[Federal Register Volume 61, Number 101 (Thursday, May 23, 1996)]
[Notices]
[Pages 25868-25869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12927]



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[[Page 25869]]

FEDERAL DEPOSIT INSURANCE CORPORATION


Investment in Leeway Securities; Rescission of Statement of 
Policy

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Rescission of Statement of Policy.

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SUMMARY: As part of the FDIC's systematic review of its regulations and 
written policies under section 303(a) of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (CDRI), the FDIC is 
rescinding its policy statement concerning bank investments under state 
leeway laws (Statement). The Statement indicates that the FDIC will not 
criticize investments of a civic or community nature if they meet 
reasonable limits set out in the Statement. The FDIC is rescinding the 
Statement because it is now outmoded. The rescission does not reflect 
any substantive change in the FDIC's supervisory attitude toward this 
type of investment.

EFFECTIVE DATE: This Statement is rescinded effective May 23, 1996.

FOR FURTHER INFORMATION CONTACT: Robert W. Walsh, Manager, Division of 
Supervision (202) 898-6911; Gerald J. Gervino, Senior Attorney, (202) 
898-3723, Legal Division, FDIC, 550 17th Street, N.W., Washington, D.C. 
20429.

SUPPLEMENTARY INFORMATION: The FDIC is conducting a systematic review 
of its regulations and written policies. Section 303(a) of the CDRI (12 
U.S.C. 4803(a)) requires each federal banking agency to streamline and 
modify its regulations and written policies in order to improve 
efficiency, reduce unnecessary costs, and eliminate unwarranted 
constraints on credit availability. Section 303(a) also requires each 
federal banking agency to remove inconsistencies and outmoded and 
duplicative requirements from its regulations and written policies.
    As part of this review, the FDIC has determined that the Statement 
is outmoded, and that the FDIC's written policies can be streamlined by 
its elimination.
    The Statement was published on August 4, 1972, 37 FR 16228 and 
amended on March 7, 1974, 39 FR 8956. The Statement was designed to 
clarify the FDIC's position with regard to bank investments under state 
leeway laws. Leeway laws were adopted by many states to give depository 
institutions a way to make direct investments in civic or community 
related projects that would otherwise be prohibited under the standard 
bank or thrift charter. It was felt that financial institutions were 
receiving inconsistent messages from their regulators. While community 
beneficial projects were encouraged by state agencies, the credit 
quality of the related investments was being criticized. The FDIC did 
not want to inhibit banks from making investments that were primarily 
of a civic or community nature. Therefore the Statement indicated that 
FDIC examiners would not criticize these leeway investments provided 
they were made within reasonable limits established by state law and 
aggregated no more than 10 percent of capital and surplus, whichever 
was less.
    Section 24 of the Federal Deposit Insurance Act, 12 U.S.C. 1831a, 
prohibits equity investments by an insured state bank if the investment 
is not of a type and in an amount that is permissible for a national 
bank. 12 CFR part 362 implements this statutory provision. Both the 
statute and the regulation contain exceptions for investments as a 
limited partner in a partnership, the sole purpose of which is the 
acquisition, rehabilitation or new construction of qualified housing 
projects. In addition, the National Bank Act was amended since the last 
amendment to the Statement in 1974 to expressly provide authority for a 
national bank to make investments that are designed to primarily 
promote the public welfare. Such investments can be made up to a 
maximum of 10 percent of unimpaired capital and surplus. (12 U.S.C. 24 
(Eleventh). Finally, community welfare investments are encouraged under 
the FDIC's regulations implementing the Community Reinvestment Act 
which was enacted by Congress subsequent to the adoption of the 
agency's Statement. Consistent with that Act and the FDIC's 
regulations, the FDIC will generally not criticize commercially viable 
community welfare investment. Thus, the rescission of the Statement 
does not signal any change in the manner in which the FDIC evaluates 
investments which are the subject of the current Statement. In view of 
this current statutory and regulatory direction, the Statement is no 
longer necessary.

    For the above reasons, the Statement is hereby rescinded.

    By Order of the Board of Directors.

    Dated at Washington, D.C., this 14th day of May, 1996.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 96-12927 Filed 5-22-96; 8:45 am]
BILLING CODE 6714-01-P