[Federal Register Volume 68, Number 7 (Friday, January 10, 2003)]
[Proposed Rules]
[Pages 1394-1399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-362]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 68, No. 7 / Friday, January 10, 2003 / 
Proposed Rules  

[[Page 1394]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 24

[Docket No. 03-01]
RIN 1557-AC09


Community and Economic Development Entities, Community 
Development Projects, and Other Public Welfare Investments

AGENCY: Office of the Comptroller of the Currency, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
proposing to amend 12 CFR part 24, the regulation governing national 
bank investments that are designed primarily to promote the public 
welfare. This proposal updates the definition section of the regulation 
to reflect the additional types of public welfare investment structures 
that have become more common in recent years and that are permissible 
under the governing statute. The proposal also clarifies the statutory 
standard that applies to the activities of those entities; simplifies 
the standards for making public welfare investments; clarifies how a 
national bank calculates the value of its public welfare investments 
for purposes of complying with the rule's investment limits; simplifies 
the regulation's investment self-certification and prior approval 
processes; and expands the list of examples of qualifying public 
welfare investments that satisfy the rule's requirements. These changes 
are intended to encourage additional public welfare investments by 
national banks by simplifying the regulation and further reducing 
unnecessary burden associated with part 24 investments.

DATES: Comments must be received March 11, 2003.

ADDRESSES: Please direct your comments to: Docket No. 03-01, 
Communications Division, Public Information Room, Mailstop 1-5, Office 
of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 
20219. Due to delays in paper mail in the Washington area, commenters 
are encouraged to submit their comments by fax or by e-mail. You may 
send comments by fax to (202) 874-4448, or by electronic mail to 
[email protected]. You can make an appointment to inspect and 
photocopy comments by calling (202) 874-5043.

FOR FURTHER INFORMATION CONTACT: OCC: Michele Meyer, Counsel, 
Legislative and Regulatory Activities Division, (202) 874-5090; Stephen 
Van Meter, Assistant Director, Community and Consumer Law Division, 
(202) 874-5750; or Barry Wides, Director, or Karen Bellesi, Investments 
Manager, Community Development Division, (202) 874-4930.

SUPPLEMENTARY INFORMATION:

I. Background

    The OCC is proposing to amend 12 CFR part 24, which contains the 
rules relating to national banks' investments in community development 
corporations (CDCs), community development (CD) projects, and other 
public welfare investments. Part 24 implements 12 U.S.C. 24 (Eleventh), 
which authorizes national banks to make investments designed primarily 
to promote the public welfare, including the welfare of low- and 
moderate-income communities and families, subject to certain 
percentage-of-capital limitations. (The investments authorized by 12 
U.S.C. 24 (Eleventh) are collectively referred to in this proposal as 
``public welfare investments.'') The purpose of this proposal is to 
make it easier for national banks to use the public welfare investment 
authority that the statute and regulation provide, and to eliminate 
unnecessary regulatory burdens currently associated with the investment 
review and approval process.
    The OCC originally adopted part 24 in 1993 and substantially 
revised the regulation in 1996.\1\ The 1996 revisions encouraged 
national banks to make public welfare investments by eliminating 
unnecessarily burdensome provisions and streamlining the part 24 
procedures. Among other things, the 1996 revisions: Modified the test 
for determining whether an investment primarily promotes the public 
welfare; streamlined the procedures for investment self-certification 
(which permits an eligible bank \2\ to make a public welfare investment 
and notify the OCC after-the-fact) and prior approval of investments; 
and expanded the list of activities eligible for self-certification.
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    \1\ See 58 FR 68464 (December 27, 1993); and 61 FR 49654 
(September 23, 1996).
    \2\ An ``eligible bank'' is well capitalized; has a composite 
rating of 1 or 2 under the Uniform Financial Institutions Rating 
System and at least a ``satisfactory'' Community Reinvestment Act 
rating; and is not subject to a cease and desist order, consent 
order, formal written agreement, or Prompt Corrective Action 
directive. 12 CFR 24.2(e).
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    In 1999, we revised part 24 further by simplifying the prior 
approval and self-certification requirements that apply to national 
banks' public welfare investments, expanding the types of investments 
for which self-certification may be used by removing geographic 
restrictions, and permitting an eligible bank to self-certify in 
connection with any eligible public welfare investment.\3\
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    \3\ See 64 FR 31160 (June 10, 1999).
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    We are committed to continually reevaluating our rules to reduce 
unnecessary regulatory burden and simplify compliance, consistent with 
the safe and sound operation of national banks. Our experience since 
the 1999 revisions to part 24 has demonstrated the benefits of these 
efforts. In the year 2001, national banks self-certified compliance in 
90 percent of all part 24 investments, compared with 65 percent in 
1998. In the same year, national banks and their community partners 
committed $995 million to part 24 investments, compared with $1.7 
million in 1998.
    We believe that additional improvements to this regulation could 
further stimulate part 24 investments fully consistent with safety and 
soundness considerations. Toward that end, this proposal streamlines 
the rule to eliminate additional unnecessary regulatory burdens 
currently associated with the investment review and approval process, 
as described in greater detail in the next section of this preamble 
discussion. These changes are designed to further encourage national 
bank participation in the part 24 investment program, without

[[Page 1395]]

compromising bank safety and soundness.

II. Description of the Proposal

Definitions (Sec.  24.2)

    The proposal adds a new definition of ``community and economic 
development entity.'' The new definition of ``community development 
entity'' replaces the current definition of ``community development 
corporation.'' A community development corporation is defined in the 
current regulation as a corporation established by one or more insured 
financial institutions (with or without other investors) ``to make one 
or more investments that meet the requirements of Sec.  24.3.'' \4\ The 
proposal defines a community and economic development entity (CDE) as 
an entity--such as a national bank community development subsidiary, 
community development financial institution, limited liability company, 
or limited partnership--that makes investments or conducts activities 
that primarily benefit low- and moderate-income individuals or areas or 
other areas targeted for redevelopment.
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    \4\ 12 CFR 24.2(c). Current Sec.  24.3 sets forth the criteria 
for a public welfare investment, including that the investment 
primarily benefits low- and moderate-income individuals or areas or 
other areas targeted for redevelopment, and that the bank 
demonstrates non-bank community support for the investment.
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    The proposed definition of CDE better reflects the scope of 12 
U.S.C. 24 (Eleventh), which permits a national bank to ``make [public 
welfare] investments directly or by purchasing interests in an entity 
primarily engaged in making such investments.'' 12 U.S.C. 24 (Eleventh) 
(emphasis added). The language of the statute does not restrict the 
entities in which a national bank may invest to a particular form of 
organization, provided the investing bank is not exposed to unlimited 
liability. Nor does the legislative history suggest that any such 
restriction was intended. Accordingly, the OCC has interpreted section 
24 (Eleventh) broadly, permitting a national bank to invest in a 
variety of entities that make public welfare investments themselves or 
that use a national bank's investment to support other types of public 
welfare activities.\5\ The proposed definition of CDE is consistent 
with this long-standing interpretation of the statute.
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    \5\ The annual OCC Directory of National Bank Community 
Development Investments lists numerous public welfare activities 
conducted by CDEs, such as the development of affordable housing, 
job creation, and commercial revitalization. For the most recent 
examples of such activities, see ``National Bank Community 
Development Investments, 2001 Directory.''
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Public Welfare Investments (Sec.  24.3)

    Section 24 (Eleventh) authorizes national banks to make investments 
``designed primarily to promote the public welfare, including the 
welfare of low- and moderate-income communities or families (such as 
through the provision of housing, services, or jobs).'' Current Sec.  
24.3 implements this authority by providing that a national bank may 
make an investment under part 24 if two conditions are met. The first, 
set forth in current Sec.  24.3(a), requires that the investment 
primarily benefit low- and moderate-income individuals, low- and 
moderate-income areas, or other areas targeted for redevelopment \6\ by 
providing or supporting one or more of four enumerated public welfare 
activities.\7\ The second condition, set forth in current Sec.  
24.3(b), requires the bank to demonstrate non-bank community support 
for, or participation in, the investment.\8\ The proposal simplifies 
the text of the first condition and deletes the second.
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    \6\ Under the current regulation, redevelopment areas are those 
targeted for redevelopment by ``local, State, tribal or Federal 
government (including Federal enterprise communities and Federal 
empowerment zones) * * *'' 12 CFR 24.3(a).
    \7\ These include affordable housing, equity or debt financing 
for small businesses, area revitalization or stabilization, and 
``other activities, services, or facilities that primarily promote 
the public welfare.'' 12 CFR 24.3(a).
    \8\ The current rule permits banks to demonstrate community 
support by, for example, having non-bank community representatives 
as members of the board of directors of a CDE or on a separate 
advisory board for the bank's community development activities; 
formation of formal business relationships between the bank and a 
community organization; contractual agreements with community 
partners to provide services in connection with the proposed 
investment; joint ventures with local small businesses; and 
financing for the proposed investment from the public sector or 
community development organizations or the receipt of Federal low-
income housing tax credits by the project in which the investment is 
made. 12 CFR 24.3(b).
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    Under proposed Sec.  24.3, a national bank may make a part 24 
investment if the investment primarily benefits low- and moderate-
income individuals or areas or other areas targeted for redevelopment 
by governmental entities.\9\ The proposal deletes the four enumerated 
public welfare activities set forth in current Sec.  24.3(a)(1)-(4). 
The list is merely illustrative of the types of investments a national 
bank may make under this part. It appears unnecessary in light of Sec.  
24.6, which sets forth examples of public welfare investments a 
national bank may make under this part (see the discussion that follows 
of proposed changes to Sec.  24.6, including additional examples of 
permissible investments).
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    \9\ Because the purposes and requirements of section 24 
(Eleventh) and the Community Reinvestment Act are different, a part 
24 investment does not necessarily qualify for consideration under 
the Community Reinvestment Act. For example, the Community 
Reinvestment Act limits the areas in which a bank may invest based 
on location and income levels, whereas part 24 places no geographic 
restrictions on a bank's public welfare investment and permits a 
bank to make an investment in an area that is not low-or moderate-
income (provided the area has been targeted for redevelopment).
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    The OCC is also proposing to delete the community support 
demonstration requirement set forth in current Sec.  24.3(b) because it 
is not required by statute or the comparable rules that apply to other 
financial institutions that have Federal statutory investment authority 
similar to section 24 (Eleventh)\10\ and may limit a bank's flexibility 
in making public welfare investments by hinging the permissibility of 
the investment on factors other than the nature and purpose of the 
investment. Moreover, the OCC's experience in implementing part 24 
suggests that investments that otherwise meet the requirements of part 
24 will receive the support of the communities benefited.
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    \10\ We note that the Federal Reserve Board's community 
development regulation (12 CFR 208.22) implements nearly identical 
statutory authority (12 U.S.C. 338a) and does not require the 
demonstration of community support for an investment.
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Investment Limits (Sec.  24.4)

    Section 24.4 of the current rule implements the investment limits 
imposed by 12 U.S.C. 24 (Eleventh). Under both the regulation and the 
statute, a national bank's aggregate public welfare investments may not 
exceed 5 percent of its capital and surplus, unless the bank is at 
least adequately capitalized and the OCC determines that a higher 
amount will pose no significant risk to the deposit insurance fund. In 
no case, however, may a bank's aggregate outstanding part 24 
investments exceed 10 percent of its capital and surplus.
    The proposal amends Sec.  24.4 to clarify that a bank should follow 
generally accepted accounting principles (GAAP) when calculating the 
aggregate amount of its part 24 investments, unless otherwise directed 
or permitted in writing by the OCC for prudential or safety and 
soundness reasons. Those reasons could exist, for example, if GAAP 
accounting permits a financially weak bank to increase investments in 
an unprofitable CDE.

Public Welfare Self-Certification and Prior Approval Procedures (Sec.  
24.5)

    Currently, an eligible national bank may make qualifying public 
welfare investments without prior notification

[[Page 1396]]

to, or approval by, the OCC by submitting a self-certification letter 
to the OCC within 10 working days after it makes the investment. For 
all other investments under part 24, a national bank must apply to the 
OCC for prior approval of an investment proposal. Unless otherwise 
notified in writing by the OCC, the proposed investment is deemed 
approved 30 calendar days from the date on which the OCC receives the 
proposal application.\11\
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    \11\ See 12 CFR 24.5 and 24.6.
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    To emphasize that eligible national banks are not required to seek 
prior approval of public welfare investments that meet the requirements 
of Sec. Sec.  24.3 and 24.4, the proposal changes the title of Sec.  
24.5 to ``Public welfare investment after-the-fact notice and prior 
approval procedures,'' and references in the section to ``self-
certification'' are changed to ``after-the-fact notice.'' The OCC 
further proposes to simplify the part 24 investment notification 
processes and make them more consistent with the notification processes 
established under 12 CFR part 5 for certain equity investments.
    Currently, Sec.  24.5(a) requires that a bank's self-certification 
letter include: (i) The name of the CDC, CD Project, or other entity in 
which the bank has invested; (ii) the date the investment was made; 
(iii) the type of investment (equity or debt), the investment activity 
listed in Sec.  24.3(a) that the investment primarily supports, and a 
brief description of the particular investment; (iv) the amount of the 
bank's total investment in the CDC, CD Project, or other entity, and 
the bank's aggregate outstanding part 24 investments, including the 
investment being self-certified; (v) the percentage of the bank's 
capital and surplus represented by the bank's aggregate outstanding 
part 24 investments, including the investment being self-certified; and 
(vi) a statement certifying compliance with the requirements of Sec.  
24.3 and Sec.  24.4. In this respect, part 24 currently calls for 
significantly more detail than the procedures prescribed by part 5 that 
apply where a national bank makes other types of permissible equity 
investments. Under part 5, a national bank's written after-the-fact 
notice of certain equity investments must set forth simply ``a 
description, and the amount, of the bank's investment.''\12\
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    \12\ See 12 CFR 5.36(d)(2).
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    The proposal revises Sec.  24.5 to make it more consistent with the 
part 5 equity investment notification procedures and to remove 
unnecessary administrative impediments to national bank public welfare 
investments. The proposal removes the first three elements currently 
required in a bank's self-certification letter (set forth at current 
Sec.  24.5(a)(3)(i)-(iii)) to give a bank the flexibility to determine 
how best to describe a particular investment and to emphasize that such 
a description may be brief. The proposal also removes the requirement 
(set forth at current Sec.  24.5(a)(3)(iv)) that a bank provide the 
amount of its aggregate outstanding part 24 investments because this 
element is redundant in light of the required certification of 
compliance with the investment limits set forth in Sec.  24.4.
    Thus, the proposal provides that a national bank may make an 
investment without prior notification to the OCC if the bank submits an 
after-the-fact notice to the OCC that includes: (i) A description of 
the bank's investment; (ii) the amount of the investment; (iii) the 
percentage of the bank's capital and surplus represented by the 
investment being self-certified and by the bank's aggregate outstanding 
public welfare investments; and (iv) a certification that the 
investment complies with the requirements of Sec. Sec.  24.3 and 24.4. 
The proposal also applies these modified requirements to the investment 
prior approval process described in Sec.  24.5(b).\13\ The OCC expects 
the after-the-fact notices and the investment proposals submitted in 
accordance with these modified requirements will be significantly 
shorter than the materials submitted under the current rule.\14\
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    \13\ The proposal does not change the triggers for the prior 
approval process. Thus, a bank that is ineligible for the after-the-
fact notice process must seek prior approval of its investments 
under 12 CFR 24.5(b)(1), unless the OCC has given it permission to 
use the after-the-fact notice process under 12 CFR 24.5(a)(4). An 
eligible bank must seek prior approval of: Investments that would 
exceed the five percent investment limit; investments in other real 
estate owned; or other investments determined by the OCC to be 
ineligible for the after-the-fact notice process. 12 CFR 24.4 and 
24.5(a)(5).
    \14\ The OCC expects to revise the sample forms for investment 
notification and prior approval to reflect this expectation. These 
sample forms will be available through the OCC's Community 
Development Division, (202) 874-4930.
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Examples of Qualifying Public Welfare Investments (Sec.  24.6)

    The proposal revises Sec.  24.6 to provide additional examples of 
the types of investments that meet the requirements of Sec.  24.3. For 
ease of reference, this list is organized by type of activity (such as 
affordable housing, economic development and job creation, and 
investments in CDEs). This list is illustrative of the types of 
investments a bank may make under this part, and national banks are not 
limited to the listed investments in creating or expanding their public 
welfare investment programs.\15\
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    \15\ For more examples of the types of investments a bank may 
make under part 24, see ``National Bank Community Development 
Investments, 2000 Directory.''
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Conforming Amendments

    As we have explained, the proposal changes the definition of 
``community development corporation'' to ``community and economic 
development entity'' to better reflect the range of investment vehicles 
that may be used for making part 24 investments. The proposal revises 
the title of part 24 to reflect this change. Thus, the proposed title 
is ``Community and Economic Development Entities, Community Development 
Projects, and Other Public Welfare Investments.''
    The proposal also revises the authority statement of the rule 
(Sec.  24.1) to refer to ``community and economic development 
entities'' rather than ``community development corporations.''

III. Comments

    The OCC requests comment on all aspects of this proposal, including 
the extent to which these proposed changes will encourage more national 
banks to make public welfare investments. Commenters are also invited 
to suggest other revisions that would simplify the standards or 
streamline the procedures currently contained in part 24.

IV. Community Bank Comment Request

    In addition, we invite your comments on the impact of this proposal 
on community banks. The OCC recognizes that community banks operate 
with more limited resources than larger institutions and may present a 
different risk profile. Thus, the OCC specifically requests comments on 
the impact of this proposal on community banks' current resources and 
available personnel with the requisite expertise, and whether the goals 
of the proposed regulation could be achieved, for community banks, 
through an alternative approach.

V. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec. 
722, 113 Stat. 1338, 1471 (November 12, 1999), requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. We invite your comments on how to make 
this proposal easier to understand. For example:
    [sbull] Have we organized the material to suit your needs? If not, 
how could this material be better organized?

[[Page 1397]]

    [sbull] Are the requirements in the proposed regulation clearly 
stated? If not, how could the regulation be more clearly stated?
    [sbull] Does the proposed regulation contain language or jargon 
that is not clear? If so, which language requires clarification?
    [sbull] Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
    [sbull] What else could we do to make the regulation easier to 
understand?

VI. Regulatory Flexibility Act

    An agency must prepare a Regulatory Flexibility Analysis if a rule 
it proposes will have a significant economic impact on a substantial 
number of small entities. 5 U.S.C. 603, 605. If, after an analysis of a 
rule, an agency determines that the rule is not expected to have a 
significant economic impact on a substantial number of small entities, 
section 605(b) provides that the head of the agency may so certify.
    The OCC has reviewed the impact this proposed rule will have on 
small national banks. For purposes of this Regulatory Flexibility 
Analysis and proposed regulation, the OCC defines ``small national 
banks'' to be those banks with less than $150 million in total assets. 
Based on that review, the OCC certifies that the proposed rule will not 
have a significant economic impact on a substantial number of small 
entities. The proposal would reduce regulatory burden on all national 
banks by simplifying the requirements and procedures applicable to part 
24 investments. The economic impact of this proposal on national banks, 
regardless of size, is not expected to be significant, though some 
national banks may benefit from a modest reduction in compliance costs.

VII. Executive Order 12866

    The OCC has determined that this proposal is not a significant 
regulatory action under Executive Order 12866.

VIII. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (2 U.S.C. 1532) (Unfunded Mandates Act), requires that an agency 
prepare a budgetary impact statement before promulgating any rule 
likely to result in a Federal mandate that may result in the 
expenditure by State, local, and tribal governments, in the aggregate, 
or by the private sector of $100 million or more in any one year. If a 
budgetary impact statement is required, section 205 of the Unfunded 
Mandates Act also requires an agency to identify and consider a 
reasonable number of regulatory alternatives before promulgating a 
rule. The OCC has determined that the proposed rule will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of $100 million or more in any one year. Accordingly, this 
rulemaking requires no further analysis under the Unfunded Mandates 
Act.

IX. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995, the OCC may not conduct or sponsor, and a respondent is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number.
    The information collection requirements contained in this notice of 
proposed rulemaking have been submitted to OMB for review and approval 
under OMB Control Number 1557-0194.
    The revisions of the information collections contained in the 
notice of proposed rulemaking are expected to reduce annual paperwork 
burden for respondents because it eliminates certain application and 
notification requirements. The information collection requirements in 
this notice of proposed rulemaking are contained in Sec. Sec.  24.5(a) 
and 24.5(b). Section 24.5(a) requires a national bank to submit an 
after-the-fact notice of public welfare investments to the OCC. The 
time per response to complete an after-the-fact notice is estimated to 
be 1.5 hours and the number of respondents is estimated to be 195 
national banks. Section 24.5(b) requires a national bank to submit an 
investment proposal to the OCC if the bank does not meet the 
requirements for after-the-fact notification. The time per response to 
complete an investment proposal is estimated to be 1.5 hours and the 
number of respondents is estimated to be 22.
    Section 24.5(a)(4) contains an existing requirement for certain 
national banks to submit a letter requesting authority to submit after-
the-fact notices of their investments. The time per response is 
approximately 30 minutes and the number of respondents is estimated to 
be four.
    The likely respondents are national banks.
    Estimated number of respondents: 221.
    Estimated number of responses: 221 responses.
    Estimated total burden hours: 327.5 hours.
    The OCC invites comments on: (1) Whether the collection of 
information contained in the proposed rulemaking is necessary for the 
proper performance of the OCC's functions, including whether the 
information has practical utility;
    (2) The accuracy of the OCC's estimate of the burden of the 
information collection, including the validity of the methodology and 
assumptions used;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected:
    (4) Ways to minimize the burden of the information collection on 
respondents, including the use of automated collection techniques or 
other forms of information technology; and
    (5) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    Comments should be sent to: Jessie Dunaway, Clearance Officer, 
Office of the Comptroller of the Currency, Legislative and Regulatory 
Activities Division, Attention: 1557-0194, 250 E Street, SW., Mailstop 
8-4, Washington, DC 20219. Due to delays in paper mail in the 
Washington area, commenters are encouraged to submit their comments by 
fax to 202-874-4889 or by e-mail to [email protected].
    Joseph F. Lackey, Jr., Desk Officer, Office of Information and 
Regulatory Affairs, Attention: 1557-0194, Office of Management and 
Budget, Room 10235, Washington, DC 20503. Comments may also be sent by 
e-mail to [email protected].

List of Subjects in 12 CFR Part 24

    Community development, Credit, Investments, National banks, 
Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the preamble, the OCC proposes to 
amend part 24 of chapter I of title 12 of the Code of Federal 
Regulations as follows:
    1-2. Revise the part heading of part 24 to read as follows:

PART 24--COMMUNITY AND ECONOMIC DEVELOPMENT ENTITIES, COMMUNITY 
DEVELOPMENT PROJECTS, AND OTHER PUBLIC WELFARE INVESTMENTS

    3. The authority citation for part 24 continues to read as follows:

    Authority: 12 U.S.C. 24 (Eleventh), 93a, 481 and 1818.


[[Page 1398]]


    4. In part 24, revise all references to ``community development 
corporation'' and ``CDC'' to read ``community and economic development 
entity'' and ``CDE.''
    5. In Sec.  24.2, revise paragraph (c) to read as follows:


Sec.  24.2  Definitions.

* * * * *
    (c) Community and economic development entity (CDE) means an entity 
that makes investments or conducts activities that primarily benefit 
low- and moderate-income individuals, low- and moderate-income areas, 
or other areas targeted by a governmental entity for redevelopment. The 
following is a non-exclusive list of examples of the types of entities 
that may be CDEs:
    (1) National bank community development corporation subsidiaries;
    (2) Private or nonbank community development corporations;
    (3) CDFI Fund-certified Community Development Financial 
Institutions or Community Development Entities;
    (4) Limited liability companies or limited partnerships;
    (5) Community development loan funds or lending consortia;
    (6) Community development real estate investment trusts;
    (7) Business development companies;
    (8) Community development closed-end mutual funds;
    (9) Non-diversified closed-end investment companies; and
    (10) Community development venture or equity capital funds.
* * * * *
    6. Revise Sec.  24.3 to read as follows:


Sec.  24.3  Public welfare investments.

    A national bank may make an investment under this part if the 
investment primarily benefits low- and moderate-income individuals, 
low- and moderate-income areas, or other areas targeted by a 
governmental entity for redevelopment.
    7. In Sec.  24.4, revise paragraph (a) to read as follows:


Sec.  24.4  Investment limits.

    (a) Limits on aggregate outstanding investments. A national bank's 
aggregate outstanding investments under this part may not exceed 5 
percent of its capital and surplus, unless the bank is at least 
adequately capitalized and the OCC determines, by written approval of 
the bank's proposed investment pursuant to Sec.  24.5(b), that a higher 
amount will pose no significant risk to the deposit insurance fund. In 
no case may a bank's aggregate outstanding investments under this part 
exceed 10 percent of its capital and surplus. When calculating the 
aggregate amount of its aggregate outstanding investments under this 
part, a national bank should follow generally accepted accounting 
principles, unless otherwise directed or permitted in writing by the 
OCC for prudential or safety and soundness reasons.
* * * * *
    8. In Sec.  24.5:
    a. Revise the section heading;
    b. revise paragraphs (a) and
    c. revise paragraphs (b)(1) and (b)(2) to read as follows:


Sec.  24.5  Public welfare investment after-the-fact notice and prior 
approval procedures.

    (a) After-the-fact notice of public welfare investments. (1) 
Subject to Sec.  24.4(a), an eligible bank may make an investment 
authorized by 12 U.S.C. 24 (Eleventh) and this part without prior 
notification to, or approval by, the OCC if the bank follows the after-
the-fact notice procedures described in this section.
    (2) An eligible bank shall provide an after-the-fact notification 
of an investment, within 10 working days after it makes the investment, 
to the Director, Community Development Division, Office of the 
Comptroller of the Currency, Washington, DC 20219.
    (3) The bank's after-the-fact-notice must include:
    (i) A description of the bank's investment;
    (ii) The amount of the investment;
    (iii) The percentage of the bank's capital and surplus represented 
by the current investment being self-certified and by the bank's 
aggregate outstanding public welfare investments, including the 
investment that is the subject of the after-the-fact notice; and
    (iv) A statement certifying that the investment complies with the 
requirements of Sec. Sec.  24.3 and 24.4.
    (4) A national bank that is not an eligible bank but that is at 
least adequately capitalized, and has a composite rating of at least 3 
with improving trends under the Uniform Financial Institutions Rating 
System, may submit a letter to the Community Development Division 
requesting authority to submit after-the-fact notices of its 
investments. The Community Development Division considers these 
requests on a case-by-case basis.
    (5) Notwithstanding the provisions of this section, a bank may not 
submit an after-the-fact notice of an investment if:
    (i) The investment involves properties carried on the bank's books 
as ``other real estate owned''; or
    (ii) The OCC determines, in published guidance, that the investment 
is inappropriate for after-the-fact notice.
    (b) Investments requiring prior approval. (1) If a national bank 
does not meet the requirements for after-the-fact investment 
notification set forth in this part, the bank must submit an investment 
proposal to the Director, Community Development Division, Office of the 
Comptroller of the Currency, Washington, DC 20219.
    (2) The bank's investment proposal must include:
    (i) A description of the bank's investment;
    (ii) The amount of the investment;
    (iii) The percentage of the bank's capital and surplus represented 
by the proposed investment and by the bank's aggregate outstanding 
public welfare investments, including the proposed investment; and
    (iv) A statement certifying that the investment complies with the 
requirements of Sec. Sec.  24.3 and 24.4.
* * * * *
    9. Revise Sec.  24.6 to read as follows:


Sec.  24.6  Examples of qualifying public welfare investments.

    Investments that primarily support the following types of 
activities are examples of investments that meet the requirements of 
Sec.  24.3:
    (a) Affordable housing activities, including:
    (1) Investments in an entity that finances, acquires, develops, 
rehabilitates, manages, sells, or rents housing primarily for low- and 
moderate-income individuals;
    (2) Investments in a project that develops or operates transitional 
housing for the homeless;
    (3) Investments in a project that develops or operates special 
needs housing for disabled or elderly low- and moderate-income persons; 
and
    (4) Investments in a project that qualifies for the Federal low-
income housing tax credit;
    (b) Economic development and job creation investments, including:
    (1) Investments that finance small businesses (including equity or 
debt financing and investments in an entity that provides loan 
guarantees) that are located in low- and moderate-income areas or that 
produce or retain permanent jobs, the majority of which are held by 
low- and moderate-income individuals;
    (2) Investments in an entity that acquires, develops, 
rehabilitates, manages, sells, or rents commercial or industrial 
property that is located in a low- and moderate-income area and 
occupied primarily by small businesses, or that is occupied primarily 
by small businesses that produce or retain permanent jobs, the majority 
of which

[[Page 1399]]

are held by low- and moderate-income individuals; and
    (3) Investments in low- and moderate-income areas that produce or 
retain permanent jobs, the majority of which are held by low- and 
moderate-income individuals;
    (c) Investments in community development entities, including:
    (1) Investments in a national bank that has been approved by the 
OCC as a national bank with a community development focus;
    (2) Investments in a community development financial institution, 
as defined in 12 U.S.C. 4742(5);
    (3) Investments in a community development entity that is eligible 
to receive New Markets tax credits under 26 U.S.C. 45D; and
    (d) Other public welfare investments, including:
    (1) Investments that provide credit counseling, job training, 
community development research, and similar technical assistance 
services for non-profit community development organizations, low- and 
moderate-income individuals or areas, or small businesses located in 
low- and moderate-income areas or that produce or retain permanent 
jobs, the majority of which are held by low- and moderate-income 
individuals;
    (2) Investments of a type approved by the Federal Reserve Board 
under 12 CFR 208.22 for state member banks that are consistent with the 
requirements of Sec.  24.3; and
    (3) Investments of a type previously determined by the OCC to be 
permissible under this part.

    Dated: December 23, 2002.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 03-362 Filed 1-9-03; 8:45 am]
BILLING CODE 4810-33-P