[Federal Register Volume 67, Number 73 (Tuesday, April 16, 2002)]
[Notices]
[Pages 18618-18621]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9155]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Policy Statement Regarding Minority Depository Institutions

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final policy statement.

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SUMMARY: The FDIC is adopting a final Policy Statement Regarding 
Minority Depository Institutions. The final Policy Statement recognizes 
the importance of minority depository institutions and the unique 
challenges they often face in serving their communities. This FDIC 
Policy Statement complies with the requirements of Section 308 of the 
Financial Institutions Reform, Recovery and Enforcement Act of 1989 
(``FIRREA'') by implementing an outreach program designed to preserve 
and encourage minority ownership of financial institutions. Based on 
comments received by the agency, the final Policy Statement amends the 
proposed definition of minority-owned institution, clarifies the types 
of technical assistance available from the FDIC, improves interagency 
coordination and enhances communications between the FDIC and minority 
institutions.

EFFECTIVE DATE: April 16, 2002.

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:

I. Background

    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 original Policy Statement 
provided guidance to the industry regarding the agency's efforts in 
achieving the goals of Section 308 of FIRREA. On December 20, 2001, the 
FDIC Board of Directors approved a new proposed Policy Statement 
Regarding Minority-Owned Depository Institutions for public comment. 
The revised Policy Statement attempts to provide a more structured 
framework that sets forth initiatives of the FDIC to promote and 
preserve the minority ownership of depository institutions, and to 
provide technical assistance, training and educational programs to 
minority depository institutions by working with those institutions, 
their trade associations and the other Federal financial regulatory 
agencies. The proposed Policy Statement was published on January 2, 
2002, and the comment period ended on March 4, 2002.

II. Comments Received

    The FDIC received eleven comment letters in response to the 
proposed Policy Statement that raised 23 issues. The comments came from 
seven insured financial institutions and four trade associations. All 
of the commenters expressed support for the FDIC's proposed Policy 
Statement; however, each of the commenters recommended specific changes 
to the final Policy Statement. These comments and the changes and 
additions made to the final Policy Statement are discussed in detail 
below. It should be noted that several commenters raised issues that 
are not related to the proposed Policy Statement (i.e., CRA credit for 
assistance to minority- and women-owned financial institutions). These 
issues are being addressed in other projects of the FDIC and the other 
Federal financial institution regulators. Since the issues raised by 
those comments relate to other initiatives, they are not specifically 
discussed herein.
    Four commenters suggested that the FDIC develop a definition of 
``minority-owned institution'' consistent with that used by other 
Federal agencies. Two commenters suggested that the FDIC change the 
term Black American to African American. Another commenter suggested 
that the definition of minority include multi-racial individuals. One 
commenter suggested that the definition of minority-owned include 
institutions owned by women. Three comments suggested that the FDIC 
expand the program to include legal residents of the United States as 
opposed to only citizens of the United States. The FDIC received a 
number of comments relating to whether an institution should continue 
to be considered minority-owned if it is merged with an institution 
that is publicly traded and/or widely held if the board of directors, 
account holders and community that it serves are predominantly 
minority. One commenter vehemently disagreed with expanding the 
definition to include publicly traded and widely held institutions 
under these circumstances, stating that the expanded definition would 
contradict the language and intent of Section 308 of FIRREA. Two 
commenters recommended expanding the definition of minority-owned to 
include any institution if a majority of its board of directors, 
account holders, and the community that it serves is predominantly 
minority. Another commenter suggested changing the requirement to allow 
publicly traded and widely held institutions to be considered minority-
owned if any one of the three specified criteria were met. Two 
commenters suggested the definition of minority-owned be based on 
ownership or control by minority individuals. Another commenter 
preferred eliminating the ownership requirement entirely and basing the 
definition on the customers and community served. Several commenters 
suggested that the FDIC be more proactive and expeditious in 
identifying and notifying qualified bidders in the event a minority-
owned institution failed. The agency also received several comments 
seeking further clarification as to the level of technical assistance 
the FDIC would provide. One commenter suggested that the FDIC consider 
hosting an annual conference designed to promote and encourage the 
creation of new minority-owned depository institutions. One commenter 
suggested that the return visit after examinations to provide technical 
assistance be available upon request rather than routinely offered to 
the institutions. One commenter recommended that the FDIC's national 
coordinator evaluate the training needs of individual minority-owned 
institutions. Two commenters recommended that the FDIC form an advisory 
board of minority-owned institution bankers to provide additional 
guidance in administering the program. Two commenters suggested that 
the content of the FDIC's Webpage contain information determined 
relevant by conducting a survey of all the minority-owned depository 
institutions and contain information regarding the FDIC's rules and 
regulations. Finally, three commenters suggested that the FDIC reduce 
the reporting burden on

[[Page 18619]]

minority institutions as a result of the program. The FDIC has 
responded to these comments by defining the term minority depository 
institution, expanding the definition for purposes of this policy 
statement to include those institutions where its board of directors 
and community that it serves are predominantly minority, and providing 
a better explanation of technical assistance under the FDIC's outreach 
program. More specific discussions of the FDIC's particular responses 
to the comments are found in the section-by-section analysis.

III. Final Policy Statement--Section-by-Section Analysis

Title

    The FDIC is changing the title of the statement to Policy Statement 
Regarding Minority Depository Institutions to reflect the change in the 
definition of minority depository institution for purposes of this 
policy statement.

Definition

    The FDIC made a few technical amendments to this section of the 
Policy Statement. We reviewed the comments relating to a change in the 
definition of minority for purposes of this Policy Statement. The FDIC 
used the definition of minority as that term is defined in section 308 
of the Financial Institutions Reform, Recovery, and Enforcement Act 
(``FIRREA''). While we understand and appreciate the sensitivity 
surrounding the suggested changes to the definition of minority, the 
FDIC has no authority to change the statutory language, and therefore 
the agency is using the exact definition provided in the law. 
Accordingly, the definition of minority is unchanged in the Final 
Policy Statement.
    Three commenters suggested that the FDIC expand its program under 
the Policy Statement to include legal residents of the United States. 
Section 308 of FIRREA does not address the citizenship issue. Permanent 
legal residents are legally accorded the privilege of residing 
permanently in the United States. The FDIC's Minority Depository 
Institutions Program is centered on outreach, and institutions do not 
receive any direct economic benefit from participation. Therefore, the 
Policy Statement has been changed to include ownership by minority 
individuals that are permanent legal residents of the United States. 
Several commenters discussed the suggested criteria relating to board 
membership, account holders and the community served being 
predominantly minority to determine whether mutual institutions, 
publicly traded and widely held institutions should be considered 
minority-owned institutions. Based on the comments received, the FDIC 
is defining the term ``minority depository institution'' as any 
Federally insured depository institution where 51 percent or more of 
the voting stock is owned by minority individuals. In addition, for 
purposes of this Policy Statement, the FDIC is including in the 
definition of minority depository institution, institutions are not 
minority-owned but a majority of its Board of Directors and the 
community that it serves are predominantly minority. The FDIC is not 
including for consideration a criterion that the majority of account 
holders of an institution be predominantly minority. The FDIC does not 
intend to suggest that institutions should collect information 
regarding the race and national origin of their account holders in 
order to be considered minority depository institutions.
    As a result, the term minority depository institution is being used 
throughout the policy statement in place of the term minority-owned 
institution.

Identification of Minority Depository Institutions

    There are no changes to this section of the Policy Statement.

Organizational Structure

    A technical change to this section that eliminates the requirement 
for the national coordinator to consult with officials from the FDIC's 
Division of Compliance and Consumer Affairs merely reflects an internal 
change in the FDIC's organizational structure. The FDIC is further 
clarifying the scope of its program under the Policy Statement by 
changing the final Policy Statement to reflect that the agency's 
regional coordinators will contact minority depository institutions 
directly supervised by the FDIC on an annual basis.

Technical Assistance

    The proposed Policy Statement clarified the meaning of technical 
assistance and provided examples as to the types of assistance that 
FDIC employees could provide to minority depository institutions. While 
the Policy Statement cannot address every possible action by which the 
FDIC could assist an institution, the final Policy Statement further 
clarifies that FDIC employees can advise on risk management procedures, 
accounting practices, recruiting techniques, etc., but will not 
actually perform tasks expected of bank personnel. The final Policy 
Statement also emphasizes that the return visits are optional, and to 
be proactive, we feel the return visits should be offered rather than 
available upon request.

Training and Educational Programs

    One of the goals specified in Section 308 of FIRREA is ``promoting 
and encouraging creation of new minority depository institutions.'' 
Therefore, the final Policy Statement has been amended to state that 
the national and regional coordinators will work with trade 
associations and other organizations to attempt to identify groups that 
may be interested in establishing new minority depository institutions. 
FDIC representatives will be available to address such groups to 
discuss the application process, the requirements of becoming FDIC 
insured, and the various programs geared toward minority depository 
institutions. In response to those comments regarding the FDIC's 
training and educational programs, the final Policy Statement 
emphasizes that we will work with trade associations representing 
minority depository institutions and other regulatory agencies to 
periodically assess the need for, and provide for, training and 
educational opportunities. The FDIC will partner with the trade 
associations to offer these types of programs during their annual 
conferences and other regional meetings. To address the specific needs 
of each institution, the agency will offer to have staff members return 
after examinations of minority depository institutions directly 
supervised by the FDIC to provide technical assistance.

Failing Institutions

    Several commenters suggested the FDIC be proactive and expeditious 
in identifying qualified interested bidders in the case of a failing 
minority-owned institution. The process of notifying qualified minority 
depository institutions is handled by the FDIC's Division of 
Resolutions and Receiverships (``DRR''). This Division already contacts 
all qualified minority-owned institutions nationwide in the case of a 
failing minority-owned institution. The process is handled as quickly 
as possible considering that the FDIC must be relatively certain that 
an institution will actually fail before soliciting the interest of 
other institutions. A technical amendment to this section is being made 
to ensure that the FDIC consults with all trade associations that 
represent minority depository institutions in maintaining a list of 
qualified and interested bidders.

[[Page 18620]]

Reporting Requirements

    No changes are being made to this section of the Final Policy 
Statement since the program does not impose any reporting burden on 
minority depository institutions participating in the program.

Internet Site

    A technical change is being made to this section based on comments 
aimed at making the site more beneficial. The final Policy Statement is 
being changed to indicate that the Webpage will provide links to 
various FDIC resources of information available to the public such as 
the FDIC's Rules and Regulations. The final Policy Statement also 
provides a general description of the proposed Webpage and states that 
visitors will have the opportunity to provide feedback regarding the 
FDIC's program and the usefulness of the Webpage.
    For the reasons set forth above, the final Policy Statement is 
amended to read as follows:

Federal Deposit Insurance Corporation

Policy Statement Regarding Minority Depository Institutions

    Minority depository institutions often promote the economic 
viability of minority and under-served communities. The FDIC has long 
recognized the importance of minority depository 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 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 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.'' 
Section 308 of FIRREA defines ``minority depository institution'' as 
any Federally insured depository institution where 51 percent or more 
of the voting stock is owned by one or more ``socially and economically 
disadvantaged individuals.'' Given the ambiguous nature of the phrase 
``socially and economically disadvantaged individuals,'' for the 
purposes of this Policy Statement, minority depository institution is 
defined as 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. Ownership must be by U.S. 
citizens or permanent legal U.S. residents to be counted in determining 
minority ownership. In addition to the institutions that meet the 
ownership test, for the purposes of this Policy Statement, institutions 
will be considered minority depository institutions if a majority of 
the Board of Directors is minority and the community that the 
institution serves is predominantly minority.
Identification of Minority Depository Institutions
    To ensure that all minority depository institutions are able to 
participate in the program, the FDIC will maintain a list of Federally 
insured minority depository institutions. Institutions that are not 
already identified as minority depository institutions 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 appropriateness of an institution being on 
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 depository 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 depository institution 
program is voluntary. Any minority depository institution not wishing 
to participate in this program will be removed from the official list 
upon request.
Organizational Structure
    The FDIC has designated a national coordinator for the FDIC's 
minority depository institutions program in the Washington Office and a 
regional coordinator in each Regional Office. The national coordinator 
will consult with officials from 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 depository 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 depository 
institutions. Representatives of other divisions and offices may 
participate in these meetings.
    The regional coordinators are knowledgeable about minority bank 
issues and are available to answer questions or to direct inquiries to 
the 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 depository institution directly supervised by the 
FDIC in their respective regions to discuss the FDIC's efforts to 
promote and preserve minority ownership of financial institutions and 
to 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 State 
nonmember banks identified through insurance applications, merger 
applications, or change in control notices to familiarize the 
institutions with the FDIC's minority depository institution program.
Technical Assistance
    The FDIC can provide technical assistance to minority depository 
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

[[Page 18621]]

recommendations and should offer to help management understand 
satisfactory methods to address such recommendations.
    At the conclusion of each examination of a minority depository 
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 visits will be to assist 
management in understanding and implementing examination 
recommendations, not to identify new problems. The level of technical 
assistance provided should be commensurate with the issues facing the 
institution. As such, institutions where more examination 
recommendations are made would generally be offered more detailed 
technical assistance in implementing those recommendations.
    FDIC employees can advise on risk management procedures, accounting 
practices, recruiting techniques, etc., but will not actually 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 recommend a specific transaction.
Training and Educational Programs
    The FDIC will work with trade associations representing minority 
depository 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.
    The national coordinator and the regional coordinators will also 
work with trade associations and other organizations to attempt to 
identify groups that may be interested in establishing new minority 
depository institutions. FDIC representatives will be available to 
address such groups to discuss the application process, the 
requirements of becoming FDIC insured, and the various programs geared 
toward minority depository institutions.
Failing Institutions
    The FDIC will attempt to preserve the minority character of failing 
institutions during the resolution process. In the event of a potential 
failure of a minority depository institution, the Division of 
Resolutions and Receiverships will contact all minority depository 
institutions nationwide that qualify to bid on failing institutions. 
The Division of Resolutions and Receiverships will solicit qualified 
minority depository 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 depository institutions 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 Depository 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 
depository 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 depository institutions. 
Visitors will have the opportunity to provide feedback regarding the 
FDIC's program and the usefulness of the Webpage.

    By order of the Board of Directors.

    Dated at Washington, DC, this 9th day of April, 2002.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 02-9155 Filed 4-15-02; 8:45 am]
BILLING CODE 6714-01-P