[Federal Register Volume 80, Number 85 (Monday, May 4, 2015)]
[Rules and Regulations]
[Pages 25209-25215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10374]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 80, No. 85 / Monday, May 4, 2015 / Rules and 
Regulations  

[[Page 25209]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1207

RIN 2590-AA67


Minority and Women Inclusion Amendments

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting a final 
rule to amend its regulation on minority and women inclusion by 
requiring the Federal Home Loan Banks (Banks) and the Office of Finance 
to include in the contents of their annual reports certain demographic 
information related to their boards of directors as well as a 
description of their related outreach activities during the reporting 
year.

DATES: This rule is effective July 6, 2015.

FOR FURTHER INFORMATION CONTACT: Sharron P.A. Levine, Director, Office 
of Minority and Women Inclusion, [email protected], (202) 649-
3496; or Eric Howard, Deputy Director, Office of Minority and Women 
Inclusion, [email protected], (202) 649-3009; or Karen Lambert, 
Associate General Counsel, [email protected], (202) 649-3094 (not 
toll-free numbers), Federal Housing Finance Agency, 400 Seventh Street 
SW., Washington, DC 20024. The telephone number for the 
Telecommunications Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. General

    Effective July 30, 2008, the Housing and Economic Recovery Act of 
2008 (HERA), Public Law 110-289, amended the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 
et seq.) (Safety and Soundness Act) to establish FHFA as an independent 
agency of the Federal government. HERA transferred the supervisory and 
oversight responsibilities of the Office of Federal Housing Enterprise 
Oversight over the Federal National Mortgage Association (Fannie Mae), 
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, 
Enterprises), and of the Federal Housing Finance Board over the Banks 
and the Bank System's Office of Finance to FHFA. The Enterprises and 
the Banks are collectively referred to as the regulated entities.
    The Safety and Soundness Act provides that FHFA is headed by a 
Director with general supervisory and regulatory authority over the 
regulated entities. FHFA is charged, among other things, with 
overseeing the prudential operations of the regulated entities. FHFA is 
also charged with ensuring that the regulated entities: Operate in a 
safe and sound manner including maintenance of adequate capital and 
internal controls; foster liquid, efficient, competitive, and resilient 
national housing finance markets; comply with the Safety and Soundness 
Act and the respective authorizing statutes of the regulated entities; 
carry out their missions through activities authorized and consistent 
with the Safety and Soundness Act and their authorizing statutes; and 
engage in activities and operations that are consistent with the public 
interest.\1\
---------------------------------------------------------------------------

    \1\ Section 1102 of HERA, 122 Stat. 2663 and 2664.
---------------------------------------------------------------------------

B. Office of Minority and Women Inclusion

i. Statutory Requirements
    Section 1116 of HERA amended section 1319A of the Safety and 
Soundness Act, 12 U.S.C. 4520, to require, in part, that the regulated 
entities establish an Office of Minority and Women Inclusion (OMWI) or 
designate an office responsible for carrying out the responsibilities 
of OMWI. That office is responsible for: All matters relating to 
diversity in the entity's management, employment, and business 
activities; the development and implementation of standards and 
procedures to promote diversity in all business and activities of the 
regulated entity; and the submission of an annual report to FHFA 
detailing the actions taken to promote diversity and inclusion. 
Furthermore, 12 U.S.C. 1833e, and Executive Order 11478, require FHFA 
and the regulated entities to promote equal opportunity in employment 
and contracting.
ii. FHFA's Regulations
    FHFA adopted regulations to implement section 1116 of HERA, 12 
U.S.C. 1833e and Executive Order 11478, and to set forth the minimum 
requirements for the regulated entities' diversity programs and 
reporting requirements. Those regulations, located at 12 CFR part 1207, 
require each regulated entity and the Office of Finance to establish an 
OMWI, or designate another office that would be responsible for 
fulfilling the entity's OMWI responsibilities. Each of these entities 
must implement policies and procedures to ensure, to the maximum extent 
possible, in balance with financially safe and sound business 
practices, the inclusion and utilization of minorities, women, 
individuals with disabilities, and minority-, women-, and disabled-
owned businesses in all business and activities and at all levels of 
the regulated entity and the Office of Finance, including in 
management, employment, procurement, insurance, and all types of 
contracts.\2\ The policies also must encourage the consideration of 
diversity in the nomination or solicitation of nominees for positions 
on boards of directors as well as engagement in recruiting and outreach 
directed at encouraging minorities, women and individuals with 
disabilities to seek or apply for employment with the regulated entity 
or the Office of Finance.\3\
---------------------------------------------------------------------------

    \2\ 12 CFR 1207.21(b).
    \3\ 12 CFR 1207.21(b)(5).
---------------------------------------------------------------------------

    Part 1207 also requires each regulated entity and the Office of 
Finance to submit to the FHFA Director, on or before March 1 of each 
year, a detailed annual report summarizing its activities during the 
reporting year (January 1 through December 31 of the preceding year) to 
comply with the OMWI regulatory requirements.\4\ To that end, each 
regulated entity and the Office of Finance is required to submit as 
part of its annual report the EEO-1 Employer Information Report (Form 
EEO-1 used by the Equal Employment Opportunity

[[Page 25210]]

Commission (EEOC) and the Office of Federal Contract Compliance 
Programs to collect certain demographic information) or a similar 
report.\5\ The Form EEO-1 pertains only to broad occupational 
categories of employees such as executives/senior level officials, 
first/mid-level officials and managers, professionals, technicians, and 
other employee job categories, and those employees' gender, race, and 
ethnicity classifications.\6\
---------------------------------------------------------------------------

    \4\ 12 CFR 1207.22(c) and 1207.23.
    \5\ 12 CFR 1207.23(b)(1).
    \6\ The race and ethnicity categories used on the Form EEO-1 
are: Hispanic or Latino; White (Not Hispanic or Latino); Black or 
African American (Not Hispanic or Latino); Native Hawaiian or Other 
Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or 
Latino); American Indian or Alaska Native (Not Hispanic or Latino); 
Two or More Races (Not Hispanic or Latino).
---------------------------------------------------------------------------

    In addition, part 1207 provides that the FHFA Director has broad 
enforcement authority in that he or she may enforce this regulation and 
standards issued under it in any manner and through any means within 
his or her authority, including through identifying matters requiring 
attention, corrective action orders, directives, or enforcement actions 
under 12 U.S.C. 4513b and 4514.\7\ To that end, the FHFA Director may 
conduct examinations of the activities of a regulated entity or the 
Office of Finance under and in compliance with this part 1207 pursuant 
to 12 U.S.C. 4517.\8\
---------------------------------------------------------------------------

    \7\ 12 CFR 1207.24.
    \8\ Id.
---------------------------------------------------------------------------

C. The Bank System

    The Bank System (System) was created by the Federal Home Loan Bank 
Act of 1932 (Bank Act) to support mortgage lending and related 
community investment. It is currently composed of 12 Banks, Bank member 
financial institutions, and the System's fiscal agent, the Office of 
Finance. The Banks fulfill their statutory mission primarily through 
providing secured loans (advances) to their members.
    The Office of Finance is a joint office of the Banks, the primary 
responsibility of which is to act as their agent in offering, issuing, 
and servicing the consolidated obligations that are issued to fund the 
operations of the Banks.\9\ The Office of Finance also prepares the 
combined financial reports for the System, functions as its fiscal 
agent, and performs certain duties relating to the Financing 
Corporation and Resolution Funding Corporation, respectively.\10\
---------------------------------------------------------------------------

    \9\ 12 CFR 1273.3(a).
    \10\ 12 CFR 1273.3(b)-(d).
---------------------------------------------------------------------------

    The board of directors of the Office of Finance consists of 17 
members; these include the 12 Bank presidents who serve ex officio and 
five independent directors.\11\ The independent directors must be 
United States citizens and not have any material relationship with a 
Bank or the Office of Finance. As a group, the independent directors 
must have substantial experience in financial and accounting matters. 
The Office of Finance's independent directors were initially appointed 
by FHFA. Once the terms of the independent directors expire or the 
positions otherwise become vacant, the succeeding independent directors 
will be elected by majority vote of the Office of Finance's board of 
directors subject to FHFA's review of, and non-objection to, each 
independent director.\12\
---------------------------------------------------------------------------

    \11\ 12 CFR 1273.7(a).
    \12\ 12 CFR 1273.7(d); See 75 FR 23163 (May 3, 2010).
---------------------------------------------------------------------------

    Section 1202 of HERA altered the composition of the Banks' boards 
of directors by amending section 7 of the Bank Act (12 U.S.C. 1427) to 
require the management of each Bank to be vested in a board of 13 
directors, or such other number as the Director determines appropriate. 
In addition, each board must comprise both a majority of member 
directors and at least 40 percent of independent directors.\13\ Both 
member and independent directors are elected by a plurality vote of the 
members. All board members are required to be U.S. citizens.
---------------------------------------------------------------------------

    \13\ Previously, section 7 of the Bank Act required each Bank's 
board of directors to be comprised of 14 directors, 8 of whom were 
elected by members and 6 of whom were appointed by the former 
Federal Housing Finance Board.
---------------------------------------------------------------------------

    Each member director nominee is required to execute a director 
eligibility certification form prescribed by FHFA.\14\ A member 
director is a member of the board of directors of a Bank, who is a 
director or officer of a member institution located in the district in 
which the Bank is located.\15\
---------------------------------------------------------------------------

    \14\ 12 CFR 1261.7(c).
    \15\ 12 U.S.C. 1427(a)(4)(B).
---------------------------------------------------------------------------

    Each independent director nominee is required to execute an 
independent director application form prescribed by FHFA that 
demonstrates the individual is eligible and has the qualifications to 
be an independent director.\16\ An independent director is a member of 
the board of directors of a Bank who is a bona fide resident of the 
district in which the Bank is located.\17\ Each independent director 
who is not a public interest director is required to have demonstrated 
knowledge of, or experience in, financial management, auditing and 
accounting, risk management practices, derivatives, project 
development, organizational management, or such other expertise as the 
Director may prescribe by regulation.\18\ FHFA regulations include the 
law as one of the areas in which an independent director may have 
knowledge of, or experience in, to qualify as an independent 
director.\19\ Before nominating any individual to be an independent 
director, each Bank is required to determine that such knowledge or 
experience of the nominee is commensurate with that needed to oversee a 
financial institution with a size and complexity that is comparable to 
that of the Bank.\20\ At least two of the independent directors are 
required to be public interest directors who shall have more than four 
years of experience in representing consumer or community interests on 
banking services, credit needs, housing, or consumer financial 
protection.\21\
---------------------------------------------------------------------------

    \16\ 12 CFR 1261.7(d).
    \17\ 12 U.S.C. 1427(a)(4)(A).
    \18\ 12 U.S.C. 1427(a)(3)(B)(i).
    \19\ 12 CFR 1261.7(e)(1).
    \20\ 12 CFR 1261.7(e)(1).
    \21\ 12 U.S.C. 1427(a)(3)(B)(ii); 12 CFR 1261.7(e)(2).
---------------------------------------------------------------------------

    FHFA's regulations include specific actions the Banks may take when 
nominating and electing directors as well as limitations on the Banks' 
actions.\22\ For example, each Bank may conduct an annual assessment of 
the skills and experience of the members of its board of directors and 
may determine whether the capabilities of the board would be enhanced 
by the addition of individuals with particular qualifications, such as 
auditing and accounting, derivatives, financial management, 
organizational management, project development, risk management 
practices, or the law.\23\ If the Bank identifies such particular 
qualifications, it will inform the members as part of its announcement 
of elections.\24\
---------------------------------------------------------------------------

    \22\ 12 CFR 1261.9.
    \23\ 12 CFR 1261.9(a).
    \24\ 12 CFR 1261.9(a).
---------------------------------------------------------------------------

    FHFA's regulations also set out the circumstances under which 
support may be provided for the nomination or election of an individual 
to a member or independent directorship.
    Member Directors: A Bank director, officer, attorney, employee, or 
agent acting in his or her personal capacity, may support the 
nomination or election of any individual for a member directorship, 
provided no such individual shall purport to represent the views of the 
Bank in doing so.\25\
---------------------------------------------------------------------------

    \25\ 12 CFR 1261.9(b)(1).
---------------------------------------------------------------------------

    Independent Directors: A Bank director, officer, attorney, 
employee, or agent and the board of directors and Advisory Council (and 
members of the Advisory Council) may support the

[[Page 25211]]

candidacy of any individual nominated by the board of directors for 
election to an independent directorship.\26\
---------------------------------------------------------------------------

    \26\ 12 CFR 1261.9(b)(2).
---------------------------------------------------------------------------

    Beyond these specific allowances for support, a Bank director, 
officer, attorney, employee, or agent is otherwise prohibited, directly 
or indirectly, from supporting or opposing the nomination or election 
of a particular individual for a member or independent director 
vacancy, or from taking any other action to influence the voting with 
respect to any particular individual.\27\
---------------------------------------------------------------------------

    \27\ 12 CFR 1261.9(c).
---------------------------------------------------------------------------

D. Proposed Minority and Women Inclusion Amendments

    On June 25, 2014, FHFA published a proposed rule to amend its 
regulation on Minority and Women Inclusion to revise the existing 
reporting requirements.\28\ Proposed Sec.  1207.23(b)(9)(i) would 
require each Bank and the Office of Finance to include in the contents 
of its annual report data showing for the reporting year by minority 
and gender classification, the number of individuals on the board of 
directors of each Bank and the Office of Finance.\29\ Proposed Sec.  
1207.23(b)(9)(i)(A) would require the Banks and the Office of Finance 
to use data collected through an information collection requesting each 
director's voluntary self-identification of his or her minority and 
gender classification without personally identifiable information.\30\ 
Proposed Sec.  1207.23(b)(9)(i)(B) would require that the Banks and the 
Office of Finance use the same demographic classifications as those on 
the Form EEO-1.\31\ FHFA noted in the Federal Register explanation of 
the proposed rule that the aggregate board diversity data reported to 
FHFA would establish a baseline to analyze future trends, and could be 
used to assess the effectiveness of the strategies developed by the 
Banks and the Office of Finance related to promoting board 
diversity.\32\
---------------------------------------------------------------------------

    \28\ 79 FR 35960-35963 (June 25, 2014).
    \29\ See 79 FR 35963 (June 25, 2014).
    \30\ Id.
    \31\ Id.
    \32\ See 79 FR 35961-35962 (June 25, 2014).
---------------------------------------------------------------------------

    The proposed rule would also add Sec.  1207.23(b)(9)(ii), which 
would require the Banks and the Office of Finance to include a 
description of their outreach activities and strategies related to 
promoting diversity in nominating or soliciting nominees for positions 
on boards of directors.\33\ Finally, proposed Sec.  1207.23(b)(10) 
would require a year-over-year comparison of the data reported in Sec.  
1207.23(b)(9) by the Banks and the Office of Finance.\34\
---------------------------------------------------------------------------

    \33\ See 79 FR 35963 (June 25, 2014).
    \34\ Id.
---------------------------------------------------------------------------

    The proposed amendment to Sec.  1207.22(c) would require the Banks 
and the Office of Finance to include the board demographic data and a 
description of related outreach activities and strategies in the 
contents of the annual report submitted to FHFA beginning with the 
report required on or before March 1, 2015.\35\
---------------------------------------------------------------------------

    \35\ Id.
---------------------------------------------------------------------------

    The 60-day comment period closed on August 25, 2014. FHFA received 
three comment letters in response to the proposed rule. Nine Banks 
(Atlanta, Boston, Chicago, Cincinnati, Des Moines, New York, 
Pittsburgh, Topeka, and Seattle) and the Office of Finance submitted 
consolidated comments in one letter. The Greenlining Institute, a non-
profit organization, and a private citizen also submitted comment 
letters. The comments were thoughtful and discussed matters that were 
carefully considered by FHFA.

II. Final Rule

    FHFA responds to specific concerns below as it explains aspects of 
the rule to which the comments pertain. After considering the comments 
received in response to the proposed rule, FHFA is adopting a final 
rule amending its minority and women inclusion regulations, which 
applies to the Banks and the Office of Finance.

A. Applicability of Amendments

    A private citizen commented that the amendments should apply to the 
Enterprises as well as to the Banks and the Office of Finance. FHFA 
does not include the Enterprises in the final rule. As noted in the 
Federal Register explanation of the proposed rule, FHFA, in its role as 
conservator of Fannie Mae and Freddie Mac, is involved in the selection 
of their board members.\36\ Therefore, FHFA maintains that under 
current circumstances, it is not necessary to consider promulgating 
regulations pertaining to the Enterprises with respect to the 
requirements of the final rule.
---------------------------------------------------------------------------

    \36\ See 79 FR 35961 (June 25, 2014).
---------------------------------------------------------------------------

B. Data Collection

i. Method of Collection
    The nine Banks and the Office of Finance commented that FHFA should 
include the voluntary self-identification request for board diversity 
demographic data in the Independent Director Annual Certification Form 
and the annual Member Director Eligibility Certification Form, which 
they believe would provide a ``simple method'' of collecting this 
information.
    FHFA does not adopt this proposal in the final rule. These forms 
are used solely to collect information to determine whether each 
director meets the statutory and regulatory eligibility 
requirements.\37\ The demographic status of a director or candidate for 
director is not a requirement for eligibility. In addition, completion 
of the annual director certification forms is mandatory, whereas 
submission of minority and gender classification data is voluntary. The 
final rule adopts the proposed requirement that the Banks and the 
Office of Finance collect board demographic information by requesting 
each incumbent director to voluntarily self-identify his or her 
minority and gender classification, without personally identifiable 
information. The inclusion of the request for board diversity 
demographic data in the annual certification forms could imply that the 
information is mandatory and not voluntary. The inclusion of the 
request for board diversity demographic data in the annual director 
certification forms could also raise privacy concerns.
---------------------------------------------------------------------------

    \37\ The Independent Director Annual Certification Form applies 
to each incumbent Bank director, and the Member Director Eligibility 
Certification Form applies to both candidates for and incumbents of 
member directorships.
---------------------------------------------------------------------------

    The Greenlining Institute proposed mandating the use of the Form 
EEO-1 itself to collect the board member demographic information to 
standardize reporting metrics. FHFA does not adopt this proposal in the 
final rule. The Form EEO-1 is a compliance survey tool required to be 
completed by certain employers who are subject to title VII of the 
Civil Rights Act of 1964, as amended, in accordance with the EEOC's 
implementing regulations.\38\ The Form EEO-1 categorizes a company's 
employment data by race and ethnicity, gender and job category. Part 
1207 requires that the Banks and the Office of Finance report 
employment demographic information to FHFA using the Form EEO-1 or 
similar report. The Form EEO-1 does not include a job category for 
board members since they are not employees. Therefore, the final rule 
continues to leave to the discretion of the Banks and the Office of 
Finance the particular method of collection of the data as long as the 
Form EEO-1 diversity categories are used.
---------------------------------------------------------------------------

    \38\ See 29 CFR 1602.7.
---------------------------------------------------------------------------

    The nine Banks and the Office of Finance also commented that it is 
not ``necessary or appropriate'' to follow the instructions of the Form 
EEO-1 with respect to the collection of the board

[[Page 25212]]

demographic information, which allow employers to report observed 
diversity.\39\ The commenters requested that FHFA clarify that there is 
no requirement to report observed diversity in addition to the board 
members' voluntary demographic self-identification. FHFA agrees with 
this comment and reiterates that the Banks and the Office of Finance 
are expected to report aggregate data based only on the board members' 
voluntary demographic self-identification.
---------------------------------------------------------------------------

    \39\ See EEO-1 Instruction Booklet, Appendix, paragraph 4.
---------------------------------------------------------------------------

ii. Diversity Categories
    The proposed rule requires the Banks and the Office of Finance to 
use the ``same classifications as those on Form EEO-1,'' referred to 
here as ``diversity categories,'' for the purpose of reporting minority 
and gender classifications of individuals on the boards of directors of 
the Banks and the Office of Finance. The nine Banks and the Office of 
Finance commented that following the diversity categories of the Form 
EEO-1 for boards of directors is ``neither necessary nor appropriate'' 
and requested that the minority categories as defined in part 1207 be 
used. The commenters propose that the Form EEO-1 diversity categories 
be replaced with the diversity categories found in Sec.  1207.1, which 
defines ``minority'' as ``any Black (or African) American, Native 
American (or American Indian), Hispanic (or Latino) American, or Asian 
American.'' The commenters note that although it is reasonable for FHFA 
to require the Banks and the Office of Finance to report employee 
demographic information using the Form EEO-1 diversity categories to 
avoid duplicating reporting burdens and to ensure that the data 
reported is consistent with similar information reported to any other 
agency or regulator, they do not believe these categories are necessary 
or appropriate for board member demographic information. The commenters 
provide that there is no legal requirement to report board member 
demographics, and further note that the ``[t]he small size of the 
reporting pool and greater visibility of each respondent necessitates 
heightened sensitivity.''
    FHFA does not adopt the request to require the use of the minority 
categories as defined in part 1207. The definition of ``minority'' in 
part 1207 is consistent with that in section 1204(c) of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989, which is 
referenced by section 1319A of the Safety and Soundness Act, as amended 
by HERA.\40\ The Form EEO-1 includes six diversity categories (i.e., 
Hispanic or Latino; Black or African American (not Hispanic or Latino); 
Native Hawaiian or Other Pacific Islander (not Hispanic or Latino); 
Asian (not Hispanic or Latino); American Indian or Alaska Native (not 
Hispanic or Latino); or Two or More Races (not Hispanic or Latino)). 
Part 1207 requires that the regulated entities use the Form EEO-1 to 
report their demographic workforce data. Use of the same minority 
categories to collect board diversity data will provide consistency of 
reporting and enhance the comparability of the Banks' and the Office of 
Finance's board composition to that of their workforces. In addition, 
use of the Form EEO-1's broader diversity categories will provide a 
board member with more choices should he or she choose to self-
identify.
---------------------------------------------------------------------------

    \40\ 12 U.S.C. 4520(b).
---------------------------------------------------------------------------

iii. Collection of Additional Data
    The nine Banks and the Office of Finance proposed that FHFA include 
a category for individuals with disabilities in the board demographic 
self-reporting request. FHFA does not adopt this proposal in the final 
rule. The requirement for the regulated entities to report data related 
to persons with disabilities is limited in part 1207 due to medical 
privacy concerns.\41\ In addition, disability status is not included as 
a category on the Form EEO-1, and therefore, is not reported as part of 
the workforce demographic data. For privacy reasons and for 
comparability of reporting, FHFA does not include a category for 
individuals with disabilities in the final rule requirements related to 
board diversity reporting.
---------------------------------------------------------------------------

    \41\ See 75 FR 81396 (December 28, 2010).
---------------------------------------------------------------------------

    The commenters noted that some Banks have Equal Employment 
Opportunity statements that include diversity categories beyond the 
required protected classes. The commenters also highlighted their 
efforts to recruit, hire, and retain employees within the additional 
diversity categories. To that end, FHFA affirms that the Banks and the 
Office of Finance have the flexibility to collect demographic status 
information beyond the gender and minority categories on the Form EEO-
1, but FHFA does not require the Banks and the Office of Finance to 
collect or report information beyond the requirements of the final 
rule.
    The Greenlining Institute proposed that FHFA collect additional 
information about the board members, including their professional 
backgrounds, ages, and board turnover data (including time served on 
the board). The commenter believes that the additional information will 
better inform FHFA about the composition of the Banks' and the Office 
of Finance's respective boards. FHFA does not adopt this proposal in 
the final rule. Board members are required to meet specific statutory 
and regulatory eligibility requirements, and information related to 
these requirements is collected on the pertinent director certification 
forms. The Banks already report information about their board members' 
professional backgrounds, time served on the board, and ages in their 
annual Form 10-K reports filed with the U.S. Securities and Exchange 
Commission pursuant to section 13 or 15(d) of the Securities and 
Exchange Act of 1934, which are publicly available. The Office of 
Finance provides similar information about its directors in the annual 
Federal Home Loan Bank Combined Financial Report, which also is 
publicly available. As a result, it is not necessary to include in the 
final rule a reporting requirement for these types of data.
    The Greenlining Institute also proposed that FHFA collect 
additional data by use of qualitative inquiries on recruitment 
activities and other information related to board members and 
applicants. FHFA does not adopt this proposal in the final rule. The 
final rule requires the Banks and the Office of Finance to include a 
description of their outreach activities and strategies executed during 
the preceding year to promote diversity in nominating or soliciting 
nominees for positions on their respective boards of directors. Such 
descriptions could include recruiting events. The additional data 
collection could lead to the attribution of personally identifiable 
information due to the small number of board member positions.

C. Outreach Activities

i. Broad View of Diversity
    The nine Banks and the Office of Finance requested that FHFA take a 
broad view of diversity for the purpose of proposed Sec.  
1207.23(b)(9)(ii), which would require reporting ``the outreach 
activities and strategies executed during the preceding year to promote 
diversity in nominating or soliciting nominees for positions on boards 
of directors of the Banks and the Office of Finance.'' The commenters 
proposed that the minority and women inclusion amendments allow a 
regulated entity to define diversity for the purpose of describing 
their outreach activities and strategies. The commenters noted FHFA's 
Federal

[[Page 25213]]

Register explanation of the final rule on the Bank boards of directors 
eligibility and elections, which states that ``diversity among the 
members of each board of directors of the Banks would be beneficial to 
the Banks, and thus [FHFA] encourages the Banks to consider the 
diversity of their boards . . . as it requests nominees for member 
directorships from its members and as it goes through the process of 
nominating candidates for independent directorships.'' \42\ However, 
the eligibility and elections final rule pertaining to the Banks' 
boards of directors does not include any provisions that address 
diversity.
---------------------------------------------------------------------------

    \42\ 74 FR 51453 (October 7, 2009).
---------------------------------------------------------------------------

    FHFA does not include a definition of ``diversity'' in this final 
rule and maintains that the Banks and the Office of Finance have the 
flexibility to conduct their outreach activities and strategies to 
promote board diversity beyond that contemplated by the rule. However, 
FHFA expects the Banks and the Office of Finance to report on their 
outreach activities and strategies that promote minority and women 
inclusion for the purpose of satisfying the reporting requirements of 
Sec.  1207.23(b)(9)(ii). FHFA intends to develop guidance that will 
further elaborate on the agency's expectations related to outreach 
activities and strategies for the Banks' and the Office of Finance's 
boards of directors.
ii. Interplay With Director Nomination and Election Process
    Also related to the outreach reporting requirement, the nine Banks 
and the Office of Finance commented that the rule should acknowledge 
aspects of the director nomination and election process, including the 
geographic limitations, eligibility requirements and nomination 
procedures, and that a Bank director, officer, attorney, employee, or 
agent is restricted by 12 CFR 1261.9 from taking certain actions to 
influence director nominations and elections.
    The nine Banks and the Office of Finance noted that the election 
regulations at Sec.  1261.9(c) prohibit a Bank director, officer, 
attorney, employee or agent from communicating in any manner that he or 
she directly or indirectly supports or opposes the nomination or 
election of a particular individual for a directorship or from taking 
any other action to influence the voting with respect to any particular 
individual. The commenters also noted that the election regulations 
provide exceptions to the prohibitions when the actions taken meet the 
following criteria:
     The actions are part of a skills and experience assessment 
and statement, as permitted by Sec.  1261.9(a);
     The actions taken are in his or her personal capacity, to 
support the nomination or election of any individual for a member 
directorship, provided that he or she does not purport to represent the 
views of the Bank or its board of directors in doing so, as permitted 
by Sec.  1261.9(b)(1); or
    The actions support the candidacy of any individual nominated by 
the board of directors for election to an independent directorship, as 
permitted by Sec.  1261.9(b)(2).
    The commenters expressed concern that the regulatory restrictions 
on communication could limit a Bank's ability to address gender or 
minority identification in the election process, particularly with 
respect to member directorships. The commenters provided several 
examples of general outreach and education efforts to promote diversity 
on their respective boards of directors that they believe are 
consistent with the terms of Sec.  1261.9. The examples included the 
following actions for promoting board diversity:
     Engaging in general outreach to encourage a diverse pool 
of nominations for member directorships and applications for 
independent directorships;
     including a statement about EEO in member director 
nomination, independent director application, and election materials;
     encouraging trade associations to consider diverse 
candidates for member director nominations, or encouraging a Bank's 
Advisory Council to encourage applications from diverse candidates for 
an independent directorship; and
     providing information about Bank directorships and the 
election process through general outreach to professional affinity 
groups to which officers and directors of member institutions may 
belong.
    FHFA agrees that the scenarios provided by the Banks are 
permissible under, and consistent with, the existing election 
regulations at 12 CFR 1261.9.
    In addition, the commenters requested clarification on whether more 
direct actions would be permissible, such as a Bank identifying 
specific individuals as potential nominees and encouraging the 
nomination of an individual for a member directorship.
    Member Directors: With respect to identifying and supporting 
specific individuals for nomination or election, the regulations permit 
a Bank director, officer, attorney, employee or agent, acting in his or 
her personal capacity, to support the nomination or election of any 
individual for a member directorship. The term `` `personal capacity' 
is intended to preclude the use of a director's official title, 
position, or authority associated with the position of Bank director, 
such as through use of Bank stationery, to endorse a candidate.'' \43\ 
While the regulations allow such support, they provide that no Bank 
director, officer, attorney, employee or agent may purport to represent 
the views of the Bank or its board of directors.\44\ Thus, support for 
the nomination or election of individual member directors, including 
considerations of diversity, may be made by Bank directors, officers, 
attorneys, employees or agents acting only in a personal capacity.
---------------------------------------------------------------------------

    \43\ When proposing the predecessor regulation, the Federal 
Housing Finance Board explained the term ``personal capacity'' as 
quoted above. See 63 FR 26536 (May 13, 1998).
    \44\ 12 CFR 1261.9(b)(1).
---------------------------------------------------------------------------

    Independent Directors: Although not addressed by the commenters, 
FHFA notes that nothing in the existing nomination and election 
regulations prohibits board members and others from discussing the 
importance of diversity when nominating, or considering the nomination 
of, individuals for independent directorships. For example, Board 
members may introduce the topic and discuss the role diversity plays in 
the solicitation and nomination processes for independent 
directorships.
    FHFA has also addressed the commenters' concerns in the final rule. 
FHFA acknowledges this ``interplay'' between the outreach requirements 
in the minority and women inclusion regulations and the Bank board of 
directors nomination and election regulations and further clarifies it 
by adding a reference to Sec.  1261.9 in Sec.  1207.23(b)(9)(ii) in the 
final rule to require that the Banks conduct their outreach activities 
and strategies consistent with the restrictions in the director 
nomination and election regulations. Since these restrictions apply 
only to the Banks, FHFA included the phrase ``consistent with 12 CFR 
1261.9'' as a parenthetical after ``Banks'' in Sec.  1207.23(b)(9)(ii), 
and not at the end of that section as proposed by the commenters.

D. Reports

i. Due Date for Initial Data Submission
    FHFA did not receive any comments regarding the proposed rule's 
requirement to submit the demographic board data concurrent with the 
March 1, 2015, minority and women inclusion report. Since publication 
of the final

[[Page 25214]]

rule follows that date, FHFA has extended the timeframe for initially 
submitting the board diversity data and outreach activities and 
strategies executed in order to afford the Banks and the Office of 
Finance a reasonable opportunity from the effective date of the final 
rule to collect and submit this data. Therefore, the final rule amends 
Sec.  1207.22(c) to require the first submission of board demographic 
data and outreach activities and strategies to FHFA no later than 
September 30, 2015, and thereafter with the annual report.
ii. Timeline for Reporting Comparative Data
    The nine Banks and the Office of Finance requested that the 
comparison of board diversity data be voluntary for the first annual 
report following the effective date of the regulation. The commenters 
requested that the first mandatory year-over-year comparison be 
required in the 2015 annual report, which will be filed in March 2016. 
FHFA agrees with these requests and does not expect the Banks and the 
Office of Finance to submit a comparative report until March 2016.
    The Federal Register explanation of the proposed rule stated that 
the initial aggregate demographic data reported would provide a 
baseline to analyze future trends.\45\ The Banks and the Office of 
Finance will be able to use the baseline data submitted by September 
30, 2015, to compare with the data submitted in the March 1, 2016 
report. Although not required, a Bank or the Office of Finance may 
voluntarily submit and compare any historical board demographic data it 
has to date collected and submitted in the report due by September 30, 
2015. FHFA determined that this clarification did not require a change 
to the final rule.
---------------------------------------------------------------------------

    \45\ See 79 FR 35961-35962 (June 25, 2014).
---------------------------------------------------------------------------

iii. Use of Data
    The Greenlining Institute recommended that FHFA make the annual 
minority and women inclusion reports of the Banks and the Office of 
Finance available to the public. The commenter believes that the 
public's confidence in the progress of the respective OMWIs of the 
Banks and the Office of Finance in advancing diversity will be limited 
until the annual reports are made public.
    FHFA does not adopt this recommendation in the final rule. FHFA 
reiterates its position as stated in the Federal Register explanation 
of the final part 1207 regulations:
    FHFA considers the reports and data to be related to examinations 
and examination, operation, or conditions reports. In general, FHFA 
will consider all the information and the data attributed to a 
particular regulated entity to be non-public, subject to the Freedom of 
Information Act Exemption (b)(8) and to the examination privilege. The 
agency does not intend to make attributed information public. However, 
FHFA intends to use the information and data arrayed or aggregated in a 
variety of ways, without attribution to specific institutions, in order 
to identify trends, success or lack of success, or best practices each 
regulated entity can use to assess or improve its own programs. 
Additionally, FHFA may use such unattributed information in various 
formats to inform the public on such trends, success, lack of success 
and best practices among the regulated entities.\46\
---------------------------------------------------------------------------

    \46\ 75 FR 81400 (December 28, 2010).
---------------------------------------------------------------------------

    The commenter also noted that it is standard practice for FHFA, the 
Federal Deposit Insurance Corporation, the National Credit Union 
Administration, the Office of the Comptroller of the Currency, the 
Consumer Financial Protection Bureau, the U.S. Securities and Exchange 
Commission, the Federal Reserve Board of Governors, and the U.S. 
Department of the Treasury to make reports on their respective minority 
and women inclusion activities available to the public. The commenter 
appears to be referring to the agency statutory reporting requirements 
under section 342(e) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 (Dodd-Frank), which apply to most federal 
financial regulatory agencies.\47\ Such reports are required to be 
submitted to Congress and include certain information related to the 
agencies' minority and women inclusion programs.\48\ FHFA also makes 
public its agency annual minority and women inclusion report. However, 
the statutory reporting requirements under section 1319A of the Safety 
and Soundness Act apply only to entities regulated by FHFA.\49\ Since 
there are no comparable reporting requirements for the regulated 
entities of the other financial regulatory agencies, those agencies do 
not receive minority and women inclusion reports from their regulated 
entities. FHFA will consider including aggregated data related to its 
regulated entities in the annual minority and women inclusion report it 
prepares in accordance with section 342(e) of Dodd-Frank.
---------------------------------------------------------------------------

    \47\ Section 342(e) of Public Law 111-203, July 21, 2010, 12 
U.S.C. 5452(e).
    \48\ Id.
    \49\ 12 U.S.C. 4520(d).
---------------------------------------------------------------------------

III. Consideration of Differences Between the Banks and the Enterprises

    Section 1313(f) of the Safety and Soundness Act, as amended by 
section 1201 of HERA, requires the Director, when promulgating 
regulations relating to the Banks, to consider the differences between 
the Banks and the Enterprises with respect to the Banks' cooperative 
ownership structure; mission of providing liquidity to members; 
affordable housing and community development mission; capital 
structure; and joint and several liability. The Director may also 
consider any other differences that are deemed appropriate. In 
preparing this final rule, the Director has considered the differences 
between the Banks and the Enterprises as they relate to the above 
factors and has determined that the rule would not adversely affect any 
of the above factors.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) requires that FHFA 
consider the impact of paperwork and other information collection 
burdens imposed on the public.\50\ Under the PRA and the implementing 
regulations of the Office of Management and Budget (OMB), an agency may 
not collect or sponsor the collection of information, or impose an 
information collection requirement, unless it displays a currently 
valid control number assigned by OMB.\51\ This final rule contains a 
new information collection requirement, which is described below.
---------------------------------------------------------------------------

    \50\ See 44 U.S.C. 3507(a) and (d).
    \51\ See 44 U.S.C. 3512(a); 5 CFR 1320.8(b)(3)(vi).
---------------------------------------------------------------------------

    As required by the PRA, FHFA requested comments on the new 
collection of information in the proposed rule.\52\ The agency received 
no comments on that issue. As is also required by the PRA, FHFA 
submitted an analysis of the new collection of information to OMB for 
review in conjunction with the publication of the proposed rule.\53\ 
OMB assigned to this collection of information control number 2590-
0014, but has not yet approved the collection; however, FHFA expects 
OMB will do so by the effective date of the final rule.
---------------------------------------------------------------------------

    \52\ See 44 U.S.C. 3507(a)(1)(D); 5 CFR 1320.11(a).
    \53\ See 44 U.S.C. 3507(d)(1)(A); 5 CFR 1320.11(b).
---------------------------------------------------------------------------

    Summary: Under Sec.  1207.23(b)(9)(i), each Bank and the Office of 
Finance are required to request annually that each member of its board 
of directors provide, on a voluntary basis, self-identification of his 
or her demographic classification (using the same minority

[[Page 25215]]

and gender classifications as those used on the Form EEO-1), without 
including personally identifiable information. Sections 1207.23(b)(9) 
and 1207.22(c) require that each Bank and the Office of Finance submit 
the baseline board demographic information collected to FHFA no later 
than September 30, 2015, and thereafter the information be included as 
part of the annual reports they are already required to submit under 
existing part 1207.
    Use: FHFA will use the information collected under Sec.  
1207.23(b)(9)(i) to assess the effectiveness of the policies and 
procedures that each of the Banks and the Office of Finance is required 
to implement to promote diversity in all of its business and activities 
``at all levels'' and, specifically, to encourage diversity in the 
nomination and solicitation of nominees for members of its boards of 
directors. FHFA will also use the information to establish a baseline 
to analyze future trends relating to the diversity of the boards of 
directors of the Banks and the Office of Finance.
    Respondents: Respondents will be the approximately 210 individuals 
serving on the boards of directors of the Banks and the Office of 
Finance in any given year.
    Frequency: The information will be collected annually.
    Annual Burden Estimate: FHFA estimates the total annualized hour 
burden for all respondents to the proposed information collection to be 
21 hours. FHFA estimates that an average of 210 board directors will 
provide information annually and that each response will take 
approximately 0.1 hours on average (210 respondents x 0.1 hours per 
response = 21 hours). There will be no annualized cost to the Federal 
government.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the final 
rule under the Regulatory Flexibility Act.
    The General Counsel of FHFA certifies that the final rule is not 
likely to have a significant economic impact on a substantial number of 
small entities because the regulation is applicable only to the Banks 
and the Office of Finance, which are not small entities for purposes of 
the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1207

    Discrimination, Diversity, Equal employment opportunity, Minority 
businesses, Office of Finance, Outreach, Regulated entities.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, and under 
the authority of 12 U.S.C. 4526, FHFA amends part 1207 of title 12 of 
the Code of Federal Regulations as follows:

PART 1207--MINORITY AND WOMEN INCLUSION

0
1. The authority citation for part 1207 continues to read as follows:

    Authority:  12 U.S.C. 4520 and 4526; 12 U.S.C. 1833e; E.O. 
11478.

Subpart C--Minority and Women Inclusion and Diversity at Regulated 
Entities and the Office of Finance

0
2. Amend Sec.  1207.22 by adding a new sentence at the end of paragraph 
(c) to read as follows:


Sec.  1207.22  Regulated entity and Office of Finance reports.

* * * * *
    (c) * * * The data required to be reported by Sec.  1207.23(b)(9) 
shall be submitted no later than September 30, 2015, and thereafter 
included in each annual report.
* * * * *

0
3. Amend Sec.  1207.23 as follows:
0
a. Redesignate paragraphs (b)(9) through (19) as paragraphs (b)(10) 
through (20); and
0
b. Add new paragraph (b)(9) and revise newly redesignated paragraph 
(b)(10) to read as follows:


Sec.  1207.23  Annual reports--format and contents.

* * * * *
    (b) * * *
    (9)(i) Data showing for the reporting year by minority and gender 
classification, the number of individuals on the board of directors of 
each Bank and the Office of Finance--
    (A) Using data collected by each Bank and the Office of Finance 
through an information collection requesting each director's voluntary 
self-identification of his or her minority and gender classification 
without personally identifiable information;
    (B) Using the same classifications as those on the Form EEO-1; and
    (ii) A description of the outreach activities and strategies 
executed during the preceding year to promote diversity in nominating 
or soliciting nominees for positions on boards of directors of the 
Banks (consistent with 12 CFR 1261.9) and the Office of Finance;
    (10) A comparison of the data reported by Fannie Mae and Freddie 
Mac under paragraphs (b)(1) through (8) of this section, and by the 
Banks and the Office of Finance under paragraphs (b)(1) through (9) of 
this section, to such data as reported in the previous year together 
with a narrative analysis;
* * * * *

    Dated: April 28, 2015.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2015-10374 Filed 5-1-15; 8:45 am]
 BILLING CODE 8070-01-P