Banks have been using telephone or internet-based conferencing since the disruption and social distancing guidelines from COVID-19. The OCC issues an Interim Final Rule (IFR) which became effective on May 28, 2020 clarifying that national banks and Federal Savings Associations would be able to continue using remote communication tools to comply with internal and regulatory meeting requirements. This would help reduce the burden and costs of meeting in person for the Banks and the meeting participants.
Both Federal Savings Associations and national banks would be permitted to follow the procedures for telephone or electronic participation of:
(1) The State corporate governance procedures it is permitted to elect pursuant to § 5.21(j)(3)(iii), if those State corporate governance procedures include telephonic or electronic participation procedures; (2) the Delaware General Corporation Law (with ‘‘member’’ substituting for ‘‘stockholder’’); or (3) the Model Business Corporation Act (with ‘‘member’’ substituting for ‘‘shareholder’’), provided that such procedures are not inconsistent with applicable Federal statutes and regulations and safety and soundness.
With certain exceptions, Federal Savings Associations are also permitted to follow the corporate governance procedures of the State where the home office of the Association is located.
Currently, 12 CFR §5.21 and §5.22 provide that for Federal Savings Associations, annual meetings must take place in a convenient place that the board of directors may designate. The recent IFR amends these sections to permit an association’s bylaws to provide for participation in these meetings via telephone or other electronic means. They are also deemed to be present in person for purposes of the quorum requirements.
These sections of the CFR also require Federal mutual savings associations to publish a notice of their annual or special meetings in a newspaper or general circulation in the city or county of their principal place of business. It also requires posting notices in each of its offices during the 14 days preceding the date of the meetings. To modernize this rule, the OCC is considering allowing electronic delivery of these notices and allow for posting this notice on the banks’ websites instead of the offices.
Similar to the rule for Federal Savings Associations, the OCC is changing the appropriate sections in 12 CFR § 7.2001 and § 7.2003 to allow national banks to provide for participating in meetings using telephone or other electronic measures.
These amendments would allow Banks and Federal Savings Associations much more flexibility in their meeting procedures. It would also be able to reduce costs associated with having shareholders, directors and members. However, there could always be security risks associated, including cybersecurity risks, with allowing this kind of flexibility which our member Banks should think about as well.
Although this IFR has been effective as of May 28, 2020, the OCC is still requesting comments regarding the changes it implemented and the potential risks associated in allowing participation in these meetings via telephone and electronic means. The comment period is still open until July 13, 2020, so if the Bank has any concerns regarding this IFR, the Bank could provide its insight.