WASHINGTON -- The Office of Thrift Supervision has proposed allowing healthy thrifts to pay dividends or buy back their stock without first notifying their regulator.

The proposed rule continues regulators' practice of cutting red tape for healthy institutions -- those with an OTS exam rating of 1 or 2, in this case.

The thrift trade group praised the move, saying it will save the industry time and money now spent preparing notifications and applications and waiting for OTS decisions on the transactions.

"It is definitely something we favor," said Gary G. Gilbert, a regulatory specialist for the Savings and Community Bankers of America. "As long as the institution's distributions aren't going to impair its capital, there's no reason [it] shouldn't be able to" make its own business decisions on what dividends to pay and whether to buy back its stock.

The notice of proposed rulemaking was published Monday in the Federal Register. The OTS is accepting comments on the matter until Feb. 3. It would also affect cash-out mergers, in which an institution pays cash to its existing shareholders in exchange for their stakes as it merges with another institution, which serves to eliminate minority stockholders.

The OTS said the proposed change was prompted by the thrift industry's record-high capital levels. The rule would not apply to thrifts owned by a holding company because those institutions are governed by congressionally mandated rules.

Under current rules, all thrifts must notify the agency or win OTS approval before making such capital distributions.

If the new rule is adopted, undercapitalized or troubled institutions would still be required to apply for OTS permission before paying out any of their capital.

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