[Federal Register Volume 62, Number 234 (Friday, December 5, 1997)]
[Rules and Regulations]
[Pages 64440-64447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31452]



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Part II





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 Award (BEA) Program; Notice

  Federal Register / Vol. 62, No. 234 / Friday, December 5, 1997 / 
Rules and Regulations  

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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 (BEA) Program administered 
by the Community Development Financial Institutions Fund (Fund). The 
purpose of the BEA Program is to encourage insured depository 
institutions to increase their level of activities in the form of 
loans, investments, services, and technical assistance within 
distressed communities and to provide financial assistance to Community 
Development Financial Institutions (CDFIs) through grants, stock 
purchases, loans, deposits, and other forms of financial and technical 
assistance. The BEA Program rewards participating insured depository 
institutions for increasing their activities in economically distressed 
communities and investing in CDFIs. The revisions contain a number of 
changes which clarify current requirements, but do not change them. 
This rule also simplifies current requirements and updates various 
references, and contains one revision that the Fund believes will 
generally inure to the benefit of insured depository institutions. 
Specifically, the revision clarifies the measured value of renewed 
loans and rolled over time deposits to include the entire amount of the 
renewed loans and rolled over deposits. However, in order to facilitate 
implementation of the BEA program regulations by participating insured 
depository institutions, the complete text of the regulations, as 
amended, is published by this interim rule.

DATES: Interim rule effective December 5, 1997; comments must be 
received on or before April 6, 1998.

ADDRESSES: All comments concerning this interim rule should be 
addressed to the Director, Community Development Financial Institutions 
Fund, Department of the Treasury, 601 13th Street, NW, Suite 200 South, 
Washington, DC 20005. Comments may be inspected at the above address 
between 9:30 a.m. and 4:30 p.m. on business days.

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

SUPPLEMENTARY INFORMATION:

I. Background

    The Community Development Financial Institutions Fund (Fund) was 
established as a wholly owned government corporation by the Community 
Development Banking and Financial Institutions Act of 1994 (the 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. The 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 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 amend the 
Bank Enterprise Award (BEA) Program, which has its roots in the Federal 
Deposit Insurance Corporation Improvement Act of 1991. The BEA Program 
was significantly modified as part of the Act to enable it to function 
as a companion to the Community Development Financial Institutions 
(CDFI) Program. Together, the CDFI Program and BEA Program will promote 
activity among the spectrum of financial institutions that serve 
distressed communities.
    The purpose of the BEA Program 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 
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.
    Elsewhere in this issue of the Federal Register is a separate 
Notice of Funds Availability (NOFA) for this Program. A final 
regulation will be published after receipt and consideration of public 
comments. The Fund previously promulgated an interim regulation with a 
request for comment, which was published in the Federal Register on 
March 7, 1997 (62 FR 10679). No comments were received in response to 
the March 7, 1997 interim rule. Since these regulations were last 
amended, the Fund has identified several provisions that need to be 
updated, clarified, or simplified.

II. Summary of Changes

Authorities

    The current rule contains a list of authorities. This interim rule 
updates the list by adding 12 U.S.C. 4713, 12 U.S.C. 1834a, and 31 
U.S.C. 321. Such authorities concern the promulgation of regulations, 
procedures and guidelines. The current rule lists 12 U.S.C. 4703 note 
with a reference to Pub. L. 104-19. The Fund is deleting the reference 
to this public law, for purposes of regulatory economy and because 
there is more than one public law underlying the section 4703 note.

Definition of Community Services

    Section 1806.103(p)(1) of the current rule defines the forms of 
assistance that constitute Community Services. This interim rule does 
not change the definition of what constitutes Community Services, but 
it clarifies that all forms of such assistance may be provided by 
officers, employees, or agents (contractual or otherwise) of the 
Applicant. This revision conforms with the Fund's interpretation of the 
current rule.

Measuring the Value of Renewed Loans and Rolled Over Deposits

    Section 1806.202(c)(1) of the current rule provides that for 
purposes of calculating BEA Program awards, the Fund will assess the 
value of Equity Investments, loans, grants, and deposits at the 
original amount of such investments, loans, grants or deposits. Section 
1806.202(c)(1) of the current rule excludes the value of any loans 
which are renewed, rolled over, or

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refinanced in an amount equal to or less than the principal amount 
outstanding at the time of refinancing. Because the Fund believes that 
the interim rule in its current form: (1) Appears too restrictive with 
regard to loans; and (2) is unclear with regard to renewed loans and 
rolled over time deposits, the Fund is revising Sec. 1806.202(c)(1) as 
follows.
    With regard to loans, the Fund believes that where a loan matures, 
is fully paid, and is then renewed during an applicable Baseline or 
Assessment period, the renewed loan constitutes a new origination. As 
such, the Fund will assess the full principal amount of the renewed 
loan in calculating a BEA Program award. However, the Fund is not 
changing the current interim rule with regard to refinancings. 
Specifically, where a loan is refinanced during an applicable Baseline 
or Assessment period, the Fund will only assess the value of any 
increase in the principal amount of the refinanced loan.
    With regard to deposits, the Fund will assess the full amount of 
any deposit which is rolled over during an applicable Baseline or 
Assessment period. For example, where an Applicant made a time deposit 
with an insured CDFI, e.g. a five year certificate of deposit with an 
interest rate materially below market rates, which matures and is 
rolled over during an Assessment Period, the Fund will assess the full 
amount of the rolled over time deposit in calculating a BEA Program 
award.

Estimated Award Amounts for Development and Service Activities

    The current rule at 12 CFR 1806.203(c)(3) describes a calculation 
step for estimating an award amount for Development and Service 
Activities. This step requires adding the weighted values of deposit 
liabilities and Financial Services to yield a service score. This 
revised rule corrects an omission to the step by adding Community 
Services. This addition conforms with previous and the most current BEA 
Program Application packets.
    For purposes of regulatory economy, the Fund is deleting the 
parenthetical reference in Sec. 1806.203(c)(5) of the current rule, 
which references the Act. This deletion is technical in scope and will 
have no substantive effect on the implementation of the BEA Program.

Application Contents for Equity Investment and CDFI Support Activities

    Section 1806.206(b)(9) of the current rule describes the collection 
of information requirements set forth in the Application packet for 
those Applicants proposing to engage in CDFI Related Activities. The 
current rule describes the Application packet as requiring each 
Applicant to submit a narrative description of each CDFI in which it 
proposes to engage in CDFI Related Activities and a description of the 
amount, terms, and conditions of the assistance to be provided or, 
alternatively, a list of potential CDFIs and a description of the 
Applicant's investment, lending, or selection criteria. However, the 
most recently revised Application packet, which has been reviewed and 
approved by the Office of Management and Budget (OMB) in accordance 
with the Paperwork Reduction Act of 1995, simplifies the collection of 
information from Applicants. Specifically, the revised Application 
packet requires Applicants to list the potential CDFIs to which they 
may provide assistance and provide a description of the amount, terms, 
and conditions for such assistance. Because the revised Application 
packet does not require a narrative description of each potential CDFI 
or a description of the Applicant's investment, lending or selection 
criteria, the Fund is revising Sec. 1806.206(b)(9) in this interim rule 
to accurately reflect the collection of information requirements set 
forth in the most current Application packet.

III. Rulemaking Analysis

Executive Order 12866

    It has been determined that this regulation is not a significant 
regulatory action as defined in Executive Order 12866. Therefore, a 
Regulatory Assessment is not required.

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.

Paperwork Reduction Act

    The collections of information contained in this interim rule have 
been previously reviewed and approved by OMB in accordance with the 
Paperwork Reduction Act of 1995 and assigned OMB Control Number 1505-
0153. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a valid control number assigned by OMB. This document restates the 
collections of information without substantive change.
    Comments concerning suggestions for reducing the burden of the 
collections of information should be directed to the Director, 
Community Development Financial Institutions Fund, 601 13th Street, 
NW., Suite 200 South, Washington, DC 20005.

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 Procedure Act

    The Fund is promulgating this revised interim rule without 
opportunity for prior public comment pursuant to the Administrative 
Procedure Act (APA), 5 U.S.C. 553, because the BEA Program involves 
grants and is thereby exempt from the procedural requirements of the 
APA pursuant to 5 U.S.C. 553(a)(2). The Fund also finds good cause for 
dispensing with a notice of proposed rulemaking because such advance 
notice and public procedure are unnecessary. First, most of the changes 
in this interim rule are minor or technical amendments which do not 
affect the substance of the regulation. Second, the changes to this 
interim rule are narrow in scope, clarify existing requirements, and 
inure to the benefit of the regulated community, namely insured 
depository institutions, by making participation in the BEA Program 
easier for Applicants, reducing regulatory burden, and clarifying the 
measured value of renewed loans and rolled over time deposits.
    The Fund also is making this interim rule effective upon 
publication without providing the 30-day period between publication and 
effective date contemplated by the APA because, as noted above, the BEA 
Program involves grants and is thereby exempt from the procedural 
requirements of the APA found at 5 U.S.C. 553(d). The Fund also 
believes that an immediate effective date is necessary for the 
convenience of the persons affected. Specifically, an immediate 
effective date will minimize the risk of confusion on the affected 
community by ensuring that there will be a single and uniform 
regulation in effect during the Assessment Period, which as stated in 
the NOFA published elsewhere in this issue of the Federal Register, 
will begin on January 1, 1998. The Fund also believes that an immediate 
effective date is appropriate because this interim rule inures to the 
benefit of the affected community by removing a potential restriction 
on the measured value of renewed loans and rolled over time deposits.

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Comment

    Public comment is solicited on all aspects of this interim 
regulation. The Fund will consider all comments made on the substance 
of this interim regulation, but does not intend to hold hearings.

IV. Catalog of Federal Financial Assistance Numbers

    Bank Enterprise Award Program--21.021.

List of Subjects in 12 CFR Part 1806

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

    For the reasons set forth in the preamble, 12 CFR part 1806 is 
revised 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. 1834a, 4703, 4703 note, 4713, 4717; 31 
U.S.C. 321.

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.
    (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

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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 
provided by officers, employees or agents (contractual or otherwise) of 
the Applicant:
    (1) Provision of technical assistance to Residents in managing 
their personal finances through consumer education programs;
    (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. 
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 
will 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.

[[Page 64444]]

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.

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 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); and
    (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

[[Page 64445]]

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 NOFA 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, grants and deposits described in 
Sec. 1806.103 at the original amount of such investments, loans, grants 
or deposits. Where a loan matures, is fully paid and is then renewed, 
the Fund will assess the value of the principal amount of the renewed 
loan. Where a deposit, such as a certificate of deposit, matures and is 
then rolled over, the Fund will assess the value of the full amount of 
the rolled over deposit. However, where an existing loan is refinanced, 
the Fund will only assess the value of any increase in the principal 
amount of the refinanced loan;
    (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 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, 
Financial Services and Community 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;
    (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 
Applicant 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 (b). 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.

[[Page 64446]]

    (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 will receive will be equal to the 
estimated award previously calculated and (if necessary) adjusted 
pursuant to this section.
    (b) Achievement. If an Applicant 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 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 Applicant 
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

[[Page 64447]]

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 list of 
potential CDFIs to which assistance may be provided, and a description 
of the amount, terms and conditions of any Equity Investment that may 
be provided.
    (ii) CDFI Support Activities. An Applicant shall submit:
    (A) A list of potential CDFIs to which assistance may be provided 
and a description of the amount, terms and conditions of the assistance 
that may be provided; and
    (B) Information that indicates that each CDFI to which an Applicant 
proposes to provide CDFI Support Activities is integrally involved 
within a Distressed Community, a completed Distressed Community 
Designation worksheet, 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 will, 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, will 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.

    At the end of an Assessment Period, each Applicant shall submit to 
the Fund:
    (a) Worksheet. A Bank Enterprise Award worksheet that reports the 
Qualified Activities actually carried out during the Assessment Period;
    (b) 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
    (c) Documentation. The Applicant shall make available the 
following:
    (1) With respect to Equity Investments and CDFI Support Activities, 
the Applicant shall submit documentation that meets the conditions 
described in Sec. 1806.202(d);
    (2) 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);
    (3) 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
    (4) 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.

    Dated: November 25, 1997.
Maurice A. Jones,
Acting Deputy Director.
[FR Doc. 97-31452 Filed 12-4-97; 8:45 am]
BILLING CODE 4810-70-P