Regulatory Bulletin  Regulatory Bulletin Manual

Date:	05/01/2005
Referenced Sources:	209 Code of Massachusetts Regulations (CMR)

Regulatory Bulletin Manual

March 1998 (Updated May 2005)

Foreword

It is the position of the Division of Banks (the "Division") that the adoption of this Regulatory Bulletin Manual shall not negate any previous position of the Division recorded in an advisory opinion or otherwise, unless and until the Division expressly changes such position in writing.

March 1998

To the Reader:

Welcome to the Division of Banks' (Division) revised Regulatory Bulletin Manual. Prior to the release of this Manual (formerly known as the Administrative Bulletin Manual), the Division undertook an extensive review of all former Administrative Bulletins to ensure their continued relevance. As part of this review, many related bulletins were combined; five bulletins were rescinded; while all others were updated.

In addition, the Division has completely recodified the Manual from previous editions into a more meaningful order both by type of institution covered as well as by the functional subject matter. Please refer to the Executive Summary for a review of the individual bulletins as well the new numbering system.

Concurrent with the release of this Manual, the Division is also issuing an historical digest of opinions issued prior to 1992. These opinions were previously contained within the Administrative Bulletin Manual.

Please note that the regulations of the Division are codified at 209 Code of Massachusetts Regulations (CMR). As with all regulations of state agencies, those regulations are published by the Office of the Secretary of State and may be purchased through the State House Bookstore.

We hope that you will find this Manual both useful and easy to use. You are also invited to visit the Division's Web site at www.state.ma.us/dob, where we intend to post the Manual. As always, we welcome your suggestions on additional ways to improve the Manual. You may call the Division's Legal Unit at [phone], extension 1520.

Very truly yours,

Thomas J. Curry

Commissioner of Banks

Executive Summary

Introduction

The Division has completed its review of all the former Administrative Bulletins ("AB") and made several changes and additions. First, the former bulletin numbering system was replaced by one which is ordered both by applicability (banks, credit unions, and licensees) as well as by the functional type of bulletin (General, Safety and Soundness, and Compliance and Community Affairs). A new name, Regulatory Bulletin ("RB") Manual and uniform format were also adopted to provide greater clarity and consistency. All existing bulletins were also reviewed to ensure that they continued to be relevant to the applicable financial institutions.

Upon its review, the Division rescinded former AB 18-8 regarding credit unions offering repurchase agreements; AB 19-4B regarding credit union rental of safe deposit vaults and boxes, AB 25-1 regarding temporary branch office closings, AB 26-1 regarding the issuance of subordinated debt securities to meet regulatory capital requirements, and AB 31-1 regarding non-federally insured credit unions use of state certified or licensed appraisers. Additionally, several sets of related bulletins were combined into single bulletins. In certain bulletins, substantive changes were made to reflect statutory changes, changes in policy, or simply to provide greater clarity. However, no substantive changes were made to several bulletins. In order to clarify the changes made, the Division has also added Conversion Tables to the Regulatory Bulletin Manual which show the former AB numbers next to their new RB numbers, and vice versa.

Four new policies were also added to the RB Manual: RB 1.1-103, Advisory Opinion and Approval Requests; RB 1.1-104, Public Information Requests; RB 1.3-102, Truth-In-Lending Reimbursement Guidelines; and RB 2.3-103, Alternative CRA Examination Procedures (for institutions with High Satisfactory or Outstanding CRA ratings). Modifications or rescission of existing ABs, does not negate any previous position of the Division rendered in an advisory opinion or otherwise, unless and until the Division expressly changes such position in writing.

Summary of Changes

Examination Policies and Procedures - RB 1.1-101 combines the former AB 5-2 and AB 5-3. This Bulletin has been expanded to set forth all of the Division's Examination Policies and Procedures (Examination Scheduling Policy, Initial Examination Contact Policy, On-Site Examination, Examination and Exit Meeting, Board Meetings, Issuance of Report of Examination, Availability of Reports of Examination, Rating System, Appeal Process, Regional Offices) as they apply not only to state-chartered banks and credit unions but also to the Division's licensees. Also, this Bulletin addresses the confidentiality and availability of Reports of Examination, as well as the disclosure of composite and component ratings.

Conflict of Interest Policy - RB 1.1-102 combines the former AB 5-6, AB 7-1 and AB 9-2. This Bulletin clarifies that employees of the Division may only obtain credit from non-FDIC insured state-chartered institutions, non-bank creditors, federally-chartered institutions or out-of-state lenders. However, any such permissible borrowings by Division employees must receive prior approval from the Division.

Advisory Opinions and Approval Requests - RB 1.1-103 recites internal policies on the filing procedures for requesting an advisory opinion or applying for an approval from the Division. The requirements set forth in this Bulletin are intended to expedite the Division's issuance of opinions and approvals on a timely basis.

Public Information Requests - RB 1.1-104 recites internal policies on the procedures for requesting public information from the Division and sets forth certain frequently requested documents, as well as exceptions to the statute requiring disclosure of public information.

Adjustable Rate Mortgage Loans - RB 1.3-101 is a reformatting of former AB 13-2C regarding Adjustable Rate Mortgage Loan Price Structure, Loan Options, Interest Rate Adjustments, Payment Adjustments, Product Design and Application, Disclosure Requirements, and Reverse Mortgages, with no substantive changes made.

Truth-In-Lending Reimbursement Guidelines - RB 1.3-102 is a new Bulletin setting forth the Division's policy on reimbursements for Truth-in-Lending Violations. This Bulletin provides guidelines, methods, and special disclosures for calculating adjustments in regard to the restitution required to consumer borrowers under Massachusetts General Laws chapter 140D. The Bulletin also provides guidance in the case of obvious error and sets forth a de minimis rule when an adjustment would total less than one dollar. Finally, the Bulletin provides for a corrective action period and exempts creditors who notify debtors and adjust any disclosure errors within sixty days of discovering such errors.

Consumer Protection and Fair Lending Examinations - RB 1.3-103 lists various consumer protection laws with which state-chartered financial institutions must comply. The Bulletin is a restatement of former AB 5-9 and reflects the repeal of the Massachusetts Commission Against Discrimination's regulations at 804 CMR 7.00.

Audit Policy Requirements - RB 2.1-101 combines the former AB 1-3, Audit Policy, AB 1-4, Directive Relative to Minimum Standards of Performance for Auditing Committee Members, and AB 22-1A, Verification of Savings Accounts.

Insider Transactions - RB 2.1-102 is a restatement of former AB 9-1 which attempts to conform the RB in conjunction with the federal Regulation O to the extent permitted by controlling State law provisions. The Bulletin sets forth State requirements which are more protective than Regulation O and thus control in applicable situations, but by incorporating the Division's Opinion # 93-096 this Bulletin also provides an exception for covered contracts or services in regard to intercompany transactions.

Annual Report Filing - RB 2.1-103 consolidates all of the Division's call report requirements by combining the former AB 29-1, AB 29-2 and AB 29-3. This Bulletin also eliminates the requirement that all reports be filed in duplicate.

Expedited Branch Office Application Procedures - RB 2.1-104 is a restatement of the former AB 36-1 setting forth the expedited application procedures and fees for branch office openings and relocations.

Investment Policy Minimum Requirements - RB 2.2-101 governs investments and combines the former AB 3-2, AB 6-2 and AB 9-5. This Bulletin applies to all state-chartered banks and credit unions and sets forth certain requirements for their investment policies in areas such as Quality, Control, Maturity, Diversification, Marketability and Income.

Management Information Systems Examinations - RB 2.2-102 restates the former

AB 5-8A. This Bulletin provides the website address where the Division's list of records to be kept for Management Information Systems Exams may be found. This Bulletin also requires a signed Letter of Assurance from any servicer or software vendor acknowledging that their services will also be subject to examination by the Division.

Exclusive Leases and Other Restrictive Agreements - RB 2.2-103 restates the former AB 9-3. This Bulletin retains and clarifies the Division's policy prohibiting exclusive lease or other restrictive agreements involving state-chartered banks or credit unions.

Community Reinvestment and Fair Lending Policy - RB 2.3-101 restates the former AB 5-10 with the same title without making any substantive changes.

CRA Ratings Policy - RB 2.3-102 restates the former AB 5-11 entitled, Policy Statement Relative to CRA Ratings, without making any substantive changes.

Alternative CRA Examination Procedures - RB 2.3-103 establishes the Division's internal policy for alternative CRA examinations in regard to banks and credit unions who received a rating of "High Satisfactory" or "Outstanding" at their most recent CRA examination either by the Division or the FDIC pursuant to the statutory requirements of Massachusetts General Laws chapter 167, § 14, as amended by Chapter 238 of the Acts of 1996. This Bulletin permits such well-rated institutions to be examined on an 18 or 36 month cycle depending upon which regulator conducted the most recent CRA examination.

School Bank Program - RB 2.3-104 combines the former AB 23-1 and AB 23-2 and sets forth four options by which school bank programs may be established.

Certificate of Deposit and Money Market Account Advertising Guidelines -

RB 2.3-105 restates the Fair Advertising Guidelines of former AB 30-1. This Bulletin applies to certain deposit accounts in conjunction with Massachusetts General Laws chapters 140D and 140E, as well as the provisions of 12 U.S.C. 4301 and 12 CFR 230.

Deposit Return Item Fees - RB 2.3-106 establishes the maximum allowable fee at $2.66 for processing dishonored checks of certain consumer deposit accounts pursuant to Massachusetts General Laws chapter 167D, § 2, and chapter 171, § 41A as amended by Chapter 178 of the Acts of 1997.

Supervisory Stock Conversion Bank Equity Value Standard - RB 3.1-101 restates the former AB 34-1, Policy Statement on Determining the Equity Value of a Bank in a Supervisory Stock Conversion, without making any substantive changes.

Reserve Requirements for State-Chartered Stock Banks - RB 3.2-101 restates the former AB 18-3 with the same title without making any substantive changes.

Guidelines for "18-65" Accounts - RB 3.3-101 combines the former AB 24-1 and AB 24-2 and adds new Questions and Answers based upon opinions issued by the Division. This Bulletin also provides answers to commonly asked questions regarding which accounts are subject to the "18-65" Law, which depositors are eligible for those accounts, what types of fees are covered, and which notice and registration requirements are applicable.

Loans & Fees to Officers and Directors - RB 4.1-101 restates the former AB 9-1A, Directive Governing Loans and Fees to Credit Union Officers, Directors and their Related Interests, without making any substantive changes.

Investment in Foreign Government Bonds - RB 4.1-102 restates the former AB 9-6, Credit Union Investment in Foreign Government Bonds, without making any substantive changes.

Fidelity Bond Coverage Requirements - RB 4.1-103 combines the former AB 28-1 and AB 28-2 regarding Credit Union Minimum Fidelity Bond Coverage Requirements and Notice of Termination, without making any substantive changes.

Membership By-Law Amendments - RB 4.1-104 restates the former AB 35-1, Application and Drafting Guidelines for Amending Credit Union By-Laws Relative to Membership, without making any substantive changes.

Loan Loss Reserve Requirements - RB 4.2-101 restates the former AB 2-1A. This Bulletin retains the requirement that a credit union's loan loss reserve be calculated according to generally accepted accounting principles ("GAAP") or as othewise directed by the Commissioner.

Minimum Regulatory Capital Standards - RB 4.2-102 restates the former AB 32-1, with the same title without making any substantive changes to the minimum regulatory capital requirements for credit unions.

Residential Mortgage Loan Underwriting - RB 4.2-103 restates the former AB 33-1, Policy Statement on Residential Mortgage Loan Underwriting By Credit Unions, without making any substantive changes.

Adjustable Rate Personal Loans - RB 4.3-101 restates the former AB 27-1, Memorandum On Adjustable Rate Personal Loans, without making any substantive changes.

Enforcement Policy For Unlicensed Entities - RB 5.1-101 restates the former AB 37-1 with the same title without making any substantive changes.

Former ABs Rescinded Upon Publication Of The Regulatory Bulletin Manual:

AB 18-8 - Directive Relative To Reverse Repurchase Agreements Offered By State-Chartered Credit Unions. This bulletin was rescinded in favor of a more general Regulatory Bulletin on sound investment policies.

AB 19-4B - Rental Of Safe Deposit Vaults And Boxes By State-Chartered Credit Unions.

This Bulletin has been rescinded due to changes implemented by 209 CMR 4.00 which incorporates federal law on bank safety measures.

AB 25-1 - Guideline Relative To The Temporary, Non-Mandatory Closing Of Bank Offices. This Bulletin was initially issued to provide bank's with notice of a change in law and is no longer applicable as banks have had such notification for over ten years.

AB 26-1 - Directive Governing The Issuance Of Subordinated Debt Securities For Consideration In Meeting Regulatory Capital Requirements. This Bulletin is no longer applicable due to changes in FDIC regulatory capital requirements.

AB 31-1 - Directive Governing The Use Of State Certified Or Licensed Appraisers By Non-Federally Insured Credit Unions. This Bulletin is no longer applicable because all state-chartered credit unions are now required to be federally insured by the N.C.U.A.

Table A

Regulatory Bulletins - Administrative Bulletins

Ref. No.	Regulatory Bulletin	Ref. No.	Administrative Bulletin
1.1-101	Examination Policies and Procedures	5-2	Safety and Soundness Examination Policies and Procedures
		5-3	Availability of Examination Reports for Individual Study by Directors and Trustees of State Chartered Financial Institutions
1.1-102	Conflict of Interest Policy	5-6	Loans to Examiners
		7-1	Conflict of Interest - Gifts
		9-2	Deleted
1.1-103	Advisory Opinions and Approval Requests		Reciting internal Division policies
1.1-104	Public Information Requests		Reciting internal Division policies
1.3-101	Adjustable Rate Mortgage Loans	13-2C	Memorandum On Adjustable Rate Mortgage Loans
1.3-102	Truth-In-Lending Reimbursement Guidelines		New issuance
1.3-103	Consumer Protection and Fair Lending Examinations	5-9	Equal Credit Opportunity Examination
2.1-101	Audit Policy Requirements	1-3	Mutual Banks and Credit Unions
		1-4	Directive Relative to Minimum Standards of Performance for Members of the Auditing Committee of Mutual Savings Banks and the Finance Committees of Mutual Co-Operative Banks
		22-1A	Verification of Savings Accounts
2.1-102	Insider Transactions	9-1	Insider Transactions (incorporating Opinion # 93-096)
2.1-103	Annual Report Filing	29-1	Directive Governing the Filing of Annual Call Reports by State-Chartered Financial Institutions
		29-2	Filing of Annual Call Reports by State-Chartered Financial Institutions On Their Activities Under the Community Reinvestment Act
		29-3	Directive Governing the Filing of Annual and Semi-Annual Reports by State-Chartered Credit Unions
2.1-104	Expedited Branch Office Application Procedures	36-1	Expedited Branch Office Application Procedures for Banks and Credit Unions with "Outstanding" CRA Ratings
2.2-101	Investment Policy Minimum Requirements	3-2	Covered Call Options
		6-2	Forward Placement or Delayed Delivery Contracts
		9-5	Directive Relative to Investment in Interest Rate Futures by State Chartered Banks
2.2-102	Management Information Systems Examinations	5-8A	Electronic Data Processing Services
2.2-103	Exclusive Leases and Other Restrictive Agreements	9-3	Directive on Exclusive Leases and Other Restrictive Agreements
2.3-101	Community Reinvestment and Fair Lending Policy	5-10	Community Reinvestment and Fair Lending Policy
2.3-102	CRA Ratings Policy	5-11	Policy Statement Relative to CRA Ratings
2.3-103	Alternative CRA Examination Procedures		New Issuance
2.3-104	School Bank Program	23-1	Conditions and Restrictions Relative to the Establishment and Operation of School Banks
		23-2	Memorandum on the Establishment of Branch Offices Located At Educational Facilities
2.3-105	Certificate of Deposit and Money Market Accounts Advertising Guidelines	30-1	Fair Advertising Guidelines For Short-Term Certificates Of Deposit and Money Market Accounts
2.3-106	Deposit Return Item Fees		New bulletin published February 24, 1998
3.1-101	Supervisory Stock Conversion Bank Equity Value Standard	34-1	Policy Statement on Determining the Equity Value of a Bank in a Supervisory Stock Conversion Pursuant to Subpart B of 209 CMR 33.00
3.2-101	Reserve Requirements for State-Chartered Stock Banks	18-3	Reserve Requirements for State-Chartered Stock Banks
3.3-101	Guidelines for "18-65" Accounts	24-1	Insufficient Fund Charge Guideline and Opinion Relative To Chapter 230 of the Acts of 1984 Governing Savings and Checking Accounts of Certain Depositors
		24-2	Guidance on Compliance With the Provisions of General Law Chapter 167D § 2, the "18/65 Law"
4.1-101	Loans & Fees to Officers and Directors	9-1A	Directive Governing Loans and Fees to Credit Union Officers Directors and their Related Interests
4.1-102	Investment in Foreign Government Bonds	9-6	Credit Union Investment in Foreign Government Bonds
4.1-103	Fidelity Bond Coverage Requirements	28-1	Fidelity Bond Coverage Requirements for State-Chartered Credit Unions
		28-2	Notice of Fidelity Bond Coverage Termination
4.1-104	Membership By-Law Amendments	35-1	Application And Drafting Guidelines For Amendments To A Credit Union's By-Laws Relative To The Conditions Of Association Which Qualifies Persons For Membership
4.2-101	Loan Loss Reserve Requirements	2-1A	Statement of Policy on Loan Loss Reserve Requirements for Credit Unions
4.2-102	Minimum Regulatory Capital Standards	32-1	Minimum Regulatory Capital Standards for Credit Unions
4.2-103	Residential Mortgage Loan Underwriting	33-1	Policy Statement on Residential Mortgage Loan Underwriting by Credit Unions
4.3-101	Adjustable Rate Personal Loans	27-1	Memorandum On Adjustable Rate Personal Loans
5.1-101	Enforcement Policy for Unlicensed Entities	37-1	Enforcement Policy for Unlicensed Entities

Table B

Administrative Bulletins - Regulatory Bulletins

Ref. No.	Administrative Bulletin	Ref. No.	Regulatory Bulletin
1-3	Audit Policy	2.1-101	Audit Policy Requirements
1-4	Directive Relative to Minimum Standards of Performance for Members of the Auditing Committee of Mutual Savings Banks and the Finance Committees of Mutual Co-Operative Banks	2.1-101	Audit Policy Requirements
2-1A	Statement of Policy on Loan Loss Reserve Requirements for Credit Unions	4.2-101	Loan Loss Reserve Requirements
2-4	Directive Relative to the Charge-Off of Loans by State Chartered Institutions	1.1-101	Examination Policies and Procedures
3-2	Covered Call Options	2.2-101	Investment Policy Minimum Requirements
5-2	Safety and Soundness Examination Policies and Procedures	1.1-101	Examination Policies and Procedures
5-3	Availability of Examination Reports for Individual Study by Directors and Trustees of State Chartered Financial Institutions	1.1-101	Examination Policies and Procedures
5-6	Loans to Examiners	1.1-102	Conflict of Interest Policy
5-8A	Electronic Data Processing Services	2.2-102	Management Information Systems Examinations
5-9	Equal Credit Opportunity Examination	1.3-103	Consumer Protection and Fair Lending Examinations
5-10	Community Reinvestment and Fair Lending Policy	2.3-101	Community Reinvestment and Fair Lending Policy
5-11	Policy Statement Relative to CRA Ratings	2.3-102	CRA Ratings Policy
6-2	Forward Placement or Delayed Delivery Contracts	2.2-101	Investment Policy Minimum Requirements
7-1	Conflict of Interest - Gifts	1.1-102	Conflict of Interest Policy
9-1	Insider Transactions	2.1-102	Insider Transactions
9-1A	Directive Governing Loans and Fees to Credit Union Officers Directors and their Related Interests	4.1-101	Loans & Fees to Officers and Directors
9-3	Directive on Exclusive Leases and Other Restrictive Agreements	2.2-103	Exclusive Leases and Other Restrictive Agreements
9-5	Directive Relative to Investment in Interest Rate Futures by State Chartered Banks	2.2-101	Investment Policy Minimum Requirements
9-6	Credit Union Investment in Foreign Government Bonds	4.1-102	Investment in Foreign Government Bonds
13-2C	Memorandum On Adjustable Rate Mortgage Loans	1.3-101	Adjustable Rate Mortgage Loans
13-5(I)	Memorandum On Regulating The Charging Of Points In Certain Mortgage Transactions		Rescinded on November 9, 1996
13-5(II)	Point Charging Practices, Section 63 of Chapter 183, And Administrative Bulletin 13-5		Rescinded on November 9, 1996
13-5(III)	Administrative Bulletin 13-5 Mortgages: Points, fees, etc. and Section 63 of Chapter 183, Massachusetts General Laws		Rescinded on November 9, 1996
13-5(IV)	Amendment to Administrative Bulletin 13-5		Rescinded on November 9, 1998
18-3	Reserve Requirements for State-Chartered Stock Banks	3.2-101	Reserve Requirements for State-Chartered Stock Banks
18-8	Directive Relative To Reverse Repurchase Agreements Offered by State-Chartered Credit Unions		Deleted
19-4B	Rental of Safe Deposit Vaults and Boxes by State-Chartered Credit Unions		Deleted
22-1A	Verification of Savings Accounts	2.1-101	Audit Policy Requirements
23-1	Conditions and Restrictions Relative to the Establishment and Operation of School Banks	2.3-104	School Bank Program
23-2	Memorandum on the Establishment of Branch Offices Located At Educational Facilities	2.3-104	School Bank Program
24-1	Insufficient Fund Charge Guideline and Opinion Relative To Chapter 230 of the Acts of 1984 Governing Savings and Checking Accounts of Certain Depositors	3.3-101	Guidelines for "18-65" Accounts
24-2	Guidance on Compliance With the Provisions of General Law Chapter 167D § 2, the "18/65 Law"	3.3-101	Guidelines for "18-65" Accounts
25-1	Guideline Relative To The Temporary, Non-Mandatory Closing of Bank Offices		Deleted
26-1	Directive Governing The Issuance Of Subordinated Debt Securities For Consideration In Meeting Regulatory Capital Requirements		Deleted
27-1	Memorandum On Adjustable Rate Personal Loans	4.3-101	Adjustable Rate Personal Loans
28-1	Fidelity Bond Coverage Requirements for State-Chartered Credit Unions	4.1-103	Fidelity Bond Coverage Requirements
28-2	Notice of Fidelity Bond Coverage Termination	4.1-103	Fidelity Bond Coverage Requirements
29-1	Directive Governing the Filing of Annual Call Reports by State-Chartered Financial Institutions	2.1-103	Annual Report Filing
29-2	Filing of Annual Call Reports by State-Chartered Financial Institutions On Their Activities Under the Community Reinvestment Act	2.1-103	Annual Report Filing
29-3	Directive Governing the Filing of Annual and Semi-Annual Reports by State-Chartered Credit Unions	2.1-103	Annual Report Filing
30-1	Fair Advertising Guidelines For Short-Term Certificates Of Deposit and Money Market Accounts	2.3-105	Certificate of Deposit and Money Market Accounts Advertising Guidelines
31-1	Directive Governing the Use of State Certified or Licensed Appraisers by Non-Federally Insured Credit Unions		Deleted
32-1	Minimum Regulatory Capital Standards for Credit Unions	4.2-102	Minimum Regulatory Capital Standards
33-1	Policy Statement on Residential Mortgage Loan Underwriting by Credit Unions	4.3-104	Adjustable Rate Personal Loans
34-1	Policy Statement on Determining the Equity Value of a Bank in a Supervisory Stock Conversion Pursuant to Subpart B of 209 CMR 33.00	3.1-101	Supervisory Stock Conversion Bank Equity Value Standard
35-1	Application And Drafting Guidelines For Amendments To A Credit Union's By-Laws Relative To The Conditions Of Association Which Qualifies Persons For Membership	4.1-104	Membership By-Law Amendments
36-1	Expedited Branch Office Application Procedures for Banks and Credit Unions with "Outstanding" CRA Ratings	2.1-104	Expedited Branch Office Application Procedures