[Federal Register Volume 67, Number 1 (Wednesday, January 2, 2002)]
[Notices]
[Pages 77-80]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-32155]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Policy Statement Regarding Minority-Owned Depository Institutions

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Policy statement.

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SUMMARY: The FDIC is proposing to revise its Policy Statement Regarding 
Minority-Owned Depository Institutions. Section 308 of the Financial 
Institutions Reform, Recovery and Enforcement Act of 1989 (``FIRREA'') 
requires the Secretary of the Treasury to consult with the Director of 
the Office of Thrift Supervision and the Chairperson of the Board of 
Directors of the FDIC to determine the best methods for preserving and 
encouraging minority ownership of depository institutions. The FDIC has 
long recognized the unique role and importance of minority-owned 
depository institutions and has historically taken steps to preserve 
and encourage minority ownership of financial institutions. The revised 
Policy Statement updates, expands, and clarifies the agency's policies 
and procedures related to minority-owned institutions.

DATES: Written comments must be received on or before March 4, 2002.

ADDRESSES: All comments should be addressed to Robert E. Feldman, 
Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429. Comments may 
be hand delivered to the guard station at the rear of the 550 17th 
Street Building (located on F Street) on business days between 7 a.m. 
and 5 p.m. (fax number (202) 898-3838; Internet address: 
[email protected]). Comments may be posted on the FDIC Internet site at 
http://www.fdic.gov/regulations/laws/federal/propose.html and may be 
inspected and photocopied in the FDIC Public Information Center, Room 
100, 801 17th Street, NW., Washington, DC 20429, between 9 a.m. and 
4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Brett A. McCallister, Risk Management 
and Applications Section, Division of Supervision (202) 898-3803 or 
Grovetta N. Gardineer, Counsel, Legal Division, (202) 898-3728, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429.

SUPPLEMENTARY INFORMATION: On April 3, 1990, the Board of Directors of 
the FDIC adopted a Policy Statement on Encouragement and Preservation 
of Minority Ownership of Financial Institutions. The framework for the 
original Policy Statement resulted from several key provisions 
contained in Section 308 of FIRREA, which enumerated several goals as 
follows: (1) Preserving the number of minority depository institutions; 
(2) preserving the minority character in cases of merger or 
acquisition; (3) providing technical assistance to prevent insolvency 
of institutions not now insolvent; (4) promoting and encouraging 
creation of new minority depository institutions; and (5) providing for 
training, technical assistance, and education programs.
    The original Policy Statement provided guidance to the industry 
regarding the agency's efforts in achieving the goals of Section 308. 
The revised Policy Statement attempts to provide a more structured 
framework that sets forth initiatives of the FDIC to promote the 
preservation of, as well as to provide technical assistance, training 
and educational programs to, minority-owned institutions by working 
with

[[Page 78]]

those institutions, their trade associations and the other federal 
financial regulatory agencies.
    Section 308(b) of FIRREA provides that ``minority'' means any Black 
American, Native American, Hispanic American or Asian American. The 
FDIC adopts this definition of minority in the revised Policy 
Statement. Section 308(b) of FIRREA defines the term ``minority 
depository institution'' as: any depository institution that--(A) If a 
privately owned institution, 51 percent is owned by one or more 
socially and economically disadvantaged individuals; (B) if publicly 
owned, 51 percent of the stock is owned by one or more socially and 
economically disadvantaged individuals; and (C) in the case of a mutual 
institution where the majority of the Board of Directors, account 
holders, and the community which it services is predominantly minority. 
The revised Policy Statement defines the term ``minority-owned 
institution'' as any Federally insured depository institution where 51 
percent or more of the voting stock is owned by minority individuals. 
Additionally mutual, publicly traded, and widely held institutions will 
be considered minority-owned if a majority of the Board of Directors, 
account holders, and the community which the institution serves are 
predominantly minority, regardless of non-minority or non-U.S. citizen 
ownership of the capital stock. The proposed Policy Statement also 
clarifies that the FDIC's program is targeted at institutions owned by 
U.S. citizens, and ownership by non-U.S. citizens is not counted in 
determining minority-owned status. The FDIC invites the public to 
comment on the proposed definition of ``minority-owned institution''. 
The FDIC specifically seeks comment on the proposed treatment of 
mutual, publicly traded and widely held institutions, as to the 
feasibility of collecting information regarding the account holders and 
the community in making a determination regarding its status as a 
minority-owned institution.
    The proposed Policy Statement also provides for the FDIC to 
maintain a list of minority-owned institutions to ensure that all 
eligible minority-owned depository institutions are able to participate 
in the program. If not already identified as minority-owned, an 
institution can be added to the list by self-certifying that the 
institution meets the above definition. FDIC examiners will review the 
accuracy of the list during regular examinations, and case managers 
will incorporate any changes due to mergers, acquisitions, and changes 
in control. The FDIC will also work with the other Federal regulatory 
agencies to make certain that the minority-owned institutions that they 
supervise are included on the list. The revised Policy Statement makes 
it clear, however, that inclusion on the list is voluntary and any 
institution that does not want to be included will be removed from the 
official list. The FDIC invites comments on this approach to compile a 
list of minority-owned institutions.
    The revised Policy Statement also proposes to designate a national 
coordinator for the FDIC's minority-owned institution program. The 
national coordinator will be located at the FDIC's Washington, DC 
headquarters. That person will act as a liaison between the Division of 
Supervision and officials from the Division of Compliance and Consumer 
Affairs, the Office of Diversity and Economic Opportunity and the 
Division of Resolutions and Receiverships and the other federal 
financial regulators. The national coordinator will regularly contact 
the various minority-owned institution trade associations to obtain 
feedback on the FDIC's efforts under the program. The national 
coordinator will be responsible for contacting the other Federal 
financial regulatory agencies to discuss their outreach efforts and to 
identify opportunities for the agencies to work together to assist 
minority-owned institutions. The national coordinator will also guide 
subject matter experts in each of the FDIC's eight regional offices who 
will oversee their region's efforts under the program. The FDIC 
believes that the more formalized structure within the Division of 
Supervision will facilitate more meaningful and helpful communications 
between the FDIC and minority-owned institutions since these employees 
will be available to answer questions or provide assistance on issues 
presented by minority-owned institutions. The FDIC specifically seeks 
comment on this proposed organizational structure.
    The revised Policy Statement also discusses the types of technical 
assistance that will be provided by the FDIC to minority-owned 
institutions. The Policy Statement sets forth examples of ways that 
FDIC staff will be able to provide assistance to minority-owned 
institutions while making it clear that staff will not perform duties 
and tasks reserved for management of a minority-owned institution. In 
addition to being available to answer questions and provide guidance to 
a minority-owned institution, the FDIC is also proposing to have staff 
return to any minority-owned institution approximately 90 to 120 days 
after the conclusion of an examination to review any areas of concern 
identified during the examination or any issues of particular interest 
to the institution. The minority-owned institution may accept or 
decline this offer of assistance. The FDIC invites comments on the 
scope of technical assistance that would be provided by the FDIC and 
the optional return visit at the conclusion of an examination of a 
minority-owned institution.
    The revised Policy Statement also proposes that the FDIC work with 
trade associations representing minority-owned institutions, as well as 
other regulatory agencies, to discuss and provide for training 
opportunities for minority-owned institutions. The proposed Policy 
Statement provides that the FDIC will partner with certain trade 
associations to offer training programs during their annual conferences 
and regional meetings. The FDIC solicits comments on other methods to 
identify and provide training and educational programs that would be 
beneficial to minority-owned institutions.
    The revised Policy Statement also discusses the issue of failing 
institutions. The revised Policy Statement states that the Division of 
Resolutions and Receiverships is the appropriate division in the FDIC 
to deal with issues regarding failing institutions. While the original 
Policy Statement provided for certain preferences to be given to 
minority-owned institutions in the resolution of failed institutions 
pursuant to Sections 13(k) and 13(f)(12) of the FDI Act, the revised 
Policy Statement takes into account both the decision of the United 
States Supreme Court in Adarand Constructors, Inc. v. Pena, 115 S. Ct. 
2097 (1995) and the statutory requirement under Section 13(c)(4) 
enacted in 1991 that failed institutions be resolved in a manner that 
results in the least cost to the insurance fund. The Adarand decision 
held that federal affirmative action programs that use racial and 
ethnic criteria as a basis for decisionmaking are subject to strict 
judicial scrutiny. The decision set forth a two-prong test to determine 
whether federally administered affirmative action programs are 
constitutional. The first prong of the test requires the government to 
demonstrate a compelling interest in remedying past or persistent 
continuing or lingering discrimination against minorities and the 
second prong requires that any remedy be narrowly tailored to cure a 
specific identified problem. While Adarand was a contracts case, the 
strict scrutiny standard of review will apply whenever the federal 
government voluntarily adopts a racial or ethnic

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classification as a basis for decisionmaking. As a result, this ruling 
has had a significant impact on the FDIC's ability to give preference 
to minority institutions in a resolutions context. In October of 2001, 
the U.S. Supreme Court heard another case involving Adarand 
Constructors. While the FDIC had hoped to gain additional guidance on 
what actions may be permissible regarding the minority preference 
statutes, the Supreme Court declined to render a decision in the case 
citing procedural problems with the case that prevented the Court from 
addressing the merits of the affirmative action complaint.
    Additionally, the least-cost resolution requirement also 
significantly reduced the ability of the FDIC to give preference to 
minority institutions in the resolution of failed institutions. 
However, the Division of Resolutions and Receiverships will work with 
the Division of Supervision and the Office of Diversity and Economic 
Opportunity to ensure that all qualified minority institutions and 
individuals that have expressed an interest in acquiring a minority-
owned institution are notified of any potential failure. The FDIC 
invites the public to comment on the methodology to be used to ensure 
that all qualified minority-owned institutions will be made aware of 
situations involving the failure of a minority-owned institution.
    To ensure that the regional coordinators are meeting the goals 
associated with the revised Policy Statement, the proposed Policy 
Statement requires them to provide quarterly reports to the national 
coordinator on their region's activities relating to minority-owned 
institutions. The national coordinator, in turn, will compile the 
results of the eight regional reports and provide a quarterly summary 
to the Office of the Chairman. The FDIC's Annual Report will also 
contain information relating to the agency's efforts to promote and 
preserve minority-owned financial institutions. The proposed Policy 
Statement also provides for the FDIC to create a Webpage on its 
Internet site (www.fdic.gov) to promote the minority-owned institution 
program. It is anticipated that the Webpage will describe the program, 
contain information regarding the national coordinator and the regional 
coordinators and provide links to the list of minority-owned 
institutions, their trade associations and other programs that 
specifically affect minority-owned institutions. The FDIC invites the 
public to comment on the types of information that would be helpful and 
beneficial to include on the agency's Web page regarding the minority-
owned institution program.
    The text of the proposed Policy Statement follows:

Federal Deposit Insurance Corporation

Policy Statement Regarding Minority-Owned Depository Institutions

    Minority-owned depository institutions often promote the economic 
viability of minority and under-served communities. The FDIC has long 
recognized the importance of minority-owned institutions and has 
historically taken steps to preserve and encourage minority ownership 
of insured financial institutions.

Statutory Framework

    In August 1989, Congress enacted the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (``FIRREA''). Section 308 of 
FIRREA established the following goals:
     Preserve the number of minority-owned depository 
institutions;
     Preserve the minority character in cases of merger or 
acquisition;
     Provide technical assistance to prevent insolvency of 
institutions not now insolvent;
     Promote and encourage creation of new minority-owned 
depository institutions; and
     Provide for training, technical assistance, and 
educational programs.

Definition

    ``Minority'' as defined by Section 308 of FIRREA means any Black 
American, Asian American, Hispanic American, or Native American. For 
the purposes of this Policy Statement, the term ``minority-owned 
institution'' means any Federally insured depository institution where 
51 percent or more of the voting stock is owned by minority 
individuals. This includes institutions collectively owned by a group 
of minority individuals, such as a Native American Tribe. However, 
ownership by non-U.S. citizens will not be counted in determining 
minority-owned status. Mutual, publicly traded, and widely held 
institutions will be considered minority-owned if a majority of the 
Board of Directors, account holders, and the community which the 
institution serves are predominantly minority, regardless of non-
minority or non-U.S. citizen ownership.

Identification of Minority-Owned Institutions

    To ensure that all minority-owned depository institutions are able 
to participate in the program, the FDIC will maintain a list of 
federally insured minority-owned institutions. Institutions that are 
not already identified as minority-owned by the FDIC can request to be 
designated as such by certifying that they meet the above definition. 
For institutions supervised directly by the FDIC, our examiners will 
review the accuracy of the list during the examination process. In 
addition, case managers in our regional offices will note changes to 
the list while processing deposit insurance applications, merger 
applications, change of control notices, or failures of minority-owned 
institutions. The FDIC will work closely with the other Federal 
regulatory agencies to ensure that institutions not directly supervised 
by the FDIC are accurately captured on our list. In addition, the FDIC 
will periodically provide the list to relevant trade associations and 
seek input regarding its accuracy. Inclusion in the FDIC's minority-
owned institution program is voluntary. Any minority-owned institution 
not wishing to participate in this program will be removed from the 
official list upon request.

Organizational Structure

    The Division of Supervision has designated a national coordinator 
for the FDIC's minority-owned institutions program in the Washington 
Office and a regional coordinator in each Regional Office. The national 
coordinator will consult with officials from the Division of Compliance 
and Consumer Affairs, the Office of Diversity and Economic Opportunity, 
the Legal Division, and the Division of Resolutions and Receiverships 
to ensure appropriate personnel are involved in program initiatives. 
The national coordinator will regularly contact the various minority-
owned institution trade associations to seek feedback on the FDIC's 
efforts under this program, discuss possible training initiatives, and 
explore options for preserving and promoting minority ownership of 
depository institutions. As the primary Federal regulator for State 
nonmember banks, the FDIC will focus its efforts on these institutions. 
However, the national coordinator will meet with the other Federal 
regulators periodically to discuss each agency's outreach efforts, to 
share ideas, and to identify opportunities where the agencies can work 
together to assist minority-owned institutions. Representatives of 
other divisions and offices may participate in these meetings.
    The regional coordinators are knowledgeable about minority-owned 
bank issues and are available to answer questions or to direct 
inquiries to the

[[Page 80]]

appropriate office. However, each FDIC insured institution has 
previously been assigned a specific case manager in their regional 
office who will continue to be the institution's central point of 
contact at the FDIC. At least annually, regional coordinators will 
contact each minority-owned, State nonmember bank in their respective 
regions to discuss the FDIC's efforts to promote and preserve minority 
ownership of financial institutions and will offer to have a member of 
regional management meet with the institution's board of directors to 
discuss issues of interest. Finally, the regional coordinators will 
contact all new minority-owned State nonmember banks identified through 
insurance applications, merger applications, or change in control 
notices to familiarize the institutions with the FDIC's minority-owned 
institution program.

Technical Assistance

    The FDIC can provide technical assistance to minority-owned 
institutions in several ways on a variety of issues. An institution can 
contact its case manager for assistance in understanding bank 
regulations, FDIC policies, examination procedures, etc. Case managers 
can also explain the application process and the type of analysis and 
information required for different applications. During examinations, 
examiners are expected to fully explain any supervisory recommendations 
and should offer to help management understand satisfactory methods to 
address such recommendations.
    At the conclusion of each examination of a minority-owned 
institution directly supervised by the FDIC, the FDIC will offer to 
have representatives return to the institution approximately 90 to 120 
days later to review areas of concern or topics of interest to the 
institution. The purpose of the return visit will be to provide 
technical assistance, not to identify new problems. The level of 
technical assistance provided should be commensurate with the issues 
facing the institution, but FDIC employees will not perform tasks 
expected of an institution's management or employees. For example, FDIC 
employees may explain Call Report instructions as they relate to 
specific accounts, but will not assist in the preparation of an 
institution's Call Report. As another example, FDIC employees may 
provide information on community reinvestment opportunities, but will 
not participate in a specific transaction.

Training and Educational Programs

    The FDIC will work with trade associations representing minority-
owned institutions and other regulatory agencies to periodically assess 
the need for, and provide for, training opportunities and educational 
opportunities. We will partner with the trade associations to offer 
training programs during their annual conferences and other regional 
meetings.

Failing Institutions

    In the event of a potential failure of a minority-owned 
institution, the Division of Resolutions and Receiverships will contact 
all minority-owned institutions nationwide that qualify to bid on 
failing institutions. The Division of Resolutions and Receiverships 
will solicit qualified minority-owned institutions' interest in the 
failing institution, discuss the bidding process, and upon request, 
offer to provide technical assistance regarding completion of the bid 
forms. In addition, the Division of Resolutions and Receiverships, with 
assistance from the Office of Diversity and Economic Opportunity, will 
maintain a list of minority individuals and nonbank entities that have 
expressed an interest in acquiring failing minority-owned institutions. 
Trade associations that represent minority-owned institutions (the 
National Bankers Association, the American League of Financial 
Institutions, and the North American Native Bankers Association) will 
also be contacted periodically to help identify possible interested 
parties.

Reporting

    The regional coordinators will report their region's activities 
related to this Policy Statement to the national coordinator quarterly. 
The national coordinator will compile the results of the regional 
offices' reports and submit a quarterly summary to the Office of the 
Chairman. Our efforts to preserve and promote minority ownership of 
depository institutions will also be highlighted in the FDIC's Annual 
Report.

Internet Site

    The FDIC will create a Webpage on its Internet site (www.fdic.gov) 
to promote the minority-owned institution program. Among other things, 
the page will describe the program and include the name, phone number, 
and email address of the national coordinator and each regional 
coordinator. The page will also contain links to the list of minority-
owned institutions, pertinent trade associations, and other regulatory 
agency programs. We will also explore the feasibility and usefulness of 
posting other items to the page, such as statistical information and 
comparative data for minority-owned institutions. Visitors will have 
the opportunity to provide feedback regarding the program on the Web 
page.

    By order of the Board of Directors.

    Dated at Washington, DC., this 20th day of December, 2001.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 01-32155 Filed 12-31-01; 8:45 am]
BILLING CODE 6714-01-P