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Interpretations and Actions: August 2006

Vol. 19, No. 8

Interpretive Letters

Letter No. Topic
1064 Letter concludes that a national bank may hedge the risks arising from bank permissible, customer-driven derivative transactions using below-investment grade bonds, and that when the bank acquires such bonds for this purpose, it is subject to the standards applicable to derivative hedges and not the limitations of 12 C.F.R. Part 1 applicable to investment securities. 07/13/2006
1065 Letter concludes that it is legally permissible for national banks to engage in customer-driven, perfectly matched, cash-settled derivative transactions with payments based on 11 categories of reference assets related indices. 07/24/2006
1066 Letter permits bank to use, pursuant to the OCC's reservation of authority, an alternative calculation based on the bank's value at risk model (VAR approach) to determine the risk-based capital charge for certain securities lending transactions. Under the VAR approach, the risk-based capital charge would be based on a measure of economic exposure that takes into account the market value of collateral received and security lent, as well as the market price volatilities of both the securities lent by the bank and received as collateral. 11/08/2005
1067 Letter clarifies that "service costs" paid on an innovative capital instrument by an operating subsidiary to third party investors constitutes a dividend for the purposes of 12 USC 60. However, to avoid double counting of the service costs, the bank may adjust its net income for distributions on innovative capital instruments that are treated as dividends. 02/28/2006
1068 Letter concludes that laws recently enacted in some states that prohibit or restrict branching by out-of-state industrial loan companies into the enacting state undercut those states' laws permitting interstate de novo branching by banks generally. The result is that under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, federal regulators cannot approve the establishment of de novo branches in such states by any out of state bank. 07/28/2006

Corporate Decisions

Letter No. Topic
2006-06 Application by Sunflower Bank, National Association, Salina, Kansas to establish an operating subsidiary to facilitate the purchase of Kansas State Rehabilitation Tax Credits. (Control Number 2006 WE 08 020), 07/12/2006
2006-07 Application to merge in Elmira Savings and Loan, F. A., Elmira, New York, under the charter and title of Community Bank, National Association. (Control Number 2006 NE 02 0010), 07/27/2006

Approvals with Conditions Enforceable under 12 U.S.C. 1818

Letter No. Topic
749 Application to establish a new national bank with the title of "National Bank of Southwest Florida," Port Charlotte, Florida. (Control Number 2006 SO 01 0004), 07/05/2006
750 Application by UBS AG to establish a limited federal branch with the title of UBS 299 Wealth Management New York Branch. (Control Number 2006 IB 10 0002), 07/10/2006
751 Application to establish a new national bank with the title of "TCF National Bank," Mesa, Arizona. (Control Number 2006 CE 01 004), 07/17/2006
752 Application to establish a new national bank with the title of "Heritage Bank, National Association," Phoenix, Arizona. (Control Number 2006 WE 01 0012), 07/24/2006

Final Enforcement Actions

Enclosed is a copy of the OCC's news release number 2006-86, announcing the availability of enforcement actions. Copies of the final actions are available by writing to the OCC, Public Information Room, Mail Stop 1-5, Washington, D.C. 20219. When ordering, specify the appropriate enforcement action number.

Community Reinvestment Act (CRA) Performance Evaluations

Enclosed is a list of CRA performance evaluations that became public during the period of July 15, 2006 through August 14, 2006.

PLEASE NOTE: Interpretive Letters and No-Objection Letters reflect the views of the Comptroller's legal staff. Corporate Decisions, CRA Decisions and Conditional Approvals are from the office of Licensing. The Community Development Investment Letters are from the office of Community Affairs. The list of CRA Ratings is from the Communications Division. For copies of the CRA evaluations, you may either contact the bank directly, or you may write to the Office of the Comptroller of the Currency (OCC) in any of three ways: by mail to the OCC, Attn: Public Information Room, Mail Stop 1-5, Washington, D.C. 20219; by fax to (202) 874-4448; or by e-mail to You may also write to the OCC for copies of enforcement actions and charters with standard conditions.

Members of the news media are encouraged to cite the letter number when reporting or summarizing documents from this package. This helps us to process single requests based upon your citation in a timelier manner.

The Office of the Comptroller of the Currency publishes INTERPRETATIONS AND ACTIONS monthly. Subscriptions are available at a rate of $200 per year by writing to the Comptroller of the Currency, ATTN: Accounts Receivable, Mail Stop 4-8, 250 E Street, S.W., Washington, DC 20219. Prepayment is requested. Suggestions, comments or questions may be sent to Jacqueline J. England, Comptroller of the Currency, Communications Division, Mail Stop 3-2, Washington, DC 20219.