[Federal Register Volume 78, Number 209 (Tuesday, October 29, 2013)]
[Notices]
[Pages 64598-64600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25622]


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DEPARTMENT OF THE TREASURY

Community Development Financial Institutions Fund


Bank Enterprise Award (BEA) Program; Programmatic and 
Administrative Aspects; Public Comment Request

AGENCY: Community Development Financial Institutions Fund, Department 
of the Treasury.

ACTION: Request for public comment.

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SUMMARY: This notice invites comments from the public on certain 
programmatic and administrative aspects of the Community Development 
Financial Institutions Fund's (CDFI Fund) Bank Enterprise Award (BEA) 
Program, pursuant to the BEA Program regulations set forth at 12 CFR 
part 1806 (the Interim Rule). All materials submitted will be available 
for public inspection and copying.

DATES: All comments and submissions must be received by December 30, 
2013.

ADDRESSES: Comments should be sent by mail to: CDFI Fund, BEA Program 
Office, U.S. Department of the Treasury, 1500 Pennsylvania Ave., NW., 
Washington, DC 20220; by email to [email protected]; or by facsimile 
at (202) 508-0089. This is not a toll free number.

FOR FURTHER INFORMATION CONTACT: Information regarding the CDFI Fund 
and its programs may be downloaded from the CDFI Fund's Web site at 
http://www.cdfifund.gov.

SUPPLEMENTARY INFORMATION: Through the BEA Program, the CDFI Fund 
encourages Insured Depository Institutions to increase their activities 
in the form of loans, investments, services, and technical assistance 
provided within Distressed Communities, as well as investments in 
Community Development Financial Institutions (CDFIs) through grants, 
stock purchases, loans, deposits, and other forms of financial and 
technical assistance. The increase in these activities is measured from 
a Baseline Period to an Assessment Period. Each capitalized term used 
in this Request for Public Comments is more fully defined either in the 
Interim Rule or the Notice of Funds Availability for the FY 2013 BEA 
Program award round (Federal Register/Vol. 78, No.109) (the NOFA). 
Through this notice, the CDFI Fund is seeking comments from the public 
regarding certain programmatic and administrative aspects of the CDFI 
Fund's BEA Program. Commentators are encouraged to consider, at a 
minimum, the following topics:

I. Eligibility

    A. CRA Rating: The Community Reinvestment Act (CRA) encourages and 
examines efforts to service the banking needs of low- and moderate-
income communities. The CDFI Fund considers a financial institution's 
CRA rating a key indicator of its efforts to serve the communities that 
it does business in and the effectiveness of those efforts in providing 
access to financial products and services to businesses and residents 
of those communities, including low-and-moderate income communities.
    As stated in Section VII ``Application Review Information'' of the 
NOFA, the CDFI Fund may choose not to approve a BEA Program award at 
the time of application if the Applicant and/or its affiliates' most 
recent overall CRA assessment rating is below ``Satisfactory.'' This 
determination is made during the review of the application.
    The CDFI Fund is considering making this an ``Eligibility'' 
requirement (Section III of the NOFA). If implemented, Section III of 
the NOFA would inform prospective Applicants that a CRA rating of below 
``Satisfactory'' during the Baseline Period or the Assessment Period of 
the applicable BEA Program award round will result in ineligibility.
    1. Should the CDFI Fund consider an Applicant ineligible if the 
Applicant's CRA rating is below ``Satisfactory'' and the CRA 
examination date was within the applicable Baseline or Assessment 
Period? If so, please indicate why. If not, please provide a specific 
reason why not.
    2. Should the CDFI Fund consider an Applicant ineligible if the 
Applicant's most recent CRA rating is below ``Satisfactory'' but the 
CRA examination date was prior to the applicable Baseline or Assessment 
Period? If so, please indicate why. If not, please provide a specific 
reason why not.
    3. Should the CDFI Fund perform additional due diligence to obtain 
an update on the status or progress made by the Applicant to improve 
its CRA rating prior to making an eligibility determination? If so, in 
which of the two scenarios above should additional due diligence be 
performed? Should that information be self-reported by the

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Applicant, or provided directly by its Appropriate Federal Banking 
Regulatory Agency?
    B. Financial Health: The BEA Program requires award recipients to 
deploy an amount equivalent to the award received in additional 
Qualified Activities in the calendar year following the receipt of the 
award. This requirement ensures that all BEA Program award proceeds are 
directly invested in distressed communities. Award recipients must 
remain in operation in order for their BEA Program award proceeds to be 
successfully deployed in Distressed Communities. Therefore, the 
financial health of an Applicant is an important factor in making an 
award determination. The CDFI Fund considers an audit opinion a key 
indicator of the financial health of an Applicant.
    As stated in Section VII ``Application Review Information'' of the 
NOFA, the CDFI Fund may choose not to approve a BEA Program Award at 
the time of application if the Applicant received a going concern 
opinion on its most recent audit. This determination is made during the 
review of the application.
    The CDFI Fund is considering making this an ``Eligibility'' 
requirement (Section III of the NOFA). If implemented, Section III of 
the NOFA would inform prospective Applicants that a going concern audit 
opinion during the Baseline Period or the Assessment Period of the 
applicable BEA Program award round will result in ineligibility.
    1. Should the CDFI Fund consider an Applicant ineligible to apply 
for a BEA Program award if the Applicant received a going concern on 
its most recent audit report? If not, please provide a specific reason 
why not.
    2. Is there additional financial health information that the CDFI 
Fund should consider in making eligibility determinations? If so, 
please describe.

II. Additional Program Considerations

    A. Integrally Involved Certified-CDFIs: The Interim Rule defines 
CDFI Support Activity as assistance provided by an Applicant or its 
Subsidiary to a certified CDFI that meets criteria set forth by the 
CDFI Fund in the applicable NOFA, that is Integrally Involved in a 
Distressed Community. The NOFA defines Integrally Involved as having 
provided: (i) At least 10 percent of financial transactions or dollars 
transacted (e.g., loans or Equity Investments as defined in 12 CFR 
1805.104(t)), or 10 percent of Development Service activities (as 
defined in 12 CFR 1805.104(s)), in the Distressed Community identified 
by the Applicant or the CDFI Partner, as applicable, in each of the 
three calendar years preceding the date of the applicable NOFA, (ii) 
having transacted at least 25 percent of financial transactions (e.g., 
loans or Equity Investments) in said Distressed Community in at least 
one of the three calendar years preceding the date of the applicable 
NOFA, or (iii) demonstrated that it has attained at least 10 percent of 
market share for a particular product in said Distressed Community 
(such as at least 10 percent of home mortgages originated in said 
Distressed Community) in at least one of the three calendar years 
preceding the date of the applicable NOFA.
    1. Should the current definition of Integrally Involved be revised 
or replaced? If so, how should the CDFI Fund define Integrally 
Involved?
    2. What other factors should the CDFI Fund consider when 
determining an updated definition of Integrally Involved?
    B. Updating the Types of BEA Qualified Activities: The CDFI Fund is 
considering updating the types of activities eligible for BEA Program 
awards. This includes the specific types of activities currently 
considered eligible in the CDFI-Related, Distressed Community 
Financing, and Service Activity categories. The following activities 
are eligible CDFI-Related Activities: Equity-Like Loans (ELL), Grants 
(CG), Loans (LNS), CDFI Deposits/Shares (DS), and Technical Assistance 
(TA). The following activities are eligible Distressed Community 
Financing Activities: Affordable Home Mortgage Loans (AHM), Affordable 
Housing Development Loans and Project Investments (AHD), Home 
Improvement Loans (HIL), Education Loans (EDU), and Commercial Real 
Estate Loans and Project Investments (CRE). The following activities 
are eligible Service Activities: Deposits (D), Community Services (CS), 
Financial Services (FS), Targeted Financial Services (TFS), and 
Targeted Retail Savings/Investment Products (TSP).
    1. Should the CDFI Fund revise, replace, or add to the existing 
types of CDFI-Related, Distressed Community Financing or Service 
Activities to include financial products or services relevant to the 
current economic environment? If so, please indicate the specific type 
of activity that should be considered, the reasons why it should be 
considered, and to the extent possible, the benefits of the activity to 
residents of Distressed Communities. If the suggestion is that a 
particular activity type be revised or replaced, please explain why.
    C. Pay for Success: The CDFI Fund has received recent inquiries 
about broadening BEA Qualified Activities to include ``Pay for 
Success'' activities. The objective of the Pay for Success initiative 
is to improve social outcomes while more effectively allocating public 
resources, paying for services only when the desired results of social 
outcomes are achieved. Examples of social outcomes include: academic 
programs for disadvantaged youth that accelerate academic gains; 
programs that reduce recidivism rates; and elderly care services that 
reduce the number of elderly individuals placed in costly nursing home 
facilities. Pay for Success has been part of the President's annual 
budget since FY 2012. Pay for Success activities are typically 
structured through contracts between state agencies and social service 
providers. A financial institution can participate in Pay for Success 
activities by providing the funding component. The financial 
institution would be reimbursed by the federal government only if the 
agreed-upon outcomes are achieved and verified by an external 
evaluator. Since the anticipated social outcomes are achieved over a 
number of years, Pay for Success contracts are typically multiple-year 
commitments.
    If a BEA applicant funds a certified CDFI that administers or 
supports a Pay for Success activity, the activity could qualify as a 
CDFI-related activity under the current Interim Rule. The CDFI Fund is 
considering revising the Distressed Community Financing Activities 
category to include the funding component of Pay for Success activities 
by FDIC-insured financial institutions as a qualified activity. An 
example of a Pay for Success activity which could qualify in the 
Distressed Community Financing Activities category, is a loan or 
investment made by an FDIC-insured financial institution to an 
organization that funds a Pay for Success activity located in a BEA 
Distressed Community. The Applicant would still need to be a FDIC-
insured financial institution, and the borrower would still need to be 
located in a BEA Distressed Community in order for the transaction to 
qualify. Disbursement of a Pay for Success award would be contingent 
upon verification that the agreed upon social outcomes for which the 
award determination was based have been achieved.
    1. Should the CDFI Fund add Pay for Success activities as an 
eligible Distressed Community Financing Activity? If so, please 
indicate why. If not, please indicate why not.

[[Page 64600]]

    2. If Pay for Success activities are added, should the CDFI Fund 
cap the amount of BEA Program awards related to these activities? If 
so, explain why and be specific regarding the amount in award dollars 
and/or percentage.
    3. Would the addition of Pay for Success activities as an eligible 
Distressed Community Financing Activity incentivize financial 
institutions to increase the funding of Pay for Success activities?
    4. Do financial institutions currently fund Pay for Success 
activities? If so, what are the attributes of the financial 
institutions? For example, are they predominately certified-CDFIs, 
community banks, minority depository institutions, small banks, large 
banks, etc.?
    D. Limitations on Loans or Investments to Certain Types of 
Businesses: The CDFI Fund is considering prohibiting loans or 
investments to certain types of businesses that otherwise meet other 
eligibility criteria from qualifying for the BEA Program.
    1. Should the CDFI Fund prohibit loans or investments to certain 
types of businesses that otherwise meet other BEA Program eligibility 
requirements from qualifying for the BEA Program? For example, should 
the CDFI Fund consider a loan to a liquor store, gambling facility, 
etc. that otherwise meets other BEA Program eligibility requirements, 
an ineligible activity? If so, to which types of businesses should 
loans or investments be considered ineligible? If not, please provide a 
specific reason why not. Also, please discuss the positive or negative 
impact that loans or investments to these types of businesses may have 
on a Distressed Community.
    E. Award Size: The CDFI Fund has received feedback regarding the 
continued reduction in the maximum BEA Program award size. Over the 
past three years, appropriated funds for the BEA Program have decreased 
from $25 million in FY 2010 to approximately $17.1 million in FY 2013. 
The CDFI Fund has continued to make an effort to award as many 
Applicants as possible with available appropriations. In order to do 
so, the CDFI Fund has lowered the award cap in the last three BEA 
Program award rounds, reducing the maximum award amount an individual 
Applicant can receive. For example, in FY 2010 the BEA Program was 
appropriated $25 million and the award cap was $600,000. In FY 2011, 
the BEA Program was appropriated $22 million and the award cap was 
$500,000. In FY 2012, the BEA Program was appropriated $18 million and 
the award cap was $415,000. The CDFI Fund is particularly interested in 
knowing how impactful BEA Program awards are to: community banks, 
certified CDFIs, minority depository institutions, and Small Banks 
based on CRA Asset Size Classification (assets of less than $296 
million as of 12/31/2012).
    1. How impactful are BEA Program awards to the recipient financial 
institutions?
    2. Should the CDFI Fund consider making fewer, significantly larger 
awards? For example, with an appropriation of $18 million, the CDFI 
Fund could make 18 awards of $1 million each.
    3. What other factors should the CDFI Fund consider regarding the 
size of BEA Program awards?

III. Reporting and Supporting Documentation

    A. Worksheet 2: BEA Report of Transactions: The CDFI Fund requires 
BEA Applicants to complete and submit Worksheet 2: BEA Report of 
Transactions as part of the BEA application. Worksheet 2: BEA Report of 
Transactions captures the transaction data for the transactions an 
Applicant included in its application. The data currently captured is: 
(1) Name of Borrower/Investee/Service Provider; (2) Total Dollar Value 
or Amount of Transactions; (3) Amount Disbursed to Date; (4) Street 
Address; (5) City; (6) State; (7) Zip; (8) Census Tract; (9) Date of 
Execution; (10) Date of Initial Disbursement; (11) Date of Final 
Disbursement; (12) Type of Activity; and (13) Impact.
    In addition to the information currently captured, the CDFI Fund is 
considering adding two columns to Worksheet 2: BEA Report of 
Transactions: (1) Description of Business Financed; and (2) NAICS Code 
of the Business Financed. These two columns would only apply to loans 
or investments provided to businesses.
    1. Would the addition of these columns significantly increase the 
burden on Applicants or result in any potential issues that the CDFI 
Fund may not have considered?
    2. Should the supporting documentation requirements apply to every 
transaction, to only certain specific transaction types, or to 
transactions of a certain amount?
    B. Supporting Documentation Provided by Applicants: The CDFI Fund 
currently requires Applicants to provide supporting documentation for 
transactions greater than or equal to $250,000. The CDFI Fund is 
considering changing the supporting documentation requirements.
    1. Should the CDFI Fund require Applicants to provide supporting 
documentation for loans or investments of less than $250,000? If so, 
what type of supporting documentation should be required?
    2. Would lowering the threshold amount for requiring supporting 
documentation requirements significantly increase the burden on 
Applicants or result in any potential issues that the CDFI Fund may not 
have considered?
    3. Should the supporting documentation requirements apply to every 
transaction, to only certain specific transaction types, or to 
transactions of a certain amount?

IV. Other

    A. General Feedback: The CDFI Fund would also like to obtain 
general feedback on the BEA Program and recognizes that there are other 
topics that may not have been addressed in the questions above, but 
that are important to consider. This information is especially 
important given that the BEA Program statute is over 12 years old and 
the Program regulations are over three years old. Please provide any 
general feedback on any aspect of the BEA Program, including but not 
limited to, program design, direction, impacts, performance measures, 
etc.

    Authority: 12 U.S.C. 1834a, 4703, 4703 note, 4713, 4717; 31 
U.S.C. 321; 12 CFR part 1806.

    Dated: October 23, 2013.
Donna J. Gambrell,
Director, Community Development Financial Institutions Fund.
[FR Doc. 2013-25622 Filed 10-28-13; 8:45 am]
BILLING CODE 4810-70-P