Washington - The Office of Thrift Supervision on Wednesday released regulations that tell some depositor-owned savings associations how to structure sales of minority stakes to the public.

The regulations, which take effect Sept. 20, are aimed at mutual holding companies, a recently created corporate structure for thrifts that combines the attributes of mutual ownership with those of stock-owned companies.

Mutual holding companies allow federally chartered mutual thrifts to sell minority shares of stock to the public. At the same time, the thrift creates a holding company for itself that holds a majority of the thrift's stock and remains a mutual - or depositor-owned - institution.

Stracture Offers Flexibility

Wendy B. Samuel, regulatory counsel at Savings and Community Bankers of America, said thrifts that have used the mutual holding company structure "have been very pleased with the flexibility - they have gotten the result that they wanted."

The OTS views mutual thrifts converting to stock-owned institutions - whether using the new MHC structure or through a standard stock conversion - as one way for the thrift industry to raise capital.

Consumer groups praised the new OTS rules for safeguarding depositors' interests by stipulating that they have the right to buy stock before management, and by requiring independent appraisals of the company's value.

"It is injecting some fairness where there was a great potential for rip-offs," said Chris Lewis, director of banking and housing policy at the Consumer Federation of America. The OTS rules help to "limit the windfall any initial stock purchasers would reap from fraudulent appraisals," he said.

The MHC ruies parallel those that govern standard conversions in that they set limits on the amount of stock thrift executives can buy and allow the mutuals' depositor/owners to buy stock before management.

Previously, some thrifts got OTS permission to let management buy large amounts of the new stock before the depositor-owners were allowed to buy shares.

Although this is the first regulation governing a MHC structure for federally chartered thrifts, the OTS had already approved 20 applications from thrifts with $7 billion in assets for such deals at the end of July. The agency took each application on a case-by-case basis.

Most Pending Deals on Hold

However, since July, when the Internal Revenue Service said it would review the tax liability of thrifts that converted to MHCs, most of the pending deals have been put on hold.

"The IRS says that the way they have been done in the past ... makes it taxable," said Bob Freedman, the partner in charge of financial institutions at Silver, Freedman & Taff, a Washington law firm. The IRS is reviewing how it will treat bad-debt reserves - the main tax break for thrifts - in MHC transactions.

The OTS has met with the IRS to discuss how MHCs will be taxed, said John C. Price, acting assistant director for policy at the OTS.

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