Substantial Asset Changes, Including Changes in Charter Purpose

Office of the
Comptroller of the Currency
Washington, DC 20219

COMPTROLLER’S LICENSING MANUAL

Substantial Asset Changes,
Including Changes in
Charter Purpose

August 2017

Contents
Introduction ....................................................................................................................... 1
Key Policies ........................................................................................................................ 2
Regulatory Applicability............................................................................................... 2
Exceptions ..................................................................................................................... 2
Related Requirements ................................................................................................... 3
Decision Criteria ........................................................................................................... 4
Filing Requirements.......................................................................................................... 5
Publication, Public Comment, and Hearings ................................................................ 5
Application Contents .................................................................................................... 5
Application Process ........................................................................................................... 6
Exploratory Meeting ..................................................................................................... 6
Prefiling Meeting .......................................................................................................... 6
Filing the Application ................................................................................................... 7
Consummation .............................................................................................................. 7
Glossary ............................................................................................................................. 8
References .......................................................................................................................... 9

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Introduction
This booklet of the Comptroller’s Licensing Manual discusses key policies and
requirements under 12 CFR 5.53 for filings by a national bank or federal savings
association (FSA) pertaining to a substantial asset change, including a change in charter
purpose. In this booklet, national banks and FSAs are collectively referred to as banks,
unless it is necessary to distinguish between the two.
In general, a bank must submit an application and obtain OCC approval before engaging
in a substantial asset change or change in charter purpose. 1 This booklet discusses what
constitutes a substantial asset change, including a change in charter purpose, and when a
filing with the OCC is required.

1

Refer to 12 CFR 5.53(b).

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Key Policies
Regulatory Applicability
A bank must file an application and obtain OCC approval before engaging in a
substantial asset change, including changes in charter purpose. Except as described in the
“Exceptions” section, a substantial asset change includes any of the following:
•
•
•
•
•

Sale or other disposition of all, or substantially all, of a bank’s assets in a transaction
or a series of transactions.
After having sold or disposed of all, or substantially all, of its assets, subsequent
purchases or other acquisitions or other expansions of the bank’s operations.
Any other purchases, acquisitions, or other expansions of operations that are part of a
plan to increase a bank’s size by more than 25 percent in a one-year period.
Any change in a bank charter’s purpose as described in 12 CFR 5.20(l)(2).
Any other material increase or decrease in a bank’s size or a material alteration in the
composition of the types of assets or liabilities of a bank (including the entry or exit
of business lines), on a case-by-case basis, as determined by the OCC.

A bank must consult with the OCC when considering a transaction, or series of
transactions, that may constitute, or result in, a material alteration in the composition of
the bank’s assets or liabilities. Such a consultation assists in determining whether an
application to the OCC is required. 2
In addition, 12 CFR 5.20(l)(2) requires a bank to file an application and obtain prior OCC
approval under 12 CFR 5.53 if
•
•

the bank is a special purpose bank that wants to change to another special purpose,
add another special purpose, or no longer be limited to a special purpose (expansion
of operations); or
the bank’s activities are not limited and the bank wants to limit its activities and
become a special purpose bank (contraction of operations).

Exceptions
Under 12 CFR 5.53, the term substantial asset change does not include a change in the
composition of all, or substantially all, of a bank’s assets in the following circumstances:

2
Refer to 12 CFR 5.53(d). A bank considering a transaction or series of transactions that may constitute a
material change under 12 CFR 5.53(c)(1)(iv) must consult with the appropriate OCC supervisory office for
a determination whether the OCC will require an application under this section. In determining whether to
require an application, the OCC considers all of the relevant facts and circumstances, including the size and
nature of the transaction and the condition of the institutions involved.

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•
•

•
•

The bank undertakes the change in response to direction from the OCC (for example,
an enforcement action pursuant to 12 USC 1818).
The change is part of a voluntary liquidation under 12 CFR 5.48, provided that the
bank has obtained the OCC’s non-objection to the liquidation plan and has stipulated
in its liquidation notice to the OCC that it will complete the liquidation, dissolve the
bank, and return its charter within one year of the date it filed the notice, unless the
OCC extends the time period.
The change occurs as a result of a bank’s ordinary and ongoing business of
originating and securitizing loans.
The change is subject to OCC approval under another application to the OCC. 3

With respect to changes in charter purpose, 12 CFR 5.20(l)(2) requires a bank to file an
application under 12 CFR 5.53 for an expansion or a contraction of operations and does
not include any exceptions. Accordingly, a bank that is subject to the 12 CFR 5.53 filing
requirement by virtue of 12 CFR 5.20(l)(2) is not exempted from the 12 CFR 5.53 filing
requirement if the bank is also required to file a separate application with the OCC (such
as an application under 12 CFR 5.21 or 5.22 to amend its charter). Refer to the discussion
in the “Changes in Charter Purpose” section of this booklet for additional information
regarding charter issues.
Questions on the applicability of the exception under 12 CFR 5.53(c)(2)(iv) should be
directed to the appropriate OCC licensing office.

Related Requirements
Changes in Charter Purpose
The activities of a special purpose national bank are limited by its articles of association
and generally by a condition of approval in the OCC’s decision letter on the application
to establish the bank as a special purpose bank. The activities of a special purpose FSA
may be limited by its charter and also may be limited by a condition of approval imposed
in a decision letter on a prior application by the FSA.
Changes in charter purpose often also involve amendments to the bank’s articles of
association or charter. The bank must add restrictions if it contracts operations or remove
restrictions if it expands operations. Refer to 12 CFR 5.20, 5.21, and 5.22.

3

For example, a full-service bank that proposes to expand by acquiring insured deposits from another
bank is required to file a Bank Merger Act application with the OCC, but is not required to file under
12 CFR 5.53 for the same acquisition. A national bank that proposes to transfer its insured deposits to
another insured institution and then merge into an uninsured affiliate pursuant to 12 USC 215a-3, however,
must file an application under 12 CFR 5.53 for the transfer of the deposits, and also file an application
under 12 USC 215a-3 with respect to the merger with the affiliate.

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Filing Requirements With Other Regulators
A bank filing an application under this regulation may be subject to filing requirements
with other regulators. For example, an uninsured national trust bank changing its charter
purpose to a full-service national bank must file an application with the OCC pursuant to
12 CFR 5.53 and also file an application with the Federal Deposit Insurance Corporation
to obtain insurance of deposit accounts.

Dormant Banks
The OCC has a long-standing practice of not allowing transactions that would remove
substantially all of the assets and liabilities of a bank without closing it, thereby creating a
dormant bank. Banks should consult with the appropriate OCC licensing office if a
substantial change in assets would result in a dormant bank.

Decision Criteria
When reviewing an application filed pursuant to 12 CFR 5.53, the OCC considers the
following factors:
•
•
•
•
•

Capital level of any resulting bank.
Conformity of the transaction to applicable laws, regulations, and supervisory
policies.
Purpose of the transaction.
Impact of the transaction on the bank’s safety and soundness.
Projected effect of the transaction on the bank’s depositors, other creditors,
customers, and shareholders or members.

The OCC’s review of any substantial asset change that involves the purchase, other
acquisition, or other expansion of a bank’s operations or that involves a change in charter
purpose, as described in 12 CFR 5.20(l), also includes factors that would apply to the
organization of a new bank as outlined in 12 CFR 5.20. Although many of the factors
regarding safety and soundness and conformity to applicable laws, regulations, and OCC
policies are factors in both 12 CFR 5.53 and 12 CFR 5.20, the OCC considers additional
factors outlined in 12 CFR 5.20 to the extent appropriate for the circumstances of the
proposed transaction.

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Filing Requirements
An application for a substantial asset change, including a change in charter purpose, by a
bank as required by 12 CFR 5.53 must be filed with the bank’s appropriate OCC
licensing office.

Public Notice, Public Comments, and Hearings
The public notice, public comments, and hearings provisions under 12 CFR 5.8, 5.10, and
5.11, respectively, do not apply to the applications filed pursuant to 12 CFR 5.53. If the
OCC determines that the application presents a significant or novel policy, supervisory,
or legal issue, however, the OCC may determine that some or all of the provisions of
12 CFR 5.8, 5.10, and 5.11 apply.

Application Contents
A “Change in Assets Applications” form for a substantial asset change, including further
information and instructions, is available on the OCC’s website. The application should
include
•
•
•
•
•
•
•
•
•
•
•

4

a description of the change in charter purpose or the transaction(s), including
descriptions of the assets to be sold, transferred, retained, purchased, or received.
the business reason for the transaction(s).
a discussion that details the impact of the transaction(s) on the bank’s depositors,
creditors, customers, and shareholders or members.
a discussion of any other required regulatory approvals and the steps and timeline for
obtaining the approvals and copies of other regulatory filings.
information regarding any shareholder or member approvals that will be required and
the timeline for obtaining the approvals.
financial information, including pro forma balance sheets before and after the
transaction(s), showing projected adjustments resulting from the transaction.
a pro forma calculation of regulatory capital ratios before and after the transaction(s).
a discussion of any proposed change in management or board composition.
if applicable, a post-transaction business plan.
information pertaining to the factors in 12 CFR 5.20 as appropriate for the proposed
transaction(s). 4
a discussion of Community Reinvestment Act (CRA) implications, such as an
amended CRA plan, if there will be any changes in the market area to be served.

Refer to 12 CFR 5.53(d)(3)(ii).

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Application Process
Exploratory Meeting
1. Potential applicants may request an exploratory meeting (or conference call) with the
OCC to clarify any questions or concerns. The OCC encourages potential applicants
to contact the appropriate OCC licensing office for assistance regarding regulatory
requirements. A potential applicant should securely submit a copy of any written
documents, if available, that describe the proposal to the appropriate OCC licensing
office for review before the meeting.
2. A bank contemplating a transaction or series of transactions that may result in a
substantial change of assets must consult with the OCC to determine if an application
is required. In addition, the OCC encourages banks to consult with the OCC before
filing an application.
3. OCC licensing staff will arrange an exploratory meeting as appropriate.
4. Before an exploratory meeting, OCC licensing staff will advise potential applicants to
review the “Charters,” “Business Combinations,” or “Termination of Federal
Charter” booklets of the Comptroller’s Licensing Manual, as appropriate, and the
“General Policies and Procedures” booklet of the Comptroller’s Licensing Manual.

Prefiling Meeting
1. Potential applicants may request a prefiling meeting with the OCC. A prefiling
meeting is optional but is beneficial if the transaction presents possible issues or if the
applicant has questions on the structure of the transaction or the filing process. The
OCC also may request a prefiling meeting.
2. Before any prefiling meeting, potential applicants should provide OCC staff with an
overview of the proposal that includes
•
•
•
•

a brief description of the proposal, including a listing of planned activities and
related transactions.
biographical information on each member of the senior management team who is
coming onboard in connection with the bank’s proposed engagement in a new
activity, including experience managing that activity.
pro forma balance sheet and income statements and capital schedules.
a schedule for completion of the transaction in cases when a series of transactions
is contemplated.

3. OCC licensing staff will arrange a prefiling meeting after allowing adequate time for
review of the prefiling materials. The meeting is normally held in the OCC district

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office where the application will be filed but may be held at another location or by
telephone at the request of the applicant. 5

Filing the Application
1. File the application with the appropriate OCC licensing office.
2. As necessary, file applications with the OCC or other regulatory agencies for
approvals to execute any necessary steps in the plan to change the assets or scope of
activities or purpose of the bank.
3. Depending on the transaction, shareholder or member approval may be required for
certain steps. As necessary, provide proper notification of any required shareholder
meetings, provide appropriate proxy or shareholder disclosures, and obtain the
requisite approvals.

Consummation
1. If applicable, provide the OCC copies of any required board of director approvals,
shareholder or member approvals, and other regulatory approvals 10 calendar days
before consummation of the transaction.

5

Refer to 12 CFR 5.4(f).

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Glossary
Articles of association: The organizational document for a national bank.
Charter: The organizational document for a federal savings association.
Dormant bank: A bank that is no longer engaged in banking activities other than on a
de minimis basis. This definition includes, for example, a bank that has significantly
reduced its activities and services or that has contracted out significant portions of its
operations to third-party service providers, other than in the ordinary course of the bank’s
ongoing business.
Liquidation: The process by which a solvent national bank or FSA that has decided to
close, without being sold to another owner or merged into another entity, winds down its
operations and ceases to exist.
Special purpose bank: A bank that offers only a small number of products, targets a
limited customer base, or operates narrow business plans that limit activities. Examples
of special purpose banks include bankers’ banks, credit card banks, trust-only banks or
trust companies, community development banks, or banks that focus on cash
management activities. Special purpose banks are described in the “Charters” booklet of
the Comptroller’s Licensing Manual.

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References
In this section, “NB” denotes that the referenced law or regulation applies to national banks,
and “FSA” denotes that the reference applies to federal savings associations.

Articles of Association and Charter
Law

12 USC 21, 21a (NB)
12 USC 1464 (FSA)
12 CFR 5.21, 5.22 (FSA)

Regulation
Bank Merger Act
Law
Regulation

12 USC 1828(c) (NB and FSA)
12 CFR 5.33 (NB and FSA)

Bylaws
Law
Regulation

12 USC 24(Sixth) (NB)
12 CFR 5.21, 5.22 (FSA); 7.2000(NB)

Enforcement Action
Law

12 USC 1818 (NB and FSA)

Organization of a National Bank or Federal Savings Association
Law
12 USC 21, 21a, 22, 23, and 24 (NB); 1464 (FSA)
Regulation
12 CFR 5.20 (NB and FSA)
Substantial Asset Change
Regulation
Voluntary Liquidation
Law
Regulation

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12 CFR 5.53 (NB and FSA)

12 USC 181, 182 (NB); 12 USC 1464 (FSA)
12 CFR 5.48 (NB and FSA)

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