[Federal Register Volume 66, Number 98 (Monday, May 21, 2001)]
[Proposed Rules]
[Pages 27912-27914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12689]
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FEDERAL RESERVE SYSTEM
12 CFR Chapter II
[Docket No. R-1105]
Study of Banking Regulations Regarding the Online Delivery of
Financial Services
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Study of regulations; request for comment.
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[[Page 27913]]
SUMMARY: Pursuant to section 729 of the Gramm-Leach-Bliley Act (the GLB
Act or Act), the Board is conducting a study and preparing a report
about its banking regulations with respect to the online delivery of
financial services. To assist this review of its regulations, the Board
requests comment on whether any of its regulations should be amended or
removed in order to facilitate online banking.
DATES: Comments must be received by August 20, 2001.
ADDRESSES: Comments should refer to Docket No. R-1105 and may be mailed
to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551,
or mailed electronically to [email protected]. Comments
addressed to Ms. Johnson also may be delivered to the Board's mail room
between 8:45 a.m. and 5:15 p.m. and to the security control room
accessible from the courtyard entrance on 20th Street between
Constitution Avenue and C Street, NW. Comments may be inspected in Room
MP-500 between 9 a.m. and 5 p.m., pursuant to Sec. 261.12, except as
provided in Sec. 216.14, of the Board's Rules Regarding the
Availability of Information, 12 CFR 261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT: Stephanie Martin, Assistant General
Counsel, Legal Division, (202) 452-3198; Thomas E. Scanlon, Senior
Attorney, Legal Division, (202) 452-3594; Heidi Richards, Assistant
Director, Division of Banking Supervision and Regulation, (202) 452-
3598; Jane Ahrens, Senior Counsel, Division of Consumer and Community
Affairs, (202) 452-2412; Minh-Duc Le, Attorney, Division of Consumer
and Community Affairs, (202) 452-3667; Jeff Stehm, Assistant Director,
Division of Reserve Bank Operations and Payment Systems, (202) 452-
2217.
SUPPLEMENTARY INFORMATION:
Background
Section 729 of the GLB Act requires the Board, the Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency (OCC),
and Office of Thrift Supervision (the Agencies), to conduct a study of
banking regulations regarding the online delivery of financial
services.\1\ Section 729 further requires the Agencies to report their
recommendations on adapting existing legislative or regulatory
requirements to online banking and lending.
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\1\ Pub. L. 106-102, 113 Stat. 1476 (1999).
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In accordance with section 729, the Board is reviewing its
regulations that relate to the delivery of financial services to assess
their suitability for transactions that are conducted through the
Internet. The Board plans to consult with the other Federal banking
agencies about the appropriate aims and scope of its review and will
coordinate its report with those that will be produced by the other
Federal banking agencies.\2\ The purpose of this document is to invite
public comment on a wide range of issues that bear on delivering
financial products and services over the Internet to assess whether any
Board regulations should be amended in order to facilitate online
banking. In addition, the Board requests comment on how particular
statutory provisions affect the online delivery of financial products
or services.
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\2\ The OCC issued an advance notice of proposed rulemaking and
requested comment on a wide range of electronic banking issues to
determine whether the OCC's regulations should be changed to
facilitate national banks' use of new technologies. 65 FR 4895
(February 2, 2000). The Board notes that the OCC specifically
requested comment in connection with its study of its regulations
under section 729, and the Board will review those comments in
connection with the Board's own study.
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The Board recently requested comment on five interim final rules to
establish uniform standards for the electronic delivery of notices to
consumers, namely: Regulations B (Equal Credit Opportunity), E
(Electronic Fund Transfers), M (Consumer Leasing), Z (Truth in
Lending), and DD (Truth in Savings).\3\ In connection with comments
sought on those interim final rules, the Board also requested comment
on whether other legislative or regulatory changes are needed to adapt
current requirements to online banking and lending. In particular, the
Board has requested comment on revising its regulations to facilitate
electronic delivery of financial products and services to individual
consumers, such as the provisions regarding periodic statements under
Regulations E, Z, and DD. (Comments on those interim final rules must
be received by June 1, 2001.) Any comments submitted in connection with
the review of those regulations to facilitate electronic delivery of
financial products and services for individual consumers shall also be
considered for the study and report under section 729 of the GLB Act.
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\3\ 66 FR 17779 (April 4, 2001); 66 FR 17786 (April 4, 2001); 66
FR 17322 (March 30, 2001); 66 FR 17329 (March 30, 2001); 66 FR 17795
(April 4, 2001).
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Issues for Comment
The Board recognizes that using electronic technology to deliver
financial products and services poses distinct challenges to financial
institutions and their customers. Much of the legislative and
regulatory framework that governs banking was developed based on
social, cultural, and technological practices that existed before the
advent of widespread computer-based communications. The prospect of
conducting banking transactions over the Internet has forced
reconsideration of the existing legislative and regulatory framework
that governs banking businesses.
The Board invites comment on how particular statutes, regulations,
or supervisory policies specifically affect financial institutions and
their customers' uses of new technologies. The following discussion
identifies topics that the Board believes are appropriate for the
design of the study and report required under section 729. Commenters
are invited to respond to the questions presented and to offer comments
or suggestions on any other issues related to financial products or
services delivered online that are not described herein.
Laws and Regulations That Affect Transactions
Do any of the Board's regulations, such as those governing payment
transactions, negatively affect the ability of financial institutions
to offer certain online financial services? Which regulations, if any,
negatively affect the likelihood that an individual or business
customer would choose to obtain financial products or services through
the Internet?
The ways in which financial institutions themselves obtain services
from other financial institutions, including Federal Reserve Banks,
significantly affects the products and services that financial
institutions may, in turn, provide to their non-bank customers. The
Board also requests comment on the specific ways in which laws,
regulations, and other supervisory policies affect the online delivery
of financial products and services between financial institutions.
Geography and Time Considerations
Some aspects of the Board's banking regulations, as well as other
banking laws, are predicated on conceptions of geography. For example,
bank mergers and acquisitions are regulated, in part, by legal
standards that have been developed to determine whether a transaction
poses anti-competitive
[[Page 27914]]
consequences in the relevant geographic market for the cluster of
banking products.\4\ Similarly, the legal standards that apply to the
location of bank branches depend on certain conceptions of
geography.\5\ How should these kinds of regulatory provisions be
revised (if at all) to more appropriately govern the location of online
banking and lending activities?
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\4\ United States v. Philadelphia Nat'l Bank, 374 U.S. 321
(1963) (In an action challenging a proposed merger of banks under
the antitrust laws, the Court held, in relevant part, that the
geographic market for the cluster of banking products and services
is local in nature).
\5\ 12 U.S.C. 321 (requiring, in relevant part, a state member
bank to obtain the Board's approval to establish certain new
branches ``beyond the limits of the city, town, or village in which
the parent bank is located'').
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Other laws or regulations contain concepts of time that may not be
relevant in an online environment. For example, the term ``banking
day'' in Regulation CC is defined as that part of any business day on
which an office of a bank is open to the public for carrying on
substantially all of its banking functions.\6\ Regulation CC requires
funds that must be available for withdrawal on a business day to be
available at the start of business, which may be as late as 9 a.m.
local time of the depositary bank.\7\ Are these provisions appropriate
in the context of a customer that opened an account and performs all
banking functions online?
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\6\ 12 CFR 229.2(f).
\7\ 12 CFR 229.19(b).
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The Board recognizes that these traditional boundaries of geography
and time may need to be reexamined in light of online banking practices
that enable customers to obtain financial products and services
relatively free from customary time or place constraints. Comments are
invited on how particular laws and regulations may be modified to
accommodate the online delivery of financial products and services
under these varying conditions.
Banking and Supervisory Regulations and Policies
The Board invites comment on how particular regulations or
supervisory policies specifically affect financial institutions and
their customers' uses of new technologies. For example, are there any
specific Board regulations that unreasonably interfere with the use of
online technologies? Are there any supervisory policies that impose
unreasonable burdens on a financial institution's design or adaptation
of online technologies? Are there any regulations or other supervisory
policies regarding risk management that should be clarified or amended
to adequately address any particular risks associated with methods of
online banking?
Electronic Signatures in Global and National Commerce Act and Other
Federal Laws That Affect Online Banking
The Board recognizes that the enactment of the Electronic
Signatures in Global and National Commerce Act (E-Sign Act) has
addressed several important legal and regulatory issues regarding the
uses of electronic media in commercial transactions.\8\ For example,
the E-Sign Act permits the retention of certain types of records in
electronic form (subject to specified conditions) if such records are
required by any other law or regulation.\9\ Do any of the Board's
regulations or supervisory policies require a banking organization to
use or retain written forms, notices, or other records in a manner that
hinders its ability to deliver financial products or services over the
Internet? The Board requests comment on how particular provisions of
the E-Sign Act, or any other law, affect financial institutions and
their customers' ability to use (or ease of using) new technologies.
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\8\ Pub. L. 106-229, 114 Stat. 464 (2000).
\9\ Sec. 101(d), 114 Stat. 466-67.
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Differing Legal Requirements
Do certain provisions of Federal law that apply to online banking
and lending practices make compliance with other provisions of State
law (or laws enforced by foreign states) more costly? Are there
particular aspects of conducting online banking and lending activities
that could benefit from a single set of legal standards that can be
applied uniformly nationwide?
Are there any inconsistencies between Federal and State laws or
regulations that impede the electronic provision or use of financial
products or services? For example, do State laws or regulations apply
differently to state-chartered financial institutions, relative to
federally chartered institutions, that conduct online banking and
lending? Are there any State laws or regulations, such as licensing
provisions for banking and other financial products and services, that
affect the nationwide provision of financial products or services over
the Internet?
By order of the Board of Governors of the Federal Reserve
System, May 16, 2001.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 01-12689 Filed 5-18-01; 8:45 am]
BILLING CODE 6210-01-P