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<p>WASHINGTON-As part of an on-going, comprehensive review of the treatment of mutual thrifts, the Office of Thrift Supervision (OTS) is proposing rule changes governing mutual thrifts, mutual holding companies and mutual-to-stock conversions. The OTS proposal appeared in the Federal Register April 9. The agency made extensive changes to the original proposal from July 2000 as a result of public comments received, and it reflects additional guidance issued by OTS in the intervening 18 months. The proposed regulation eliminates a requirement for thrifts to obtain a “non-objection” letter from OTS for a business plan before applying to convert from mutual-to-stock, permits stock repurchases to be included in business plans and clarifies how the standards for approval of a business plan are applied. The current proposal also addresses the issue of “remutualization,” in which a mutual holding company with a publicly traded subsidiary is taken over by a mutual institution. OTS’ proposal would allow subsidiaries of mutual holding companies to adopt similar post-conversion anti-takeover provisions to those stipulated for standard conversions, to allow newly-converted mutual holding companies time to implement their business plan before becoming takeover targets. In response to public comments, OTS has placed an additional limit on management benefit plans for mutual holding companies. In addition to the existing restrictions, the amount of stock permitted to be allocated at the time of reorganization to management benefit plans, excluding employee stock option plans, would be limited to 25% of the shares issued to minority shareholders in the public offering. Another provision would allow checking account holders to participate in initial public offerings by converting mutuals. The new proposal would also codify the rules on establishing charitable foundations in connection with a conversion. To date, OTS has allowed converting thrifts to fund a charitable foundation with a portion of their stock on a case-by-case basis Mutual institutions make up nearly 40% of all thrifts and control approximately 7% of the industry’s assets. Copies of both the July 12, 2000, proposal and the new proposal may be found on the OTS Web site, www.ots.treas.gov.</p>

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