Fed Clarifies Its Approach to HOLA Flexibility

The Federal Reserve has released a long-awaited set of frequently asked questions regarding its approach with regard to OCC-regulated federal savings associations and federal mutual savings banks that choose to exercise the option to become a “covered savings association,” as allowed by Section 206 of the 2018 S. 2155 regulatory reform law. The law provided additional flexibility for institutions chartered under the Home Owners Loan Act. The FAQs address consequences under the Bank Holding Company Act, Federal Reserve Act, and related regulations and reporting requirements.

The American Bankers Association has previously raised concerns to Fed officials that the approach being taken in letters to individual institutions and in an announcement made by Fed staff at a forum in June 2021 has not been in keeping with the intent of the authorizing statute that created the covered savings association option.

Specifically, ABA noted that certain requirements, such as mandating that mutual holding companies convert to bank holding companies, were directly in violation of the statutory intent to reduce burden. The FAQs clarify that mutual holding companies do not have to convert, and make clear that compliance with the qualified thrift lender test for CSAs is under the purview of the OCC, not the Fed.

Additionally, they clarify that the parameters of the Bank Holding Company Act would apply to companies that control CSAs and that CSAs would have to become members of the Federal Reserve system, but their primary federal regulator (the OCC) would not change. ABA will issue a staff analysis of the FAQs in the coming days.