[Federal Register Volume 62, Number 45 (Friday, March 7, 1997)]
[Rules and Regulations]
[Pages 10668-10678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5678]



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Part IV





Department of the Treasury





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Community Development Financial Institutions Fund



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12 CFR Part 1806



Bank Enterprise Award Program; Interim Rule; Notice of Funds 
Availability (NOFA) Inviting Applications for the Bank Enterprise 
Awards (BEA) Program

  Federal Register / Vol. 62, No. 45 / Friday, March 7, 1997 / Rules 
and Regulations  

[[Page 10668]]



DEPARTMENT OF THE TREASURY

Community Development Financial Institutions Fund

12 CFR Part 1806

RIN 1505-AA71


Bank Enterprise Award Program

AGENCY: Community Development Financial Institutions Fund, Department 
of the Treasury.

ACTION: Revised interim rule with request for comment.

-----------------------------------------------------------------------

SUMMARY: The Department of the Treasury is issuing a revised interim 
rule implementing the Bank Enterprise Award Program administered by the 
Community Development Financial Institutions Fund. The program was 
authorized by the Community Development and Financial Institutions Act 
of 1994. The programs of the CDFI Fund are intended to facilitate the 
flow of lending and investment capital into distressed communities and 
to individuals who have been unable to take full advantage of the 
financial services industry.

DATES: Interim rule effective March 7, 1997; comments must be received 
on or before July 7, 1997.

ADDRESSES: All comments concerning this interim rule should be 
addressed to the Director, Community Development Financial Institutions 
Fund, Department of the Treasury, 1500 Pennsylvania Avenue, NW, 
Washington, DC 20220. Comments may be inspected at the above address 
between 9:30 a.m. and 4:30 p.m.

FOR FURTHER INFORMATION CONTACT: Kirsten S. Moy, Director, the 
Community Development Financial Institutions Fund at (202) 622-8662. 
(This is not a toll free number.)

SUPPLEMENTARY INFORMATION:

I. General

Executive Order (E.O.) 12866

    It has been determined that this regulation is not a significant 
regulatory action as defined in E.O. 12866. Because no substantive 
changes were made to this regulation subsequent to submission to the 
Office of Management and Budget (OMB), the provisions of section 
6(a)(3)(E) of the E.O. do not apply.

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required for this 
revised interim rule, the provisions of the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.) do not apply. Moreover, the Department of the 
Treasury finds that any economic or other consequence of this revised 
interim rule is a direct result of the implementation of statutory 
provisions.

Paperwork Reduction Act

    The Department of the Treasury is issuing these revised interim 
regulations without notice and public comment pursuant to the 
Administrative Procedures Act (5 U.S.C. 553). For this reason, the 
collections of information contained in these revised regulations have 
been reviewed and pending receipt and evaluation of public comments, 
approved by the Office of Management and Budget under control number 
1505-0153 (expires 08/31/97). Comments concerning the collections of 
information, the accuracy of the estimated average annual burden, and 
the reduction of such burden should be directed to the Office of 
Management and Budget, Paperwork Reduction Projection (OMB Paperwork 
control number 1505-0153), Washington, DC 20503, with copies to the 
Community Development Financial Institutions Fund, Department of the 
Treasury, 1500 Pennsylvania Avenue NW., Washington, DC 20220. Any such 
comments should be submitted not later than July 7, 1997.
    Provisions requiring the collection of information can be found in 
Secs. 1806.206, 1806.301, 1806.304, and 1806.305 of these regulations. 
The information requested in such provisions is necessary to evaluate 
applications, monitor the performance of entities receiving assistance, 
and ensure compliance with statutory and program requirements. The 
anticipated respondents and recordkeepers are financial institutions 
that may apply for and receive assistance.
    Estimated total annual reporting and/or recordkeeping burden: 750 
hours.
    Estimated average annual burden hours per respondent and/or 
recordkeeper: 10 hours.
    Estimated number of respondents and/or recordkeepers: 75.
    Estimated annual frequency of responses: 1-2.

National Environmental Policy Act

    Pursuant to Treasury Directive 75-02 (Department of the Treasury 
Environmental Quality Program), the Department has determined that 
these revised interim regulations are categorically excluded from the 
National Environmental Policy Act and do not require an environmental 
review.

Administrative Procedures Act

    Pursuant to the provisions of 5 U.S.C. 553(a)(2), these revised 
regulations are exempt from the proposed rule-making requirements of 5 
U.S.C. 553(b) and are being issued as revised interim regulations 
without opportunity for notice and public comment prior to their 
effective date. Furthermore, the Department for good cause finds that 
notice and public comment prior to effect are impracticable and 
contrary to the public interest. Congress appropriated funds for the 
CDFI Fund in FY 1996 and required such funds to be obligated by 
September 30, 1997. The Fund is required by statute to make one-third 
of each fiscal year's appropriated program funds available in order to 
implement the Bank Enterprise Award (BEA) Program. Such actions clearly 
indicate Congress' intent that the BEA Program be implemented in an 
expeditious manner. The amendments to the interim rule originally 
issued on October 19, 1995, and subsequently amended on January 23, 
1996, February 29, 1996, and November 25, 1996, herein are intended to 
make the program easier for Applicants to participate and reduce 
regulatory burden. If the Department does not issue these regulations 
for effect, it will not be feasible to implement the program, as 
amended prior to September 30, 1997, in a manner that better achieves 
the results intended by Congress.

Catalog of Federal Financial Assistance Numbers

    Bank Enterprise Award Program--21.021.

II. Background

    The CDFI Fund was established as a wholly owned government 
corporation by the Community Development Banking and Financial 
Institutions Act of 1994 (the CDFI Act). Subsequent legislation placed 
the Fund within the Department of the Treasury and gave the Secretary 
of the Treasury all powers and rights of the Administrator of the Fund 
as set forth in the authorizing statute.
    Consistent with the placement and administration of the Fund within 
the Department's organizational structure, the Department of the 
Treasury's Inspector General will serve as the Inspector General for 
the Fund. Any individual who becomes aware of the existence or apparent 
existence of fraud, waste, or abuse of assistance provided by the Fund 
is encouraged to report it to the Department of the Treasury's Office 
of Inspector General in writing or on the Inspector General's Hotline 
(toll free 1-800-359-3898). All telephone calls will be handled 
confidentially. Written complaints should be addressed to the U.S. 
Department of the Treasury, Office of Inspector General, Room 2412,

[[Page 10669]]

1500 Pennsylvania Avenue NW., Washington, DC 20220.
    All records and materials pertaining to the selection and awarding 
of assistance by the Fund shall be fully subject to the Freedom of 
Information Act. Interested parties should contact the U.S. Department 
of the Treasury, Office of the Assistant Secretary for Management, 
Disclosure Services at (202) 622-1500.
    The CDFI Fund's programs are designed to facilitate the flow of 
lending and investment capital into distressed communities and to 
individuals who have been unable to take full advantage of the 
financial services industry. This initiative is an important step in 
rebuilding poverty-stricken and transitional communities and creating 
economic opportunity for people often left behind by the economic 
mainstream.
    Access to credit and investment capital is an essential ingredient 
for creating and retaining jobs, revitalizing neighborhoods, developing 
affordable housing, and unleashing the economic potential of small 
businesses. The CDFI Fund recognizes the important role traditional 
financial institutions have played, and should continue to play, in 
serving the credit needs of distressed communities and their residents. 
As a means of facilitating increased activity and innovation among 
traditional financial institutions, these revised regulations will 
implement the BEA Program. The BEA Program has its roots in the Federal 
Deposit Insurance Corporation Improvement Act of 1991. The Program was 
significantly modified as part of the CDFI Act to enable it to function 
as a companion to the CDFI Program. Together, the CDFI Program and BEA 
Program will promote activity among the spectrum of financial 
institutions that serve distressed communities.
    The following revised interim regulations amend the BEA Program. 
Elsewhere in this issue of the Federal Register is a separate Notice of 
Funds Availability (NOFA) for this program. Final regulations will be 
published after receipt and consideration of public comments. Such 
public comments are extremely important to the development of the final 
regulations. The remainder of this background section provides a 
summary of the revised interim rule and the major amendments to the 
interim regulations that were originally published on October 19, 1995, 
and subsequently amended on January 23, 1996, February 29, 1996, and 
November 25, 1996.

III. Bank Enterprise Award Program

Subpart A--Overview

    Section 114 of the CDFI Act is based on the Bank Enterprise Act of 
1991 and gives the Fund authority to implement, with some 
modifications, its provisions. The Bank Enterprise Act of 1991, though 
enacted in 1991, had not previously received appropriated funds for 
implementation.
    The purpose of the BEA Program (12 CFR Part 1806) is to encourage 
insured depository institutions to increase loans, services, and 
technical assistance within distressed communities and to make Equity 
Investments or engage in CDFI Support Activities. The BEA Program 
rewards participating insured depository institutions for increasing 
their activities in economically distressed communities and investing 
in CDFIs. Applicants are selected to participate in the Program through 
a competitive process which evaluates applications based on the value 
of proposed increases in their specified activities. Program 
participants receive monies only after successful completion of the 
specified activities.

Subpart B--Public Comments on Previous Interim Rule

    The Fund received a modest number (3) of formal comments on the 
interim rule to this part published in the Federal Register on October 
19, 1995, and amended on January 23, 1996, February 29, 1996, and 
November 25, 1996. The Fund also sought input on Program improvements 
from the approximately 50 Applicants to the Program during the first 
round and held a focus group in Chicago with several Program 
participants in October 1996 to solicit additional input. The Fund also 
solicited input at meetings and conferences of national community 
development trade organizations, as well as regional workshops hosted 
by the Federal Reserve System. Most of the revisions to the interim 
rule are based on comments received through these avenues.
    Most of the issues raised by the formal comments involved elements 
of the Program which cannot be changed without statutory amendments. 
For example, all commenters expressed concerns that the ``Distressed 
Community'' (as defined in Sec. 1806.200) designation requirements were 
difficult for both urban and rural communities to meet. Several 
suggestions were made to amend these requirements to correspond to the 
standards established by other Federal programs or agencies (i.e. 
Community Reinvestment Act, Home Mortgage Disclosure Act, HUD 
affordable housing goal standards established for housing-related 
government-sponsored enterprises). Suggestions for technical amendments 
to the Program's statutory provisions to make it more compatible with 
the statutory provisions dealing with the CDFI Program were also put 
forth. In addition, commenters expressed a desire for a reduction in 
the information-tracking and reporting burden associated with the BEA 
Program.
    The BEA statute requires the use of both U.S. Bureau of the Census 
and the U.S. Bureau of Labor Statistics (BLS). Furthermore, the BLS 
data specified in the statute is not available on a census tract basis. 
Thus, it was difficult for many Applicants to satisfy the Program 
requirements. Furthermore, although the BEA Program and the Community 
Development Financial Institutions Program (12 CFR part 1805) are 
intended to be companion programs, the criteria for designating 
communities is different.
    One commenter expressed concern that small banks in rural 
communities may experience greater difficulty in meeting the 
application requirements due to limitations on resources of smaller 
institutions. The Fund has responded by simplifying some of the 
Application and Program requirements in this revised rule. One 
commenter suggested that for the purpose of calculating BEA award 
amounts, grants to CDFIs used for operating purposes should be given 
the same consideration as grants used for building the capital of a 
CDFI. The Fund responded by removing this distinction. All commenters 
expressed a desire to simplify and streamline the Program requirements. 
The Fund has attempted to address these concerns with the changes 
discussed below.
    The Fund informally solicited comments from Applicants 
participating in the Program. Participants cited several elements of 
the Program that they considered favorable. For example, the Program 
provides a new vehicle of opportunity for getting recognition for 
community development activities. Many Awardees indicated that they 
engaged in activities that support CDFIs for the first time or 
significantly increased the level of support provided to CDFIs over 
their historical support levels. Some Awardees reported that they 
intend to use their BEA funding to support future community development 
activities. However, the Fund received mixed feedback on the 
application process. Many Applicants expressed the opinion that the 
requirements for applying for assistance or reporting their

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activities was simple and straightforward; others found it burdensome.
    Some Applicants had difficulty with the eligibility requirements 
(as did many institutions that considered applying for assistance but 
did not submit an application because they could not meet the 
eligibility requirements). Specifically, the authorizing statute 
permits only insured depository institutions to apply. Insured 
depository institution Applicants can only report their Qualified 
Activities and the activities of their subsidiaries (not holding 
companies or non-insured depository institution subsidiaries of holding 
companies). However, many banks and thrifts carry out their community 
development activities through subsidiaries of their holding companies 
that are not insured depository institutions. Other Program 
participants expressed a desire to make the Program structure more 
flexible. Several suggestions were made to provide grants on a 
prospective basis (rather than retrospectively) so the Program could be 
used to catalyze different types of activity. Participants suggested 
that rather than looking at only one aspect of community development 
lending--increases in activity--the Program could be amended to give 
greater consideration to innovation, impact, or other qualitative 
aspects of an institution's activities. Implementation of many of the 
suggestions discussed above will require a statutory change and 
therefore are not reflected in the revised interim rule that follows.
    In this revised interim rule, the Fund has sought to address 
difficulties experienced by Program participants during the first 
funding round that may be addressed without any statutory changes. 
First, the revised rule includes numerous changes that seek to 
streamline and simplify the Program and Application requirements. The 
revised rule clarifies the requirements for reporting and documenting 
eligible activities. The Fund will provide a BEA Help Desk that will be 
available to provide data and assistance to Applicants in designating 
their Distressed Communities and will provide a list of certified CDFIs 
as part of the application packet.

Subpart C--Findings From the First Funding Round

    In the first funding round of the BEA Program, the Fund set aside 
$15.5 million to distribute in awards to qualifying institutions. 
Approximately 50 institutions applied for assistance totaling $13.5 
million in requests at the time the applications were submitted. The 
Fund received applications from institutions located in 18 states and 
the District of Columbia. Of these Applicants, 38 institutions received 
awards totaling $13.1 million. Since the Program was undersubscribed, 
all Applicants that met the Program's basic statutory and regulatory 
requirements received an award. Applicants did not need to be 
competitively rated and ranked. Twelve institutions that applied for 
assistance did not receive awards because they did not meet the program 
requirements.
    The awards ranged from $3,750 to $2.7 million; the median award 
received was approximately $100,000. With respect to the types of 
institutions that received awards, 39% were national banks, 34% were 
state chartered commercial banks, 24% were Federal savings banks or 
thrifts, and 3% (1 Awardee) was a state chartered mutual savings bank. 
Awardees ranged in asset size from more than $21 million to $320 
billion, as of the time that awards were obligated (16% under $250 
million in total assets; 14% between $250 million and $1 billion in 
total assets; 74% over $1 billion in total assets).
    Awardees engaged in a variety of activities. With regard to Equity 
Investments or other activities that support CDFIs, the Fund found that 
nearly two-thirds (63%) of all Awardees engaged in activities that 
support CDFIs. These Awardees provided support to 49 community based 
financial intermediaries through their BEA activities which generated 
nearly $66 million in support for CDFIs. Of the support provided to 
CDFIs: 78% of all support was provided in the form of equity 
investments or capital grants; 21% was provided in the form of loans; 
and approximately 1% was provided in the form of operating grants, 
nonmember deposits in credit unions, and technical assistance. Thirty-
seven percent of the Awardees engaged in the provision of direct 
lending or services within distressed neighborhoods. Through the 
Program, these Awardees reported a total of $60.1 million in lending 
and service activities during the Assessment Period.

Subpart D--General Provisions

    Section 1806.102 describes the Program's relationship to the CDFI 
Program (part 1805). To prevent Applicants from receiving more than one 
Federal award for a single activity, no CDFI may receive an award under 
the BEA Program if it: (1) Has an application pending under the CDFI 
Program; (2) has received assistance from the CDFI Program within the 
preceding 12 months; or (3) has ever received assistance under the CDFI 
Program for the same activities proposed in a BEA Program application. 
Assistance provided to a CDFI by a BEA Program participant may be used 
by the CDFI as matching funds for the CDFI Program.
    Section 1806.103(m) is amended to provide that any organization 
that is certified as a CDFI as of the end of the Assessment Period, and 
is a CDFI at the time of the Qualified Activity, shall be considered a 
CDFI for the purposes of the BEA Program. If an Applicant is proposing 
to make an Equity Investment in or engage in CDFI Support Activities 
with respect to an entity that has not been certified as a CDFI, such 
uncertified CDFI shall submit the information described in 
Sec. 1805.701(b) of this chapter. Such information shall be submitted 
to the Fund as specified in the applicable NOFA published in the 
Federal Register. Certification must be completed by the end of the 
applicable Assessment Period as specified in the applicable NOFA. A 
list of organizations with current certifications may be obtained at 
the offices of the Fund. An Applicant should be aware that if it closes 
on an Equity Investment or CDFI Support Activity transaction prior to 
an uncertified CDFI's certification, such transaction may not be 
considered a Qualified Activity. The uncertified CDFI must qualify as a 
CDFI at the time of the transaction and must be certified as a CDFI by 
no later than the end of the applicable Assessment Period in order for 
the transaction to be deemed a Qualified Activity.
    This revised interim rule makes technical amendments and 
clarifications to several terms. The term Eligible Development Activity 
is changed to Development and Services Activity. The term Commercial 
Real Estate Loan is modified to clarify the distinction between 
Business Loan and Agriculture Loans. The term Community Service is 
added as a new Development and Service Activity and includes the 
provision of technical assistance, counseling, and other services. 
These activities were described as Qualified Activities in Section 
1806.201(x) through (xiii) of the interim rule published on October 19, 
1995, as heretofore amended on January 23, 1996, February 29, 1996, and 
November 25, 1996, and must take place within a Distressed Community. 
The term CDFI Support Activity is added and includes loans, certain 
deposits, and technical assistance provided to CDFIs integrally 
involved with a Distressed Community. The term Equity Investment is 
amended to include all types of grants regardless

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of use by recipients and the purchase of a partnership or limited 
liability company membership interest. The term Equity Investment is 
further clarified to describe various instruments that will be 
considered to be an Equity Investment including grants made to CDFIs. 
The Fund finds that grants are commonly used like equity (and often is 
more favorable) by a recipient CDFI to support its lending, investment, 
or other activities. Since the large majority of CDFIs are non-profit 
organizations and the Fund's authorizing statute intended that non-
profit CDFIs benefit from its programs, the Fund has determined that it 
is consistent with the purposes of this Program to consider a grant to 
be a form of Equity Investment.

Subpart E--Awards

Distressed Community
    Section 1806.200 describes the community eligibility and 
designation process. In the previous rule, an Applicant proposing to 
make Equity Investments in a CDFI in a Distressed Community was 
required to designate a Distressed Community (or Communities) at the 
time of application. In the revised rule, an insured depository 
institution applying for an award is required to designate a Distressed 
Community (or Communities) if it proposes to carry out Development and 
Services Activities and CDFI Support Activities. As a means of reducing 
the paperwork burden for Applicants, the Fund has eliminated the 
requirement that an Applicant that proposes to make an Equity 
Investment designate a Distressed Community at the time of application. 
In the event that the Fund's resources are oversubscribed, the Fund 
reserves the right to request that such Applicants provide this 
information.
    The statute mandates that each designated Distressed Community meet 
certain geographic requirements and distress criteria. Under the 
geographic requirements, the community must be located within certain 
boundaries, its boundaries must be contiguous, and its population must 
meet certain requirements or must be located entirely within an Indian 
Reservation (as defined in the regulations). The distress criteria 
require that at least 30 percent of the residents have incomes which 
are less than the national poverty level and the unemployment rate for 
the area must be at least 1.5 times the national average (as determined 
by the Bureau of Labor Statistics'' most recent figures). Such criteria 
are intended to ensure that BEA Program resources are targeted to some 
of the most Distressed Communities in the nation.
Qualified Activities
    In Sec. 1806.201 the activities that Program participants may 
engage in are categorized as CDFI Related Activities and Development 
and Service Activities. Development and Service Activities include 
certain consumer, commercial real estate, single family, multi-family, 
business and agricultural loans, and Project Investments. Additional 
Development and Service Activities are deposit taking activities, 
Financial Service provision, and Community Services. Each of these 
activities is defined and must serve a Distressed Community. Each 
Development and Service Activity is assigned a priority factor based on 
the Fund's assessment of its degree of difficulty, the extent of 
innovation involved, and the extent of benefits provided to a 
Distressed Community by the activity. In developing the categories of 
Development and Service Activities, the Fund sought to minimize 
recordkeeping and reporting burdens. The CDFI Related Activities 
include Equity Investments and CDFI Support Activities.
    The rule is amended to prohibit an Applicant from receiving an 
award for activities for which the Applicant may receive a benefit 
through the Low Income Housing Tax Credit. In no case shall such 
activities be considered an Equity Investment, Project Investment, or 
other Qualified Activity for the purpose of calculating an award. The 
Department of the Treasury is fully supportive of the Low Income 
Housing Tax Credit (LIHTC) as a critical tool for promoting investment 
in affordable housing. However, for the purposes of the BEA Program, 
investments made by an Applicant for which such Applicant receives a 
benefit through the LIHTC shall not be considered a Qualified Activity 
for several reasons. First, a well established market already exists 
for the LIHTC among investors, and the LIHTC provides sufficient 
returns to such investors that additional Federal subsidy is not 
necessary to prompt banks or thrifts to become investors in such an 
instrument. Second, generally in recent years, the LIHTC program has 
reached its statutorially-imposed limit. Thus, it is not clear that 
providing additional Federal subsidy through the BEA Program will 
result in affordable housing in addition to what would occur without 
such incentive. In the interests of using scarce Federal resources in a 
more effective manner, the Fund has determined that it is prudent to 
prohibit activities involving the LIHTC from being counted as Qualified 
Activities for the purposes of this Program.
Measuring Activities
    Section 1806.202 describes the methodology used to measure 
activities for the purpose of ranking Applications and determining 
award amounts. All Qualified Activities will be measured by the 
increases in value of the activities between a retroactive Baseline 
Period (for which the Applicant will provide historical data) and a 
prospective Assessment Period (for which the Applicant must project 
future activity levels). Dates for the Baseline and Assessment Periods 
will be published in the NOFA for each funding round.
    Section 1806.202(d) clarifies that, for the purpose of reporting 
Qualified Activities occurring during the Baseline Period or the 
Assessment Period, an Applicant may only report activities on the basis 
of the date a final ``closing'' transaction occurred. The rule 
specifies that the evidence of such a transaction must constitute a 
legally binding agreement between the Applicant and a borrower or 
investee which, among other things, specifies the final terms and 
conditions of the agreement. The rule establishes some limitations on 
the amount of a transaction that an Applicant may claim of the purpose 
of calculating an award in the event of a multi-year disbursement. The 
rule excludes from consideration for an award loan transactions 
involving a renewal, rollover, or refinancing of a loan made by an 
Applicant or an affiliate of the Applicant in amounts that are equal to 
or less than the principal outstanding of such loan at the time of 
refinancing.
Estimated Award Amounts
    In Sec. 1806.203, procedures are established for calculating 
estimated award amounts. In general, the estimated award amount for 
Equity Investments, CDFI Support Activities carried out by an Applicant 
that is not a CDFI, and CDFI Support Activities carried out by an 
Applicant that is a CDFI will be equal to 15, 11 and 33 percent, 
respectively, of an Applicant's anticipated increase in such 
activities. For Development and Service Activities, a seven step 
procedure is established under which a total score is calculated. 
Generally, if the Applicant is a CDFI, the total score is multiplied by 
15 percent to determine the estimated award. If the Applicant is not a 
CDFI, the total score is multiplied by five percent.

[[Page 10672]]

Selection Process
    A selection process is established in Sec. 1806.204 which reflects 
the funding priorities discussed in the statute. In the event that the 
amount of funding requests exceeds the amount of funds available, first 
priority in selection will go to Applications that propose to engage in 
CDFI Related Activities. Of such Applicants, funding consideration will 
be given to Applicants in the following order: (1) Applicants proposing 
to make Equity Investments in CDFIs in Distressed Communities; (2) 
Applicants proposing to make Equity Investments in CDFIs not in 
Distressed Communities; and (3) Applicants proposing to engage in CDFI 
Support Activities. Applicants proposing to make Equity Investments in 
CDFIs may be ranked based on the extent to which an Applicant proposes 
to reduce its award below 15 percent, but in no case shall an Applicant 
reduce its award to less than 12 percent. Ties will be broken using the 
ratio of proposed Equity Investments to the asset size of the 
institution. Applicants proposing to engage in CDFI Support Activities 
will be ranked based on the ratio of the proposed CDFI Support Activity 
to the asset size of the Applicant. The second priority in selection 
will go to Applicants proposing to engage in Development and Service 
Activities. Applications in the last category of funding priorities may 
be ranked according to the ratio of an Applicant's total score to its 
asset size. Any ties between such Applicants will be broken using the 
poverty rates of the Distressed Communities.
Actual Award Amounts
    Section 1806.205 establishes the award calculation process. In 
general, awards will be calculated on a pro-rata basis with respect to 
the increase in activities actually carried out. In the event that the 
amount of funds available for a specific funding round are insufficient 
to cover all estimated award amounts, the Fund, at its sole discretion, 
may limit the amount of or deny an award to an Applicant that has 
achieved less than 75 percent of its projected activities. This 
provision is intended to prevent Applicants from over-estimating 
projected activities to enhance their competitiveness in the selection 
process.
Application Process
    Section 1806.206 describes the Application process for Bank 
Enterprise Awards. Each funding round will be preceded by a NOFA 
published in the Federal Register. The NOFA will contain specific 
information on requirements or restrictions applicable to such round. 
As indicated above, the Fund has sought to minimize its application and 
reporting requirements and seeks comment on how these requirements 
might be improved.

Subpart F--Terms and Conditions of Assistance

    Section 1806.300 requires that each Awardee execute an award 
agreement with the Fund. The agreement will establish requirements for 
receiving funds and appropriate sanctions for failure to comply with 
Program requirements. Section 1806.301 specifies that, at the end of 
the Assessment Period, each Awardee will submit evidence of its 
completed activities. The rule clarifies the Program's documentation 
requirements. Upon receipt of final reports and documentation, the Fund 
will make the appropriate disbursement of funds to the Awardee.

List of Subjects in 12 CFR Part 1806

    Banks, banking, Community development, Grant programs--housing and 
community development, Reporting and recordkeeping requirements, 
Savings associations.

    Dated: March 4, 1997.
Kirsten S. Moy,
Director, Community Development Financial Institutions Fund.

    For the reasons set forth in the preamble, chapter XVIII of title 
12 of the Code of Federal Regulations is amended by revising part 1806 
to read as follows:

PART 1806--BANK ENTERPRISE AWARD PROGRAM

Subpart A--General Provisions

Sec.
1806.100  Purpose.
1806.101  Summary.
1806.102  Relationship to the Community Development Financial 
Institutions Program.
1806.103  Definitions.
1806.104  Waiver authority.
1806.105  OMB control number.

Subpart B--Awards

1806.200  Community eligibility and designation.
1806.201  Qualified Activities.
1806.202  Measuring activities.
1806.203  Estimated award amounts.
1806.204  Selection process.
1806.205  Actual award amounts.
1806.206  Applications for Bank Enterprise Awards.

Subpart C--Terms and Conditions of Assistance

1806.300  Award Agreement; sanctions.
1806.301  Records, reports and audits of Awardees.
1806.302  Compliance with government requirements.
1806.303  Fraud, waste and abuse.
1806.304  Books of account, records and government access.
1806.305  Retention of records.

    Authority: 12 U.S.C. 4703, 4717; chapter X, Pub. L. 104-19, 108 
Stat. 237 (12 U.S.C. 4703 note).

Subpart A--General Provisions


Sec. 1806.100  Purpose.

    The purpose of the Bank Enterprise Award Program is to encourage 
insured depository institutions to make Equity Investments and carry 
out CDFI Support Activities and Development and Service Activities to 
revitalize distressed urban and rural communities.


Sec. 1806.101  Summary.

    (a) Under the Bank Enterprise Awards Program, the Fund makes awards 
to selected Applicants that:
    (1) Invest in or otherwise support Community Development Financial 
Institutions;
    (2) Increase lending and investment activities within Distressed 
Communities; or
    (3) Increase the provision of certain services and assistance.
    (b) Distressed Communities must meet minimum poverty and 
unemployment criteria. Applicants are selected to participate in the 
program through a competitive application process. Awards are based on 
increases in Qualified Activities that are carried out by the Applicant 
during an Assessment Period. Bank Enterprise Awards are distributed 
after successful completion of projected Qualified Activities. All 
awards shall be made subject to the availability of funding.


Sec. 1806.102  Relationship to the Community Development Financial 
Institutions Program.

    (a) Prohibition against double funding. No CDFI may receive a Bank 
Enterprise Award if it has:
    (1) An application pending for assistance under the Community 
Development Financial Institutions Program (part 1805 of this chapter);
    (2) Received assistance from the Community Development Financial 
Institutions Program within the preceding 12-month period; or
    (3) Ever received assistance under the Community Development 
Financial Institutions Program for the same activities for which it is 
seeking a Bank Enterprise Award.

[[Page 10673]]

    (b) Matching funds. Equity Investments and CDFI Support Activities 
(except technical assistance) provided to a CDFI under this part can be 
used by the CDFI to meet the matching funds requirements of the 
Community Development Financial Institutions Program.


Sec. 1806.103  Definitions.

    For the purpose of this part:
    (a) Act means the Community Development Banking and Financial 
Institutions Act of 1994, as amended (12 U.S.C. 4701 et seq.);
    (b) Agricultural Loan means an origination of a loan secured by 
farm land (including farm residential and other improvements), a loan 
to finance agricultural production, or a loan to a farmer (other than a 
Single Family Loan or Consumer Loan);
    (c) Applicant means any insured depository institution (as defined 
in section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1813)) that is applying for a Bank Enterprise Award;
    (d) Appropriate Federal Banking Agency has the same meaning as in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);
    (e) Assessment Period means an annual or semi-annual period 
specified in the applicable Notice of Funds Availability (NOFA) in 
which an Applicant will carry out Qualified Activities;
    (f) Award Agreement means a formal agreement between the Fund and 
an Awardee pursuant to Sec. 1806.300;
    (g) Awardee means an Applicant selected by the Fund to receive a 
Bank Enterprise Award;
    (h) Bank Enterprise Award means an award made to an Applicant 
pursuant to this part;
    (i) Bank Enterprise Award Program means the program authorized by 
section 114 of the Act and implemented under this part;
    (j) Baseline Period means an annual or semi-annual period specified 
in the applicable NOFA in which an Applicant has previously carried out 
Qualified Activities;
    (k) Business Loan means an origination of a loan used for 
commercial or industrial activities (other than an Agricultural Loan, 
Commercial Real Estate Loan, Multi-Family Loan or Single Family Loan);
    (l) Commercial Real Estate Loan means an origination of a loan 
(other than a Multi-Family Loan or a Single Family Loan) used for 
commercial purposes to finance construction and land development or an 
origination of a loan that is secured by real estate and used to 
finance the acquisition or rehabilitation of a building used for 
commercial purposes;
    (m) Community Development Financial Institution (or CDFI) means an 
entity whose certification as a CDFI under Sec. 1805.201 of this 
chapter is in effect as of the end of the applicable Assessment Period 
(the Assessment Period in which the Qualified Activity takes place) and 
that meets the requirements of Sec. 1805.200 (b) through (h) of this 
chapter at the time of the Qualified Activity, subject to the rest of 
this paragraph (m). If an Applicant is proposing to make an Equity 
Investment or engage in CDFI Support Activities with an uncertified 
CDFI, the uncertified CDFI may apply for certification by submitting 
the information described in Sec. 1805.701(b) of this chapter. In order 
for the Applicant to be eligible to receive an award for its activity, 
the required information with respect to the uncertified CDFI shall be 
submitted to the Fund as specified in the applicable NOFA published in 
the Federal Register, and certification must be completed by the end of 
the applicable Assessment Period as specified in the applicable NOFA. 
Notwithstanding anything in this paragraph (m) to the contrary, an 
Applicant may receive an award pursuant to this part for assistance 
provided to an uncertified CDFI that, at the time of the Qualified 
Activity, does not meet the requirements of Sec. 1805.200 (b) through 
(h) of this chapter if:
    (1) The Applicant requires the uncertified CDFI to refrain from 
using the assistance provided until the entity is certified;
    (2) The uncertified CDFI is certified by the end of the applicable 
Assessment Period; and
    (3) The Applicant retains the option of recapturing said assistance 
in the event that the uncertified CDFI is not certified by the end of 
the applicable Assessment Period;
    (n) CDFI Related Activities means Equity Investments and CDFI 
Support Activities;
    (o) CDFI Support Activity means assistance provided by an Applicant 
or its Subsidiary to a CDFI that is integrally involved in a Distressed 
Community in the form of the origination of a loan, technical 
assistance, or deposits if such deposits are:
    (1) Uninsured and committed for a term of at least three years; or
    (2) Insured, committed for a term of at least three years, and 
provided at an interest rate that is materially (in the determination 
of the Fund) below market rates;
    (p) Community Services means the following forms of assistance:
    (1) Provision of technical assistance to Residents in managing 
their personal finances through consumer education programs (either 
sponsored or offered by the Applicant);
    (2) Provision of technical assistance and consulting services to 
newly formed small businesses located in the Distressed Community;
    (3) Provision of technical assistance to, or servicing the loans 
of, Low-or Moderate-Income homeowners and homeowners located in the 
Distressed Community; and
    (4) Other services provided for Low-and Moderate-Income persons in 
a Distressed Community or enterprises integrally involved in a 
Distressed Community deemed appropriate by the Fund;
    (q) Consumer Loan means an origination of a loan to one or more 
individuals for household, family, or other personal expenditures;
    (r) Distressed Community means a geographic community which meets 
the minimum area eligibility requirements specified in Sec. 1806.200;
    (s) Development and Service Activities means activities described 
in Sec. 1806.201(b)(4) that are carried out by the Applicant or its 
Subsidiary;
    (t) Equity Investment means financial assistance provided by an 
Applicant or its Subsidiary to a CDFI in the form of a grant, a stock 
purchase, a purchase of a partnership interest, a purchase of a limited 
liability company membership interest, a loan made on such terms that 
it has characteristics of equity (and is considered as such by the Fund 
and is consistent with requirements of the Applicant's Appropriate 
Federal Banking Agency), or any other investment deemed to be an Equity 
Investment by the Fund;
    (u) Financial Services means check-cashing, providing money orders 
and certified checks, automated teller machines, safe deposit boxes, 
and other comparable services as may be specified by the Fund that are 
provided to Low-and Moderate-Income persons in the Distressed Community 
or enterprises integrally involved with the Distressed Community;
    (v) Fund means the Community Development Financial Institutions 
Fund established under section 104(a) of the Act (12 U.S.C. 4703(a));
    (w) Geographic Units means counties (or equivalent areas), 
incorporated places, minor civil divisions that are units of local 
government, census tracts, block numbering areas, block groups, and 
American Indian or Alaska Native areas (as each is defined by the U.S.

[[Page 10674]]

Bureau of the Census) or other areas deemed appropriate by the Fund;
    (x) Indian Reservation means a geographic area that meets the 
requirements of section 4(10) of the Indian Child Welfare Act of 1978 
(25 U.S.C. 1903(10)), and shall include land held by incorporated 
Native groups, regional corporations, and village corporations, as 
defined in and pursuant to the Alaska Native Claims Settlement Act (43 
U.S.C. 1601 et seq.), public domain Indian allotments, and former 
Indian Reservations in the State of Oklahoma;
    (y) Low-and Moderate-Income means income that does not exceed 80 
percent of the median income of the area involved, as determined by the 
Secretary of Housing and Urban Development with adjustments for smaller 
and larger families pursuant to section 102(a)(20) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5302(a)(20));
    (z) Metropolitan Area means an area designated as such (as of the 
date of the application) by the Office of Management and Budget 
pursuant to 44 U.S.C. 3504(d)(3), 31 U.S.C. 1104(d), and Executive 
Order 10253 (3 CFR, 1949-1953 Comp., p. 758), as amended;
    (aa) Multi-Family Loan means an origination of a loan secured by a 
five-or more family residential property;
    (bb) Project Investment means providing financial assistance in the 
form of a purchase of stock, limited partnership interest, other 
ownership instrument, or a grant to an entity that is integrally 
involved with a Distressed Community and formed for the sole purpose of 
engaging in a project or activity, approved by the Fund, related to 
commercial real estate, single family housing, multi-family housing, 
business or agriculture (as defined in this part);
    (cc) Qualified Activities means CDFI Related Activities and 
Development and Service Activities;
    (dd) Resident means an individual domiciled in a Distressed 
Community;
    (ee) Single Family Loan means an origination of a loan secured by a 
one-to-four family residential property;
    (ff) Subsidiary has the same meaning as in section 3 of the Federal 
Deposit Insurance Act, except that a CDFI shall not be considered a 
subsidiary of any insured depository institution or any depository 
institution holding company that controls less than 25 percent of any 
class of the voting shares of such corporation and does not otherwise 
control, in any manner, the election of a majority of directors of the 
corporation; and
    (gg) Unit of General Local Government means any city, county, town, 
township, parish, village, or other general purpose political 
subdivision of a State or Commonwealth of the United States, or general 
purpose subdivision thereof, and the District of Columbia.


Sec. 1806.104  Waiver authority.

    The Fund may waive any requirement of this part that is not 
required by law, upon a determination of good cause. Each such waiver 
shall be in writing and supported by a statement of the facts and 
grounds forming the basis of the waiver. For a waiver in any individual 
case, the Fund must determine that application of the requirement to be 
waived would adversely affect the achievement of the purposes of the 
Act. For waivers of general applicability, the Fund will publish 
notification of granted waivers in the Federal Register.


Sec. 1806.105  OMB control number.

    The collection of information requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB 
control number 1505-0153 (expires September 30, 1998).

Subpart B--Awards


Sec. 1806.200  Community eligibility and designation.

    (a) General. If an Applicant proposes to carry out CDFI Support 
Activities or Development and Service Activities, the Applicant shall 
designate one or more Distressed Communities in which it proposes to 
carry out those activities. If an Applicant proposes to carry out CDFI 
Support Activities, the Applicant shall provide evidence that the CDFI 
it is proposing to support is integrally involved with such a 
Distressed Community. In the case of an Applicant proposing to make an 
Equity Investment, the Fund reserves the right to request information 
on Distressed Communities served by such a CDFI should such information 
be deemed necessary by the Fund to complete the selection process 
described in Sec. 1806.204. In the case of an Applicant that proposes 
to carry out both CDFI Support Activities and Development and Service 
Activities it may designate different Distressed Communities for these 
two categories of activity.
    (b) Minimum area eligibility requirements. A Distressed Community 
must meet the minimum area eligibility requirements contained in this 
paragraph (b).
    (1) Geographic requirements. A Distressed Community must be a 
geographic area:
    (i) That is located within the boundaries of a Unit of General 
Local Government;
    (ii) The boundaries of which are contiguous; and
    (iii) (A) The population of which must be at least 4,000 if any 
portion of the area is located within a Metropolitan Area with a 
population of 50,000 or greater;
    (B) The population must be at least 1,000 if no portion of the area 
is located within such a Metropolitan Area; or
    (C) The area is located entirely within an Indian Reservation.
    (2) Distress requirements. A Distressed Community must be a 
geographic area where:
    (i) At least 30 percent of the Residents have incomes which are 
less than the national poverty level, as published by the U.S. Bureau 
of the Census in the 1990 decennial census; and
    (ii) The unemployment rate is at least 1.5 times greater than the 
national average, as determined by the U.S. Bureau of Labor Statistics' 
most recent data including estimates of unemployment developed using 
the U.S. Bureau of Labor Statistics' Census Share calculation method. 
U.S. Bureau of Labor Statistics data and information necessary for 
Census Share calculations may be obtained from the Fund.
    (c) Area designation. An Applicant shall designate an area as a 
Distressed Community by:
    (1) Selecting Geographic Units which individually meet the minimum 
area eligibility requirements; or
    (2) Selecting two or more Geographic Units which, in the aggregate, 
meet the minimum area eligibility requirements set forth in paragraph 
(b) of this section provided that no Geographic Unit selected by the 
Applicant within the area has a poverty rate of less than 20 percent.
    (d) Designation and notification process. Upon request, the Fund 
will provide a prospective Applicant with data and other information to 
help it identify areas eligible to be a Distressed Community. A 
prospective Applicant is encouraged to contact the Fund prior to filing 
an application to determine if an area meets the minimum area 
eligibility requirements.


Sec. 1806.201  Qualified Activities.

    (a) CDFI Related Activities. An Applicant may receive a Bank 
Enterprise Award for making an Equity Investment or carrying out CDFI 
Support Activities during an Assessment Period.
    (b) Development and Service Activities. (1) General. An Applicant 
may receive a Bank Enterprise Award

[[Page 10675]]

for carrying out Development and Service Activities during an 
Assessment Period.
    (2) Area served. The Development and Service Activities listed in 
paragraphs (b)(4) (i) through (x) of this section must serve a 
Distressed Community. An activity is considered to serve a Distressed 
Community if it is:
    (i) Undertaken in the Distressed Community; or
    (ii) Provided to Low- and Moderate-Income Residents or enterprises 
integrally involved in the Distressed Community.
    (3) Priority factors. Each Development and Service Activity is 
assigned a priority factor. A priority factor represents the Fund's 
assessment of the degree of difficulty, the extent of innovation, and 
the extent of benefits accruing to the Distressed Community for each 
type of activity.
    (4) Development and Service Activities. Development and Service 
Activities are listed in this paragraph with their corresponding 
priority factors:
    (i) Deposit liabilities in the form of savings or other demand or 
time accounts accepted from Residents at offices located within the 
Distressed Community (priority factor = 1.0);
    (ii) Financial Services (priority factor = 1.2);
    (iii) Community Services (priority factor = 1.4);
    (iv) Consumer Loans (priority factor = 1.2);
    (v) Single Family Loans and related Project Investments (priority 
factor = 1.4);
    (vi) Multi-Family Loans and related Project Investments (priority 
factor = 1.6);
    (vii) Commercial Real Estate Loans and related Project Investments 
(priority factor = 1.6);
    (viii) Business Loans, Agricultural Loans, and related Project 
Investments of $100,000 or less (priority factor = 1.9);
    (ix) Business Loans, Agricultural Loans, and related Project 
Investments of more than $100,000 through $250,000 (priority factor = 
1.8);
    (x) Business Loans and related Project Investments of more than 
$250,000 through $1,000,000 and Agricultural Loans and related Project 
Investments of more than $250,000 through $500,000 (priority factor = 
1.7).
    (c) Limitation. Financial assistance provided by an Applicant for 
which the Applicant receives benefits through the Low Income Housing 
Tax Credit authorized pursuant to Section 42 of the Internal Revenue 
Code of 1986, as amended (26 U.S.C. 42), shall not constitute an Equity 
Investment, Project Investment, or other Qualified Activity, as defined 
in this part, for the purposes of calculating or receiving an award.


Sec. 1806.202  Measuring activities.

    (a) General. Qualified Activities shall be measured by comparing 
the Qualified Activities carried out during the Baseline Period with 
the Qualified Activities projected to be carried out during the 
Assessment Period. Increases in the values of Qualified Activities 
between the Baseline Period and Assessment Period will be used in 
determining award amounts. If an Applicant is seeking assistance only 
for CDFI Related Activities, it should only report its activities for 
CDFI Related Activities categories. If an Applicant is seeking 
assistance only for Development and Service Activities, it should only 
report its activities for Development and Service Activities 
categories. If An Applicant is seeking assistance for both CDFI Related 
Activities and Development and Service Activities, it should report its 
activities for both types of categories. If an applicant is unable to 
report its activities in the aforementioned manner, the Applicant shall 
provide an explanation satisfactory to the Fund as to why it cannot 
report required information and simultaneously submit to the Fund a 
certification that during the Assessment Period the Applicant did not 
reduce its total activity in any unreported categories. The form and 
content of any certification shall be determined by the Fund. The dates 
of the Baseline Period and Assessment Period will be published in a 
Notice for each funding round.
    (b) Exception. An Applicant may select not to report its deposit 
liabilities as described in Sec. 1806.201(b)(4)(i). In such a case, an 
Applicant's deposit liabilities will not be considered in calculating 
the service score pursuant to Sec. 1806.203(c).
    (c) Value. The Fund will assess the value of:
    (1) Equity Investments, loans (excluding any renewal, roll over, or 
refinancing of a loan made by the Applicant or an affiliate of the 
Applicant in an amount equal to or less than the principal outstanding 
of such loan at the time of refinancing), grants and deposits described 
in Sec. 1806.103 at the original amount of such investments, loans, 
grants or deposits;
    (2) Deposit liabilities at the face dollar amount of monies 
deposited as measured by comparing the net change in the amount of 
applicable funds (as described in Sec. 1806.201(b)(4)(i)) on deposit at 
the Applicant institution during the period described in this paragraph 
(c)(2). An Applicant shall measure the net changes in deposit 
liabilities during:
    (i) The Baseline Period, by comparing the amount of applicable 
funds on deposit at the close of business the day before the beginning 
of the Baseline Period and at the close of business on the last day of 
the Baseline Period; and
    (ii) The Assessment Period, by comparing the amount of applicable 
funds on deposit at the close of business the day before the beginning 
of the Assessment Period and at the close of business on the last day 
of the Assessment Period;
    (3) Financial Services, Community Services, and CDFI Support 
Activities consisting of technical assistance based on the 
administrative costs of providing such services; and
    (4) Project Investments at the original amount of the purchase of 
stock, limited partnership interest, other ownership interest, or 
grant.
    (d) Closed Transactions. A transaction shall be considered to have 
been carried out during the Baseline Period or the Assessment Period 
if:
    (1) The documentation evidencing the transaction:
    (i) Is executed on a date within the applicable Baseline Period or 
Assessment Period, respectively, as specified in the applicable NOFA; 
and
    (ii) Constitutes a legally binding agreement between the Applicant 
and a borrower or investee which specifies the final terms and 
conditions of the transaction, except that any contingencies included 
in the final agreement must be typical of such transaction and 
acceptable (both in the judgment of the Fund); and
    (2) An initial disbursement of loan or investment proceeds has 
occurred in a manner that is consistent with customary business 
practices and is reasonable given the nature of the transaction, (both 
as determined by the Fund).
    (e) Reporting. An Applicant shall report Qualified Activities on 
the basis of transactions that were:
    (1) Completed during the Baseline Period; and
    (2) Are expected to be completed during the Assessment Period and 
disbursed by the Applicant to a borrower or investee within the period 
described in Sec. 1806.205(a).


Sec. 1806.203  Estimated award amounts.

    Award amounts will be determined at the sole discretion of the Fund 
and estimated as described in this section.
    (a) Equity Investments. The estimated award amount for an Equity 
Investment

[[Page 10676]]

will be equal to 15 percent (or such lower percentage as may be 
requested by the Applicant) of the anticipated increase in the value of 
such investment between the Baseline Period and Assessment Period.
    (b) CDFI Support Activities. If an Applicant is not a CDFI, the 
estimated award amount for CDFI Support Activities will be equal to 11 
percent of the anticipated increase in the dollar amount of such 
support between the Baseline Period and Assessment Period. If Applicant 
is a CDFI, the estimated award amount for CDFI Support Activities will 
be equal to 33 percent of the anticipated increase in the dollar amount 
of such support between the Baseline Period and Assessment Period.
    (c) Development and Service Activities. The estimated award amount 
for Development and Service Activities will be calculated as follows:
    (1) Step 1. For each type of Development and Service Activity, 
subtract the value in the Baseline Period from the estimated value for 
the Assessment Period to yield a remainder;
    (2) Step 2. Multiply the remainder for each Development and Service 
Activity by the assigned priority factor to yield a weighted value for 
each activity;
    (3) Step 3. Add the weighted values for deposit liabilities and 
Financial Services to yield a service score;
    (4) Step 4. Add the weighted values for all other categories of 
Development and Service Activities to yield a development score. If the 
development score is negative, an Applicant will be ineligible to 
receive a Bank Enterprise Award. If the development score is positive, 
go to Step 5;
    (5) Step 5. If the service score is greater than the development 
score, reduce the service score to equal the same amount as the 
development score to yield an adjusted service score. (The Act 
prohibits an Applicant from receiving more assistance for its deposit 
taking activities than for other Qualified Activities.);
    (6) Step 6. Add the service score (or adjusted service score if 
applicable) and the development score to yield a total score; and
    (7) Step 7. If the Applicant is:
    (i) A CDFI, multiply the total score by 15 percent to yield an 
estimated award amount; or
    (ii) Not a CDFI, multiply the total score by 5 percent to yield an 
estimated award amount.


Sec. 1806.204  Selection process.

    (a) Availability of funds. All awards are subject to the 
availability of funds. If the amount of funds available during a 
funding round is sufficient for all estimated award amounts, an Awardee 
that meets all of the program requirements specified in this part shall 
receive an award that is calculated in the manner specified in 
Sec. 1806.205. If the amount of funds available during a funding round 
is insufficient for all estimated award amounts, Awardees will be 
selected based on the process described in this section.
    (b) Priority of categories.--(1) General. The Fund will rank an 
Applicant's estimated award amount for Qualified Activities according 
to the priority categories described in this paragraph. All Applicants 
in the first priority category will be selected as Awardees before 
Applicants in the second priority category. Selections within each 
priority category will be based on the relative rankings within each 
such category, subject to the availability of funds.
    (2) First priority. (i) If the amount of funds available during a 
funding round is insufficient for all estimated award amounts, first 
priority will be given to Applicants that propose to engage in CDFI 
Related Activities in the following order:
    (A) Equity Investments in CDFIs serving Distressed Communities;
    (B) Equity Investments in CDFIs not serving Distressed Communities; 
and
    (C) CDFI Support Activities.
    (ii) Ranking Equity Investments. Estimated awards for Equity 
Investments may be ranked within each applicable priority subcategory 
based on the extent to which an Applicant proposes to reduce the 
percentage used to calculate its award amount (e.g., an Applicant that 
chooses to reduce its award to 13 percent will be ranked higher than an 
Applicant that reduces its award to 14 percent). The Applicant, 
however, may not reduce its award percentage below 12 percent. For 
Applicants that propose the same percentage, estimated awards will be 
ranked by the ratio of the proposed Equity Investment to the asset size 
of the Applicant (as reported in the Applicant's most recent Report of 
Condition or Thrift Financial Report) at the time of submission of an 
application.
    (iii) Ranking CDFI Support Activities. Estimated awards for CDFI 
Support Activities may be ranked based on the ratio of the proposed 
CDFI Support Activity to the asset size of the Applicant (as reported 
in the Applicant's most recent Report of Condition or Thrift Financial 
Report) at the time of submission of an application.
    (3) Second priority. (i) If the amount of funds available during a 
funding round is sufficient for all CDFI Related Activities but 
insufficient for all estimated award amounts, second priority will go 
to Applicants that propose to engage in Development and Service 
Activities.
    (ii) Ranking Development and Service Activities. Estimated awards 
for Development and Service Activities may be ranked by the ratio of 
the total score to the asset size of the Applicant (as reported in the 
Applicant's most recent Report of Condition or Thrift Financial Report) 
at the time of the submission of an application. If the ratios of two 
Applicants are the same, the estimated awards will be ranked based on 
the degree of the poverty of each Applicant's Distressed Community.
    (4) Combined awards. If an Applicant receives an award for more 
than one priority category described in this section, the award amounts 
will be combined into a single Bank Enterprise Award.


Sec. 1806.205  Actual award amounts.

    (a) General. The Fund will assess an Applicant's success in 
achieving the Qualified Activities projected in its application. The 
extent of such success will be measured based on the activities that 
were actually carried out during the Assessment Period and expected to 
be disbursed to an investee, borrower, or other recipient within three 
years of the end of the applicable Assessment Period. The Fund reserves 
the right to extend this period on a case-by-case basis where it has a 
high degree of confidence that disbursement will occur and the activity 
will promote the purposes of the Act. Subject to Sec. 1806.204 and any 
recapture sanction for failure to perform pursuant to this part, the 
actual award amount that an Awardee shall receive will be equal to the 
estimated award previously calculated and (if necessary) adjusted 
pursuant to this section.
    (b) Achievement. If an Awardee carries out all or a portion of its 
projected Qualified Activities and satisfies all program requirements 
described in this part, its award amount will be calculated on a pro-
rata basis to reflect the increase in activities actually carried out 
except that if:
    (1) The amount of funds available is insufficient for all estimated 
award amounts; and
    (2) An Applicant carries out less than 75 percent of its projected 
Qualified Activities, the Fund in its sole discretion, may limit the 
amount or deny an award.
    (c) Unobligated or deobligated funds. The Fund, in its sole 
discretion, may

[[Page 10677]]

use any deobligated funds or funds not obligated during a funding 
round:
    (1) Using the calculation and selection process contained in this 
part:
    (i) To increase an award amount of an Awardee for achievement in 
excess of the projected Qualified Activities; or
    (ii) To select Applicants not previously selected;
    (2) To make additional monies available for a subsequent funding 
round; or
    (3) As otherwise authorized by the Act.
    (d) Limitation. The Fund, in its sole discretion, may deny or limit 
the amount of an award for any reason, including if an Awardee submits 
an application based on unrealistic Assessment Period projections.


Sec. 1806.206  Applications for Bank Enterprise Awards.

    (a) Notice of Funds Availability. An Applicant shall submit an 
application for a Bank Enterprise Award in accordance with this section 
and the applicable NOFA published by the Fund in the Federal Register. 
The NOFA will advise potential Applicants with respect to obtaining an 
application packet and will establish submission deadlines. The NOFA 
also will establish any other requirements or restrictions applicable 
for the funding round including any restrictions on award amounts. 
After receipt of an application, the Fund may request clarifying or 
technical information on materials submitted as part of such 
application.
    (b) Application contents. Each application must contain the 
information required in the application packet, which includes:
    (1) A copy of the Applicant's certificate of insurance issued by 
the Federal Deposit Insurance Corporation and a copy of the Applicant's 
incorporation, charter, organizing, formation, or otherwise 
establishing documents to be used to establish eligibility for an 
award;
    (2) A completed Bank Enterprise Award Rating and Calculations 
worksheet (If an Applicant intends to complete a merger with another 
institution during the Assessment Period, it shall submit a separate 
Baseline Period worksheet for each subject institution and one 
Assessment Period worksheet that represents the projected activities of 
the merged institutions. If such a merger is unexpectedly delayed 
beyond the Assessment Period, the Fund reserves the right to withhold 
distribution of an award until the merger has been completed.);
    (3) A narrative summary of each Qualified Activity expected to be 
performed in the Assessment Period;
    (4) The asset size of the Applicant, as reported in its most recent 
Report of Condition or Thrift Financial Report, to its Appropriate 
Federal Banking Agency;
    (5) Information necessary for the Fund to complete its 
environmental review requirements pursuant to part 1815 of this 
chapter;
    (6) Certifications that the Applicant will comply with all relevant 
provisions of this chapter and all applicable Federal, State, and local 
laws, ordinances, regulations, policies, guidelines, and requirements;
    (7) A copy of the Applicant's most recent annual report;
    (8) In the case of an Applicant proposing to engage in Development 
and Service Activities, a completed Distressed Community Designation 
worksheet and a map and narrative description of the Distressed 
Community;
    (9) In the case of an Applicant proposing to engage in CDFI Related 
Activities:
    (i) Equity Investment. An Applicant shall submit:
    (A) A narrative description of each CDFI in which the Applicant 
proposes to make an Equity Investment and a description of the amount, 
terms and conditions of any Equity Investment to be provided; or
    (B) A list of potential CDFIs to which assistance may be provided 
and a description of the Applicant's investment criteria.
    (ii) CDFI Support Activities. An Applicant shall submit:
    (A) A narrative description of each CDFI to which the Applicant 
proposes to provide CDFI Support Activities and a description of the 
amount, terms and conditions of the assistance to be provided; or
    (B) A list of potential CDFIs to which assistance may be provided 
and a description of the Applicant's lending or selection criteria; and
    (C) Information that indicates that each CDFI to which a Applicant 
proposes to provide CDFI Support Activities is integrally involved with 
a Distressed Community and a map and narrative description of the 
Distressed Community.

Subpart C--Terms and Conditions of Assistance


Sec. 1806.300  Award Agreement; sanctions.

    (a) General. After the Fund selects an Awardee, the Fund and the 
Awardee will enter into an Award Agreement. The Award Agreement shall 
provide that an Awardee shall:
    (1) Carry out its Qualified Activities in accordance with 
applicable law, the approved application, and all other applicable 
requirements;
    (2) Comply with such other terms and conditions (including record 
keeping and reporting requirements) that the Fund may establish; and
    (3) Not receive any monies until the Fund has determined that the 
Awardee has fulfilled all applicable requirements.
    (b) Sanctions. In the event of any fraud, misrepresentation, or 
noncompliance with the terms of the Award Agreement by the Awardee, the 
Fund may terminate, reduce, or recapture the Award and pursue any other 
available legal remedies.
    (c) Notice. Prior to imposing any sanctions pursuant to this 
section or an Award Agreement, the Fund shall, to the maximum extent 
practicable, provide the Awardee with written notice of the proposed 
sanction and an opportunity to comment. Nothing in this section, 
however, shall provide an Awardee with the right to any formal or 
informal hearing or comparable proceeding not otherwise required by 
law.


Sec. 1806.301  Records, reports and audits of Awardees.

    (a) At the end of an Assessment Period, each Awardee shall submit 
to the Fund:
    (1) Worksheet. A Bank Enterprise Award worksheet that reports the 
Qualified Activities actually carried out during the Assessment Period;
    (2) Certification. A certification that the information provided to 
the Fund is true and accurately reflects the Qualified Activities 
carried out during an Assessment Period; and
    (3) Documentation. The Applicant shall make available the 
following:
    (i) With respect to Equity Investments and CDFI Support Activities, 
the Applicant shall submit documentation that meets the conditions 
described in Sec. 1806.202(d);
    (ii) With respect to Development and Services Activities where the 
original amount of the value of the activity is $250,000 or greater, 
the Applicant shall submit documentation that meets the conditions 
described in Sec. 1806.202(d);
    (iii) With respect to Development and Services Activities where the 
original amount of the value of the activity is less than $250,000, the 
Applicant shall submit a schedule that describes the original amount, 
census tract served, and the dates of execution, initial disbursement, 
and final disbursement of the instrument; and

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    (iv) Any other information reasonably requested by the Fund in 
order to document or otherwise assess the validity of information 
provided by the Applicant to the Fund.


Sec. 1806.302  Compliance with government requirements.

    In carrying out its responsibilities pursuant to an Award 
Agreement, the Awardee shall comply with all applicable Federal, State, 
and local laws, regulations and ordinances, OMB Circulars, and 
Executive Orders.


Sec. 1806.303  Fraud, waste and abuse.

    Any person who becomes aware of the existence or apparent existence 
of fraud, waste, or abuse of assistance provided under this part should 
report such incidences to the Office of Inspector General of the U.S. 
Department of the Treasury.


Sec. 1806.304  Books of account, records and government access.

    An Awardee shall submit such financial and activity reports, 
records, statements, and documents at such times, in such forms, and 
accompanied by such supporting data, as required by the Fund and the 
U.S. Department of the Treasury to ensure compliance with the 
requirements of this part. The United States Government, including the 
U.S. Department of the Treasury, the Comptroller General, and its duly 
authorized representatives, shall have full and free access to the 
Awardee's offices and facilities, and all books, documents, records, 
and financial statements relevant to the award of the Federal funds and 
may copy such documents as they deem appropriate.


Sec. 1806.305  Retention of records.

    An Awardee shall comply with all record retention requirements as 
set forth in OMB Circular A-110 (as applicable). This circular may be 
obtained from Office of Administration, Publications Office, 725 17th 
Street, NW., Room 2200, New Executive Office Building, Washington, DC 
20503.

[FR Doc. 97-5678 Filed 3-6-97; 8:45 am]
BILLING CODE 4810-70-P