When deemed appropriate, spedetails of a proposed plan for ing the minimum capital requires; and

The date for a written response e bank or bank holding company e proposed directive, which shall least 14 days from the date of isce of the notice unless the Board mines a shorter period is necesbecause of the financial condition Le bank or bank holding company. Response to notice. The bank or - holding company may file a writresponse to the notice within the period set by the Board. The rese may include:

An explanation why a directive ld not be issued;

O Any proposed modification of terms of the directive;

i) Any relevant information, miting circumstances, documentation ther evidence in support of the intion's position regarding the proed directive; and

7) The institution's plan for attainthe required level of capital.

) Failure to file response. Failure che bank or bank holding company ile a written response to the notice ntent to issue a directive within the cified time period shall constitute a ver of the opportunity to respond I shall constitute consent to the isnce of such directive.

5) Board consideration of response. er considering the response of the nk or bank holding company, the ard may:

i) Issue the directive as originally oposed or in modified form;

ii) Determine not to issue a direce and so notify the bank or bank olding company; or

(iii) Seek additional information or clarification of the response by the bank or bank holding company.

(6) Contents of directive. Any directive issued by the Board may order the bank or bank holding company to:

(i) Achieve or maintain the minimum capital requirement established pursuant to the Board's Capital Adequacy Guidelines or the procedures in § 263.40 of this subpart by a certain date;

(ii) Adhere to a previously submitted plan or submit for approval and adhere to a plan for achieving the minimum capital requirement by a certain date;

(iii) Take other specific action as the Board directs to achieve the minimum capital levels, including requiring a reduction of assets or asset growth or restriction on the payment of dividends;

or

(iv) A combination of the above actions.

(7) Request for reconsideration of directive. Any state member bank or bank holding company, upon a change in circumstances, may request the Board to reconsider the terms of a directive and may propose changes in the plan under which it is operating to meet the required minimum capital level. The directive and plan continue in effect while such request is pending before the Board.

§ 263.39

Enforcement of directive.

(a) Judicial and administrative remedies. (1) Whenever a bank or bank holding company fails to follow a directive issued under this subpart, or to submit or adhere to a capital adequacy plan as required by such directive, the Board may seek enforcement of the directive, including the capital adequacy plan, in the appropriate United State district court, pursuant to section 908 (b)(2)(B)(ii) of ILSA (12 U.S.C. 3907(b)(2)(B)(ii) and to section 8(i) of the Federal Deposit Insurance Act (12 U.S.C. 1818(i)), in the same manner and to the same extent as if the directive were a final cease and desist order.

(2) The Board, pursuant to section 910(d) of ILSA (12 U.S.C. 3909(d)), may also assess civil money penalties

for violation of the directive against any bank or bank holding company and any officer, director, employee, agent, or other person participating in the conduct of the affairs of the bank or bank holding company, in the same manner and to the same extent as if the directive were a final cease and desist order.

(b) Other enforcement actions. A directive may be issued separately, in conjunction with, or in addition to any other enforcement actions available to the Board, including issuance of cease and desist orders, the approval or denial of applications or notices, or any other actions authorized by law.

(c) Consideration in application proceedings. In acting upon any application or notice submitted to the Board pursuant to any statute administered by the Board, the Board may consider the progress of a state member bank or bank holding company or any subsidiary thereof in adhering to any directive or capital adequacy plan required by the Board pursuant to this subpart, or by any other appropriate banking supervisory agency pursuant to ILSA. The Board shall consider whether approval or a notice of intent not to disapprove would divert earnings, diminish capital, or otherwise impede the bank or bank holding company in achieving its required minimum capital level or complying with its capital adequacy plan.

§ 263.40 Establishment of increased capital level for individual bank or bank holding company.

(a) Establishment of capital levels for individual institutions. The Board may establish a capital level higher than that specified in the Board's Capital Adequacy Guidelines for an individual bank or bank holding company pursuant to:

(1) A written agreement or memorandum of understanding between the Board or the appropriate Federal Reserve Bank and the bank or bank holding company;

(2) A temporary or final cease and desist order issued pursuant to section 8(b) or (c) of the FIS Act (12 U.S.C. 1818(b) or (c));

(3) A condition for approval of an application or issuance of a notice of intent not to disapprove a proposal;

(4) Or other similar means; or

(5) The procedures set forth in subsection (b) of this section.

(b) Procedure to establish higher capital requirement—(1) Notice. When the Board determines that capital levels above those in the Board's Capital Adequacy Guidelines may be necessary and appropriate for a particular bank or bank holding company under the circumstances, the Board shall give the bank or bank holding company notice of the proposed higher capital requirement and shall permit the bank or bank holding company an opportunity to comment upon the proposed capital level, whether it should be required and, if so, under what time schedule. The notice shall contain the Board's reasons for proposing a higher level of capital.

(2) Response. The bank or bank holding company shall be allowed at least 14 days to respond, unless the Board determines that a shorter period is necessary because of the financial condition of the bank or bank holding company. Failure by the bank or bank holding company to file a written response to the notice within the time set by the Board shall constitute a waiver of the opportunity to respond and shall constitute consent to issuance of a directive containing the required minimum capital level.

(3) Board decision. After considering the response of the institution, the Board may issue a written directive to the bank or bank holding company setting an appropriate capital level and the date on which this capital level will become effective. The Board may require the bank or bank holding company to submit and adhere to a plan for achieving such higher captial level as the Board may set.

(4) Enforcement of higher capital level. The Board may enforce the capital level established pursuant to the procedures described in this section and any plan submitted to achieve that capital level through the procedures set forth in § 263.39 of this subpart.

The maintenance of unusually high tandards of honesty, integrity, impariality, and conduct by employees and pecial employees of the Board is esential to assure the proper performance of Board business and the mainenance of confidence by citizens in heir Government. The avoidance of misconduct and conflicts of interest on he part of employees and special employees of the Board through use of nformed judgment is indispensable to the maintenance of these standards. To accord with these concepts, this part prescribes standards of conduct and responsibilities, and governs statements reporting employment and financial interests of the Board's employees and special employees of the Board.

ee) means an officer or employee of the Board who is retained, designated, appointed, or employed to perform, with or without compensation, for not to exceed 130 days during any period of 365 consecutive days, temporary duties either on a full-time or intermittent basis.

(d) "Conflict or apparent conflict of interest" means a conflict or the appearance of a conflict between the interests of an employee or special employee and the performance of his services for the Board.

§ 264.735-3 Effective date, distribution, and counseling.

(a) This part and any amendment thereto shall be effective upon publication in the FEDERAL REGISTER.

(b) The Division of Personnel Administration shall distribute a comprehensive summary of this part to every employee and every special employee within 90 days after the effective date, and to each new employee and special employee at the time of entrance on duty, and distribute to every employee and every special employee each calendar year thereafter a reminder of the basic provisions of this part. A copy of this part shall be made available, upon request, to every employee and special employee by the Division of Personnel Administration, or by the Counselor or any Deputy Counselor.

(c) A Counselor and Deputy Counselors, appointed by the Board, shall be available for counseling and guidance respecting statutes and regulations affecting employee responsibility and conduct, including interpretations of the provisions of this part, and each employee and special employee shall be notified of this service by the Division of Personnel Administration at the time he receives a comprehensive summary of this part.

§ 264.735-4 Financial statements.

(a) Each employee required to do so by § 264.735-8(a) shall complete and file Form FR 264.A in accordance with § 264.735-8. Each special employee shall complete and file Form FR 264.B in accordance with § 264.735-8.

(b) All Forms FR 264.A and FR 264.B shall be received and reviewed

73-031 0-86-29

by the Director of the Division of Personnel Administration or his designated representative to determine whether there are any conflicts or apparent conflicts of interest or other violations of this part, law, or other regulations. The Director shall be responsible for maintaining all completed forms in confidence pursuant to paragraph (c) of this section and shall not allow access to, or allow information to be disclosed from, a form-except to carry out the purpose of this part. Information obtained from other sources shall be treated as if it was contained in the forms.

(c) All reports, forms, papers, and the information contained therein, filed pursuant to this section shall be confidential, except as the Board or the Civil Service Commission may determine for good cause shown.

In addition to any action that may be taken, or penalty imposed, for violations of this part, as prescribed by law:

(a) When conflicts or apparent conflicts of interest or other violations or apparent violations of this part cannot be resolved or explained to the satisfaction of the Director of Personnel Administration, he shall report the matter to the Board through the Counselor.

(b) The employee or special employee concerned shall be given an opportunity to explain such conflicts or apparent conflicts of interest before and after the matter is reported to the Board.

(c) The Board, after consideration of the matter, and after an opportunity for the employee or special employee concerned to appear, shall decide what steps are to be taken to remedy the situation. Among other steps, the Board may:

(1) Attempt to remove any conflict of interest by requiring a change in duties, disqualification for a particular assignment, or divestment of the conflicting interest by the employee or special employee;

(2) Take other corrective action; or (3) Where corrective actions are inadequate, impose disciplinary action.

Remedial action, whether disciplinary or otherwise, shall be effected in accordance with any applicable laws, Executive orders, and regulations.

§ 264.735-6 Ethical and other conduct and responsibilities of employees.

(a) An employee shall avoid any action, whether or not specifically prohibited by this section, which might result in, or create the appearance of: (1) Using public office for private gain;

(2) Giving preferential treatment to any person;

(3) Impeding Board efficiency or economy;

(4) Losing complete independence or impartiality;

(5) Making a Board decision outside official channels; or

(6) Affecting adversely the confi dence of the public in the integrity of the Board and the Government.

(b) Gifts, entertainment, favors, and loans. (1) Except as provided in paragraph (b)(2) of this section, an employee shall not solicit or accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan, or any other thing of monetary value, from a person who:

(i) Has or is seeking to obtain contractual or other business or financial relations with the Board;

(ii) Conducts operations or activities that are regulated by the Board;

or

(iii) Has interests that may be substantially affected by the performance or nonperformance of his official duty.

(2) Paragraph (b)(1) of this section shall not apply to the following activities that are necessary to, or compatible with the duties and responsibilities of, the Board and its employees:

(i) The acceptance of loans from, or other financial relations with, banks or other financial institutions, in the ordinary course of business of the bank or other financial institution and the employee, governed by terms no more favorable than would be available in like circumstances to persons who are not employees of the Board, except as provided by law or regulation;

(ii) Obvious family or personal relaionships (such as those between the arents, children, or spouse of the emloyee and the employee) when the ircumstances make it clear that it is hose relationships rather than the usiness of the persons concerned that re the motivating factors;

(iii) The acceptance of food, refreshnents, or accompanying entertainnent in the ordinary course of a uncheon or dinner meeting or other unction or inspection tour where an mployee is properly in attendance;

(iv) The acceptance of lodging on inusual occasions if an employee is >roperly in attendance and the circumstances thereof are reported to he Board, or if covered by paragraph (c)(4) of this section; or

(v) The acceptance of unsolicited advertising or promotional materials, such as pens, pencils, note pads, calendars, and other items of nominal intrinsic value.

(3) An employee shall not solicit contributions from another employee for a gift to an employee in a superior official position. An employee in a superior official position shall not accept a gift presented as a contribution from employees receiving less salary than himself. An employee shall not make a donation as a gift to an employee in a superior official position. However, this paragraph does not prohibit a voluntary gift of nominal value or donation in a nominal amount made on a special occasion such as marriage, illness, or retirement.

(4) An employee shall not accept a gift, present, decoration, or other thing from a foreign government unless authorized by Congress as provided by the Constitution and other law.

(5) Neither this paragraph nor paragraph (c) of this section precludes an employee from receipt of bona fide reimbursement, unless prohibited by law, for actual expenses for travel and such other subsistence as is compatible with this part for which no Government payment or reimbursement is made. However, an employee may not be reimbursed, and payment may not be made on his behalf, for excessive personal living expenses or other personal benefits.

(c) Outside employment and other activity. (1) An employee shall not engaged in outside employment or other outside activity not compatible with the full and proper discharge of the duties and responsibilities of his Board employment. Incompatible activities include but are not limited to:

(i) Acceptance of a fee, compensation, gift, payment of expense, or any other thing of monetary value, in circumstances in which acceptance may result in, or create the appearance of, (a) conflicts of interest or (b) the use of nonpublic information gained through, or incidental to, his Board duties, except as provided in this part;

(ii) Outside employment which tends to impair his mental or physical capacity to perform his Board duties and responsibilities in an acceptable manner;

or

(iii) Outside business and teaching employment not approved by the Board and reported on Form FR 725.

(2) An employee shall not receive any salary or anything of monetary value from a private source as compensation for his services to the Board.

(3) Employees are encouraged to engage in teaching, lecturing, speaking, and writing relating to the Board's functions and responsibilities that is not prohibited by law, Executive Order 11222 or this part. However, an employee shall not, either for or without compensation, engage in such activities including teaching, lecturing, or writing for the purpose of the special preparation of a person or class of persons for an examination of the Civil Service Commission or Board of Examiners for the Foreign Service, that are dependent on information obtained as a result of his Board employment, except when that information has been made available to the general public or will be made available on request, or when the Board gives written authorization for the use of nonpublic information on the basis that the use is in the public interest. In any case, before any employee engages in such activities, he shall consult his Division Head for the appropriate procedure to obtain official approval.

(4) This paragraph does not preclude an employee from: