Community Reinvestment Act; Interagency Questions and Answers Regarding Community Reinvestment; Notice, 16765-16775 [2013-06075]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 52 (Monday, March 18, 2013)]
[Notices]
[Pages 16765-16775]
From the Federal Register Online via the Government Printing 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: regs.comments@occ.treas.gov.
     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: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     FederaleRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: regs.comments@federalreserve.gov. 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 https://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: https://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 
comments@fdic.gov.
     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

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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., https://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