OF THE FEDERAL RESERVE BOARD, OR AFFILIATES OF BANK HOLDING COMPANIES ON BEHALF OF THE BOARD. FN3 THE FACT THAT SECTION 1844(C) REQUIRES THE BOARD, WHERE POSSIBLE, TO USE THE REPORTS OF OCC, FDIC AND APPROPRIATE STATE AGENCIES DOES NOT, IN OUR VIEW, CONSTITUTE AUTHORITY FOR THE FEDERAL RESERVE BOARD TO DIRECT THOSE AGENCIES TO CONDUCT EXAMINATIONS ON BEHALF OF THE BOARD BEYOND THEIR REGULAR EXAMINATIONS.

WITH RESPECT TO THE EXAMINATION AUTHORITY OF THE FDIC, 12 U.S.C. 1820(B) PROVIDES THAT:

"(B) THE BOARD OF DIRECTORS SHALL APPOINT EXAMINERS WHO SHALL HAVE POWER, ON BEHALF OF THE CORPORATION, TO EXAMINE ANY INSURED STATE NONMEMBER BANK (EXCEPT A DISTRICT BANK), ANY INSURED STATE BRANCH OF A FOREIGN BANK, ANY STATE BRANCH OF A FOREIGN BANK MAKING APPLICATION TO BECOME AN INSURED BANK, ANY STATE NON-MEMBER BANK OR OTHER INSTITUTION MAKING APPLICATION TO BECOME AN INSURED BANK, AND ANY CLOSED INSURED BANK OR BRANCH, WHENEVER IN THE JUDGMENT OF THE BOARD OF DIRECTORS AN EXAMINATION OF THE BANK IS NECESSARY. ADDITION TO THE EXAMINATIONS PROVIDED FOR IN THE PRECEDING SENTENCE, SUCH EXAMINERS SHALL HAVE LIKE POWER TO MAKE A SPECIAL EXAMINATION OF ANY STATE MEMBER BANK AND ANY NATIONAL BANK, INSURED FEDERAL BRANCH OF A FOREIGN BANK, OR DISTRICT BANK, WHENEVER IN THE JUDGMENT OF THE BOARD OF DIRECTORS SUCH SPECIAL EXAMINATION IS NECESSARY TO DETERMINE THE CONDITION OF ANY SUCH BANK FOR INSURANCE PURPOSES. IN MAKING EXAMINATIONS OF INSURED BANKS, EXAMINERS APPOINTED BY THE CORPORATION SHALL HAVE POWER ON BEHALF OF THE CORPORATION TO MAKE SUCH EXAMINATIONS OF THE AFFAIRS OF ALL AFFILIATES OF SUCH BANKS AS SHALL BE NECESSARY TO DISCLOSE FULLY THE RELATIONS BETWEEN SUCH BANKS AND THEIR AFFILIATES AND THE EFFECT OF SUCH RELATIONS UPON SUCH BANKS, AND IN THE CASE OF A FOREIGN BANK, A BINDING COMMITMENT BY SUCH BANK TO PERMIT SUCH EXAMINATION TO THE EXTENT DETERMINED BY THE BOARD OF DIRECTORS TO BE NECESSARY TO CARRY OUT THE PURPOSES OF THIS CHAPTER SHALL BE REQUIRED AS A CONDITION TO THE INSURANCE OF ANY DEPOSITS. EACH EXAMINER SHALL HAVE POWER TO MAKE A THOROUGH EXAMINATION OF ALL OF THE AFFAIRS OF THE BANK AND ITS AFFILIATES, AND SHALL MAKE A FULL AND DETAILED REPORT OF THE CONDITION OF THE BANK TO THE CORPORATION. THE BOARD OF DIRECTORS IN LIKE MANNER SHALL APPOINT CLAIM AGENTS WHO SHALL HAVE POWER TO INVESTIGATE AND EXAMINE ALL CLAIMS FOR INSURED DEPOSITS."

UNDER SECTION 1820(B), FDIC HAS AUTHORITY TO EXAMINE BANKS AND BRANCHES WHICH ARE INSURED BY FDIC AND THOSE APPLYING FOR FDIC INSURANCE, AND AFFILIATES OF INSURED BANKS. SUCH AUTHORITY INCLUDES EXAMINATIONS OF INSURED STATE NONMEMBER BANKS AND INSURED STATE BRANCHES OF FOREIGN BANKS. IN ADDITION, FDIC IS AUTHORIZED TO MAKE SPECIAL EXAMINATIONS OF ANY STATE MEMBER BANK, NATIONAL BANK, OR INSURED FEDERAL BRANCH OF A FOREIGN BANK TO DETERMINE ITS CONDITION FOR INSURANCE PURPOSES.

THE LEGISLATIVE HISTORY OF SECTION 1820(B) MAKES IT CLEAR THAT CONGRESS INTENDED TO LIMIT FDIC'S USE OF SPECIAL EXAMINATIONS OF MEMBER AND NATIONAL BANKS. IN THE CONFERENCE REPORT ON THIS LEGISLATION, H. REP. NO. 3049, 81ST CONG., 2ND SESS. 3-4 (1950), IT WAS STATED:

"IN PROVIDING DIRECT AUTHORITY TO THE CORPORATION TO MAKE A SPECIAL EXAMINATION OF ANY NATIONAL BANK, DISTRICT BANK, OR STATE MEMBER BANK, THE CONFEREES WERE FIRMLY OF THE OPINION THAT SUCH AUTHORITY IS NOT TO BE UTILIZED BY THE CORPORATION TO EMBARK UPON A PROGRAM OF REGULAR PERIODIC EXAMINATIONS OF SUCH BANKS, WHICH WOULD ONLY RESULT IN A NEEDLESS DUPLICATION OF EFFORT. SUCH SPECIAL EXAMINATION AUTHORITY IS TO BE UTILIZED BY THE CORPORATION ONLY IN A CASE WHERE, IN THE JUDGMENT OF THE BOARD OF DIRECTORS, AFTER A REVIEW OF THE FEDERAL RESERVE OR COMPTROLLER OF THE CURRENCY EXAMINATION REPORTS, THERE ARE INDICATIONS THAT THE BANK MAY BE A PROBLEM CASE, OR THAT IT IS IN A CONDITION LIKELY TO RESULT IN LOSS TO THE DEPOSITORS OR TO THE CORPORATION."

THUS IT IS CLEAR FROM THE LANGUAGE OF SECTION 1820(B) AND ITS LEGISLATIVE HISTORY THAT FDIC IS AUTHORIZED UNDER THAT PROVISION TO EXAMINE INSURED BANKS ONLY UNDER LIMITED CIRCUMSTANCES AND ONLY FOR INSURANCE PURPOSES. SECTION 1820(B) OTHERWISE DOES NOT PROVIDE FDIC EXAMINERS WITH AUTHORITY TO EXAMINE UNINSURED BANKS OR OTHER TYPES OF FINANCIAL INSTITUTIONS. FN4 AS WITH OCC AND FRS, WE HAVE FOUND NO LEGAL AUTHORITY WHICH WOULD PERMIT OTHER REGULATORY AGENCIES TO CONDUCT EXAMINATIONS OF INSURED BANKS ON BEHALF OF FDIC PURSUANT TO SECTION 1820(B).

BASED ON THE FOREGOING, IT APPEARS THAT OCC, FRS, AND FDIC HAVE NO LEGAL BASIS FOR SHARING OR EXCHANGING EXAMINERS, EXCEPT FOR OCC EXAMINATIONS OF THE FOREIGN OPERATIONS OF STATE MEMBER BANKS.

EXAMINATION AUTHORITY OF THE FHLBB AND THE NCUA

THE EXAMINATION AUTHORITY OF THE FEDERAL HOME LOAN BANK BOARD (FHLBB) IS CONTAINED IN 12 U.S.C. 1440, 1464(A), AND 1726.

SECTION 1440 OF TITLE 12 AUTHORIZES FHLBB TO EXAMINE FEDERAL HOME LOAN BANKS AND MAKES FHLBB EXAMINERS SUBJECT TO THE SAME REQUIREMENTS AND RESPONSIBILITIES AS OCC EXAMINERS:

"THE BOARD SHALL FROM TIME TO TIME, AT LEAST ANNUALLY, REQUIRE EXAMINATIONS AND REPORTS OF CONDITIONS OF ALL FEDERAL HOME LOAN BANKS IN SUCH FORM AS THE BOARD SHALL PRESCRIBE AND SHALL FURNISH PERIODICALLY STATEMENTS BASED UPON THE REPORTS OF THE BANKS TO THE BOARD. FOR THE PURPOSES OF THIS CHAPTER, EXAMINERS APPOINTED BY THE BOARD SHALL BE SUBJECT TO THE SAME REQUIREMENTS, RESPONSIBILITIES, AND PENALTIES AS ARE APPLICABLE TO EXAMINERS UNDER CHAPTERS 2 AND 3 OF THIS TITLE, AND SHALL HAVE, IN THE EXERCISE OF FUNCTIONS UNDER THIS CHAPTER, THE SAME POWERS AND PRIVILEGES AS ARE VESTED IN SUCH EXAMINERS BY LAW."

THERE ARE NO OTHER PROVISIONS WHICH AUTHORIZE ANY OTHER AGENCY TO MAKE EXAMINATIONS OF FEDERAL HOME LOAN BANKS, AND WE HAVE FOUND NO AUTHORITY FOR THE FHLBB TO DELEGATE ITS EXAMINATION AUTHORITY TO OTHER AGENCIES. FHLBB EXAMINERS APPEAR TO HAVE THE SAME EXCLUSIVE EXAMINATION AUTHORITY OVER SUCH BANKS THAT IS GRANTED TO OCC EXAMINERS WITH RESPECT TO EXAMINATIONS OF NATIONAL BANKS UNDER 12 U.S.C. 481.

UNDER 12 U.S.C. 1464(A), THE FHLBB "IS AUTHORIZED, UNDER SUCH RULES AND REGULATIONS AS IT MAY PRESCRIBE, TO PROVIDE FOR THE *** EXAMINATION" OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS. FN5 ALTHOUGH SECTION 1464(A) DOES NOT EXPLICITLY REQUIRE THAT FHLBB EXAMINERS BE USED FOR SUCH EXAMINATIONS, IT IS REASONABLE TO CONCLUDE THAT THE FHLBB EXAMINERS PROVIDED FOR IN 12 U.S.C. 1440 WERE TO BE USED FOR EXAMINATIONS UNDER SECTION 1464(A). WITH THE EXAMINATIONS AUTHORIZED UNDER SECTION 1440, WE BELIEVE THAT FHLBB EXAMINERS HAVE SOLE AUTHORITY TO CONDUCT EXAMINATIONS OF FEDERAL SAVINGS AND LOANS, TO THE EXCLUSION OF ALL OTHER AGENCY EXAMINERS.

UNDER 12 U.S.C. 1726(A), THE FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION (FSLIC), AN ENTITY OF THE FHLBB WHICH OPERATES UNDER THE DIRECTION OF FHLBB, IS AUTHORIZED TO INSURE AND EXAMINE FOR INSURANCE PURPOSES FEDERAL AND STATE CHARTERED SAVINGS AND LOAN ASSOCIATIONS. SECTION 1726(B) PROVIDES:

"(B) APPLICATION FOR SUCH INSURANCE SHALL BE MADE IMMEDIATELY BY EACH FEDERAL SAVINGS AND LOAN ASSOCIATION, AND MAY BE MADE AT ANY TIME BY OTHER ELIGIBLE INSTITUTIONS. SUCH APPLICATIONS SHALL BE IN SUCH FORM AS THE CORPORATION SHALL PRESCRIBE, AND SHALL CONTAIN AN AGREEMENT (1) TO PAY THE REASONABLE COST OF SUCH EXAMINATIONS AS THE CORPORATION SHALL DEEM NECESSARY, IN CONNECTION WITH SUCH INSURANCE, AND (2) IF THE INSURANCE IS GRANTED, TO PERMIT AND PAY THE COST OF SUCH EXAMINATIONS AS IN THE JUDGMENT OF THE CORPORATION MAY FROM TIME TO TIME BE NECESSARY FOR ITS PROTECTION AND THE PROTECTION OF OTHER INSURED INSTITUTIONS, TO PERMIT THE CORPORATION TO HAVE ACCESS TO ANY INFORMATION OR REPORT WITH RESPECT TO ANY EXAMINATIONS MADE BY ANY PUBLIC REGULATORY AUTHORITY AND TO FURNISH ANY ADDITIONAL INFORMATION WITH RESPECT THERETO AS THE CORPORATION MAY REQUIRE, AND TO PAY THE PREMIUM CHARGES FOR INSURANCE AS HEREINAFTER PROVIDED. ***"

IN GUARDIAN FEDERAL SAVINGS AND LOAN ASSOCIATION V. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, 589 F.2D 658 (D.C. CIR. 1978), THE COURT SUSTAINED AN FSLIC REGULATION THAT REQUIRED INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE FINANCIAL INSTITUTIONS INSURED BY FSLIC. THE COURT HELD THAT EXAMINATIONS UNDER SECTION 1726(B) INCLUDED AUDITS REQUIRED BY FSLIC REGULATIONS, AND THE STATUTORY PHRASE REQUIRING INSTITUTIONS TO "PERMIT SUCH EXAMINATIONS AS IN THE JUDGMENT OF THE CORPORATION MAY BE *** NECESSARY" GIVES THE CORPORATION DISCRETION TO REQUIRE AUDITS BY PERSONS OTHER THAN FSLIC STAFF. 589 F.2D AT 665.

IN ADDITION, 12 U.S.C. 1725(C)(5) PROVIDES THAT FSLIC SHALL HAVE POWER -

"(5) TO APPOINT AND TO FIX THE COMPENSATION, BY THE FEDERAL HOME LOAN BANK BOARD, OF SUCH OFFICERS, EMPLOYEES, ATTORNEYS, OR AGENTS, AS SHALL BE NECESSARY FOR THE PERFORMANCE OF ITS DUTIES UNDER THIS SUBCHAPTER. NOTHING IN THIS SUBCHAPTER OR ANY OTHER PROVISION OF LAW SHALL BE CONSTRUED TO PREVENT THE APPOINTMENT AND COMPENSATION AS AN OFFICER, ATTORNEY, OR EMPLOYEE OF THE CORPORATION, OF ANY OFFICER, ATTORNEY, OR ANY EMPLOYEE OF ANY BOARD, CORPORATION, COMMISSION, ESTABLISHMENT, EXECUTIVE DEPARTMENT, OR INSTRUMENTALITY OF THE GOVERNMENT. THE CORPORATION, WITH THE CONSENT OF ANY BOARD, CORPORATION, COMMISSION, ESTABLISHMENT, EXECUTIVE DEPARTMENT, OR INSTRUMENTALITY OF THE GOVERNMENT, INCLUDING ANY FIELD SERVICE THEREOF, MAY AVAIL ITSELF OF THE USE OF INFORMATION, SERVICES, AND FACILITIES THEREOF IN CARRYING OUT THE PROVISIONS OF THIS SUBCHAPTER. ***"

THIS PROVISION IN ESSENTIALLY ITS PRESENT FORM DATES BACK TO THE NATIONAL HOUSING ACT OF 1934 (SEC. 402(C)(5), 48 STAT. 1256). WE HAVE FOUND NO LEGISLATIVE HISTORY OR OTHER BACKGROUND INFORMATION WHICH SHEDS LIGHT ON THE SCOPE OR MECHANICS OF THE UNDERSCORED LANGUAGE QUOTED ABOVE. HOWEVER, THIS LANGUAGE SEEMS BROAD ENOUGH ON ITS FACE TO PERMIT FSLIC TO USE EXAMINERS FROM OTHER AGENCIES WITH THE CONSENT OF SUCH AGENCIES. THE COURT IN GUARDIAN FEDERAL SAVINGS AND LOAN ASSOCIATION, DISCUSSED PREVIOUSLY, ENDORSED SECTION 1725(C)(5) AS AUTHORITY FOR FSLIC TO USE FHLBB EXAMINERS FOR CERTAIN PURPOSES. 589 F.2D AT 666, FN. 25.

ON THE OTHER HAND, WE FIND NO AUTHORITY FOR FSLIC EXAMINERS TO PERFORM EXAMINATION SERVICES FOR OTHER AGENCIES.

THE NCUA HAS GENERAL AUTHORITY UNDER 12 U.S.C. 1756 TO EXAMINE ALL FEDERAL CREDIT UNIONS, AND HAS SPECIFIC AUTHORITY UNDER 12 U.S.C. 1784 TO EXAMINE FEDERALLY INSURED FEDERAL AND STATE CHARTERED CREDIT UNIONS FOR INSURANCE PURPOSES. SPECIFICALLY, 12 U.S.C. 1756 PROVIDES:

"FEDERAL CREDIT UNIONS SHALL BE UNDER THE SUPERVISION OF THE BOARD, AND SHALL MAKE FINANCIAL REPORTS TO IT AS AND WHEN IT MAY REQUIRE, BUT AT LEAST ANNUALLY. EACH FEDERAL CREDIT UNION SHALL BE SUBJECT TO EXAMINATION BY, AND FOR THIS PURPOSE SHALL MAKE ITS BOOKS AND RECORDS ACCESSIBLE TO, ANY PERSON DESIGNATED BY THE BOARD."

12 U.S.C. 1784 PROVIDES, IN PART:

"(A) THE BOARD SHALL APPOINT EXAMINERS WHO SHALL HAVE POWER, ON ITS BEHALF TO EXAMINE ANY INSURED CREDIT UNION, ANY CREDIT UNION MAKING APPLICATION FOR INSURANCE OF ITS MEMBER ACCOUNTS, OR ANY CLOSED INSURED CREDIT UNION WHENEVER IN THE JUDGMENT OF THE BOARD AN EXAMINATION IS NECESSARY TO DETERMINE THE CONDITION OF ANY SUCH CREDIT UNION FOR INSURANCE PURPOSES. EACH EXAMINER SHALL HAVE POWER TO MAKE A THOROUGH EXAMINATION OF ALL OF THE AFFAIRS OF THE CREDIT UNION AND SHALL MAKE A FULL AND DETAILED REPORT OF THE CONDITION OF THE CREDIT UNION TO THE BOARD. ***"

IN ADDITION, 12 U.S.C. 1766(D) PROVIDES:

"(D) THE BOARD IS AUTHORIZED AND EMPOWERED TO EXECUTE ANY AND ALL FUNCTIONS AND PERFORM ANY AND ALL DUTIES VESTED IN THEM HEREBY, THROUGH SUCH PERSONS AS IT SHALL DESIGNATE OR EMPLOY; AND IT MAY DELEGATE TO ANY PERSON OR PERSONS, INCLUDING ANY INSTITUTION OPERATING UNDER THE GENERAL SUPERVISION OF THE ADMINISTRATION, THE PERFORMANCE AND DISCHARGE OF ANY AUTHORITY, POWER, OR FUNCTION VESTED IN IT BY THIS CHAPTER."

WHILE THESE SECTIONS AUTHORIZE THE NCUA TO EXAMINE FEDERAL CREDIT UNIONS, THEY DO NOT SPECIFICALLY PROVIDE FOR SUCH EXAMINATIONS TO BE MADE BY NCUA EXAMINERS. RATHER, SECTION 1766(D) AUTHORIZES EXAMINATIONS BY "ANY PERSON DESIGNATED BY THE BOARD." THE LEGISLATIVE HISTORY OF THIS PROVISION DOES NOT EXPLAIN WHAT CONGRESS INTENDED BY THIS PHRASE. IT IS ARGUABLE THAT THE BOARD OF DIRECTORS OF THE NCUA COULD DESIGNATE UNDER 12 U.S.C. 1766(D) EXAMINERS FROM OTHER FEDERAL AGENCIES AS ITS REPRESENTATIVES OR AGENTS FOR PURPOSES OF CONDUCTING FEDERAL CREDIT UNION EXAMINATIONS. HOWEVER, ACTUAL USE OF EXAMINERS FROM OTHER AGENCIES WOULD REQUIRE RECIPROCAL AUTHORITY ON THE PART OF THE DESIGNATED AGENCY OR ITS EXAMINERS TO PERFORM SERVICES FOR NCUA. WE ARE AWARE OF NO SUCH AUTHORITY.

FINALLY, IT IS CLEAR THAT STATE-CHARTERED SAVINGS AND LOAN ASSOCIATIONS AND STATE-CHARTERED CREDIT UNIONS ARE REGULATED BY THE STATES. WE HAVE FOUND NO EXPRESS OR IMPLIED STATUTORY AUTHORITY FOR ANY FEDERAL REGULATORY AGENCIES TO EXAMINE UNINSURED STATE-CHARTERED SAVINGS AND LOAN ASSOCIATIONS AND UNINSURED STATE-CHARTERED CREDIT UNIONS.

SPECIAL STUDIES AND ANALYSIS

FN1 THE AUTHORITY OF OCC TO EXAMINE FOREIGN OPERATIONS OF STATE MEMBER BANKS WAS RECENTLY ADDED BY SECTION 709(B) OF THE DEPOSITORY INSTITUTION DEREGULATION AND MONETARY CONTROL ACT OF 1980, PUB. L. NO. 96-221 (MARCH 31, 1980), 94 STAT. 132, 188. IN ENACTING THIS AMENDMENT, CONGRESS APPARENTLY CONCLUDED THAT THERE WAS NO EXISTING LEGAL BASIS FOR FRS TO USE OCC EXAMINERS FOR SUCH PURPOSES. SEE HEARINGS BEFORE THE SUBCOMMITTEE ON FINANCIAL INSTITUTION'S SUPERVISION, REGULATION, AND INSURANCE OF THE HOUSE COMMITTEE ON BANKING, FINANCE, AND URBAN AFFAIRS, 96TH CONG., 1ST SESS. 37 (1979). THE SUBCOMMITTEE HEARINGS INDICATE THAT THE AMENDMENT WAS ENACTED IN RESPONSE TO A GAO RECOMMENDATION. SEE GAO REPORT, OCG-77- 1, P. 4-35. IN THAT REPORT, WE RECOMMENDED THAT THE FRS AND OCC UTILIZE EACH OTHERS' EXAMINERS TO CUT EXPENSES WHEN CONDUCTING EXAMINATIONS OF FOREIGN OPERATIONS. OCC AGREED WITH OUR RECOMMENDATION, BUT CITED THE DIFFICULTY OF SHARING EXAMINERS UNDER THEN CURRENT LAW, SINCE ITS EXAMINATION AUTHORITY WAS LIMITED TO NATIONAL BANKS AND THEIR AFFILIATES, EXCLUDING MEMBER BANKS. ID., P. 4-37.

FN2 TO THE EXTENT THAT A FINANCIAL INSTITUTION COULD BE DEEMED AN "AFFILIATE" OF A NATIONAL BANK AS THAT TERM IS DEFINED IN 12 U.S.C. 221AB), IT COULD BE EXAMINED BY OCC, BUT ONLY IN CONNECTION WITH THE EXAMINATION OF A NATIONAL BANK FOR THE LIMITED PURPOSE STATED. SUCH SPECIAL EXAMINATION AUTHORITY OVER AFFILIATE INSTITUTIONS DOES NOT APPEAR TO PROVIDE ANY BASIS FOR EXCHANGE OF EXAMINERS BETWEEN OCC AND THE OTHER AGENCIES RESPONSIBLE FOR SUPERVISION OF SUCH AFFILIATE INSTITUTIONS.

FN3 ALTHOUGH 12 U.S.C. 248(K) GRANTS THE FEDERAL RESERVE BOARD AUTHORITY TO DELEGATE MOST OF ITS FUNCTIONS, THAT AUTHORITY IS SPECIFICALLY LIMITED TO DELEGATIONS TO ADMINISTRATIVE LAW JUDGES, MEMBERS OR EMPLOYEES OF THE FEDERAL RESERVE BOARD, AND FEDERAL RESERVE BANKS. NO PROVISION IS MADE FOR DELEGATION OF THE BOARD'S FUNCTIONS TO OTHER SUPERVISORY AGENCIES OR THEIR EMPLOYEES.

FN4 SECTION 1820(B) AUTHORIZES FDIC TO EXAMINE THE "AFFILIATES" OF INSURED BANKS AS IS NECESSARY TO DISCLOSE FULLY THE RELATIONS BETWEEN THE BANKS AND THEIR AFFILIATES AND THE EFFECTS OF SUCH RELATIONS ON THE BANKS. TO THE EXTENT THAT A FINANCIAL INSTITUTION COULD BE DEEMED AN "AFFILIATE" AS THAT TERM IS DEFINED IN 12 U.S.C. 221AB), IT COULD BE EXAMINED BY FDIC, BUT ONLY IN CONNECTION WITH THE EXAMINATION OF AN INSURED BANK FOR THE LIMITED PURPOSE STATED. SUCH EXAMINATION AUTHORITY OVER AFFILIATE INSTITUTIONS, AS IS SIMILAR TO THAT PROVIDED TO OCC, DOES NOT EXTEND TO THE EXCHANGE OF EXAMINERS BETWEEN FDIC AND THE OTHER AGENCIES RESPONSIBLE FOR SUPERVISION OF SUCH AFFILIATE INSTITUTIONS.

FN5 UNDER 12 U.S.C. 1466A, FHLBB IS AUTHORIZED TO EXAMINE DISTRICT OF COLUMBIA SAVINGS AND LOANS.