PURPOSE

This statement is issued to clarify and update the Bureau's policies regarding applications to establish and operate a branch or a branch facility, and to relocate an existing bank office. Coincident to implementation of the updated policies, the Bureau is amending its internal review procedures and the application forms. Consideration of these applications will be guided by the revised policies and implementation of the amended procedures and forms will be effective immediately.

The updated policy statement and the new procedures and forms reflect the Bureau's efforts to streamline the application process, eliminate unnecessary regulatory analysis, and reduce application filing burdens. While continuing to comply with existing state laws which remain unchanged, the policies will allow the Bureau to respond to applicants' proposals in a manner consistent with current industry trends and the recently revised positions taken by the three Federal regulatory agencies. More importantly, the policy recognizes the competitive atmosphere in which banks operate, including competition from other depository and non-depository institutions. The policies will further the Bureau's ongoing program to make its practices more responsive to the needs of state-chartered banks and the customers they serve by decreasing the regulatory burden upon the institutions that apply to establish or relocate banking offices. The streamlined process will shorten application processing and review time, and thus permit the approved establishment or relocation of banking offices to take place as expeditiously as possible. The amended forms will substantially reduce the volume of information required from applicants and thus reduce compliance costs by eliminating excessive and sometimes unnecessary expenditure of time and effort in completing applications.

PRINCIPLES

In determining whether or not to approve an application to establish and operate a branch bank or a branch facility or to relocate an existing bank office, the Bureau subscribes to the following principles: the Bureau has a responsibility to maintain a safe and sound banking system; the Bureau has a responsibility to encourage a bank to help meet the financial services and credit needs of its entire community; the marketplace is one of the best regulators of bank expansion; branching or office relocation is primarily and properly a management decision; and fair competition promotes a more efficient banking system that provides the best possible service to consumers. The Bureau has long held that a pro-competitive policy toward branching, giving due consideration to the competitive benefits versus the detrimental impact of the branch on specific banks operating in the market area, is of importance.

Within the framework of these principles, proposals to establish and operate a branch or a branch facility must meet the requirements of Sections 171 and 173 of the Banking Code of 1969, and proposals to relocate a bank office must meet the requirements of Sections 157 or 171. Both types of applications must also meet the procedural requirements of Section 30.

STATEMENT OF POLICY

Accordingly, the Bureau will approve applications provided the applicant's proposal meets the statutory criteria and the Bureau has no significant supervisory concerns relative to the applicant bank. This policy is designed to promote prompt approval of such applications submitted by sound, well-managed banks. The Bureau reserves the right to disapprove applications, if the proposal is clearly unnecessary, if the proposal will clearly result in unsuccessful operations, if the applicant's capital is inadequate, or if significant issues are raised by an informed protestant. The Bureau may, on occasion, grant approval subject to fulfillment of certain conditions if there are material supervisory concerns with respect to the applicant bank which can be corrected. Conditional approvals will be utilized to direct an applicant's attention to, and promote prompt correction of areas where such concerns exist.

Necessity and Prospects

In accordance with this policy statement, the amended application forms will call for a reduced volume of data in support of the necessity of the proposed branch or relocation, the prospects for its success, and its competitive aspects. The Bureau, unless otherwise convinced by its own knowledge or a protestant's argument, will rely upon the applicant s evaluation and statements as to the necessity for the establishment and operation of a branch bank or a branch facility. Likewise, the Bureau will principally rely upon the applicant's analysis as to the prospects of a successful operation in relocation to corporate expansions. Further, branching and office relocations will generally be assumed to be competitively desirable unless they are clearly injurious to another bank because of conditions recognized by the Bureau or brought to the Bureau's attention by a protestant's assertions.

By supplementing the reduced volume of application data with information obtained through its regular examination activities and other readily available sources, the Bureau believes it has access to sufficient details to assess the legitimacy of most applicant's proposals. However, the Bureau, at its discretion, reserves the right to request any additional information from the applicant. In all cases, statements from protestants contesting any proposal will be accorded appropriate consideration.

Capital Adequacy

In consideration of branch applications, the Bureau will continue to perform its own thorough analysis of an applicant's capital adequacy in accordance with Section 71(3) of the Banking Code of 1969, and Bank Bulletin No. 25, issued August 31, 1981. In arriving at a decision the Bureau will emphasize capital adequacy and the existence of any significant supervisory concerns with the applicant. Accordingly, in unprotested applications, approval, conditional approval, or denial decisions will be primarily based upon the Bureau's findings as to the adequacy of the applicant's capital, and the overall condition of the institution.

Additional Considerations

In the future, approval of proposals submitted by sound, well-managed banks, and not subject to protests, generally will be rendered within sixty days of acceptance of the application. The written Order will be substantially shortened by excluding a recitation of the demographic, physical, competitive, and prospective particulars of the proposal. Analysis of all the legally required elements will, however, be accomplished to the satisfaction of the Commissioner, but with increased reliance upon representations made by the applicant.

Orders of approval will terminate after eighteen months rather than the present one year. The allowance of an additional six months to establish an approved branch is intended to reduce the likelihood of an applicant seeking an extension of the approval because of unavoidable delays. The Bureau will consider granting extensions beyond the initial eighteen-month period upon the written request of the applicant and for good cause shown. Generally, extensions will be considered as being for good cause if circumstances beyond the applicant's control result in delays in the opening of the office. The granting of an extension should not be considered as the Bureau's implied approval of "reserving" branch sites for future expansion.

When all requirements and conditions for opening a new branch bank, branch facility, or relocated office at the location specified in the application have been fulfilled, and upon prior two-week written notice to the Bureau of the planned opening date, a Certificate of Authority for operation of the banking office will be issued.

This policy does not, in any manner, reduce the right of any party to protest an application pursuant to applicable law. It may, however, reduce the potential for successful protest in view of this policy's effect of placing a greater burden on a protestant to show why its judgment should be substituted for that of the applicant or the Bureau.

This policy statement does not change the Bureau's position with respect to applications to establish new banks. In general, the Bureau feels the criteria for the establishment and operation of de novo institutions should continue to be closely analyzed as the possible failure of the bank is viewed as being significantly more damaging than the potential closing of a branch.

Signed:	Martha R. Seger, Ph.D., Commissioner
	Russell S. Kropschot, Chief Deputy Commissioner
Dated:	November 30, 1982