[Federal Register Volume 61, Number 152 (Tuesday, August 6, 1996)]
[Proposed Rules]
[Pages 40756-40758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19810]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 357
RIN 3064-AB08
Determination of Economically Depressed Regions
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Proposed rule and withdrawal of proposed rule.
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SUMMARY: As part of the FDIC's systematic review of its regulations
under section 303(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (CDRI), the FDIC is amending its regulation on
economically depressed regions to reflect changes in the marketplace,
update and streamline the regulation, improve efficiency, and reduce
unnecessary costs. The FDIC also is withdrawing a previous proposed
amendment to the regulation which was published December 18, 1992.
[[Page 40757]]
The FDIC is required by statute to consider proposals for direct
financial assistance by Savings Association Insurance Fund (SAIF)
members having offices located in an economically depressed region and
meeting certain other specified criteria, before grounds exist for the
appointment of a conservator or receiver for the institution. The FDIC
is proposing to amend this regulation, which designates certain
economically depressed regions, by adding guidance to enable applicants
to evaluate their situations before formally applying for assistance.
Rather than periodically designating specific regions in light of
current economic conditions, the proposed rule provides the criteria
that the FDIC will use to determine which regions are economically
depressed.
DATES: Comments must be received by October 7, 1996.
ADDRESSES: Send comments to Jerry L. Langley, Executive Secretary,
FDIC, 550 17th Street, N.W., Washington, DC 20429. Comments may be
hand-delivered to room F-400, 1776 F Street, N.W., Washington, DC
20429, on business days between 8:30 a.m. and 5:00 p.m.; or sent by
facsimile: (202) 898-3838; or by Internet: [email protected]. Comments
may be inspected and photocopied in the FDIC Public Information Center,
room 100, 801 17th Street, N.W., Washington, DC 20429, between 9:00
a.m. and 5:00 p.m. on business days.
FOR FURTHER INFORMATION CONTACT: James L. Freund, Chief, Economic
Analysis Section, Division of Research and Statistics, (202) 898-3960,
FDIC, 550 17th Street, N.W., Washington, DC 20429; Michael Phillips,
Counsel, Legal Division, (202) 898-3581, FDIC, 550 17th Street, N.W.,
Washington, DC 20429; or Sandra Comenetz, Counsel, Legal Division,
(202) 898-3582, FDIC, 550 17th Street, N.W., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The proposed rule does not require any collections of paperwork
pursuant to section 3504(h) of the Paperwork Reduction Act (44 U.S.C.
3501 et seq.). Accordingly, no information has been submitted to the
Office of Management and Budget for review.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that the proposed rule will not
have a significant economic impact on a substantial number of small
entities. The rule per se does not impose regulatory compliance
requirements on depository institutions of any size beyond that imposed
by the underlying statute. Moreover, no institutions have filed
assistance proposals since 1990 when the rule was first promulgated.
Discussion
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 part 357 of
its rules and regulations (12 CFR part 357) should be amended to
minimize the cost of implementing the regulation, make it more flexible
regarding market standards, and give institutions more opportunity to
establish that they are located in an economically depressed region.
The FDIC has authority under section 13(c) of the Federal Deposit
Insurance Act (FDI Act) (12 U.S.C. 1823(c)) to provide financial
assistance to prevent the default of an insured depository institution.
Under section 13(k)(5) of the FDI Act (12 U.S.C. 1823(k)(5)), the FDIC
must consider proposals for eligible SAIF member institutions to
receive assistance pursuant to section 13(c) before grounds exist for
the appointment of a conservator or receiver for the institution.
Section 13(k)(5) establishes nine criteria for such eligibility. One of
the criteria is that an institution's offices must be located in an
economically depressed region. In addition, for purposes of assistance
proposals under section 13(k)(5), SAIF member applicants must
separately meet the criteria set by the FDIC for purposes of section
13(c) assistance. However, assistance proposals with respect to SAIF
member institutions under section 13(k)(5) that do not meet all nine of
the criteria set forth in that section may nevertheless be submitted to
the FDIC for consideration under section 13(c). Thus, institutions
whose offices are not located in an economically depressed region under
section 13(k)(5) are not precluded from proposing and receiving open
institution assistance.
The term ``economically depressed region'' is defined in section
13(k)(5)(c) to mean any geographical region which the [FDIC] determines
by regulation to be a region within which real estate values have
suffered serious decline due to severe economic conditions, such as a
decline in energy or agricultural values or prices.
On September 17, 1990, the FDIC issued a final rule (55 FR 38043)
codified at 12 CFR 357.1, which determined that certain geographical
regions were economically depressed regions for purposes of section
13(k)(5) of the FDI Act. In determining which regions were economically
depressed, the FDIC considered the following factors: (1) The ratio of
poor quality real estate assets to total assets in the portfolios of
BIF members; (2) the ratio of poor quality real estate assets to total
assets in the portfolios of SAIF members; and (3) unemployment figures.
The statewide percentages of impaired real estate assets for BIF and
SAIF members and unemployment rates were analyzed with reference to
national levels. These factors are subject to periodic review and
application by the FDIC in light of changing economic conditions.
The FDIC's final rule designated eight individual states as
economically depressed regions for purposes of section 13(k)(5) of the
FDI Act. They were: Alaska, Arizona, Arkansas, Colorado, Louisiana, New
Mexico, Oklahoma, and Texas.
Two years later, having reexamined real estate and employment
conditions based on the most recent information, the FDIC determined
that the eight states previously designated as economically depressed
regions should no longer receive that designation. The FDIC concluded
that the following nine states and the District of Columbia should be
classified as economically depressed regions: California, Connecticut,
Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode
Island, and Vermont. In December 1992, the FDIC published this list of
states in a proposed rule (57 FR 60140, December 18, 1992). The FDIC
had considered, as before, the ratio of poor quality real estate assets
to total assets in the portfolios of BIF and SAIF members, and the
labor market situation. The FDIC considered both the overall
unemployment rate and non-farm employment growth trends.
The December 1992 proposed rule was never adopted, and will be
withdrawn pursuant to an FDIC policy statement which provides that any
proposed rule that has not been the subject of final Board action
within nine months generally should be withdrawn. Statement of Policy
on Development
[[Page 40758]]
and Review of FDIC Rules and Regulations, 49 FR 7288 (Feb. 28, 1984).
Rather than periodically revisiting the criteria used to identify
regions for designation as economically depressed regions, and listing
regions so designated, the FDIC is proposing to revise part 357 to
provide guidance to enable applicants to evaluate their situations
before formally applying for assistance. The proposed rule provides the
criteria the FDIC will use to determine which regions are economically
depressed. Adoption of the rule would mean that the FDIC will no longer
periodically designate specific regions in light of current economic
conditions.
Under the proposed rule, for the purpose of determining
economically depressed areas, the FDIC generally will consider states
as the defined geographical unit. The FDIC will determine whether an
institution qualifies as being located in an economically depressed
region on a case-by-case basis. That determination will be based on
four criteria: (1) high unemployment rates; (2) declines in non-farm
employment; (3) high levels of problem real estate assets at insured
depository institutions; and (4) where a sufficient number of
observations are reported, evidence indicating declining real estate
values from the FDIC's Survey of Real Estate Trends. All data used will
be from statistical sources available to the public. A list of these
data sources is provided in the attached Appendix. Because there are
significant industrial and labor market structural differences across
areas of the United States, national or state benchmarks are not
provided with respect to each of the aforementioned four criteria. This
enables the FDIC to more accurately determine whether a region is
depressed based on specific criteria relevant to an institution's
market area at any time. For example, the FDIC will consider relevant
information provided by institutions on local real estate prices and on
the institution's market area, whether limited to a part of a state or
covering more than one state.
In consideration of the foregoing, the FDIC hereby withdraws the
proposed rule published at 57 FR 60140, December, 18, 1992.
List of Subjects in 12 CFR Part 357
Bank deposit insurance, Grant programs--housing and community
development, Savings associations.
For the reasons set forth in the preamble, part 357 of chapter III
of title 12 of the Code of Federal Regulations is proposed to be
amended as follows:
PART 357--DETERMINATION OF ECONOMICALLY DEPRESSED REGIONS
1. The authority citation for part 357 is revised to read as
follows:
Authority: 12 U.S.C. 1819, 1823(k)(5).
2. Section 357.1 is amended by revising paragraph (b) to read as
follows:
Sec. 357.1 Economically depressed regions.
* * * * *
(b) Economically depressed regions. (1) For the purpose of
determining economically depressed areas, the FDIC in general shall
consider states as the defined geographical unit. The FDIC shall
determine whether an institution qualifies as being located in an
economically depressed area on a case-by-case basis. That determination
will be based on four criteria:
(i) High unemployment rates;
(ii) Significant declines in non-farm employment;
(iii) High delinquency rates of real estate assets at insured
depository institutions; and
(iv) Where a sufficient number of observations are reported,
evidence indicating declining real estate values from the FDIC's Survey
of Real Estate Trends.
(2) All data sources used are in the public record. The appendix to
this part contains a list of such data sources. In addition, the FDIC
will consider relevant information provided by institutions on local
real estate prices and on the institution's market area, whether
limited to a part of a state or covering more than one state.
3. Appendix A to part 357 is added to read as follows:
Appendix A to Part 357--Data Sources Used by the FDIC To Determine
``Economically Depressed Regions''
1. Non-farm employment and unemployment rates. U.S. Department
of Labor, Bureau of Labor Statistics, ``Employment and Earnings,''
Table B.7, Employees on Non-Farm Payrolls by State and Major
Industry; ``Labor Force Status by State,'' Table C.2. Washington, DC
(monthly).
2. Problem real estate assets (noncurrent real estate loans and
leases plus other real estate owned). Federal Financial Institutions
Examination Council, ``FFIEC Call Report.'' Washington, DC
(quarterly).
3. Regional real estate values. Federal Deposit Insurance
Corporation, ``Survey of Real Estate Trends.'' Washington, DC
(quarterly).
By order of the Board of Directors.
Dated at Washington, DC, this 16th day of July 1996.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
[FR Doc. 96-19810 Filed 8-5-96; 8:45 am]
BILLING CODE 6714-01-P