[Federal Register Volume 60, Number 207 (Thursday, October 26, 1995)]
[Proposed Rules]
[Pages 54819-54820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26556]



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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 24

[Docket No. 95-26]
RIN 1557-AB46


Community Development Corporation and Project Investments

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
proposing to amend its regulation regarding Community Development 
Corporation and Project Investments. The proposal removes a provision 
that requires banks to reinvest profits, dividends and other 
distributions from community development investments in activities that 
promote the public welfare and is intended to encourage public welfare 
investments by national banks.

DATES: Comments must be received by November 27, 1995.

ADDRESSES: Comments should be directed to: Communications Division, 
Office of the Comptroller of the Currency, 250 E Street, SW., 
Washington, DC 20219. Fax # 202-874-5274. Attention: Docket No. 95-26. 
In addition, comments may be sent by electronic mail to 
[email protected]. Comments will be available for public 
inspection and photocopying at the same location.

FOR FURTHER INFORMATION CONTACT: Matthew Roberts, Director, Community 
and Consumer Law Division, 202/874-5750; Janice Booker, Director, 
Community Development Division, 202/874-4940.

SUPPLEMENTARY INFORMATION:

Introduction

    The OCC is currently reviewing 12 CFR part 24 as another component 
of its Regulation Review Program. Part 24 permits public welfare 
investments by national banks, subject to certain limitations. As part 
of the review of 12 CFR part 24, the OCC is proposing to change one 
provision immediately. Currently, part 24 requires a bank to reinvest 
the profits, dividends and other distributions from its equity and debt 
investments in a community development corporation (CDC) or community 
development (CD) project in activities that primarily promote the 
public welfare. This proposal would remove that requirement.

Background

    National banks are authorized under 12 U.S.C. 24 (Eleventh) to make 
investments that are designed primarily to promote the public welfare, 
including the welfare of low- and moderate-income families and 
communities (such as through the provision of housing, services, or 
jobs) consistent with safe and sound banking practices.1 Pursuant 
to this authority, the OCC issued part 24 on December 27, 1993, to 
establish various requirements for permissible public welfare 
investments. These requirements include a provision, codified at 12 CFR 
24.4(a)(4), that prescribes how a bank may use certain proceeds from 
its 12 U.S.C. 24(Eleventh) investments. This provision requires that 
the profits, dividends, tax credits, and other distributions from 
equity investments, or interest income from debt investments, received 
by a bank from a CDC or CD project investment be devoted to activities 
that primarily promote the public welfare. Further, in the case of an 
investment in a for-profit CDC subsidiary, the profits, dividends and 
other distributions must be reinvested in the CDC during its first 
three years of operation.

    \1\ The Eleventh paragraph was added to section 24 by the 
Depository Institutions Disaster Relief Act of 1992, enacted on 
October 23, 1992. Pub.L. 102-485, Section 6(a), 106 Stat. 2774 
(1992).
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    Section 24(Eleventh) does not require reinvestment of proceeds. The 
OCC included this provision in part 24 based on its practice in 
implementing 12 U.S.C. 24(Eighth), which was enacted prior to 12 U.S.C. 
24(Eleventh). Under 12 U.S.C. 24(Eighth), as construed in former 
Interpretive Ruling 7.7480, (12 CFR 7.7480), national banks were 
authorized to contribute to community funds, or to charitable, 
philanthropic, or benevolent instrumentalities conducive to the public 
welfare.2 In 1971, the OCC revised Interpretive Ruling 7.7480 to 
permit banks to make ``investments,'' as long as the investments were 
predominantly civic, community or 

[[Page 54820]]
public in nature. At that time, the OCC concluded that it may be 
inconsistent with the underlying charitable purposes of 12 U.S.C. 
24(Eighth) for a bank to retain profits on these investments. 
Interpretive Ruling 7.7480 therefore required banks to reinvest 
profits, dividends and other distributions in public purpose 
activities.

    \2\ 12 U.S.C. 24(Eighth). The interpretive ruling was replaced 
by 12 CFR part 24 in 1993. 58 FR 68464 (December 27, 1993).
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    Although part 24 was drafted under the authority of 12 U.S.C. 
24(Eleventh), which provides direct authority for public welfare 
``investments,'' it retained the reinvestment provision as one means of 
furthering the public welfare nature of investments made pursuant to 
this authority.

Discussion

    The OCC proposes to remove the reinvestment provision, 12 CFR 
24.4(a)(4). The statute does not restrict institutions from earning and 
retaining profits on investments made pursuant to 12 U.S.C. 
24(Eleventh), as long as such investments are designed primarily to 
promote the public welfare. Reactions to the current rule indicate, 
however, that in some instances the reinvestment provision discourages 
banks from making such investments. For example, the requirement that 
banks reinvest low-income housing tax credits in restricted activities 
can diminish a bank's economic incentive for participating in that type 
of low-income housing development. The OCC believes that removal of the 
reinvestment provision will further the basic objective of 12 U.S.C. 
24(Eleventh) by helping to encourage banks to make more investments.
    The OCC also believes that the proposal is consistent with bank 
safety and soundness. The proposal will enable banks to retain profits, 
dividends and other distributions from CDC subsidiaries and CD projects 
or to redeploy such proceeds to the CDC or other public welfare 
investments based upon an overall assessment by a bank's management of 
its financial needs and public welfare investment objectives. While the 
proposal will encourage banks to make investments to promote the public 
welfare, it will not constrain a bank's use of investment proceeds nor 
hamper a bank's ability to ensure the sound operation of the bank as a 
whole.
    Commenters are invited to address with as much specificity as 
possible:
    (1) The extent to which removal of the provision will encourage 
public welfare investments;
    (2) whether there are safety and soundness reasons to retain or 
remove the provision; and
    (3) any other reasons why the current requirement should be 
retained or eliminated.

Regulatory Flexibility Act

    It is hereby certified that this notice of proposed rulemaking, if 
adopted as a final rule, will not have a significant economic impact on 
a substantial number of small entities. Accordingly, a regulatory 
flexibility analysis is not required. This notice of proposed 
rulemaking, if adopted as a final rule, will reduce somewhat the 
regulatory burden on national banks, regardless of size, by removing a 
requirement for making public welfare investments.

Executive Order 12866

    The OCC has determined that this proposal is not a significant 
regulatory action under Executive Order 12866.

Unfunded Mandates

    The OCC has determined that this proposal will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of more than $100 million in any one year. Accordingly, a 
budgetary impact statement is not required under section 202 of the 
Unfunded Mandates Reform Act of 1995.

List of Subjects in 12 CFR Part 24

    Community development, Credit, Investments, National banks, 
Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the preamble, part 24 of title 12, 
chapter I, of the Code of Federal Regulations is proposed to be amended 
as set forth below:

PART 24--COMMUNITY DEVELOPMENT CORPORATION AND PROJECT INVESTMENTS

    1. The authority citation for part 24 continues to read as follows:

    Authority: 12 U.S.C. 24(Eleventh), 93a, 161, 481, and 1818.


Sec. 24.4   [Amended]

    2. Paragraph (a)(2) of Sec. 24.4 is amended by adding ``and'' at 
the end of the paragraph.
    3. Paragraph (a)(3) of Sec. 24.4 is amended by removing the ``; 
and'' at the end of the paragraph and adding a period.
    4. Paragraph (a)(4) of Sec. 24.4 is removed.

    Dated: October 2, 1995.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 95-26556 Filed 10-25-95; 8:45 am]
BILLING CODE 4810-33-P