March 31, 1997
OTS Conference Room B, Sixth Floor
1700 G Street N.W.
Washington D.C. 20552
OTS is seeking input from its constituency and other interested parties as to whether OTS regulations are sufficiently flexible to permit savings associations to engage in the banking business with the full use of available and appropriate technology. The OTS is concerned about providing a safe and sound banking environment for institutions and customers alike while incorporating any helpful technological tools. We want institutions to be able to use technologies that will permit banking for customers that is safe, secure, private, reliable, and convenient.
The OTS seeks comments on whether certain OTS rules are too restrictive to permit certain electronic resources and whether OTS should adopt certain rules that would ease the introduction of appropriate technology into the services offered by thrifts. Interested persons are invited to submit written comments to the OTS on these topics over the next 60 days.
The OTS presently has three rules that impact directly on electronic banking:
Remote service units 545.141 - permits thrifts to operate ATM machines at remote locations without needing to treat those machines as branches.
The question here is should those machines also be permitted to open accounts for the institution and make loans. If so, institutions would be able to have automated loan machines at locations other than at an approved branch. Recent 1996 BIF/SAIF legislation (Section 2206) specifically provides that an automated teller machine or a remote service unit do not constitute a "domestic branch" of an FDIC-insured financial institution.
Home banking services 545.142 - permits thrifts to offer customers access at home to banking services by telephone, electronic home terminals, personal computer terminals, or television sets with communication abilities provided the institution has adequate security measures for such services.
Some of the questions in this area include whether institutions need to provide any particular means for accessing accounts or require any specific type of security mechanisms or standards for home banking. Another question relates to defining what are the Community Reinvestment Act implications for institutions conducting business all over the United States through electronic means. Commenters may also want to comment on the abilities or difficulties of transactions by United States citizens by electronic means from outside the United States.
Data processing regulation 545.138 - permits thrifts to be involved in data-processing services and make those services available to other others on a for-profit basis up to one half of the institution's data processing services.
Some of the questions in this area include whether institutions can sell Internet services, financial computer software, or related services to others without regard to limitations and whether institutions can operate subsidiary corporations to conduct such businesses on a for-profit basis. Should potential customers for such services be tied to the thrifts existing customer base? OCC interpretative rulings are more expansive than OTS regulations and the OTS seeks comment on whether its rules should be expanded to permit similar activities.
The OTS is watching the development of new technologies that can impact the conduct of business as a thrift. Questions arise as to whether OTS rules should be changed to specifically address these new technologies.
PC home banking is expanding its applications to not only "dial-up" banking but true Internet banking provided adequate encryption is used and safeguards are in place.
Automated loan machines can process loan requests from terminals that can process the application, take a signature on an application, dispense proper disclosure papers, and dispense an official bank check all while the customer waits in front of the terminal.
Smart Cards are not addressed in OTS regulations. Thrifts will, of course, abide by Regulation E as may be amended the Federal Reserve Board, but the OTS is interested in whether any specific regulations should instruct, guide, or permit actions by thrifts that may adopt smart card programs and permit their use by their customers.
Credit scoring is offered by some vendors that can help make lending decisions for thrifts. "Credit scoring" permits lenders to process applications for loans in accordance with the statistical experiences for similar loans in the past. Credit scoring speeds up processing and can be "blind" to prohibited lending criteria such as race and gender. Artificial intelligence can assist in the processing and analyzing data used for approving loans. OTS presently has no regulations governing credit scoring or artificial intelligence per se.
Other federal banking regulators have taken certain steps in electronic banking areas. While the OTS has participated in all available interagency efforts that relate to electronic banking, this is the first announcement of any rulemaking proposal in the area of electronic banking by the OTS. Similarly, this is the first announced rulemaking initiative by any of the banking regulators soliciting comments from banking constituents on general banking ramifications that relate to electronic tools for banks. The following particular initiatives have been taken within the past two years by the other banking regulators:
[RETURN TO ELECTRONIC BANKING]
Page EBTALK1 June 13, 1997