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EFFECTIVE DATE: This Statement is rescinded effective May 23, 1996.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