ance must be submitted by the insured institution to the Corporation with such notice.

§ 565.3 Termination by the Board.

(a) Grounds. The grounds for termination of insurance of accounts of any insured institution shall consist of any one or more of the following:

(1) The violation by the insured institution of any of its duties as an insured institution;

(2) Continued unsafe or unsound practices by the insured institution in conducting its business; or

(3) The permitting by the insured institution, either knowingly or negligently, of any of its officers or agents to violate any provision of any law or regulation to which such insured institution is subject.

(b) Hearing. In the event the Board is of the opinion that one or more of the grounds enumerated in paragraph (a) of this section exists for the termination of insurance of any insured institution, the Board will furnish to the appropriate governmental authority having supervision of such insured institution a statement with respect to such practices or violations and furnish a copy thereof to the insured institution: Provided, That, in the event there is no such supervisory authority over an insured institution operating under state law, such statement shall be sent directly to the insured institution. The insured institution shall have a period of 120 days, or such shorter period of time as the governmental authority having supervision of such insured institution, if any, may require, within which to correct such practice or violation. If satisfactory correction has not been effected by the insured institution within the specified period of time, the Board, if it shall determine to proceed further with the matter, will give the insured institution at least 30 days' written notice of intention to terminate its status as an insured institution; and such notice shall state the grounds for such termination and the time and place of a hearing at which the insured institution may appear and be heard. Such notice shall be served upon the insured institution in the manner provided in Part 509 of this chapter. Unless such insured institution shall appear at such hearing by duly authorized representative, it shall be

deemed to have consented to the termination of its status as an insured institution. The hearing shall be conducted in the manner provided in said Part 509 and in accordance with the provisions of the Administrative Procedure Act as in force and effect at the time such hearing is held.

§ 565.4

Notice to insured members.

Upon any termination of the status of any institution as an insured institution, such institution shall submit to the Corporation, within 60 days from the date of such termination, satisfactory evidence of the giving of notice of termination of insurance of accounts to its insured members, as provided by law, together with a copy of the notice given. In the event of the failure of any such institution to submit such evidence within the 60-day period or in the event the Corporation determines the form of notice given by such institution is unsatisfactory, the Corporation may give such notice to the insured members of the institution of the termination of its status as an insured institution as the Corporation determines appropriate.

Sec.

567.1

567.2

Amendment of rules and regulations.
Hearings.

AUTHORITY: §§ 567.1 and 567.2 issued under sec. 402, 48 Stat. 1256, as amended; 12 U. S. C. 1725, Reorg. Plan No. 3 of 1947, 12 F. R. 4981, 3 CFR, 1947 Supp. Interpret or apply secs. 403, 404, 407, 48 Stat. 1257, as amended, 1258, as amended, 1260, as amended; 12 U. S. C. 1726, 1727, 1730.

SOURCE: 567.1 and 567.2 appear at 23 F. R. 9918, Dec. 23, 1958.

§ 567.1 Amendment of rules and regulations.

The rules and regulations in this subchapter, subject to any specific provision contained in this subchapter, may be amended in whole or in part at any time in accordance with the provisions set forth in Subchapter A of this chapter. § 567.2

Hearings.

Any person who has made an application or petition to the Board pursuant to any provision of Parts 562, 563, 564, or 565 of this subchapter may request a hearing thereon: Provided, That such application or petition has been denied or disapproved by the Board. At any time after the filing of any such application or petition and before consideration thereof by the Board, any interested person may request a hearing upon such application or petition. The Board may order a hearing in connection with the consideration of any matter arising under any provision of the rules and regulations in this subchapter, and, subject to 567.1, under Title IV of the National Housing Act, as amended, whether or not any request therefor has been made by any person. The Board may deny any request for, or dispense with any hearing for which this section provides when, in its judgment, no need therefor exists. This section shall not apply to hearings upon action taken by the Corporation to terminate the status of an

insured institution as such, under the provisions of section 407 of the National Housing Act, as amended.

PART 568-SERVICE OF PROCESS UPON CORPORATION

§ 568.1 Agents for service of process.

Persons desiring to serve process upon the Federal Savings and Loan Insurance Corporation in any jurisdiction may obtain the name and address of the proper agent by communicating with the Secretary of the Federal Home Loan Bank Board, Washington, D. C., or the President of the Federal Home Loan Bank in the district in which such jurisdiction is located. Upon a request for the name of an agent upon whom service of process may be made, the Federal Savings and Loan Insurance Corporation shall promptly designate such an agent in any jurisdiction where there is not at that time such an agent.

(Sec. 402, 48 Stat. 1256, as amended; 12 U. S. C. 1725, Reorg. Plan No. 3 of 1947, 12 F. R. 4981, 3 CFR, 1947 Supp.) [23 F. R. 9918, Dec. 23, 1958]

AUTHORITY: §§ 570.1 to 570.3 issued under authority secs. 402, 403, 48 Stat. 1256, 1257, as amended; 12 U.S.C. 1725, 1726; Reorg. Plan No. 3 of 1947, 12 F.R. 4981, 3 CFR, 1947 Supp; secs. 3, 12, 60 Stat. 238, 244, 5 U.S.C. 1002, 1011.

SOURCE: $ 570.1 to 570.3 appear at 24 F.R. 9417, Nov. 24, 1959.

§ 570.1 Liquidity requirement; certificates of deposit; eligibility under bank system regulations.

Section 523.12 of Subchapter B of this chapter (Regulations for the Federal Home Loan Bank System) prohibits the making of any loan, other than a share loan, by an association that is a member of a Federal home loan bank at any time when its holdings of cash and unpledged obligations of the United States are not at least equal to 6 percent of the associa

tion's withdrawable accounts. For the purposes of compliance with said § 523.12 of this chapter, cash on hand, deposits made in a Federal Home Loan Bank by a member thereof, and deposits made by such member in other banks shall be considered as cash; but no deposit evidenced by a certificate of deposit shall be considered as cash for such purposes unless such member itself made the deposit for which the certificate was issued. § 570.2 Pension, retirement, and deferred compensation plans and contracts; principles governing.

In addition to compliance with applicable State laws in the case of State chartered associations, and with legal requirements which must be considered in light of the particular plan or contract, there are general principles to which each pension, retirement, and deferred compensation plan must conform to be regarded as unobjectionable from the standpoint of supervisory interests and responsibilities. These may be stated briefly as follows:

(a) Reasonableness of cost. The expense or obligation of the association should be reasonable as related to the consideration received by the association, to the compensation and term of employment of the officer or employee, and to the means of the institution.

(b) Employment contract. There should be no provision which, either by prohibition or by imposing economic sanction, places any obstruction in the way of free exercise by the board of directors of the duty or discretion provided by law, charter, bylaw or regulation as to the employment or termination of employment of any officer or employee of the institution.

(c) Amount and funding of obligation. The total obligation or liability of the association as to each participant should either be stated in or be determinable from the plan or contract; and the association's liability in respect to each participant should be fully funded either at the outset or as it accrues so as to assure that there will be no unrecognized or unexpressed liability and that none of the cost will remain to be charged or absorbed after the fiscal period in which the normal employment of the participant terminates. In some instances, the amount of the liability is determinable only actuarily (such as provision for pension payments in event

of disability, or for life rather than for a certain number of years); this is unobjectionable provided such liability is fully funded by insurance with an insurance company. Such funding may be accomplished in a variety of ways: In full at the outset if that is practicable; by the purchase of insurance covering all of the obligations, with the premium paid in full at the outset or payable periodically as a current operating expense over the remainder of the participant's normal employment; by pro-rata payment into a fund and charge to expense in each fiscal period during the remainder of the participant's normal employment.

(d) Termination. The plan or contract should permit the board of directors and their successors at any time to terminate the plan and any obligations thereunder, beyond those theretofore fully funded, and to discontinue the making of any payments after such termination. Failure to preserve such freedom could well operate to deprive those responsible in the future for the association's operation of the freedom necessary to adjust its affairs and obligations to changed conditions and means, and thus make the interests of officers and employees paramount to the interests of the members.

(a) Federal insurance; required credits to, source of, after twentieth anniversary. Paragraph (c) of § 563.13 of this subchapter requires that the credits which are required by that paragraph to be made, after the fiscal year in which occurs the twentieth anniversary of insurance, to the Federal insurance reserve or other reserve accounts irrevocably established for the sole purpose of absorbing losses shall be made from net income, or from surplus or undivided profits not earmarked as set forth in the section. Such required credits may be made by a state-chartered insured institution from a "Bad Debt Reserve" (not constituting part of the institution's Federal insurance reserve) if, and to the extent that, such "Bad

Debt Reserve" may be considered as surplus or undivided profits, is not required under state law to be maintained for the sole purpose of absorbing losses, and has not been irrevocably established for the sole purpose of absorbing losses. If, and to the extent that, such "Bad Debt Reserve" could be eliminated and amounts therein transferred to the surplus or undivided profits account, it could be considered as surplus or undivided profits within the purview of the regulation. It could not be so considered if it merely represented, for example, unrealized profits, or if it was merely a valuation account.

(b) Loss; transfers from, to undivided profits. Section 563.11 of this subchapter requires that the Federal insurance re

serve be used solely for the purpose of absorbing losses, permits only accounts so limited in use to be designated as the Federal insurance reserve, and provides that the general reserves of Federal associations are deemed to meet such requirement. No deduction may be made from, and no charge may be made against, such reserves for any purpose other than to absorb losses. No reduction of the Federal insurance reserve, through transfers therefrom to undivided profits or surplus, is permissible.

NOTE: For references to regulations issued by the Home Loan Bank Board codified as Title 24 Chapter I, Parts 100 to 184, during 1949-1958 prior to transfer to Title 12, Chapter V at 23 F.R. 9877, Dec. 23, 1958, see Appendix to List of Sections Affected.