Community Reinvestment Act; Interagency Questions and Answers Regarding Community Reinvestment; Notice, 69671-69680 [2013-27738]
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Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices
receivership assets has been completed.
To the extent permitted by available
funds and in accordance with law, the
Receiver will be making a final dividend
payment to proven creditors.
Based upon the foregoing, the
Receiver has determined that the
continued existence of the receivership
will serve no useful purpose.
Consequently, notice is given that the
receivership shall be terminated, to be
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the date of this Notice. If any person
wishes to comment concerning the
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Attention: Receivership Oversight,
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No comments concerning the
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considered which are not sent within
this time frame.
Province, China, Suchin Prapaisilp,
Frontenac, Missouri, and Thomas Cy
Wong, St. Louis, Missouri; as group to
acquire voting shares of Superior
Bancshares, Inc., and thereby indirectly
acquire voting shares of Superior Bank,
both in Hazelwood, Missouri.
Office of the Comptroller of the
Currency
Constitution Avenue NW., Washington,
DC 20551.
FDIC: Patience R. Singleton, Senior
Policy Analyst, Supervisory Policy
Branch, Division of Depositor and
Consumer Protection, (202) 898–6958;
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:
[Docket ID OCC–2013–0003]
Background
Board of Governors of the Federal Reserve
System, November 15, 2013.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2013–27786 Filed 11–19–13; 8:45 am]
BILLING CODE 6210–01–P
DEPARTMENT OF THE TREASURY
FEDERAL RESERVE SYSTEM
[Docket No. OP–1456]
FEDERAL DEPOSIT INSURANCE
CORPORATION
Dated at Washington, DC, this 14th day of
November 2013.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
Community Reinvestment Act;
Interagency Questions and Answers
Regarding Community Reinvestment;
Notice
[FR Doc. 2013–27780 Filed 11–19–13; 8:45 am]
AGENCY:
Office of the Comptroller of the
Currency, Treasury (OCC); Board of
Governors of the Federal Reserve
System (Board); Federal Deposit
Insurance Corporation (FDIC).
ACTION: Notice.
BILLING CODE 6714–01–P
FEDERAL RESERVE SYSTEM
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Change in Bank Control Notices;
Acquisitions of Shares of a Bank or
Bank Holding Company
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The OCC, Board, and FDIC
(collectively, the Agencies) are adopting
as final the Interagency Questions and
Answers Regarding Community
Reinvestment that were proposed on
March 18, 2013, to address several
community development issues. In
response to comments received, the
Agencies made minor clarifications to
some of the new and revised questions
and answers that were proposed.
DATES: Effective: November 20, 2013.
FOR FURTHER INFORMATION CONTACT:
OCC: Bobbie K. Kennedy, Bank
Examiner, Compliance Policy Division,
(202) 649–5470; or Margaret Hesse,
Senior 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
SUMMARY:
The notificants listed below have
applied under the Change in Bank
Control Act (12 U.S.C. 1817(j)) and
§ 225.41 of the Board’s Regulation Y (12
CFR 225.41) to acquire shares of a bank
or bank holding company. The factors
that are considered in acting on the
notices are set forth in paragraph 7 of
the Act (12 U.S.C. 1817(j)(7)).
The notices are available for
immediate inspection at the Federal
Reserve Bank indicated. The notices
also will be available for inspection at
the offices of the Board of Governors.
Interested persons may express their
views in writing to the Reserve Bank
indicated for that notice or to the offices
of the Board of Governors. Comments
must be received not later than
December 5, 2013.
A. Federal Reserve Bank of St. Louis
(Yvonne Sparks, Community
Development Officer) P.O. Box 442, St.
Louis, Missouri 63166–2034:
1. Fanyu Meng, Frontenac, Missouri,
Yahong Zhang, Changsha City, Hunan
69671
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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
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 by
the Agencies on March 11, 2010 (2010
Questions and Answers) (75 FR 11642).
On March 18, 2013, the Agencies
published for comment proposed
clarifications that would revise five
questions and answers (Q&A), which
address (i) community development
activities outside an institution’s
assessment area(s), both in the broader
statewide or regional area that includes
the institution’s assessment area(s) and
in nationwide funds; (ii) additional
ways to determine whether recipients of
community services are low- or
moderate-income; and (iii) technical
assistance activities related to the
provision of financial services that
might be provided to community
development organizations.1 The
Agencies also proposed two new Q&As:
One addresses the treatment of
community development lending
performance in determining a large
institution’s lending test rating, and the
other addresses the quantitative
consideration given to a certain type of
community development investment.
Finally, the Agencies proposed to
1 See
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redesignate one Q&A without
substantive change.
Together, the Agencies received
comments from approximately 200
different parties. The commenters
represented financial institutions and
their trade associations, community
development advocates and
organizations, state bank supervisors,
and others. The commenters generally
noted that the proposed changes were a
modest, but beneficial, effort to
modernize the implementation of CRA.
Commenters largely supported the
intent of the Agencies to encourage
more community development activity,
particularly outside large metropolitan
areas that are well served by financial
institutions. Many commenters
expressed concern nonetheless about
potential unintended consequences in
the proposed changes and provided
suggestions for improvement.
Comments on each revised and new
proposed Q&A are discussed in more
detail below.
As discussed below, the Agencies
adopt the five revised and two new
Q&As that were proposed, with minor
clarifications as appropriate, in response
to comments received. The Agencies
also redesignate one Q&A without
substantive change.
The new and revised Q&As that the
Agencies are adopting supplement the
2010 Questions and Answers. The
revised Q&As replace the Q&As of the
same citation designation in the 2010
Questions and Answers. The Agencies
are currently revising examination
procedures to implement this final
guidance to promote consistent
application of the guidance within and
among the Agencies.
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, the standards
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 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 l.26
would be identified as § __.26–1.
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Revisions of 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)
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). In 2001,2 the Agencies
adopted the versions of Q&As § __
.12(h)–6 and § __.12(h)–7 that are found
in the 2010 Questions and Answers to
help assure financial institutions that
community development loans and
services and qualified investments in
the broader statewide or regional area
that includes their assessment area(s)
would receive consideration in their
CRA evaluations. However, the
Agencies had become aware that both
financial institutions and community
organizations needed additional
guidance on how, and to what extent,
the Agencies considered community
development activities in the broader
statewide or regional area when
conducting CRA evaluations.
Accordingly, the Agencies proposed to
revise Q&As § __.12(h)–6 and § __.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.
Q&A § __.12(h)–6 addressed how
examiners would consider community
development activities in the broader
statewide or regional area that includes
an institution’s assessment area(s) and
differentiated between whether or not
the institution’s assessment area(s)
might receive a direct benefit from the
activity. The Agencies believed that
Q&A § __.12(h)–6 needed additional
clarification with regard to community
development activities that benefit
geographies or individuals located
somewhere within a broader statewide
or regional area that includes the
institution’s assessment area(s) but that
will not benefit the institution’s
assessment area(s). Q&A § __.12(h)–6
had stated that examiners would
consider such activities if an institution,
considering its performance context,
2 See 66 FR 36620 (July 12, 2001). Q&As
§ __.12(h)–6 and § __.12(h)–7 were previously
designated as § __.12(i) & § __563e.12(h)–5 and
§ __.12(i) & 563e.12(h)–6. See 66 FR 36626–27.
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had adequately addressed the
community development needs of its
assessment area(s).
First, the Agencies proposed to revise
Q&A § __.12(h)–6 by removing the
phrase ‘‘adequately addressed the
community development needs of its
assessment area(s).’’ In its place, the
Agencies proposed 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.’’
The Agencies received about 143
comments addressing proposed revised
Q&A § __.12(h)–6. Commenters were
generally supportive of the Agencies’
effort to clarify when and how
community development activities in
the broader statewide or regional area
that includes an institution’s assessment
area(s) would receive consideration.
However, commenters provided mixed
views on whether the proposed
clarifications would provide an
incentive for financial institutions to
increase their community development
activities or expand their opportunities
to engage in community development
activities. For example, one commenter
stated that institutions’ community
development activities would depend
more on whether opportunities exist
within a given state or region and the
expertise of the institutions than on the
Agencies’ proposed revisions to the
Q&A. On the other hand, another
commenter stated that the proposed
revisions might encourage institutions
to expand their community
development activities.
The vast majority of the commenters
stated that the proposed language, ‘‘may
not be conducted in lieu of, or to the
detriment of, activities in the
institution’s assessment area(s),’’ would
generate more uncertainty than the
existing language, ‘‘adequately
addressed the community development
needs of its assessment area(s).’’ Several
commenters stated that the proposed
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language would be an impossible
standard to meet because any activity
performed outside an institution’s
assessment area(s) would be ‘‘in lieu of’’
activities in the assessment area(s).
Some commenters advocated that the
Agencies should adopt a flexible
approach, while other commenters
suggested bright-line standards, such as
an institution having received a certain
rating on its previous CRA evaluation.
One commenter suggested that the
existing phrase, ‘‘adequately addressed
the community development needs of
its assessment area(s),’’ would be
preferable to the proposed language if
the Agencies also defined the term
‘‘adequately.’’ A few commenters also
contended that, because all CRA-related
activities must be performed in a safe
and sound manner, the proposed
language stating that ‘‘such community
development activities must be
performed in a safe and sound manner
consistent with the institution’s
capacity to oversee those activities’’ was
unnecessary. Further, some commenters
maintained that the proposed reference
to the institution’s ability to oversee
those activities appeared to impose a
duty upon the investing financial
institution to oversee independent
community development programs.
The Agencies are modifying the
proposed language in Q&A § __.12(h)–6
to address some of these comments.
First, the Agencies note that all CRArelated activities must be performed in
a safe and sound manner.3 Therefore,
the Agencies agree that express
reference to such activities being
performed in a safe and sound manner
in Q&A § __.12(h)–6 may not be
necessary. Accordingly, the Agencies
are not adopting the proposed statement
that such ‘‘community development
activities must be performed in a safe
and sound manner consistent with the
institution’s capacity to oversee those
activities . . .’’ However, the Agencies
emphasize the continued expectation
that an institution’s activities be
consistent with safe and sound
operation of the institution.
Second, among other purposes, the
Agencies’ proposed clarifications to
Q&A § __.12(h)–6 were intended to
encourage more community
development investments in
communities that are underserved by
financial institutions. However, as noted
above, commenters expressed concerns
that the proposed phrase ‘‘in lieu of, or
to the detriment of’’ may establish an
unclear standard and be more restrictive
than the current language in Q&A
§ __.12(h)–6. Thus, in response to
3 See
12 CFR __.21(d).
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comments, the Agencies are not
adopting that proposed standard. In
addition, the Agencies are not adopting
the proposed statement that ‘‘[w]hen
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.’’
Instead, the Agencies are clarifying
that a financial institution should be
‘‘responsive to community development
needs and opportunities in its
assessment area(s).’’ Specifically, Q&A
§ __.12(h)–6 states, with respect to
community development activities that
are conducted in the broader statewide
or regional area that includes the
institution’s assessment area(s), that
‘‘examiners will consider these
activities even if they will not benefit
the institution’s assessment area(s), as
long as the institution has been
responsive to community development
needs and opportunities in its
assessment area(s).’’ The Agencies
believe this revision makes clear the
importance of being responsive to
community development needs, a
concept reflected throughout the CRA
regulations.4 The Agencies further
believe this approach provides a flexible
standard for determining how financial
institutions will receive consideration
for community development activities
in the broader statewide or regional area
that includes the institution’s
assessment area(s), but that will not
directly benefit their assessment area(s).
Q&A § __.12(h)–6 no longer expressly
references an institution’s performance
context or the factors considered as part
of an institution’s performance context,
such as community development needs
and opportunities, the institution’s
business capacity and focus, and its past
performance. The Agencies reiterate that
the context in which an institution’s
CRA performance occurs is important.
Performance context is always
considered when evaluating an
institution’s record of helping to meet
credit needs under CRA.5 The needs
and opportunities of an assessment area
may vary depending on the area and the
financial institution. It is important,
therefore, for an institution to be aware
of the community development needs
and opportunities in its assessment
4 See 12 CFR __.23, __.24, __.25, __.26, and __.27,
as well as Appendix A, which describes ratings.
5 12 CFR __.21(b).
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69673
area(s) and to determine whether, and to
what extent, the institution has the
capacity and expertise to address such
needs and opportunities.
The Agencies proposed to clarify Q&A
§ __.12(h)–7, which addresses what is
meant by a ‘‘regional area,’’ by
modifying the current description of the
term ‘‘regional area’’ to provide greater
clarity about what constitutes a regional
area. Proposed Q&A § __.12(h)–7 stated
that ‘‘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 ‘midAtlantic states.’ Regions are often
defined by the geographic scope and
specific purpose of a community
development organization or initiative.’’
The Agencies also proposed to
remove the discussion in the existing
answer about how, with larger regional
areas, benefit to an institution’s
assessment area(s) may be diffused and,
thus, less responsive to assessment area
needs. The Agencies proposed this
deletion because this portion of Q&A
§ l.12(h)–7 was often misinterpreted
and would no longer be necessary in
light of revised Q&A § l.12(h)–6.
With regard to proposed Q&A
§ l.12(h)–7, most of the 16 commenters
that addressed the proposed Q&A stated
that the proposed definition of ‘‘regional
area’’ was sufficiently clear and
appropriately flexible. Several
commenters suggested that Q&A
§ l.12(h)–7 be further revised to
specifically state that the illustrative
geographic alternatives provided in the
text of Q&A § l.12(h)–7 do not
represent a definitive list so as to avoid
the misinterpretation that the listed
alternatives are the only allowable
options. In addition, three commenters
suggested adding ‘‘Indian reservation’’
or ‘‘Indian area’’ as an example of a
regional area. Commenters also
generally supported removing the
portion of the Q&A that discussed the
potential for a diffused potential benefit
to an institution’s assessment area(s). A
number of commenters asserted that
financial institutions needed more
certainty that community development
activities in the broader statewide or
regional area that includes an
institution’s assessment area(s) will
receive consideration and believed that
removal of that language may help to
clarify that institutions will, in fact,
receive such consideration.
The Agencies are adopting Q&A
§ l.12(h)–7 as proposed. The Agencies
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note that the two examples, ‘‘the tricounty area’’ or ‘‘mid-Atlantic states,’’
provided in the Q&A are not intended
to be an exhaustive list of examples of
regional areas or to otherwise serve as
a limitation. The intent of the revised
Q&A is to provide greater flexibility,
and the Agencies believe the language
‘‘such as’’ is sufficiently clear in
conveying that the examples provided
of regional areas are illustrative. The
Agencies also note that a broader
statewide or regional area that includes
an Indian reservation or Indian country
and a financial institution’s assessment
area(s) would enable the institution to
receive consideration for community
development activities in which it
engages in the Indian reservation or
Indian area. Thus, the Agencies do not
believe it is necessary to add further
examples, such as ‘‘Indian reservation’’
or ‘‘Indian area.’’
II. Investments in Nationwide Funds
In 2009, the Agencies adopted Q&A
§ l.23(a)–2 to address investments in
nationwide funds. See 12 CFR l.23(a);
74 FR 498 (Jan. 6, 2009) (2009 Q&A).
The Agencies noted that the investment
test, at 12 CFR l.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). The
2009 Q&A also stated that, at an
institution’s option, it could provide
information that a fund has explicitly
earmarked its projects or investments to
certain investors.
The Agencies proposed to revise Q&A
§ l.23(a)–2 to address concerns that
side letters and earmarking of projects is
burdensome on institutions and funds
and have seemingly become mandatory.
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The proposed revised Q&A no longer
expressly included the option for
institutions to provide written
documentation from the fund
demonstrating earmarking, side letters,
or pro-rata allocations.
Proposed revised Q&A § l.23(a)–2
continued to recognize that nationwide
funds are important sources of
investments in low- and moderateincome 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 revised Q&A
stressed 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.
Further, the proposed revised Q&A
stated 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
their assessment area(s). The proposed
revised Q&A further noted that 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 revised Q&A
advised 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 proposed
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revised Q&A signaled that the
performance context of a particular
institution is very important when
determining whether investments in
nationwide funds are appropriate.
The Agencies received approximately
53 comments addressing these proposed
revisions. Commenters were generally
supportive of the Agencies’ intent to
clarify when banks would receive CRA
consideration for investment in
nationwide funds. The Agencies are
adopting proposed revised Q&A
§ l.23(a)–2 with several revisions.
Similar to the comments received on
proposed revised Q&A § l.12(h)–6,
many commenters suggested that the
proposed language ‘‘in lieu of, or to the
detriment of’’ in Q&A § l.23(a)–2 could
exacerbate the confusion over whether
institutions would receive CRA
consideration for investments in
nationwide funds. These commenters
questioned whether its inclusion would
actually enhance the ability of
institutions to deliver products on a
nationwide basis to address community
needs. Commenters repeated many of
the same concerns expressed with
regard to proposed revised Q&A
§ l.12(h)–6, and urged the Agencies not
to adopt the phrase ‘‘in lieu of, or to the
detriment of,’’ or any reference to
‘‘safety and soundness’’ and ‘‘ability to
oversee.’’ Consistent with the revisions
in final Q&A § l.12(h)–6, the Agencies
are not adopting the proposed language
in Q&A § l.23(a)–2 stating that
‘‘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)’’ and are
eliminating the reference to
performance context. As explained
above in the discussion of final Q&A
§ l.12(h)–6, CRA-related activities must
always be consistent with the safe and
sound operation of the institution and
the Agencies always consider
performance context when evaluating
an institution’s performance. The
Agencies will consider investments in
nationwide funds that benefit an
institution’s assessment area(s). Further,
examiners will consider investments in
nationwide funds that benefit the
broader statewide or regional area that
includes the institution’s assessment
area(s) consistent with the treatment
detailed in Q&A § l.12(h)–6.
Commenters generally agreed that
earmarking and side letters may be
burdensome and provided examples of
costly accounting and documentation
expenses to demonstrate such burden.
At the same time, some commenters
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stated concerns that the eliminated
reference to optional side letters and
earmarking could be interpreted as no
longer permitting such documentation.
These commenters asserted that such an
interpretation could create a greater
obstacle to making these investments
and urged the Agencies to allow
institutions to retain the option to
earmark funds for specific assessment
areas and submit documentation, such
as side letters, during a CRA evaluation.
The final Q&A § l.23(a)–2 does not
contain language regarding written
documentation about earmarking and
side letters. Nevertheless, the Agencies
do not intend the absence of such
language to mean that side letters and
earmarking are no longer permissible,
but a side letter or earmarking
documentation is not required in order
to obtain CRA consideration.
Commenters also generally expressed
support for nationwide funds as
important sources for investments in
low- and moderate-income and
underserved communities. A few
commenters, however, were not in favor
of encouraging nationwide fund
investments that may not benefit the
institution’s assessment area(s). These
commenters expressed concern that
investments in nationwide funds could
divert an institution’s attention away
from the needs within a financial
institution’s assessment area(s) (i.e.,
their local communities). The Agencies
continue to believe that investments in
nationwide funds are important sources
of investments in low- and moderateincome and underserved communities
throughout the country and can be an
efficient vehicle for institutions to make
qualified investments that help meet
community development needs.
Accordingly, the Agencies are adopting
this language, as proposed, in Q&A
§ l.23(a)–2. In response to comments,
however, the Agencies emphasize that
an institution’s performance within its
assessment area(s) will remain the
primary focus of CRA examinations and
that investments in nationwide funds
should not substitute for direct
investments in important local
community development initiatives.
The Agencies specifically requested
comment on when nationwide funds
would be appropriate investments for
regional or smaller institutions. A few
commenters suggested that nationwide
investments are never appropriate for
small or regional institutions. In
contrast, other commenters supporting
nationwide fund investments noted that
investments in such funds are
appropriate under a number of
circumstances, including when there is
no Community Development Financial
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Institution (CDFI) presence in an area or
when the institution can demonstrate
that the fund has a history of activity in
its market and the intention to address
geographies or individuals located
within its assessment area(s). One
commenter noted that nationwide funds
provide distinct advantages to all
institutions, regardless of size, because
the large footprint of these funds
protects investors against risk associated
with over-concentration of investment
in a particular market. The Agencies are
adopting the language in Q&A
§ l.23(a)–2 that addresses regional or
smaller institutions’ investments in
nationwide funds. The final Q&A
continues to stress that, prior to
investing in a nationwide fund,
institutions should review the fund’s
investment record to determine if it is
generally consistent with the
institution’s investment goals and the
geographic focus in the CRA
regulations.
The Agencies had also proposed
language stating that nationwide funds
may be suitable investments
opportunities, particularly for large
institutions with a nationwide branch
footprint or for other financial
institutions with a nationwide business
focus, including wholesale and limited
purpose institutions. Financial
institutions with a nationwide branch
footprint, for example, typically have
assessment areas in many states and,
thus, investments in nationwide funds
are likely to benefit such an institution’s
assessment areas or the broader
statewide or regional area that includes
its assessment areas.
In the final Q&A, the Agencies have
removed the reference to ‘‘wholesale or
limited purpose institutions’’ because it
is redundant. The Agencies have also
moved the reference to financial
institutions with a nationwide business
focus from this sentence. Financial
institutions with a nationwide business
focus are now specifically addressed in
the same context as other financial
institutions that do not have a
nationwide branch footprint. Like other
financial institutions, if a financial
institution with a nationwide business
focus does not have a nationwide
branch footprint, it needs to consider
the geographic benefit requirements in
the CRA regulations. However,
investments in nationwide funds may
still be suitable investments for such
institutions. Consistent with the
treatment detailed in Q&A § l.12(h)–6,
nationwide funds may provide these
institutions with additional
opportunities to serve the broader
statewide or regional areas that include
their assessment area(s).
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Last, the Agencies requested comment
about how investments in nationwide
funds should be considered in an
investing institution’s CRA evaluation.
In response to this question,
commenters provided a number of
recommendations related to whether
there should be a special category for
investment in nationwide funds; how to
attribute investment in nationwide
funds to particular states or assessment
areas; and how to eliminate the risk of
double counting investments in funds
by financial institutions. With respect to
whether investments in nationwide
funds should be considered separately
from other qualified investments,
commenters were divided. Most
commenters opposed the creation of a
separate category because doing so
would further complicate CRA
evaluations. A few favored the idea,
however, and one recommended that
the Agencies create a distinct ‘‘national
needs’’ category in order to provide an
incentive for financial institutions to
make credit available in underserved
areas. The Agencies have considered
these comments and have decided not
to create a separate category for
investments in nationwide funds to
allow financial institutions to use
nationwide funds to provide for
community development that reflects
their particular business models and
community development strategies.
Few commenters addressed how to
attribute funds to an institution’s
various assessment areas, but those that
did comment suggested that
consideration for investments in
nationwide funds should be treated
similarly to investments in regional
funds. That is, the fund’s prospectus
should be used to determine the areas
that benefit from the investment.
Similarly, few commenters offered
suggestions as to how regulators should
avoid double counting when
considering nationwide investments.
Those that did comment expressed little
concern about double counting as long
as the full dollar amount of the
investment, and no more, is taken into
consideration. The Agencies’
examination procedures are being
revised to clarify how investments in
nationwide funds will be considered.
The examination procedures would
allow institutions to demonstrate
whether such investments have an
impact on one or more assessment areas.
They will also make it clear when such
investments will be considered at the
assessment area, state, or institution
level to avoid double counting.
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III. Community Services Targeted to
Low- or Moderate-Income Individuals
Existing Q&A § l.12(g)(2)–1 provided
guidance on ways that financial
institutions may determine that
community services are being provided
to low- or moderate-income individuals.
The Agencies proposed to add the
following examples of situations in
which institutions would be deemed to
provide community services to low- or
moderate-income people: (1) To
students or their families from a school
at which the majority of students qualify
for free or reduced-price meals, and (2)
to individuals who receive or are
eligible to receive Medicaid.
Several community group and
banking organization commenters
expressed support for the proposed
examples. In addition, some
commenters suggested that the Agencies
add additional proxies as indicators of
serving low- or moderate-income
individuals. Common suggestions
included individuals qualifying for
assistance under U.S. Department of
Housing and Urban Development’s
section 8, 202, 515, and 811 programs or
the U.S. Department of Agriculture’s
Supplemental Nutrition Assistance
Program.
The Agencies are finalizing Q&A
§ l.12(g)(2)–1 with one revision.
Revised Q&A § l.12(g)(2)–1 includes
the free and reduced-priced meals and
Medicaid proxies for determining
whether individuals are low- or
moderate-income as proposed. In
response to comments, the final Q&A
also provides that institutions may
determine that community services are
targeted to low- or moderate-income
persons if the community service is
provided to recipients of government
assistance programs that have income
qualifications equivalent to, or stricter
than, the definitions of low- and
moderate-income defined by the CRA
regulations. Examples include U.S.
Department of Housing and Urban
Development’s section 8, 202, 515, and
811 programs and U.S. Department of
Agriculture’s section 514, 516, and
Supplemental Nutrition Assistance
programs.
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IV. Service on the Board of Directors of
an Organization Engaged in Community
Development Activities
Existing Q&A § l.12(i)–3 stated that
providing technical assistance to
organizations that engage in community
development activities (as defined by
the regulation) is considered a
community development service. The
Agencies proposed to modify Q&A
§ l.12(i)–3 to clarify that service on the
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board of directors of a community
development organization is an explicit
example of a technical assistance
activity that could be provided to
community development organizations
that would receive consideration as a
community development service.
Most commenters supported the
proposed revision. A few commenters
raised concerns that mere attendance at
a board of directors meeting was not
sufficient to merit CRA consideration.
These commenters wanted to ensure
that CRA consideration would be
provided only in recognition of active
participation.
In addition, several commenters
suggested expanding the list of technical
assistance activities to include other
professional skills offered by institution
personnel, such as information
technology support, legal assistance,
and human resources, because these
technical assistance activities are crucial
to the provision of financial services by
community development organizations.
The Agencies are adopting the
revision to Q&A § l.12(i)–3 addressing
service on the board of directors of a
community development organization
as proposed. Although the Q&A does
not expressly address commenters’
concerns that financial institutions’
representatives actively participate
when serving on community
development organizations’ boards of
directors, the Agencies note that all
community development services are
expected to provide genuine benefit to
financial institutions’ communities for
consideration in a CRA evaluation.
Further, the Agencies consider the
responsiveness of community
development services. Consideration of
the qualitative aspects of performance
recognizes that community
development activities sometimes
require special expertise or effort on the
part of the institution or provide a
benefit to the community that would not
otherwise be made available.
In addition, in response to
commenters’ suggestions, the Agencies
are adding the following example of a
technical assistance activity that might
be provided to community development
organizations: providing services
reflecting financial institution
employees’ areas of expertise at the
institution, such as human resources,
information technology, and legal
services.
New Questions and Answers
I. Qualified Investments
The Agencies proposed a new Q&A
§ l.12(t)–9 to address the quantitative
consideration that should be provided
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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 became aware of situations in
which 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. In these cases,
the organization uses only the income
(or a portion thereof) from the
investment to support its 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 or loans as
qualified investments or community
development loans, particularly when
compared to investments or loans to
other organizations that use the entire
loan or invested amount to support their
community development purpose.
Accordingly, the Agencies proposed a
new Q&A § l.12(t)–9 to provide
guidance about the amount of
quantitative consideration that should
be allowed for these types of
investments or loans.
The majority of commenters
addressing Q&A § l.12(t)–9 were
supportive of the Agencies’ intent to
clarify the treatment of qualified
investments that involve funds that are
not invested in instruments related to
community development. However,
some commenters were concerned that
the proposed Q&A would result in less
consideration for qualified investments.
Several commenters were concerned
that the proposed Q&A could negatively
affect community development
organizations’ liquidity and harm the
ability of CDFIs or other investment
funds to operate in a safe and sound
manner. These commenters suggested
revisions that would make clear that the
treatment described in the Q&A would
not apply to investments in or loans to
CDFIs or other organizations with a
primary purpose of community
development. A number of commenters
believed that, absent changes, the
proposed guidance would have a
negative impact on institutions’
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investments in community development
activities.
In addition, many of the commenters
who addressed the proposed Q&A
suggested that the proposed Q&A
should not apply when funds are not
immediately deployed toward
community development activities, but
temporarily invested in non-community
development instruments until the
funds can be used for their intended
community development purpose.
Commenters asserted that financial
institutions should not be penalized for
investments that are temporarily placed
in safe instruments for a period until the
community development organization is
able to use the funds for their intended
purpose.
In response to comments, the
Agencies are adopting Q&A § l.12(t)–9
with additional clarification. The final
Q&A states that examiners will provide
consideration for investments or loans
when the community development
organization invests the funds in
instruments without a community
development purpose solely as a means
of securing capital for leveraging
purposes, securing additional financing,
or in order to generate a return with
minimal risk until funds can be
deployed toward the originally intended
community development activity. The
organization must express a bona fide
intent to deploy the funds from
investments and loans in a manner that
primarily serves a community
development purpose in order for the
institution to receive consideration
under the applicable test.
II. Community Development Lending in
the Lending Test Applicable to Large
Institutions
The Agencies proposed new Q&A
§ l.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.
Proposed new Q&A § l.22(b)(4)–2
addressed the concern that insufficient
weight was given to community
development loans in CRA evaluations.
The proposed Q&A was also intended to
promote consistent treatment of
community development lending among
the Agencies.
The proposed new Q&A clarified that
an institution’s record of making
community development loans may
have a positive, neutral, or negative
impact on an institution’s lending test
rating. The Agencies consider an
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
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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.
Some financial industry commenters
viewed the proposed Q&A as a mandate
to undertake community development
lending in all assessment areas. Most
financial industry commenters raised
concerns regarding how bankers and
examiners will determine ‘‘how much is
enough’’ community development
lending, particularly in light of the
complexity involved in evaluating
community development activities
within an institution’s performance
context. Several community
organization commenters opposed the
language indicating that strong
performance in community
development lending may offset weak
performance in retail lending and,
conversely, strong performance in retail
lending may offset weak performance in
community development lending.
The Agencies are adopting Q&A
§ l.22(b)(4)–2 as proposed. The
Agencies emphasize that the Q&A does
not mandate that a financial institution
must engage in community
development lending in every
assessment area. Examiners will
consider the absence or lack of
community development lending in a
particular assessment area within the
context of the environment in which the
institution operated during the
evaluation period, including economic,
demographic, and competitive factors,
the institution’s financial capacity or
constraints, and community needs and
opportunities to make community
development loans in the institution’s
assessment area(s). The Agencies also
note that the language in the Q&A,
which indicates that strong performance
in community development lending
may offset weak performance in retail
lending and, conversely, strong
performance in retail lending may offset
weak performance in community
development lending, repeats regulatory
language found at Appendix A to Part
l—Ratings and is further explained in
Q&A Appendix A to Part l–1.
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Redesignation of Existing Question and
Answer Without Substantive Change
Activities With Minority- and WomenOwned Financial Institutions and LowIncome Credit Unions
In 2009, the Agencies adopted Q&A
§ l.12(g)–4 to address CRA
consideration of majority-owned
institutions’ activities with minorityand women-owned financial
institutions and low-income credit
unions (MWLI). See 74 FR 498 (Jan. 6,
2009). In 2010, the Agencies revised
their regulations to implement section
804(b) of the CRA, which addresses the
same topic. See 12 CFR l.21(f); 75 FR
61035 (Oct. 4, 2010). As a result, the
Agencies proposed to redesignate
existing Q&A § l.12(g)–4 as Q&A
§ l.21(f)–1 so that the Q&A would
correlate to the appropriate regulatory
provision that addresses the same topic.
The Agencies did not propose any
substantive changes to the existing
Q&A.
Several community group and
nonprofit organization commenters
urged the Agencies to provide the same
geographically beneficial treatment for
CDFIs as is provided to MWLIs. The
CRA statute provides that activities
undertaken with MWLIs need not
benefit the majority-owned financial
institution’s assessment area(s); but
must help meet the credit needs of the
local communities in which the MWLI
is chartered. Because the CRA statute
does not extend this special status to
CDFIs, the Agencies do not believe it is
appropriate to extend the special status
granted to MWLIs to CDFIs or other
community development entities
through guidance.
Accordingly, the Agencies are
adopting redesignated Q&A § l.21(f)–1
as proposed.
The text of the final new, revised, and
redesignated Interagency Questions and
Answers follows:
*
*
*
*
*
§ l.12(g)(2)–1: Community
development includes community
services targeted to low- or moderateincome 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 lowor moderate-income persons include,
but are not limited to:
• 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
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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 lowand 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 community service is provided
to recipients of government assistance
programs that have income
qualifications equivalent to, or stricter
than, the definitions of low- and
moderate-income as defined by the CRA
Regulations. Examples include U.S.
Department of Housing and Urban
Development’s section 8, 202, 515, and
811 programs or U.S. Department of
Agriculture’s section 514, 516, and
Supplemental Nutrition Assistance
programs.
*
*
*
*
*
§ l.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
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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), as long
as the institution has been responsive to
community development needs and
opportunities in its assessment area(s).
§ l.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 ‘‘midAtlantic states.’’ Regions are often
defined by the geographic scope and
specific purpose of a community
development organization or initiative.
*
*
*
*
*
§ l.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 lowand 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
banking services under 12 CFR l.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
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institution’s retail banking services
under 12 CFR l.24(d);
• Providing technical assistance on
financial matters to nonprofit, tribal, or
government organizations serving lowand 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, homebuyer 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 are related to the
provision of financial services and that
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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;
• Assisting in fund raising, including
soliciting or arranging investments; and
• Providing services reflecting
financial institution employees’ areas of
expertise at the institution, such as
human resources, information
technology, and legal services.
*
*
*
*
*
§ l.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.
Examiners will, however, provide
consideration for such instruments
when the organization invests solely as
a means of securing capital for
leveraging purposes, securing additional
financing, or in order to generate a
return with minimal risk until funds can
be deployed toward the originally
intended community development
activity. The organization must express
a bona fide intent to deploy the funds
from investments and loans in a manner
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that primarily serves a community
development purpose in order for the
institution to receive consideration
under the applicable test.
*
*
*
*
*
§ l.21(f)–1: The CRA provides that, in
assessing the CRA performance of
nonminority- 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
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69679
• Providing free or discounted data
processing systems, or office facilities to
aid an MWLI in serving its customers.
*
*
*
*
*
§ l.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.
*
*
*
*
*
§ l.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
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Federal Register / Vol. 78, No. 224 / Wednesday, November 20, 2013 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
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 in 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. Other financial
institutions, including those with a
nationwide business focus, 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.
Examiners will consider investments in
nationwide funds that benefit the
institution’s assessment area(s).
Examiners will also consider
investments in nationwide funds that
benefit the broader statewide or regional
area that includes the institution’s
assessment area(s) consistent with the
treatment detailed in Q&A § l.12(h)–6.
End of text of the final new and
revised Interagency Questions and
Answers.
Dated: November 14, 2013.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System, November 12, 2013.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 13th day of
November, 2013.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
FEDERAL RESERVE SYSTEM
Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR part
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
The applications listed below, as well
as other related filings required by the
Board, are available for immediate
inspection at the Federal Reserve Bank
indicated. The applications will also be
available for inspection at the offices of
the Board of Governors. Interested
persons may express their views in
writing on the standards enumerated in
the BHC Act (12 U.S.C. 1842(c)). If the
proposal also involves the acquisition of
a nonbanking company, the review also
includes whether the acquisition of the
nonbanking company complies with the
standards in section 4 of the BHC Act
(12 U.S.C. 1843). Unless otherwise
noted, nonbanking activities will be
conducted throughout the United States.
Unless otherwise noted, comments
regarding each of these applications
must be received at the Reserve Bank
indicated or the offices of the Board of
Governors not later than December 16,
2013.
A. Federal Reserve Bank of St. Louis
(Yvonne Sparks, Community
Development Officer) P.O. Box 442, St.
Louis, Missouri 63166–2034:
1. Old National Bancorp, Evansville,
Indiana; to merge with Tower Financial
Corporation, and thereby indirectly
acquire Tower Bank and Trust
Company, both in Fort Wayne, Indiana.
B. Federal Reserve Bank of Dallas (E.
Ann Worthy, Vice President) 2200
North Pearl Street, Dallas, Texas 75201–
2272:
1. Hill Country Bancshares, Inc.,
Llano, Texas; to become a bank holding
company by acquiring 100 percent of
the voting shares of Llano National
Bank, Llano, Texas.
Board of Governors of the Federal Reserve
System, November 15, 2013.
Margaret McCloskey Shanks,
Deputy Secretary of the Board.
[FR Doc. 2013–27738 Filed 11–19–13; 8:45 am]
[FR Doc. 2013–27787 Filed 11–19–13; 8:45 am]
BILLING CODE 6210–01–P; 4810–33–P; 6714–01–P
BILLING CODE 6210–01–P
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DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Disease Control and
Prevention
[60Day–14–0923]
Proposed Data Collections Submitted
for Public Comment and
Recommendations
In compliance with the requirement
of Section 3506(c)(2)(A) of the
Paperwork Reduction Act of 1995 for
opportunity for public comment on
proposed data collection projects, the
Centers for Disease Control and
Prevention (CDC) will publish periodic
summaries of proposed projects. To
request more information on the
proposed projects or to obtain a copy of
the data collection plans and
instruments, call 404–639–7570 or send
comments to CDC LeRoy Richardson,
1600 Clifton Road, MS D–74, Atlanta,
GA 30333 or send an email to omb@
cdc.gov.
Comments are invited on: (a) Whether
the proposed collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information shall have
practical utility; (b) the accuracy of the
agency’s estimate of the burden of the
proposed collection of information; (c)
ways to enhance the quality, utility, and
clarity of the information to be
collected; and (d) ways to minimize the
burden of the collection of information
on respondents, including through the
use of automated collection techniques
or other forms of information
technology. Written comments should
be received within 60 days of this
notice.
Proposed Project
Evaluation of the National Tobacco
Prevention and Control Public
Education Campaign (OMB No. 0920–
0923, exp. 4/30/2014)—Revision—
National Center for Chronic Disease
Prevention and Health Promotion
(NCCDPHP), Centers for Disease Control
and Prevention (CDC).
Background and Brief Description
The Centers for Disease Control and
Prevention (CDC) requests a two-year
Office of Management and Budget
(OMB) approval to conduct a Web-based
longitudinal study of smokers and nonsmokers in the U.S. This study will be
fielded for purposes of evaluating the
CDC’s National Tobacco Prevention and
Control Public Education Campaign
(The Campaign) and monitoring its
longer term impact. We will conduct 5
survey waves of data collection among
E:\FR\FM\20NON1.SGM
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]]>Agencies
[Federal Register Volume 78, Number 224 (Wednesday, November 20, 2013)]
[Notices]
[Pages 69671-69680]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27738]
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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 Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC).
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The OCC, Board, and FDIC (collectively, the Agencies) are
adopting as final the Interagency Questions and Answers Regarding
Community Reinvestment that were proposed on March 18, 2013, to address
several community development issues. In response to comments received,
the Agencies made minor clarifications to some of the new and revised
questions and answers that were proposed.
DATES: Effective: November 20, 2013.
FOR FURTHER INFORMATION CONTACT: OCC: Bobbie K. Kennedy, Bank Examiner,
Compliance Policy Division, (202) 649-5470; or Margaret Hesse, Senior
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: Patience R. Singleton, Senior Policy Analyst, Supervisory
Policy Branch, Division of Depositor and Consumer Protection, (202)
898-6958; 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 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 by the Agencies on
March 11, 2010 (2010 Questions and Answers) (75 FR 11642).
On March 18, 2013, the Agencies published for comment proposed
clarifications that would revise five questions and answers (Q&A),
which address (i) community development activities outside an
institution's assessment area(s), both in the broader statewide or
regional area that includes the institution's assessment area(s) and in
nationwide funds; (ii) additional ways to determine whether recipients
of community services are low- or moderate-income; and (iii) technical
assistance activities related to the provision of financial services
that might be provided to community development organizations.\1\ The
Agencies also proposed two new Q&As: One addresses the treatment of
community development lending performance in determining a large
institution's lending test rating, and the other addresses the
quantitative consideration given to a certain type of community
development investment. Finally, the Agencies proposed to
[[Page 69672]]
redesignate one Q&A without substantive change.
---------------------------------------------------------------------------
\1\ See 78 FR 16765 (Mar. 18, 2013).
---------------------------------------------------------------------------
Together, the Agencies received comments from approximately 200
different parties. The commenters represented financial institutions
and their trade associations, community development advocates and
organizations, state bank supervisors, and others. The commenters
generally noted that the proposed changes were a modest, but
beneficial, effort to modernize the implementation of CRA. Commenters
largely supported the intent of the Agencies to encourage more
community development activity, particularly outside large metropolitan
areas that are well served by financial institutions. Many commenters
expressed concern nonetheless about potential unintended consequences
in the proposed changes and provided suggestions for improvement.
Comments on each revised and new proposed Q&A are discussed in more
detail below.
As discussed below, the Agencies adopt the five revised and two new
Q&As that were proposed, with minor clarifications as appropriate, in
response to comments received. The Agencies also redesignate one Q&A
without substantive change.
The new and revised Q&As that the Agencies are adopting supplement
the 2010 Questions and Answers. The revised Q&As replace the Q&As of
the same citation designation in the 2010 Questions and Answers. The
Agencies are currently revising examination procedures to implement
this final guidance to promote consistent application of the guidance
within and among the Agencies.
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, the standards 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 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.
Revisions of 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)
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). In 2001,\2\ the
Agencies adopted the versions of Q&As Sec. ----.12(h)-6 and Sec. --
--.12(h)-7 that are found in the 2010 Questions and Answers to help
assure financial institutions that community development loans and
services and qualified investments in the broader statewide or regional
area that includes their assessment area(s) would receive consideration
in their CRA evaluations. However, the Agencies had become aware that
both financial institutions and community organizations needed
additional guidance on how, and to what extent, the Agencies considered
community development activities in the broader statewide or regional
area when conducting CRA evaluations. Accordingly, the Agencies
proposed 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.
---------------------------------------------------------------------------
\2\ See 66 FR 36620 (July 12, 2001). Q&As Sec. ----.12(h)-6 and
Sec. ----.12(h)-7 were previously designated as Sec. ----.12(i) &
Sec. ----563e.12(h)-5 and Sec. ----.12(i) & 563e.12(h)-6. See 66
FR 36626-27.
---------------------------------------------------------------------------
Q&A Sec. ----.12(h)-6 addressed how examiners would consider
community development activities in the broader statewide or regional
area that includes an institution's assessment area(s) and
differentiated between whether or not the institution's assessment
area(s) might receive a direct benefit from the activity. The Agencies
believed that Q&A Sec. ----.12(h)-6 needed additional clarification
with regard to community development activities that benefit
geographies or individuals located somewhere within a broader statewide
or regional area that includes the institution's assessment area(s) but
that will not benefit the institution's assessment area(s). Q&A Sec.
----.12(h)-6 had stated that examiners would consider such activities
if an institution, considering its performance context, had adequately
addressed the community development needs of its assessment area(s).
First, the Agencies proposed to revise Q&A Sec. ----.12(h)-6 by
removing the phrase ``adequately addressed the community development
needs of its assessment area(s).'' In its place, the Agencies proposed
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.''
The Agencies received about 143 comments addressing proposed
revised Q&A Sec. ----.12(h)-6. Commenters were generally supportive of
the Agencies' effort to clarify when and how community development
activities in the broader statewide or regional area that includes an
institution's assessment area(s) would receive consideration. However,
commenters provided mixed views on whether the proposed clarifications
would provide an incentive for financial institutions to increase their
community development activities or expand their opportunities to
engage in community development activities. For example, one commenter
stated that institutions' community development activities would depend
more on whether opportunities exist within a given state or region and
the expertise of the institutions than on the Agencies' proposed
revisions to the Q&A. On the other hand, another commenter stated that
the proposed revisions might encourage institutions to expand their
community development activities.
The vast majority of the commenters stated that the proposed
language, ``may not be conducted in lieu of, or to the detriment of,
activities in the institution's assessment area(s),'' would generate
more uncertainty than the existing language, ``adequately addressed the
community development needs of its assessment area(s).'' Several
commenters stated that the proposed
[[Page 69673]]
language would be an impossible standard to meet because any activity
performed outside an institution's assessment area(s) would be ``in
lieu of'' activities in the assessment area(s). Some commenters
advocated that the Agencies should adopt a flexible approach, while
other commenters suggested bright-line standards, such as an
institution having received a certain rating on its previous CRA
evaluation. One commenter suggested that the existing phrase,
``adequately addressed the community development needs of its
assessment area(s),'' would be preferable to the proposed language if
the Agencies also defined the term ``adequately.'' A few commenters
also contended that, because all CRA-related activities must be
performed in a safe and sound manner, the proposed language stating
that ``such community development activities must be performed in a
safe and sound manner consistent with the institution's capacity to
oversee those activities'' was unnecessary. Further, some commenters
maintained that the proposed reference to the institution's ability to
oversee those activities appeared to impose a duty upon the investing
financial institution to oversee independent community development
programs.
The Agencies are modifying the proposed language in Q&A Sec. --
--.12(h)-6 to address some of these comments. First, the Agencies note
that all CRA-related activities must be performed in a safe and sound
manner.\3\ Therefore, the Agencies agree that express reference to such
activities being performed in a safe and sound manner in Q&A Sec. --
--.12(h)-6 may not be necessary. Accordingly, the Agencies are not
adopting the proposed statement that such ``community development
activities must be performed in a safe and sound manner consistent with
the institution's capacity to oversee those activities . . .'' However,
the Agencies emphasize the continued expectation that an institution's
activities be consistent with safe and sound operation of the
institution.
---------------------------------------------------------------------------
\3\ See 12 CFR ----.21(d).
---------------------------------------------------------------------------
Second, among other purposes, the Agencies' proposed clarifications
to Q&A Sec. ----.12(h)-6 were intended to encourage more community
development investments in communities that are underserved by
financial institutions. However, as noted above, commenters expressed
concerns that the proposed phrase ``in lieu of, or to the detriment
of'' may establish an unclear standard and be more restrictive than the
current language in Q&A Sec. ----.12(h)-6. Thus, in response to
comments, the Agencies are not adopting that proposed standard. In
addition, the Agencies are not adopting the proposed statement that
``[w]hen 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.''
Instead, the Agencies are clarifying that a financial institution
should be ``responsive to community development needs and opportunities
in its assessment area(s).'' Specifically, Q&A Sec. ----.12(h)-6
states, with respect to community development activities that are
conducted in the broader statewide or regional area that includes the
institution's assessment area(s), that ``examiners will consider these
activities even if they will not benefit the institution's assessment
area(s), as long as the institution has been responsive to community
development needs and opportunities in its assessment area(s).'' The
Agencies believe this revision makes clear the importance of being
responsive to community development needs, a concept reflected
throughout the CRA regulations.\4\ The Agencies further believe this
approach provides a flexible standard for determining how financial
institutions will receive consideration for community development
activities in the broader statewide or regional area that includes the
institution's assessment area(s), but that will not directly benefit
their assessment area(s).
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\4\ See 12 CFR ----.23, ----.24, ----.25, ----.26, and ----.27,
as well as Appendix A, which describes ratings.
---------------------------------------------------------------------------
Q&A Sec. ----.12(h)-6 no longer expressly references an
institution's performance context or the factors considered as part of
an institution's performance context, such as community development
needs and opportunities, the institution's business capacity and focus,
and its past performance. The Agencies reiterate that the context in
which an institution's CRA performance occurs is important. Performance
context is always considered when evaluating an institution's record of
helping to meet credit needs under CRA.\5\ The needs and opportunities
of an assessment area may vary depending on the area and the financial
institution. It is important, therefore, for an institution to be aware
of the community development needs and opportunities in its assessment
area(s) and to determine whether, and to what extent, the institution
has the capacity and expertise to address such needs and opportunities.
---------------------------------------------------------------------------
\5\ 12 CFR ----.21(b).
---------------------------------------------------------------------------
The Agencies proposed to clarify Q&A Sec. ----.12(h)-7, which
addresses what is meant by a ``regional area,'' by modifying the
current description of the term ``regional area'' to provide greater
clarity about what constitutes a regional area. Proposed Q&A Sec. --
--.12(h)-7 stated that ``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 also proposed to remove the discussion in the existing
answer about how, with larger regional areas, benefit to an
institution's assessment area(s) may be diffused and, thus, less
responsive to assessment area needs. The Agencies proposed this
deletion because this portion of Q&A Sec. --.12(h)-7 was often
misinterpreted and would no longer be necessary in light of revised Q&A
Sec. --.12(h)-6.
With regard to proposed Q&A Sec. --.12(h)-7, most of the 16
commenters that addressed the proposed Q&A stated that the proposed
definition of ``regional area'' was sufficiently clear and
appropriately flexible. Several commenters suggested that Q&A Sec.
--.12(h)-7 be further revised to specifically state that the
illustrative geographic alternatives provided in the text of Q&A Sec.
--.12(h)-7 do not represent a definitive list so as to avoid the
misinterpretation that the listed alternatives are the only allowable
options. In addition, three commenters suggested adding ``Indian
reservation'' or ``Indian area'' as an example of a regional area.
Commenters also generally supported removing the portion of the Q&A
that discussed the potential for a diffused potential benefit to an
institution's assessment area(s). A number of commenters asserted that
financial institutions needed more certainty that community development
activities in the broader statewide or regional area that includes an
institution's assessment area(s) will receive consideration and
believed that removal of that language may help to clarify that
institutions will, in fact, receive such consideration.
The Agencies are adopting Q&A Sec. --.12(h)-7 as proposed. The
Agencies
[[Page 69674]]
note that the two examples, ``the tri-county area'' or ``mid-Atlantic
states,'' provided in the Q&A are not intended to be an exhaustive list
of examples of regional areas or to otherwise serve as a limitation.
The intent of the revised Q&A is to provide greater flexibility, and
the Agencies believe the language ``such as'' is sufficiently clear in
conveying that the examples provided of regional areas are
illustrative. The Agencies also note that a broader statewide or
regional area that includes an Indian reservation or Indian country and
a financial institution's assessment area(s) would enable the
institution to receive consideration for community development
activities in which it engages in the Indian reservation or Indian
area. Thus, the Agencies do not believe it is necessary to add further
examples, such as ``Indian reservation'' or ``Indian area.''
II. Investments in Nationwide Funds
In 2009, the Agencies adopted Q&A Sec. --.23(a)-2 to address
investments in nationwide funds. See 12 CFR --.23(a); 74 FR 498 (Jan.
6, 2009) (2009 Q&A). The Agencies 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). The 2009 Q&A also stated that, at an
institution's option, it could provide information that a fund has
explicitly earmarked its projects or investments to certain investors.
The Agencies proposed to revise Q&A Sec. --.23(a)-2 to address
concerns that side letters and earmarking of projects is burdensome on
institutions and funds and have seemingly become mandatory. The
proposed revised Q&A no longer expressly included the option for
institutions to provide written documentation from the fund
demonstrating earmarking, side letters, or pro-rata allocations.
Proposed revised Q&A Sec. --.23(a)-2 continued to recognize that
nationwide funds are important sources of investments in 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 revised Q&A stressed 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.
Further, the proposed revised Q&A stated 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 their assessment
area(s). The proposed revised Q&A further noted that 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 revised Q&A advised 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 proposed revised Q&A signaled that the performance context of
a particular institution is very important when determining whether
investments in nationwide funds are appropriate.
The Agencies received approximately 53 comments addressing these
proposed revisions. Commenters were generally supportive of the
Agencies' intent to clarify when banks would receive CRA consideration
for investment in nationwide funds. The Agencies are adopting proposed
revised Q&A Sec. --.23(a)-2 with several revisions.
Similar to the comments received on proposed revised Q&A Sec.
--.12(h)-6, many commenters suggested that the proposed language ``in
lieu of, or to the detriment of'' in Q&A Sec. --.23(a)-2 could
exacerbate the confusion over whether institutions would receive CRA
consideration for investments in nationwide funds. These commenters
questioned whether its inclusion would actually enhance the ability of
institutions to deliver products on a nationwide basis to address
community needs. Commenters repeated many of the same concerns
expressed with regard to proposed revised Q&A Sec. --.12(h)-6, and
urged the Agencies not to adopt the phrase ``in lieu of, or to the
detriment of,'' or any reference to ``safety and soundness'' and
``ability to oversee.'' Consistent with the revisions in final Q&A
Sec. --.12(h)-6, the Agencies are not adopting the proposed language
in Q&A Sec. --.23(a)-2 stating that ``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)'' and are eliminating the reference to
performance context. As explained above in the discussion of final Q&A
Sec. --.12(h)-6, CRA-related activities must always be consistent with
the safe and sound operation of the institution and the Agencies always
consider performance context when evaluating an institution's
performance. The Agencies will consider investments in nationwide funds
that benefit an institution's assessment area(s). Further, examiners
will consider investments in nationwide funds that benefit the broader
statewide or regional area that includes the institution's assessment
area(s) consistent with the treatment detailed in Q&A Sec. --.12(h)-6.
Commenters generally agreed that earmarking and side letters may be
burdensome and provided examples of costly accounting and documentation
expenses to demonstrate such burden. At the same time, some commenters
[[Page 69675]]
stated concerns that the eliminated reference to optional side letters
and earmarking could be interpreted as no longer permitting such
documentation. These commenters asserted that such an interpretation
could create a greater obstacle to making these investments and urged
the Agencies to allow institutions to retain the option to earmark
funds for specific assessment areas and submit documentation, such as
side letters, during a CRA evaluation. The final Q&A Sec. --.23(a)-2
does not contain language regarding written documentation about
earmarking and side letters. Nevertheless, the Agencies do not intend
the absence of such language to mean that side letters and earmarking
are no longer permissible, but a side letter or earmarking
documentation is not required in order to obtain CRA consideration.
Commenters also generally expressed support for nationwide funds as
important sources for investments in low- and moderate-income and
underserved communities. A few commenters, however, were not in favor
of encouraging nationwide fund investments that may not benefit the
institution's assessment area(s). These commenters expressed concern
that investments in nationwide funds could divert an institution's
attention away from the needs within a financial institution's
assessment area(s) (i.e., their local communities). The Agencies
continue to believe that investments in nationwide funds are important
sources of investments in low- and moderate-income and underserved
communities throughout the country and can be an efficient vehicle for
institutions to make qualified investments that help meet community
development needs. Accordingly, the Agencies are adopting this
language, as proposed, in Q&A Sec. --.23(a)-2. In response to
comments, however, the Agencies emphasize that an institution's
performance within its assessment area(s) will remain the primary focus
of CRA examinations and that investments in nationwide funds should not
substitute for direct investments in important local community
development initiatives.
The Agencies specifically requested comment on when nationwide
funds would be appropriate investments for regional or smaller
institutions. A few commenters suggested that nationwide investments
are never appropriate for small or regional institutions. In contrast,
other commenters supporting nationwide fund investments noted that
investments in such funds are appropriate under a number of
circumstances, including when there is no Community Development
Financial Institution (CDFI) presence in an area or when the
institution can demonstrate that the fund has a history of activity in
its market and the intention to address geographies or individuals
located within its assessment area(s). One commenter noted that
nationwide funds provide distinct advantages to all institutions,
regardless of size, because the large footprint of these funds protects
investors against risk associated with over-concentration of investment
in a particular market. The Agencies are adopting the language in Q&A
Sec. --.23(a)-2 that addresses regional or smaller institutions'
investments in nationwide funds. The final Q&A continues to stress
that, prior to investing in a nationwide fund, institutions should
review the fund's investment record to determine if it is generally
consistent with the institution's investment goals and the geographic
focus in the CRA regulations.
The Agencies had also proposed language stating that nationwide
funds may be suitable investments opportunities, particularly for large
institutions with a nationwide branch footprint or for other financial
institutions with a nationwide business focus, including wholesale and
limited purpose institutions. Financial institutions with a nationwide
branch footprint, for example, typically have assessment areas in many
states and, thus, investments in nationwide funds are likely to benefit
such an institution's assessment areas or the broader statewide or
regional area that includes its assessment areas.
In the final Q&A, the Agencies have removed the reference to
``wholesale or limited purpose institutions'' because it is redundant.
The Agencies have also moved the reference to financial institutions
with a nationwide business focus from this sentence. Financial
institutions with a nationwide business focus are now specifically
addressed in the same context as other financial institutions that do
not have a nationwide branch footprint. Like other financial
institutions, if a financial institution with a nationwide business
focus does not have a nationwide branch footprint, it needs to consider
the geographic benefit requirements in the CRA regulations. However,
investments in nationwide funds may still be suitable investments for
such institutions. Consistent with the treatment detailed in Q&A Sec.
--.12(h)-6, nationwide funds may provide these institutions with
additional opportunities to serve the broader statewide or regional
areas that include their assessment area(s).
Last, the Agencies requested comment about how investments in
nationwide funds should be considered in an investing institution's CRA
evaluation. In response to this question, commenters provided a number
of recommendations related to whether there should be a special
category for investment in nationwide funds; how to attribute
investment in nationwide funds to particular states or assessment
areas; and how to eliminate the risk of double counting investments in
funds by financial institutions. With respect to whether investments in
nationwide funds should be considered separately from other qualified
investments, commenters were divided. Most commenters opposed the
creation of a separate category because doing so would further
complicate CRA evaluations. A few favored the idea, however, and one
recommended that the Agencies create a distinct ``national needs''
category in order to provide an incentive for financial institutions to
make credit available in underserved areas. The Agencies have
considered these comments and have decided not to create a separate
category for investments in nationwide funds to allow financial
institutions to use nationwide funds to provide for community
development that reflects their particular business models and
community development strategies.
Few commenters addressed how to attribute funds to an institution's
various assessment areas, but those that did comment suggested that
consideration for investments in nationwide funds should be treated
similarly to investments in regional funds. That is, the fund's
prospectus should be used to determine the areas that benefit from the
investment. Similarly, few commenters offered suggestions as to how
regulators should avoid double counting when considering nationwide
investments. Those that did comment expressed little concern about
double counting as long as the full dollar amount of the investment,
and no more, is taken into consideration. The Agencies' examination
procedures are being revised to clarify how investments in nationwide
funds will be considered. The examination procedures would allow
institutions to demonstrate whether such investments have an impact on
one or more assessment areas. They will also make it clear when such
investments will be considered at the assessment area, state, or
institution level to avoid double counting.
[[Page 69676]]
III. Community Services Targeted to Low- or Moderate-Income Individuals
Existing Q&A Sec. --.12(g)(2)-1 provided guidance on ways that
financial institutions may determine that community services are being
provided to low- or moderate-income individuals. The Agencies proposed
to add the following examples of situations in which institutions would
be deemed to provide community services to low- or moderate-income
people: (1) To students or their families from a school at which the
majority of students qualify for free or reduced-price meals, and (2)
to individuals who receive or are eligible to receive Medicaid.
Several community group and banking organization commenters
expressed support for the proposed examples. In addition, some
commenters suggested that the Agencies add additional proxies as
indicators of serving low- or moderate-income individuals. Common
suggestions included individuals qualifying for assistance under U.S.
Department of Housing and Urban Development's section 8, 202, 515, and
811 programs or the U.S. Department of Agriculture's Supplemental
Nutrition Assistance Program.
The Agencies are finalizing Q&A Sec. --.12(g)(2)-1 with one
revision. Revised Q&A Sec. --.12(g)(2)-1 includes the free and
reduced-priced meals and Medicaid proxies for determining whether
individuals are low- or moderate-income as proposed. In response to
comments, the final Q&A also provides that institutions may determine
that community services are targeted to low- or moderate-income persons
if the community service is provided to recipients of government
assistance programs that have income qualifications equivalent to, or
stricter than, the definitions of low- and moderate-income defined by
the CRA regulations. Examples include U.S. Department of Housing and
Urban Development's section 8, 202, 515, and 811 programs and U.S.
Department of Agriculture's section 514, 516, and Supplemental
Nutrition Assistance programs.
IV. Service on the Board of Directors of an Organization Engaged in
Community Development Activities
Existing Q&A Sec. --.12(i)-3 stated that providing technical
assistance to organizations that engage in community development
activities (as defined by the regulation) is considered a community
development service. The Agencies proposed to modify Q&A Sec.
--.12(i)-3 to clarify that service on the board of directors of a
community development organization is an explicit example of a
technical assistance activity that could be provided to community
development organizations that would receive consideration as a
community development service.
Most commenters supported the proposed revision. A few commenters
raised concerns that mere attendance at a board of directors meeting
was not sufficient to merit CRA consideration. These commenters wanted
to ensure that CRA consideration would be provided only in recognition
of active participation.
In addition, several commenters suggested expanding the list of
technical assistance activities to include other professional skills
offered by institution personnel, such as information technology
support, legal assistance, and human resources, because these technical
assistance activities are crucial to the provision of financial
services by community development organizations.
The Agencies are adopting the revision to Q&A Sec. --.12(i)-3
addressing service on the board of directors of a community development
organization as proposed. Although the Q&A does not expressly address
commenters' concerns that financial institutions' representatives
actively participate when serving on community development
organizations' boards of directors, the Agencies note that all
community development services are expected to provide genuine benefit
to financial institutions' communities for consideration in a CRA
evaluation. Further, the Agencies consider the responsiveness of
community development services. Consideration of the qualitative
aspects of performance recognizes that community development activities
sometimes require special expertise or effort on the part of the
institution or provide a benefit to the community that would not
otherwise be made available.
In addition, in response to commenters' suggestions, the Agencies
are adding the following example of a technical assistance activity
that might be provided to community development organizations:
providing services reflecting financial institution employees' areas of
expertise at the institution, such as human resources, information
technology, and legal services.
New Questions and Answers
I. Qualified Investments
The Agencies proposed 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 became aware
of situations in which 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. In these cases, the organization uses
only the income (or a portion thereof) from the investment to support
its 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 or loans as qualified investments or
community development loans, particularly when compared to investments
or loans to other organizations that use the entire loan or invested
amount to support their community development purpose. Accordingly, the
Agencies proposed a new Q&A Sec. --.12(t)-9 to provide guidance about
the amount of quantitative consideration that should be allowed for
these types of investments or loans.
The majority of commenters addressing Q&A Sec. --.12(t)-9 were
supportive of the Agencies' intent to clarify the treatment of
qualified investments that involve funds that are not invested in
instruments related to community development. However, some commenters
were concerned that the proposed Q&A would result in less consideration
for qualified investments. Several commenters were concerned that the
proposed Q&A could negatively affect community development
organizations' liquidity and harm the ability of CDFIs or other
investment funds to operate in a safe and sound manner. These
commenters suggested revisions that would make clear that the treatment
described in the Q&A would not apply to investments in or loans to
CDFIs or other organizations with a primary purpose of community
development. A number of commenters believed that, absent changes, the
proposed guidance would have a negative impact on institutions'
[[Page 69677]]
investments in community development activities.
In addition, many of the commenters who addressed the proposed Q&A
suggested that the proposed Q&A should not apply when funds are not
immediately deployed toward community development activities, but
temporarily invested in non-community development instruments until the
funds can be used for their intended community development purpose.
Commenters asserted that financial institutions should not be penalized
for investments that are temporarily placed in safe instruments for a
period until the community development organization is able to use the
funds for their intended purpose.
In response to comments, the Agencies are adopting Q&A Sec.
--.12(t)-9 with additional clarification. The final Q&A states that
examiners will provide consideration for investments or loans when the
community development organization invests the funds in instruments
without a community development purpose solely as a means of securing
capital for leveraging purposes, securing additional financing, or in
order to generate a return with minimal risk until funds can be
deployed toward the originally intended community development activity.
The organization must express a bona fide intent to deploy the funds
from investments and loans in a manner that primarily serves a
community development purpose in order for the institution to receive
consideration under the applicable test.
II. Community Development Lending in the Lending Test Applicable to
Large Institutions
The Agencies proposed 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. Proposed new Q&A
Sec. --.22(b)(4)-2 addressed the concern that insufficient weight was
given to community development loans in CRA evaluations. The proposed
Q&A was also intended to promote consistent treatment of community
development lending among the Agencies.
The proposed new Q&A clarified that an institution's record of
making community development loans may have a positive, neutral, or
negative impact on an institution's lending test rating. The Agencies
consider an 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.
Some financial industry commenters viewed the proposed Q&A as a
mandate to undertake community development lending in all assessment
areas. Most financial industry commenters raised concerns regarding how
bankers and examiners will determine ``how much is enough'' community
development lending, particularly in light of the complexity involved
in evaluating community development activities within an institution's
performance context. Several community organization commenters opposed
the language indicating that strong performance in community
development lending may offset weak performance in retail lending and,
conversely, strong performance in retail lending may offset weak
performance in community development lending.
The Agencies are adopting Q&A Sec. --.22(b)(4)-2 as proposed. The
Agencies emphasize that the Q&A does not mandate that a financial
institution must engage in community development lending in every
assessment area. Examiners will consider the absence or lack of
community development lending in a particular assessment area within
the context of the environment in which the institution operated during
the evaluation period, including economic, demographic, and competitive
factors, the institution's financial capacity or constraints, and
community needs and opportunities to make community development loans
in the institution's assessment area(s). The Agencies also note that
the language in the Q&A, which indicates that strong performance in
community development lending may offset weak performance in retail
lending and, conversely, strong performance in retail lending may
offset weak performance in community development lending, repeats
regulatory language found at Appendix A to Part ----Ratings and is
further explained in Q&A Appendix A to Part ---1.
Redesignation of Existing Question and Answer Without Substantive
Change
Activities With Minority- and Women-Owned Financial Institutions and
Low-Income Credit Unions
In 2009, the Agencies adopted Q&A Sec. --.12(g)-4 to address CRA
consideration of majority-owned institutions' activities with minority-
and women-owned financial institutions and low-income credit unions
(MWLI). See 74 FR 498 (Jan. 6, 2009). In 2010, the Agencies revised
their regulations to implement section 804(b) of the CRA, which
addresses the same topic. See 12 CFR --.21(f); 75 FR 61035 (Oct. 4,
2010). As a result, the Agencies proposed to redesignate existing Q&A
Sec. --.12(g)-4 as Q&A Sec. --.21(f)-1 so that the Q&A would
correlate to the appropriate regulatory provision that addresses the
same topic. The Agencies did not propose any substantive changes to the
existing Q&A.
Several community group and nonprofit organization commenters urged
the Agencies to provide the same geographically beneficial treatment
for CDFIs as is provided to MWLIs. The CRA statute provides that
activities undertaken with MWLIs need not benefit the majority-owned
financial institution's assessment area(s); but must help meet the
credit needs of the local communities in which the MWLI is chartered.
Because the CRA statute does not extend this special status to CDFIs,
the Agencies do not believe it is appropriate to extend the special
status granted to MWLIs to CDFIs or other community development
entities through guidance.
Accordingly, the Agencies are adopting redesignated Q&A Sec.
--.21(f)-1 as proposed.
The text of the final new, revised, and redesignated Interagency
Questions and Answers 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, but are not limited to:
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
[[Page 69678]]
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 community service is provided to recipients of
government assistance programs that have income qualifications
equivalent to, or stricter than, the definitions of low- and moderate-
income as defined by the CRA Regulations. Examples include U.S.
Department of Housing and Urban Development's section 8, 202, 515, and
811 programs or U.S. Department of Agriculture's section 514, 516, and
Supplemental Nutrition Assistance programs.
* * * * *
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), as long as the
institution has been responsive to community development needs and
opportunities in its assessment area(s).
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.
* * * * *
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 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 are related to the
provision of financial services and that
[[Page 69679]]
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;
Assisting in fund raising, including soliciting or
arranging investments; and
Providing services reflecting financial institution
employees' areas of expertise at the institution, such as human
resources, information technology, and legal services.
* * * * *
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. Examiners will, however, provide consideration for such
instruments when the organization invests solely as a means of securing
capital for leveraging purposes, securing additional financing, or in
order to generate a return with minimal risk until funds can be
deployed toward the originally intended community development activity.
The organization must express a bona fide intent to deploy the funds
from investments and loans in a manner that primarily serves a
community development purpose in order for the institution to receive
consideration under the applicable test.
* * * * *
Sec. --.21(f)-1: The CRA provides that, in assessing the CRA
performance of nonminority- 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.
* * * * *
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.
* * * * *
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
[[Page 69680]]
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 in 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. Other
financial institutions, including those with a nationwide business
focus, 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. Examiners will consider
investments in nationwide funds that benefit the institution's
assessment area(s). Examiners will also consider investments in
nationwide funds that benefit the broader statewide or regional area
that includes the institution's assessment area(s) consistent with the
treatment detailed in Q&A Sec. --.12(h)-6.
End of text of the final new and revised Interagency Questions and
Answers.
Dated: November 14, 2013.
Thomas J. Curry,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, November 12, 2013.
Robert deV. Frierson,
Secretary of the Board.
Dated at Washington, DC, this 13th day of November, 2013.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2013-27738 Filed 11-19-13; 8:45 am]
BILLING CODE 6210-01-P; 4810-33-P; 6714-01-P
