[Federal Register Volume 78, Number 52 (Monday, March 18, 2013)]
[Notices]
[Pages 16765-16775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06075]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket ID OCC-2013-0003]
FEDERAL RESERVE SYSTEM
[Docket No. OP-1456]
FEDERAL DEPOSIT INSURANCE CORPORATION
Community Reinvestment Act; Interagency Questions and Answers
Regarding Community Reinvestment; Notice
AGENCY: Office of the Comptroller of the Currency, Treasury (OCC);
Board of
[[Page 16766]]
Governors of the Federal Reserve System (Board); Federal Deposit
Insurance Corporation (FDIC).
ACTION: Notice and request for comment.
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SUMMARY: The OCC, Board, and FDIC (collectively, the Agencies) are
proposing to clarify their Interagency Questions and Answers Regarding
Community Reinvestment to address several community development issues.
The Agencies propose to revise five questions and answers, which
address (i) community development activities outside institutions'
assessment areas, both in the broader statewide or regional area and in
nationwide funds; (ii) additional ways to determine whether recipients
of community services are low- or moderate-income; and (iii) providing
a community development service by serving on the board of directors of
a community development organization. The Agencies also propose to add
two new questions and answers, one of which addresses the treatment of
community development performance in determining an institution's
lending test rating, and the other addresses the quantitative
consideration given to a certain type of community development
investment. Finally, the Agencies also propose to redesignate one
question and answer without substantive change.
DATES: Comments on the proposed questions and answers must be received
on or before May 17, 2013.
ADDRESSES: Comments should be directed to:
OCC: Because paper mail in the Washington, DC area and at the OCC
is subject to delay, commenters are encouraged to submit comments by
email, if possible. Please use the title ``Community Reinvestment Act:
Interagency Questions and Answers Regarding Community Reinvestment'' to
facilitate the organization and distribution of the comments. You may
submit comments by any of the following methods:
Email: [email protected].
Mail: Legislative and Regulatory Activities Division,
Office of the Comptroller of the Currency, Mail Stop 9W-11, 400 7th
Street SW., Washington, DC 20219.
Fax: (571) 465-4326.
Hand Delivery/Courier: 400 7th Street SW., Washington, DC
20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2013-0003'' in your comment. In general, OCC will enter
all comments received into the docket and publish them on the
Regulations.gov Web site without change, including any business or
personal information that you provide such as name and address
information, email addresses, or phone numbers. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this notice by any of the following methods:
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC.
For security reasons, the OCC requires that visitors make an
appointment to inspect comments. You may do so by calling (202) 649-
6700. Upon arrival, visitors will be required to present valid
government-issued photo identification and to submit to security
screening in order to inspect and photocopy comments.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
Board: You may submit comments, identified by Docket No. OP-1456 by
any of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
FederaleRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include the
docket number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Address to Robert deV. Frierson, Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue NW., Washington, DC 20551. All public comments will be made
available on the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for
technical reasons. Accordingly, comments will not be edited to remove
any identifying or contact information. Public comments may also be
viewed electronically or in person in Room MP-500 of the Board's Martin
Building (20th and C Streets NW., Washington, DC) between 9:00 a.m. and
5:00 p.m. on weekdays.
FDIC:
Mail: Written comments should be addressed to Robert E.
Feldman, Executive Secretary, Attention: Comments, Federal Deposit
Insurance Corporation, 550 17th Street NW., Washington, DC 20429.
Delivery: 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 7:00 a.m. and 5:00 p.m.
Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comment on the
agency Web site.
Email: You may also electronically mail comments to
[email protected].
Public Inspection: Comments may be inspected and
photocopied in the FDIC Public Information Center, 3501 North Fairfax
Drive, Room E-1005, Arlington, Virginia 22226, between 9:00 a.m. and
4:00 p.m. (EST), Monday to Friday.
FOR FURTHER INFORMATION CONTACT:
OCC: Bobbie K. Kennedy, Bank Examiner, Compliance Policy Division,
(202) 649-5470; or Margaret Hesse, Special Counsel, Community and
Consumer Law Division, (202) 649-6350, Office of the Comptroller of the
Currency, 400 7th Street SW., Washington, DC 20219.
Board: Catherine M.J. Gates, Senior Project Manager, (202) 452-
2099; or Theresa A. Stark, Senior Project Manager, (202) 452-2302,
Division of Consumer and Community Affairs, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW.,
Washington, DC 20551.
FDIC: Pamela A. Freeman, Senior Examination Specialist, Compliance
& CRA Examinations Branch, Division of Depositor and Consumer
Protection, (202) 898-3656; or Surya Sen, Section Chief, Supervisory
Policy Branch, Division of Depositor and Consumer Protection, (202)
898-6699; or Richard M. Schwartz, Counsel, Legal Division, (202) 898-
7424, Federal Deposit Insurance Corporation, 550 17th Street NW.,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Background
The OCC, Board, and FDIC implement the Community Reinvestment Act
(CRA) (12 U.S.C. 2901 et seq.) through their CRA regulations. See 12
CFR parts 25, 195, 228, and 345. The Agencies' regulations are
interpreted primarily through the ``Interagency Questions and Answers
Regarding Community Reinvestment'' (Questions and Answers), which
provide guidance for use by agency personnel, financial institutions,
and the public. The
[[Page 16767]]
Questions and Answers were first published under the auspices of the
Federal Financial Institutions Examination Council (FFIEC) in 1996 (61
FR 54647), and were last revised on March 11, 2010 (2010 Questions and
Answers) (75 FR 11642).
The Questions and Answers are grouped by the provision of the CRA
regulations that they discuss, are presented in the same order as the
regulatory provisions, and employ an abbreviated method of citing to
the regulations. For example, the small bank performance standards for
national banks appear at 12 CFR 25.26; for savings associations, the
small savings association performance standards appear at 12 CFR
195.26; for Federal Reserve System member banks supervised by the
Board, they appear at 12 CFR 228.26; and for state nonmember banks,
they appear at 12 CFR 345.26. Accordingly, the citation would be 12 CFR
----.26. Each question and answer (Q&A) is numbered using a system that
consists of the regulatory citation and a number, connected by a dash.
For example, the first Q&A addressing 12 CFR ----.26 would be
identified as Sec. ----.26-1.
In accordance with their statutory responsibilities, the Agencies
regularly review examination policies, procedures, and guidance to
better serve the goals of the CRA. To achieve these goals, the Agencies
have reviewed various public comments, including comments received
during public hearings held in 2010. A number of comments raised during
this review related to community development. Accordingly, the Agencies
have identified areas in the Questions and Answers regarding community
development where clarification or additional guidance may be warranted
to address and clarify some of the issues raised during this review.
The Agencies note that community development is an important
component of community reinvestment. Community development activities
are considered under the regulations' large institution, intermediate
small institution, and wholesale and limited purpose institution
performance tests. See 12 CFR Sec. Sec. ----.22(b)(4), ----.23, --
--.26(c), and ----.25, respectively. Small institutions may use
community development activity to receive consideration toward an
outstanding rating. Overall, community development has the effect of
improving the circumstances for low- and moderate-income individuals,
or of stabilizing and revitalizing the communities in which they live
or work. In this proposal, the Agencies intend to address community
development-related issues through the Questions and Answers guidance,
the Agencies' usual procedure for addressing non-regulatory changes.
This notice addressing several community development issues is intended
to be the Agencies' first step to addressing substantive and
significant issues raised by commenters. After the Agencies have
considered comments received on this proposal, the Agencies plan to
republish the amended Questions and Answers in final format. The
Agencies also intend to revise their examination procedures to reflect
the final guidance and to develop examiner training in order to promote
consistent application of the guidance within and among the Agencies.
Summary of Comments Regarding Community Development
Industry and community organizations generally agree that community
development activities are undervalued. Further, commenters, primarily
those from community organizations, stated that the Agencies should
evaluate the specifics and the outcomes of community development loans
and investments to ensure that they provide value and impact to
institutions' communities.
Commenters from both financial institutions and community
organizations stated that the Agencies should provide further guidance
on how an institution must ``adequately address the community
development needs of an institution's assessment area(s)'' before out-
of-assessment area activities are considered. As a related matter,
commenters described situations in which too many institutions try to
find scarce community development projects to fulfill their CRA
obligations in some locations, while, in other locations, there are few
or no institutions attempting to address community development needs. A
number of commenters noted that nationwide funds could be an efficient
means of addressing community development needs; however, commenters
have suggested that the current methods of ``earmarking'' investments
so that individual investors will be assured of CRA consideration in
their assessment area(s) may deter some institutions from making
investments in such funds.
Generally, commenters indicated they are satisfied with the types
of activities that receive consideration as community development
activities; however, some commenters believe that institutions'
community development loans to, and investments in, certain types of
entities should receive consideration regardless of the entity's
location. Similarly, these commenters opined that any investment made
in a nationwide fund that serves a national market should be given
consideration. Other commenters oppose giving such consideration to
regional or nationwide funds. For example, one commenter stated that
regional funds would hurt smaller and more rural markets. Another
commenter has expressed concern that favorable consideration for all
banks invested in multi-regional funds would remove the focus from the
banks' existing duty to properly serve the consumers in their
assessment area(s).
The Agencies believe that the proposed revisions and additions to
the Questions and Answers set forth in this Federal Register notice may
help to address and clarify some of these issues concerning community
development.
Proposed Revisions to Existing Q&As
I. Community Development Activities Outside an Institution's Assessment
Area(s) in the Broader Statewide or Regional Area That Includes the
Institution's Assessment Area(s)
Current Q&As Sec. ----.12(h)-6 and Sec. ----.12 (h)-7
The CRA regulations allow consideration of community development
loans, qualified investments, and community development services that
benefit an institution's assessment area(s) or a broader statewide or
regional area that includes the institution's assessment area(s). See
12 CFR ----.12(h)(ii), ----.23(a), and ----.24(b). Current Q&As Sec.
----.12(h)-6 and Sec. ----.12 (h)-7 were intended to assure financial
institutions that community development loans and services and
qualified investments in the broader statewide or regional area(s) that
includes their assessment area(s) would be provided consideration in
their CRA evaluations. However, based on comments from both financial
institutions and community organizations, the Agencies believe that
these two Q&As could benefit from additional clarification.
Current Q&A Sec. ----.12(h)-6 addresses whether there must be an
immediate or direct benefit to the institution's assessment area(s) to
satisfy the regulations' requirement that qualified investments and
community development loans or services benefit an institution's
assessment area(s) or a broader statewide or regional area that
includes the institution's assessment area(s). The Q&A states that the
answer is generally no. It continues by first addressing community
development
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activities that could benefit the institution's assessment area(s),
because the purpose, mandate, or function of the organization or fund
in which the institution is investing or to which it is providing loans
or services includes serving an area that includes the institution's
assessment area(s). Although the activities of the organization or fund
may not always directly benefit the institution's assessment area(s),
the Agencies believe that, at some point, the institution's assessment
area(s) may receive some benefit. For this reason, community
development loans and services and qualified investments to or in such
community development projects, organizations, or entities will receive
consideration. The current Q&A then addresses other community
development activities that, although located in the broader statewide
or regional area in which the institution's assessment area(s) is
located, will benefit individuals or areas that are not within the
institution's assessment area(s). The current Q&A specifically states
that, if an institution has, ``considering its performance context,''
``adequately addressed the community development needs of its
assessment area(s),'' it will also receive consideration for those
activities, even if those activities will not benefit the institution's
assessment area(s).
Financial institution commenters, in particular, noted that it is
unclear what is meant by ``adequately addressed the community
development needs of its assessment area(s).'' Further, given the lack
of clarity, both community organizations and financial institutions
indicated that institutions have been unwilling to engage in community
development activities without knowing with a degree of certainty that
they will receive consideration for such activities in their CRA
evaluations.
Commenters also noted that current Q&A Sec. ----.12(h)-7, which
addresses the meaning of the term ``regional area,'' is a source of
confusion. In addition to explaining the term ``regional area,'' the
Q&A states that ``[w]hen examiners evaluate community development loans
and services and qualified investments that benefit a regional area
that includes the institution's assessment area(s), they will consider
the institution's performance context as well as the size of the
regional area and the actual or potential benefit to the institution's
assessment area(s). With larger regional areas, benefit to the
institution's assessment area(s) may be diffused and, thus, less
responsive to assessment area needs.''
Current Q&A Sec. ----.12(h)-7 was intended to address the
qualitative consideration that some community development activities
would receive when examiners considered them, not the quantitative
consideration that those activities would be afforded. However, the
Agencies understand that some financial institutions may interpret the
Q&A to mean that, if there was a diffuse or uncertain potential benefit
to the institution's assessment area(s), the community development
activity would not receive consideration (either qualitative or
quantitative) in the institution's CRA evaluation. As a result, such
financial institutions may have been hesitant to engage in community
development activities outside their assessment area(s), even if the
purpose, mandate, or function of the entity in which they were
investing or to which they were lending or providing community
development services included serving geographies or individuals
located within the institution's assessment area(s). Financial
institutions also may have been less likely to engage in those
community development activities that would benefit geographies or
individuals located somewhere within the broader statewide or regional
area that includes the institution's assessment area(s) but that would
not benefit its assessment area(s). According to both financial
institution and community organization commenters, the confusion
generated by Q&A Sec. ----.12(h)-7 may have resulted in many financial
institutions refusing to engage in community development activities
unless they were certain that their assessment area(s) would benefit.
Given the potential uncertainty of institutions regarding whether
community development activities benefiting areas or individuals in the
broader statewide or regional area that includes their assessment
area(s) would receive the same consideration as an activity directly
benefiting the institutions' assessment area(s), they may not have
engaged in those activities and worthwhile community development needs
may have continued to be unmet. Commenters have stated, for example,
that in cities where numerous major financial institutions have
designated assessment areas, significant concentrations of community
development loans and investments may occur, while in the broader
statewide or regional area that includes these institutions' assessment
areas, underinvestment in community development loans and investments
occurs despite significant needs.
Proposed Revised Q&As Sec. ----.12(h)-6 and Sec. ----.12(h)-7
The Agencies propose to revise Q&As Sec. ----.12(h)-6 and Sec. --
--.12(h)-7 to further clarify that community development activities in
the broader statewide or regional area that includes an institution's
assessment area(s) will be considered in the evaluation of an
institution's CRA performance. The first paragraph of the answer in Q&A
Sec. ----.12(h)-6 would remain unchanged. Accordingly, the Agencies
would reaffirm that an institution's activity will be considered a
community development loan or service or a qualified investment if it
supports an organization or activity that covers a statewide or
regional area that is larger than, but includes, the institution's
assessment area(s). The institution's assessment area(s) need not
receive an immediate or direct benefit from the institution's
participation in the organization or activity, provided that the
purpose, mandate, or function of the organization or activity includes
serving geographies or individuals located within the institution's
assessment area(s). The Agencies propose to revise the second paragraph
of the answer in Q&A Sec. ----.12(h)-6 to remove the phrase
``adequately addressed the community development needs of its
assessment area(s).'' Instead, the Agencies propose to state that
community development activities located in the broader statewide or
regional area that includes an institution's assessment area(s) but
that will not benefit those assessment area(s) ``must be performed in a
safe and sound manner, consistent with the institution's capacity to
oversee those activities and may not be conducted in lieu of, or to the
detriment of, activities in the institution's assessment area(s). When
evaluating whether community development activities are being conducted
in lieu of, or to the detriment of, activities in the institution's
assessment area(s), examiners will consider an institution's
performance context, including the community development needs and
opportunities in its assessment area(s), its business capacity and
focus, and its past performance.''
Further, in Q&A Sec. ----.12(h)-7, the Agencies propose to modify
the current description of what is meant by the term ``regional area''
for additional clarity and flexibility. In addition, to prevent the
misinterpretation described above, the Agencies propose to delete the
rest of the Q&A, which currently states: ``When examiners evaluate
community development loans and services and
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qualified investments that benefit a regional area that includes the
institution's assessment area(s), they will consider the institution's
performance context as well as the size of the regional area and the
actual or potential benefit to the institution's assessment area(s).
With larger regional areas, benefit to the institution's assessment
area(s) may be diffused and, thus, less responsive to assessment area
needs.'' The Agencies believe this text is no longer necessary given
the misinterpretation of the current language and the clarification
that is being provided in proposed revised Q&A Sec. ----.12(h)-6.
The text of proposed revised Q&As Sec. ----.12(h)-6 and Sec. --
--.12(h)-7 follows:
Sec. ----.12(h)--6: Must there be some immediate or direct benefit
to the institution's assessment area(s) to satisfy the regulations'
requirement that qualified investments and community development loans
or services benefit an institution's assessment area(s) or a broader
statewide or regional area that includes the institution's assessment
area(s)?
A6. No. The regulations recognize that community development
organizations and programs are efficient and effective ways for
institutions to promote community development. These organizations and
programs often operate on a statewide or even multistate basis.
Therefore, an institution's activity is considered a community
development loan or service or a qualified investment if it supports an
organization or activity that covers an area that is larger than, but
includes, the institution's assessment area(s). The institution's
assessment area(s) need not receive an immediate or direct benefit from
the institution's participation in the organization or activity,
provided that the purpose, mandate, or function of the organization or
activity includes serving geographies or individuals located within the
institution's assessment area(s).
In addition, a retail institution will receive consideration for
certain other community development activities. These activities must
benefit geographies or individuals located somewhere within a broader
statewide or regional area that includes the institution's assessment
area(s). Examiners will consider these activities even if they will not
benefit the institution's assessment area(s). However, such community
development activities must be performed in a safe and sound manner
consistent with the institution's capacity to oversee those activities
and may not be conducted in lieu of, or to the detriment of, activities
in the institution's assessment area(s). When evaluating whether
community development activities are being conducted in lieu of, or to
the detriment of, activities in the institution's assessment area(s),
examiners will consider an institution's performance context, including
the community development needs and opportunities in its assessment
area(s), its business capacity and focus, and its past performance.
Sec. ----.12(h)-7: What is meant by the term, ``regional area''?
A7. A ``regional area'' may be an intrastate area or a multistate
area that includes the financial institution's assessment area(s).
Regional areas typically have some geographic, demographic, and/or
economic interdependencies and may conform to commonly accepted
delineations, such as ``the tri-county area'' or the ``mid-Atlantic
states.'' Regions are often defined by the geographic scope and
specific purpose of a community development organization or initiative.
The Agencies solicit comments on all aspects of these proposed
revised Q&As. In addition, the Agencies specifically request
commenters' views on the following:
Do the revised Q&As clearly convey the Agencies' intent
that community development activities in the broader statewide or
regional area that includes an institution's assessment area(s) will
receive consideration?
Will this clarification of consideration in the broader
statewide or regional area that includes an institution's assessment
area(s) provide an incentive for banks to increase their community
development activities or expand their opportunities to engage in
community development activities?
Does ``community development activities being conducted in
lieu of, or to the detriment of, activities in the institution's
assessment area(s)'' raise the same uncertainty as ``adequately
addressed the community development needs of its assessment area(s)''?
If so, how can the Agencies better describe the concept that a
financial institution cannot ignore legitimate and financially
reasonable community development needs and opportunities in its
assessment area(s) to engage in community development activities
elsewhere in the broader statewide or regional area when those
activities will not provide any benefit to its assessment area(s)?
Does removal of the portion of current Q&A Sec. --
--.12(h)-7 that discussed a diffuse potential benefit to an
institution's assessment area(s) alleviate the confusion between the
two Q&As and help to clarify that community development activities in
the broader statewide or regional area that includes an institution's
assessment area(s) will receive consideration?
Is the proposed definition of ``regional area''
sufficiently clear and appropriately flexible?
II. Investments in Nationwide Funds
Current Q&ASec. ----.23(a)-2
In 2007, the Agencies proposed a new Q&A Sec. ----.23(a)-2
addressing consideration of institutions' investments in national or
regional funds. See 72 FR 37922 (July 11, 2007). After considering the
33 comments received, the Agencies adopted a final Q&A in 2009 (2009
Q&A). See 74 FR 498 (Jan. 6, 2009). The 2009 Q&A addressed investments
in nationwide funds; however, as originally proposed, the Q&A also
would have addressed regional funds. This refinement to the 2009 Q&A
was made to avoid overlap with Q&As Sec. ----.12(h)-6 and Sec. --
--.12(h)-7, which address investments in statewide and regional funds.
The Agencies had noted that the investment test, at 12 CFR --
--.23(a), evaluates an institution's record of helping to meet the
credit needs of its assessment area(s) through qualified investments
that benefit an institution's assessment area(s) or a broader statewide
or regional area that includes the institution's assessment area(s).
See 74 FR at 501. The Agencies further noted that investments in
nationwide funds are subject to that standard. The 2009 Q&A advised
that an institution may provide documentation from a nationwide fund to
demonstrate the geographic benefit to its assessment area(s) or the
broader statewide or regional area that includes its assessment
area(s). Although the 2009 Q&A suggested types of documentation that
could be provided, it also explained that the Agencies would accept any
information provided by an institution that reasonably demonstrates
that the purpose, mandate, or function of a nationwide fund includes
serving geographies or individuals located within the institution's
assessment area(s) or a broader statewide or regional area that
includes its assessment area(s).
Since adopting the 2009 Q&A, the Agencies have received comments
addressing nationwide funds. Some commenters have argued that there
should be broad favorable consideration provided to any financial
institution that invests in nationwide funds, while others have
asserted that consideration
[[Page 16770]]
should not be provided for investments in nationwide funds because
investments in such funds are not guaranteed to benefit local
organizations. Although a number of commenters suggested that the focus
should be on an institution's duty to serve consumers in its assessment
area(s), some suggested that the Agencies should help regional and
larger financial institutions make investments in multi-investor funds
and encourage those institutions to invest in areas outside of their
markets, especially in rural and underserved areas. In addition, some
commenters advised that a retail financial institution should be able
to receive consideration for qualified investments, regardless of their
location, if the institution has adequately addressed the credit needs
in its assessment area(s). Among these commenters, some suggested that
a ``Satisfactory'' rating on the institution's previous examination
would be indicative of adequately addressing credit needs in its
assessment area(s); other commenters believed the standard should be
more stringent--an ``Outstanding'' rating on the previous examination.
Several commenters recommended that the Agencies should simplify
the documentation suggested in the Q&A for an institution to receive
consideration for investments in nationwide funds. At least one
commenter believed that the documentation suggestions in the current
Q&A, such as side letters, create disincentives for financial
institutions to participate in multi-investor funds. Several commenters
suggested that investors should be attributed with a pro-rata share of
the overall fund for CRA purposes because, legally, each investor owns
a pro-rata share of each investment. They asserted that the advantage
of a pro-rata share approach would be that several investors would be
able to receive consideration for a project in a certain area. These
commenters thought side letters artificially award investment projects
to one investor, excluding other investors from consideration for those
projects. Other commenters, however, were concerned about a pro-rata
method for allocating shares of each project given the difficulty in
determining whether an investing financial institution's investment
addresses the geographic requirements in the regulations. Another
commenter suggested that the only equitable method of distributing CRA
consideration for multi-investor fund investments is to use the
location of a fund's projects, but even this commenter was concerned
that each financial institution should receive full consideration and
full weighting of the entire amount of its investment. A different
commenter proposed that, if a nationwide fund has at least one
investment in the broader statewide or regional area that includes the
investing financial institution's assessment area(s), the institution
should receive full consideration for its investment in the fund.
The Agencies also received comments addressing assessment area
issues that are relevant to the consideration of investments in
nationwide funds. For example, commenters suggested that global and
other large institutions that have relatively small assessment areas
should be encouraged to invest in underserved areas and receive full
CRA consideration for doing so. Other commenters focused on where a
financial institution does business, particularly an institution with
one or a few branches. Those commenters advocated that such financial
institutions should provide CRA-type activities wherever they do
business--not only in their assessment area(s). Commenters also
suggested that the regulations' current approach to delineating
assessment areas may create disincentives for financial institutions to
provide financial services to low- or moderate-income communities and
rural areas that are not part of their assessment area(s) due to their
lack of a physical presence.
Proposed Revised Q&A Sec. ----.23(a)-2
As discussed above, the Agencies believe that revisions to existing
guidance can address some of the concerns raised in the context of
investments in nationwide funds. Current Q&A Sec. ----.23(a)-2
provides guidance about investments in nationwide funds in the context
of the CRA regulations' scope of the investment test--that the Agencies
evaluate an institution's record of helping to meet the credit needs of
its assessment area(s) through qualified investments that benefit its
assessment area(s) or a broader statewide or regional area that
includes its assessment area(s). See 12 CFR ----.23(a).
To address some of the commenters' concerns, the Agencies are
proposing to revise Q&A Sec. ----.23(a)-2. First, as in the 2009 Q&A,
the proposed Q&A would state that there may be several ways to
demonstrate that an institution's investment in a nationwide fund meets
the geographic requirements and that the Agencies will employ
flexibility when reviewing information provided by the institution. The
proposed Q&A also would highlight that information about where a fund's
investments are expected to be made or targeted usually will be found
in the fund's prospectus, or other documents provided by the fund prior
to or at the time of the institution's investment. To address some of
the commenters' concerns about side letters and earmarking of projects,
the proposed revised Q&A would no longer suggest that written
documentation by the fund demonstrating earmarking, side letters, or
pro-rata allocations may be provided at an institution's option. The
Agencies believe that earmarking and side letters may be burdensome and
may provide disincentives to investing financial institutions.
In addition, the Agencies believe that the current Q&A Sec. --
--.23(a)-2 places too much focus on quantitative measures tied to the
assessment area that do not give sufficient recognition to the broader
community development needs of the area or the business model of the
financial institution making the investment. The proposed revised Q&A
continues to recognize that nationwide funds are important sources of
investments for low- and moderate-income and underserved communities
throughout the country and can be an efficient vehicle for institutions
in making qualified investments that help meet community development
needs. In doing so, the proposed Q&A stresses that investments in
nationwide funds may be suitable investment opportunities, particularly
for large financial institutions with a nationwide branch footprint or
for other financial institutions with a nationwide business focus,
including wholesale or limited purpose institutions. Large institutions
with a nationwide branch footprint typically have many assessment areas
in many states; thus, investments in nationwide funds are likely to
benefit such an institution's assessment area(s), or the broader
statewide or regional area that includes its assessment area(s), and
provide that institution with the opportunity to match its investments
with the geographic scope of its business. Moreover, nationwide funds
may be an effective means of engaging in community development
activities for other financial institutions with a nationwide business
focus, including wholesale or limited purpose institutions, which are
evaluated under the community development test.
Further, the proposed revised Q&A states that other financial
institutions may find such funds to be efficient investment vehicles to
help meet community development needs in their assessment area(s) or
the broader statewide or regional area that includes
[[Page 16771]]
their assessment area(s). However, as the proposed revised Q&A notes,
these other institutions in particular should consider reviewing the
fund's investment record to see if it is generally consistent with the
institution's investment goals and the geographic considerations in the
regulations.
Finally, the proposed Q&A advises that any investments in
nationwide funds must be performed in a safe and sound manner,
consistent with an institution's capacity to oversee those activities,
and may not be conducted in lieu of, or to the detriment of, activities
in the institution's assessment area(s). When evaluating whether
community development activities are being conducted in lieu of, or to
the detriment of, activities in the institution's assessment area(s),
examiners will consider an institution's performance context, including
the community development needs and opportunities in its assessment
area(s), its business capacity and focus, and its past performance.
Thus, the performance context of a particular institution is very
important when determining whether investments in nationwide funds are
appropriate.
The text of the proposed revised Q&A Sec. ----.23(a)-2 follows:
Sec. ----.23(a)-2: In order to receive CRA consideration, what
information may an institution provide that would demonstrate that an
investment in a nationwide fund with a primary purpose of community
development will directly or indirectly benefit one or more of the
institution's assessment area(s) or a broader statewide or regional
area that includes the institution's assessment area(s)?
A2. There may be several ways to demonstrate that the institution's
investment in a nationwide fund meets the geographic requirements, and
the agencies will employ appropriate flexibility in this regard in
reviewing information the institution provides that reasonably supports
this determination.
In making this determination, the agencies will consider any
information provided by a financial institution that reasonably
demonstrates that the purpose, mandate, or function of the fund
includes serving geographies or individuals located within the
institution's assessment area(s) or a broader statewide or regional
area that includes the institution's assessment area(s). Typically,
information about where a fund's investments are expected to be made or
targeted will be found in the fund's prospectus, or other documents
provided by the fund prior to or at the time of the institution's
investment, and the institution, at its option, may provide such
documentation in connection with its CRA evaluation.
Nationwide funds are important sources of investments for low- and
moderate-income and underserved communities throughout the country and
can be an efficient vehicle for institutions in making qualified
investments that help meet community development needs. Nationwide
funds may be suitable investment opportunities, particularly for large
financial institutions with a nationwide branch footprint or for other
financial institutions with a nationwide business focus, including
wholesale or limited purpose institutions. Other financial institutions
may find such funds to be efficient investment vehicles to help meet
community development needs in their assessment area(s) or the broader
statewide or regional area that includes their assessment area(s).
Prior to investing in such a fund, an institution should consider
reviewing the fund's investment record to see if it is generally
consistent with the institution's investment goals and the geographic
considerations in the regulations. Any investments in nationwide funds
must be performed in a safe and sound manner, consistent with an
institution's capacity to oversee those activities, and may not be
conducted in lieu of, or to the detriment of, activities in the
institution's assessment area(s). When evaluating whether community
development activities are being conducted in lieu of, or to the
detriment of, activities in the institution's assessment area(s),
examiners will consider an institution's performance context, including
the community development needs and opportunities in its assessment
area(s), its business capacity and focus, and its past performance. See
also Q&As Sec. ----.12(h)-6 and Sec. ----12(h)-7 (additional
information about recognition of investments benefiting an area outside
an institution's assessment area(s).)
The Agencies intend for this proposed revised Q&A to apply only to
nationwide funds. Institutions that are considering investments in
statewide or regional funds would continue to rely on Q&As Sec. --
--.12(h)-6 and Sec. ----.12(h)-7.
The Agencies solicit comments on all aspects of this proposed
revised Q&A. In addition, the Agencies specifically request commenters'
views on the following:
Would the proposed revised Q&A assist institutions that
deliver products on a nationwide basis to address community needs in
areas where they provide products and services?
When might nationwide funds be appropriate investments for
regional or smaller institutions?
Some commenters indicated that current methods of
``earmarking'' investments, including through the use of side letters,
are burdensome. Are such methods, in fact, burdensome and, if so, in
what way?
If the proposed revised Q&A is adopted, how should
investments in nationwide funds be considered in an investing
institution's CRA evaluation? Should there be a special category for
investments in nationwide funds? How would such a category affect the
amounts of an institution's investments at the assessment area and/or
statewide levels?
Alternatively, should investments in nationwide funds be
attributed to particular states or assessment areas? If so, how can
that be done in a meaningful manner, particularly if there is no
earmarking by the fund?
If nationwide fund investments are attributed to
particular states or assessment areas, how can the Agencies avoid
double counting the same funds in the same assessment areas in
different institutions' evaluations?
III. Community Services Targeted to Low- or Moderate-Income Individuals
One prong of the definition of ``community development'' is
providing community services targeted to low- or moderate-income
individuals. See 12 CFR Sec. ----.12(g)(2). Current Q&A Sec. --
--.12(g)(2)-1 provides guidance on ways that financial institutions may
determine that community services are being provided to low- or
moderate-income individuals.
Commenters have noted two common situations in which institutions
may provide community services to low- or moderate-income people: (1)
At schools with a majority of students who receive free or reduced-
price meals, and (2) to individuals who receive or are eligible to
receive Medicaid. However, the commenters stated that it is not clear
whether the Agencies deem such community services as being provided to
low- or moderate-income individuals without additional income
information about the recipients of such services being provided by the
financial institution.
Financial institutions often provide funding for organizations that
provide community services to students and their families through
schools at which the majority of students qualify for free or reduced-
price meals under the U.S. Department of Agriculture's (USDA)
[[Page 16772]]
National School Lunch Program. The USDA's eligibility guidelines for
free and reduced-price meals are based on the Federal income poverty
guidelines and are stated by household size. The CRA regulations, on
the other hand, define income based on the area median family income,
based on a family of four individuals. In short, the USDA's eligibility
guidelines are based on nationwide incomes, while the CRA regulations
focus on local incomes. However, an analysis of USDA eligible incomes,
based on an average household size of four, against the vast majority
of the area median incomes of the Metropolitan Statistical Areas (MSAs)
and non-MSA areas in the United States shows that the USDA-eligible
incomes generally are less than or very similar to the median family
incomes that would be considered low or moderate for an MSA or a non-
MSA portion of a state.
Therefore, the Agencies propose to revise Q&A Sec. ----.12(g)(2)-1
to add that, if a community service is provided to students or their
families from a school where the majority of students qualify for free
or reduced-price meals under the USDA's National School Lunch Program,
the community service would be deemed to be provided to low- or
moderate-income individuals.
Commenters also noted that the receipt of Medicaid should be an
indicator that the recipient is low- or moderate-income for purposes of
the CRA regulations. Medicaid is generally available only to
individuals with limited income and assets. Although each state
determines its own financial criteria for Medicaid recipients, the
income criteria generally are based on the state poverty level. Thus,
as with the income thresholds used to determine a student's eligibility
for free or reduced-price meals, the income criteria for Medicaid are
not based on area median income being less than 50 percent or less than
80 percent, respectively, for low- or moderate-income individuals, as
defined in the CRA regulations at 12 CFR ----.12(m). As described more
fully above, however, the state poverty levels used to determine
Medicaid eligibility are, in most cases, less than or similar to the
income levels considered low- or moderate-income under the CRA
regulations. As a result, the Agencies believe eligibility for Medicaid
should be considered as an example of a way that a financial
institution may determine that community services are being targeted to
low- or moderate-income individuals. Accordingly, the Agencies propose
to revise Q&A Sec. ----.12(g)(2)-1 to add targeting of a community
service to individuals who receive or are eligible to receive Medicaid
as another example of how a financial institution could determine that
community services are targeted to low- or moderate-income persons.
The text of proposed revised Q&A Sec. ----.12(g)(2)-1 follows:
Sec. ----.12(g)(2)-1: Community development includes community
services targeted to low- or moderate-income individuals. What are
examples of ways that an institution could determine that community
services are offered to low- or moderate-income individuals?
A1: Examples of ways in which an institution could determine that
community services are targeted to low- or moderate-income persons
include:
The community service is targeted to the clients of a
nonprofit organization that has a defined mission of serving low- and
moderate-income persons, or, because of government grants, for example,
is limited to offering services only to low- or moderate-income
persons.
The community service is offered by a nonprofit
organization that is located in and serves a low- or moderate-income
geography.
The community service is conducted in a low- or moderate-
income area and targeted to the residents of the area.
The community service is a clearly defined program that
benefits primarily low- or moderate-income persons, even if it is
provided by an entity that offers other programs that serve individuals
of all income levels.
The community service is offered at a workplace to workers
who are low- and moderate-income, based on readily available data for
the average wage for workers in that particular occupation or industry
(see, e.g., http://www.bls.gov/bls/blswage.htm (Bureau of Labor
Statistics)).
The community service is provided to students or their
families from a school at which the majority of students qualify for
free or reduced-price meals under the U.S. Department of Agriculture's
National School Lunch Program.
The community service is targeted to individuals who
receive or are eligible to receive Medicaid.
The Agencies solicit comments on all aspects of this proposed
revised Q&A. In addition, the Agencies specifically request commenters'
views on the following:
Will the use of eligibility for free and reduced-price
meals and Medicaid effectively identify individuals who are low- or
moderate-income?
Will the use of these proxies reduce the burden on
financial institutions and community organizations to obtain actual
income and, thus, promote the provision of community development
services?
Are there other commonly used proxies for low- or
moderate-income that should be specifically included in the Q&A?
IV. Service on the Board of Directors of an Organization Engaged in
Community Development Activities
Current Q&A Sec. ----.12(i)-3 states that providing technical
assistance to organizations that engage in community development
activities (as defined by the regulation) is considered a community
development service. Some commenters stated that they were uncertain
whether service on the board of directors of a community development
organization would receive consideration as a community development
service, or if such service would receive consideration only under
certain circumstances, for example, if the board member also serves on
a loan review committee or otherwise provides specialized financial
services.
The Agencies have previously stated that ``service on the board of
directors of an organization that promotes credit availability or
affordable housing'' meets the criterion that a community development
service must be related to the provision of financial services. See
Joint Final Rule, 60 FR 22156, 22160 (May 4, 1995). Service by
financial institution personnel on the board of directors of an
organization engaged in community development activities should
consistently receive consideration as a community development service.
To further clarify this point, the Agencies propose to modify current
Q&A Sec. ----.12(i)-3 to include service on the board of directors as
an explicit example of a technical assistance activity that can be
provided to community development organizations and that would receive
consideration as a community development service.
The text of proposed revised Q&A Sec. ----.12(i)-3 follows:
Sec. ----.12(i)-3: What are examples of community development
services?
A3. Examples of community development services include, but are not
limited to, the following:
Providing financial services to low- and moderate-income
individuals through branches and other facilities located in low- and
moderate-income areas, unless the provision of such services has been
considered in the evaluation of an institution's retail
[[Page 16773]]
banking services under 12 CFR ----.24(d);
Increasing access to financial services by opening or
maintaining branches or other facilities that help to revitalize or
stabilize a low- or moderate-income geography, a designated disaster
area, or a distressed or underserved nonmetropolitan middle-income
geography, unless the opening or maintaining of such branches or other
facilities has been considered in the evaluation of the institution's
retail banking services under 12 CFR ----.24(d);
Providing technical assistance on financial matters to
nonprofit, tribal, or government organizations serving low- and
moderate-income housing or economic revitalization and development
needs;
Providing technical assistance on financial matters to
small businesses or community development organizations, including
organizations and individuals who apply for loans or grants under the
Federal Home Loan Banks' Affordable Housing Program;
Lending employees to provide financial services for
organizations facilitating affordable housing construction and
rehabilitation or development of affordable housing;
Providing credit counseling, home-buyer and home-
maintenance counseling, financial planning, or other financial services
education to promote community development and affordable housing,
including credit counseling to assist low- or moderate-income borrowers
in avoiding foreclosure on their homes;
Establishing school savings programs or developing or
teaching financial education or literacy curricula for low- or
moderate-income individuals;
Providing electronic benefits transfer and point of sale
terminal systems to improve access to financial services, such as by
decreasing costs, for low- or moderate-income individuals;
Providing international remittance services that increase
access to financial services by low- and moderate-income persons (for
example, by offering reasonably priced international remittance
services in connection with a low-cost account);
Providing other financial services with the primary
purpose of community development, such as low-cost savings or checking
accounts, including ``Electronic Transfer Accounts'' provided pursuant
to the Debt Collection Improvement Act of 1996, individual development
accounts (IDAs), or free or low-cost government, payroll, or other
check cashing services, that increase access to financial services for
low- or moderate-income individuals; and
Providing foreclosure prevention programs to low- or
moderate-income homeowners who are facing foreclosure on their primary
residence with the objective of providing affordable, sustainable,
long-term loan modifications and restructurings.
Examples of technical assistance activities that might be provided
to community development organizations include:
Serving on the board of directors;
Serving on a loan review committee;
Developing loan application and underwriting standards;
Developing loan-processing systems;
Developing secondary market vehicles or programs;
Assisting in marketing financial services, including
development of advertising and promotions, publications, workshops and
conferences;
Furnishing financial services training for staff and
management;
Contributing accounting/bookkeeping services; and
Assisting in fund raising, including soliciting or
arranging investments.
The Agencies request comment on whether there are other activities
that should also be included in this Q&A as explicit examples of
community development services.
Proposed New Questions and Answers
I. Qualified Investments
As noted above, several commenters asserted that CRA evaluations
should consider the impact of community development loans and services
and qualified investments on an institution's performance ratings. The
Agencies believe that the qualitative performance criteria considered
in CRA evaluations address the responsiveness to community needs.
Further, Q&A Sec. ----.23(e)-1 explains how the qualitative factors
are considered when evaluating an institution's qualified investments.
However, the Agencies are proposing a new Q&A Sec. ----.12(t)-9 to
address the quantitative consideration that should be provided for a
particular type of investment or loan so that the amount of
consideration is consistent with the amount of support provided to the
activity or entity with a community development purpose.
The Agencies have become aware of investment or loan opportunities
whereby a financial institution invests in or lends to an organization
and then the organization invests the funds in an instrument, such as a
Treasury security, which does not have a community development purpose,
and uses only the income (or a portion thereof) from the investment to
support the organization's community development purpose. At the end of
the investment or loan term, the institution's investment or loan
amount and, in some cases, a portion of the income from the instrument,
are returned to the institution.
Although the financial institution has invested or loaned a
comparatively large amount to the organization, only the much smaller
amount of income from the organization's investment is used to support
the organization's community development purpose. The Agencies believe
it is inappropriate to consider the entire amount of such investments
and loans as qualified investments or community development loans,
particularly when they are compared with investments or loans to other
organizations for which the entire amount of those investments or loans
are used to support the organizations' community development purpose.
To address this concern, the Agencies are proposing new Q&A Sec. --
--.12(t)-9, which would provide guidance to examiners about the amount
of quantitative consideration to provide for these types of investments
or loans.
The proposed new Q&A follows:
Sec. ----.12(t)-9: How do examiners evaluate loans or investments
to organizations that, in turn, invest in instruments that do not have
a community development purpose, and use only the income, or a portion
of the income, from those investments to support their community
development purpose?
A9. Examiners will give quantitative consideration for the dollar
amount of funds that benefit an organization or activity that has a
primary purpose of community development. If an institution invests in
(or lends to) an organization that, in turn, invests those funds in
instruments that do not have as their primary purpose community
development, such as Treasury securities, and uses only the income, or
a portion of the income, from those investments to support the
organization's community development purposes, the Agencies will
consider only the amount of the investment income used to benefit the
organization or activity that has a community development purpose for
CRA purposes.
The Agencies solicit comments on this proposed new Q&A generally,
but in particular, would like comments addressing the following:
[[Page 16774]]
Is the proposed new Q&A sufficiently clear?
Will the proposed Q&A encourage or discourage investments
or loans in organizations with a community development mission?
Does the proposed Q&A provide the flexibility necessary to
encourage community development activities, whether direct, indirect,
or through the provision of capital investments, in connection with an
organization with a primary purpose of community development?
II. Community Development Lending in the Lending Test Applicable to
Large Institutions
As discussed above, a number of commenters asserted that community
development activities are undervalued. More specifically, several
commenters stated that insufficient weight is given to community
development loans in the CRA examination. To address this concern, the
Agencies propose new Q&A Sec. ----.22(b)(4)-2 to clarify that
community development lending performance is always a factor that is
considered in an institution's lending test rating.
The lending test applicable to large financial institutions
consists of five performance criteria: (i) Lending activity, (ii)
geographic distribution, (iii) borrower characteristics, (iv) community
development lending, and (v) innovative or flexible lending practices.
See 12 CFR ----.22(b). The interagency examination procedures and the
examination practices of the Agencies currently address how lending
activity, geographic distribution, borrower characteristics, and
innovative or flexible lending practices are considered. However, the
practices at the three Agencies have not always been consistent with
regard to community development lending.
In 2000, the OCC adopted its internal guidance to examiners,
``Large Bank CRA Examiner Guidance.'' Although this guidance provided
direction to OCC examiners about how to conduct a large bank CRA
evaluation, the document also was made publicly available. See OCC
Bulletin 2000-35 (Dec. 29, 2000). This guidance explains that community
development lending performance may have only a positive or neutral
impact on overall lending test conclusions.
On the other hand, both the FDIC and the Board consider community
development lending performance in all instances. Examiners provide a
conclusion regarding an institution's community development lending
performance when that performance has a positive, neutral, or negative
impact on the lending test rating.
The Agencies are proposing new Q&A Sec. ----.22(b)(4)-2 to address
this inconsistency among the Agencies and to address commenters'
concerns that community development lending is undervalued. The
proposed Q&A clarifies that an institution's record of making community
development loans may have a positive, neutral, or negative impact on
the institution's lending test rating. The Agencies would consider the
institution's community development lending performance in the context
of the institution's business model, the needs of its community, and
the availability of community development opportunities in its
assessment area(s) or the broader statewide or regional area(s) that
includes the assessment area(s) (i.e., the institution's performance
context). Further, strong performance in retail lending may compensate
for weak performance in community development lending, and conversely,
strong community development lending may compensate for weak retail
lending performance.
The text of proposed new Q&A Sec. ----.22(b)(4)-2 follows:
Sec. ----.22(b)(4)-2: How do examiners consider community
development loans in the evaluation of an institution's record of
lending under the lending test applicable to large institutions?
A2. An institution's record of making community development loans
may have a positive, neutral, or negative impact on the lending test
rating. Community development lending is one of five performance
criteria in the lending test criteria and, as such, it is considered at
every examination. As with all lending test criteria, examiners
evaluate an institution's record of making community development loans
in the context of an institution's business model, the needs of its
community, and the availability of community development opportunities
in its assessment area(s) or the broader statewide or regional area(s)
that includes the assessment area(s). For example, in some cases
community development lending could have either a neutral or negative
impact when the volume and number of community development loans are
not adequate, depending on the performance context, while in other
cases, it would have a positive impact when the institution is a leader
in community development lending. Additionally, strong performance in
retail lending may compensate for weak performance in community
development lending, and conversely, strong community development
lending may compensate for weak retail lending performance.
The Agencies solicit comments on this proposed new Q&A. In
particular, comment is requested on the following:
Does the proposed Q&A recognize the appropriate value of
community development lending, while allowing flexibility based on
performance context consideration?
Will this proposed Q&A help to promote additional
community development lending?
Does this proposed Q&A appropriately clarify the
consideration given to community development lending as one of the five
performance criteria under the lending test?
Does this proposed Q&A raise any issues that the Agencies
will need to address with revised ratings guidance? If so, what are
they and how should they be addressed?
Redesignation of Existing Question and Answer Without Substantive
Change
Activities With Minority- and Women-Owned Financial Institutions and
Low-Income Credit Unions
In 2010, the Agencies first adopted implementing regulations for
section 804(b) of the CRA. See 75 FR 61035 (Oct. 4, 2010). Section
804(b) of the CRA provides that the Agencies may consider capital
investment, loan participation, and other ventures undertaken by the
institution in cooperation with minority- and women-owned financial
institutions and low-income credit unions as a factor when assessing
the CRA record of nonminority- and nonwomen-owned financial
institutions (``majority-owned institutions''). The regulatory section
implementing section 804(b) of the CRA is found at 12 CFR ----.21(f).
Prior to adoption of implementing regulations in 12 CFR ----.21(f),
the Agencies had adopted a related Q&A Sec. ----.12(g)-4. See 74 FR
498 (Jan. 6, 2009). This Q&A explains that activities with minority-
and women-owned financial institutions and low-income credit unions do
not have to benefit the majority-owned financial institution's
assessment area(s); however, such activities must help meet the credit
needs of the local communities in which the minority- or women-owned
financial institutions or low-income credit unions are chartered. The
Q&A also provided examples of activities undertaken by a majority-owned
financial institution in cooperation with minority- or women-owned
financial institutions or low-income credit unions that would receive
CRA consideration.
Because the new regulatory section addressing this topic is 12 CFR
[[Page 16775]]
----.21(f), the Agencies are proposing to redesignate current Q&A Sec.
----.12(g)-4 as Q&A Sec. ----.21(f)-1. The text of the Q&A would
remain unchanged.
The text of redesignated Q&A Sec. ----.21(f)-1 follows:
Sec. ----.21(f)-1: The CRA provides that, in assessing the CRA
performance of non-minority- and non-women-owned (majority-owned)
financial institutions, examiners may consider as a factor capital
investments, loan participations, and other ventures undertaken by the
institutions in cooperation with minority- or women-owned financial
institutions and low-income credit unions (MWLIs), provided that these
activities help meet the credit needs of local communities in which the
MWLIs are chartered. Must such activities also benefit the majority-
owned financial institution's assessment area(s)?
A1. No. Although the regulations generally provide that an
institution's CRA activities will be evaluated for the extent to which
they benefit the institution's assessment area(s) or a broader
statewide or regional area that includes the institution's assessment
area(s), the Agencies apply a broader geographic criterion when
evaluating capital investments, loan participations, and other ventures
undertaken by that institution in cooperation with MWLIs, as provided
by the CRA. Thus, such activities will be favorably considered in the
CRA performance evaluation of the institution (as loans, investments,
or services, as appropriate), even if the MWLIs are not located in, or
such activities do not benefit, the assessment area(s) of the majority-
owned institution or the broader statewide or regional area that
includes its assessment area(s). The activities must, however, help
meet the credit needs of the local communities in which the MWLIs are
chartered. The impact of a majority-owned institution's activities in
cooperation with MWLIs on the majority-owned institution's CRA rating
will be determined in conjunction with its overall performance in its
assessment area(s).
Examples of activities undertaken by a majority-owned financial
institution in cooperation with MWLIs that would receive CRA
consideration may include:
Making a deposit or capital investment;
Purchasing a participation in a loan;
Loaning an officer or providing other technical expertise
to assist an MWLI in improving its lending policies and practices;
Providing financial support to enable an MWLI to partner
with schools or universities to offer financial literacy education to
members of its local community; or
Providing free or discounted data processing systems, or
office facilities to aid an MWLI in serving its customers.
General Comments
The Agencies invite comments on any aspect of this proposal. The
Agencies particularly would like comments on those issues specifically
noted in this supplementary information section.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.) (PRA), the Agencies may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid Office of Management and Budget (OMB)
control number. The proposed revisions to the Questions and Answers
would not involve any new collections of information pursuant to the
PRA (44 U.S.C. 3501 et seq.). Consequently, no information will be
submitted to OMB for review.
Solicitation of Comments Regarding the Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act of 1999, 12 U.S.C. 4809,
requires the Agencies to use ``plain language'' in all proposed and
final rules published after January 1, 2000. Although this guidance is
not a proposed or final rule, comments are nevertheless invited on
whether the proposed revised interagency questions and answers are
stated clearly, and how the guidance might be revised to make it easier
to read.
Dated: March 8, 2013.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, March 12, 2013.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 7th day of March 2013.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2013-06075 Filed 3-15-13; 8:45 am]
BILLING CODE P