Emergency Capital Investment Program-Restrictions on Executive Compensation, Share Buybacks, and Dividends, 13449-13459 [2021-04900]
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
delay effective dates when the agency,
for good cause, finds that the
requirement is impracticable,
unnecessary, or contrary to the public
interest (5 U.S.C. 553(b)(B) and (d)(3)).
There is good cause to waive both of
these requirements here as they are
impracticable. A delay in the effective
date of the final rule, titled
‘‘Streamlined Launch and Reentry
License Requirements,’’ is necessary for
the President’s appointees and
designees to have adequate time to
review the rule before it takes effect, and
neither the notice and comment process
nor the delayed effective date could be
implemented in time to allow for this
review.
Issued in Washington, DC, under the
authority in 49 U.S.C. 106(f) and 51 U.S.C.
Chapter 509, on February 22, 2021.
Steve Dickson,
Administrator.
[FR Doc. 2021–04068 Filed 3–8–21; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF THE TREASURY
31 CFR Part 35
[Docket No. TREAS–DO–2021–0004]
RIN 1505–AC76
Table of Contents
Emergency Capital Investment
Program—Restrictions on Executive
Compensation, Share Buybacks, and
Dividends
Department of the Treasury.
Interim final rule and request
for public comment.
AGENCY:
ACTION:
Section 104A of the
Community Development Banking and
Financial Institutions Act of 1994,
which was added by the Consolidated
Appropriations Act, 2021, establishes
the Emergency Capital Investment
Program to support capital investments
in low- and moderate-income
community financial institutions. The
program is available to eligible minority
depository institutions and community
development financial institutions that
are insured depository institutions, bank
holding companies, savings and loan
holding companies, or federally insured
credit unions. Under Section 104A, the
Secretary of the Treasury is required to
issue rules setting restrictions on
executive compensation, share
buybacks, and dividend payments for
recipients of capital investments under
the program. This interim final rule
establishes these restrictions.
DATES:
Effective date: This interim final rule
is effective March 9, 2021.
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SUMMARY:
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Comment date: Comments must be
received on or before April 8, 2021.
ADDRESSES: You may submit comments
identified by number TREAS–DO–
2021–0004 through the Federal
eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Treasury will post all comments on
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at www.regulations.gov, please
send an email to ECIPInquiries@
Treasury.gov. Highlight the information
that you consider to be CBI and explain
why you believe Treasury should hold
this information as confidential.
Treasury will review the information
and make the final determination
whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: For
further information regarding this
interim final rule contact Brian
Donovan, Emergency Capital Investment
Program, Treasury, at (202) 653–0371 or
Brian.Donovan2@treasury.gov, or Eric
Froman, Assistant General Counsel
(Banking and Finance), Treasury, at
(202) 622–1942 or Eric.Froman@
treasury.gov.
SUPPLEMENTARY INFORMATION:
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I. Background Information
II. Comments and Immediate Effective Date
III. Interim Final Rule
A. Background on the ECIP
B. Overview of the Interim Final Rule
1. Restrictions on Compensation
2. Restrictions on Dividends, Share
Buybacks, and Other Capital
Distributions
IV. Regulatory Analyses
A. Administrative Procedure Act
B. National Environmental Policy Act
C. Paperwork Reduction Act
D. Regulatory Flexibility Act
E. Regulatory Planning and Review
F. Executive Order 13132
G. Congressional Review Act
I. Background Information
On December 27, 2020, the
Consolidated Appropriations Act, 2021
(Pub. L. 116–260), was signed into law.
It added Section 104A of the
Community Development Banking and
Financial Institutions Act of 1994 (the
Act) (12 U.S.C. 4701 et seq.), which was
enacted as part of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (Pub. L. 103–
325). Section 104A authorizes the
Secretary of the Treasury to establish
the Emergency Capital Investment
Program (ECIP or Program) to make
investments in low- and moderateincome community financial
institutions. These investments are to
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support the efforts of low- and
moderate-income community financial
institutions to, among other things,
provide loans, grants, and forbearance
for small businesses, minority-owned
businesses, and consumers, especially
in low-income and underserved
communities, including persistent
poverty counties, which may be
disproportionately impacted by the
economic effects of the COVID–19
pandemic.
Under Section 104A(h) of the Act, the
Department of the Treasury (Treasury)
must issue rules setting restrictions on
executive compensation, share
buybacks, and dividend payments for
recipients of capital investments under
ECIP. This rulemaking establishes those
restrictions, which are described in
section III below.
II. Comments and Immediate Effective
Date
ECIP is intended to be used to make
investments in low- and moderateincome community financial
institutions expeditiously.1 Section
104A(h) of the Act requires Treasury to
issue rules no later than 30 days after
the statute’s effective date that set
restrictions on executive compensation,
share buybacks, and dividend payments
for recipients of capital investments
under ECIP. This legislative mandate,
along with the dramatic and ongoing
effects of the COVID–19 pandemic—the
public health crisis, continuing closures
of small businesses and minority-owned
businesses, and heightened consumer
unemployment, especially in lowincome and underserved communities—
provides good cause for Treasury to
issue this interim final rule without
advance notice and public comment and
to dispense with the 30-day delayed
effective date provided in the
Administrative Procedure Act (5 U.S.C.
553). The immediate effective date of
this interim final rule will benefit lowand moderate-income community
financial institutions, as well as the
communities served by such
institutions, by allowing low- and
moderate-income community financial
institutions to expeditiously apply for
capital investments with a full
understanding of the executive
compensation, share buyback, and
dividend payment restrictions that will
1 For example, section 104A(d)(1) of the Act
requires Treasury to begin accepting applications
for capital investments under ECIP within 30 days
after enactment of the statute, and section
104A(h)(1) requires Treasury to issue rules setting
restrictions on executive compensation, share
buybacks, and dividend payments for ECIP
recipients within 30 days after enactment of the
statute.
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apply to participants in the Program.
Otherwise, potential recipients of
capital investments under ECIP could
decide not to participate in the Program
or to delay their applications for a
material period of time pending the
establishment of these requirements,
which would reduce or delay the
provision of much-needed assistance to
communities that have suffered
economic impairment due to the
COVID–19 pandemic. Although this
interim final rule is effective
immediately, comments are solicited
from the public on all aspects of the
interim final rule. Comments must be
submitted on or before April 8, 2021.
Treasury will consider these comments
and the need for making any revisions
as a result of these comments.
III. Interim Final Rule
A. Background on the ECIP
The purpose of ECIP is to support the
efforts of low- and moderate-income
community financial institutions to,
among other things, provide loans,
grants, and forbearance for small
businesses, minority-owned businesses,
and consumers, especially in lowincome and underserved communities,
including persistent poverty counties,
which may be disproportionately
impacted by the economic effects of the
COVID–19 pandemic.2 To support these
objectives, the Act makes up to $9
billion available to Treasury to make
capital investments in minority
depository institutions and community
development financial institutions that
are (1) insured depository institutions
that are not controlled by eligible bank
holding companies or eligible savings
and loan holding companies, (2) bank
holding companies, (3) savings and loan
holding companies, or (4) federally
insured credit unions. Certain
additional eligibility criteria apply,
including a requirement for applicants
to provide Treasury with an investment
and lending plan that provides certain
specified information concerning the
applicant’s lending history and plans.3
A community development financial
institution or minority depository
institution that submits an application
and is selected to participate in the
Program (ECIP recipient) will receive a
capital investment from Treasury.4 5
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2 Section
104A(b)(2) of the Act.
3 Sections 104A(d)(3)–(4), 104A(i) of the Act.
4 An ECIP capital investment may be treated as
equity or subordinated debt for accounting
purposes depending on the type of instrument
issued and the corporate form and regulatory
classification of the ECIP participant.
5 Currently, the only Federal credit unions that
may accept these types of investments as secondary
capital under the secondary capital rules of the
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Consistent with statutory requirements,
the investment by Treasury will take the
form of preferred stock, except in cases
where Treasury determines that an
institution cannot feasibly issue
preferred stock, Treasury may purchase
subordinated debt instruments.6 The
statute sets forth certain economic terms
of the capital investments under ECIP 7
and limitations on the amount of capital
investments Treasury may purchase
from individual institutions.8 In
addition, the statute prohibits
institutions with certain types of
conflicts of interest from participating in
ECIP.9 Treasury’s authority to make new
capital investments in ECIP will end six
months after the date on which the
national emergency concerning the
COVID–19 outbreak declared by the
President on March 13, 2020 under the
National Emergencies Act (50 U.S.C.
1601 et seq.) terminates.
B. Overview of the Interim Final Rule
This interim final rule establishes
restrictions on executive compensation,
share buybacks, and dividend
payments, as required by the Act. In
developing these restrictions, Treasury
has considered two primary objectives.
First, these restrictions should seek to
promote the integrity of ECIP by
ensuring that the funds provided under
the Program are used to provide loans,
grants, and forbearance for small
businesses, minority-owned businesses,
and consumers, especially in lowincome and underserved communities.
Second, the restrictions generally
should seek to encourage a large number
of minority depository institutions and
community development financial
institutions to participate in ECIP,
because the Program will have the most
beneficial impact on the intended
communities if a broad range of
institutions participate in the Program.
The restrictions under this interim
final rule generally apply to an ECIP
recipient during the ‘‘ECIP period,’’
defined as the period from the date the
ECIP makes its investment until the
earliest of (i) the date on which the ECIP
recipient has fully redeemed or repaid
the capital investment received under
ECIP; (ii) the date on which the capital
investment the ECIP recipient received
National Credit Union Administration (NCUA) are
those with a designation of low-income status. See
12 CFR 701.34(b). Credit unions that do not meet
the low-income credit union designation may
participate through the issuance of subordinated
debt, but the subordinated debt would not be
secondary capital.
6 Section 104(d)(5)(B) of the Act.
7 Sections 104A(d)(5)–(8) of the Act.
8 Sections 104A(e), (f) of the Act.
9 Section 104A(h) of the Act.
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under ECIP is no longer held, in full or
in part, by Treasury or a Treasury
affiliate, or a custodian, trustee, or agent
acting on behalf of Treasury or a
Treasury affiliate, and (iii) the date that
is ten years after the ECIP investment
date. The restrictions apply to the ECIP
recipient on a consolidated basis.
Treasury anticipates that the ECIP
period will provide sufficient time to
ensure that ECIP investments are
deployed in a manner that supports the
statutory objectives. Accordingly, the
requirements of the interim final rule
will cease to apply when the ECIP
investment is no longer held by
Treasury or an entity established by
Treasury (Treasury affiliate).
1. Restrictions on Compensation
The restrictions on executive
compensation under the interim final
rule include (i) a requirement to ensure
that the total compensation paid to
senior executive officers is appropriate
and not excessive; (ii) a restriction on
severance pay for an ECIP recipient’s
senior executive officers if the ECIP
recipient is in troubled condition; and
(iii) a requirement to adopt policies and
procedures prohibiting excessive or
luxury expenditures (as defined below).
Each of these compensation-related
restrictions is intended to help ensure
that the proceeds of ECIP investments
have the effect intended by Section
104A of the Act and are not to fund
excessive compensation for ECIP
recipients’ executives.
The restrictions on excess
compensation apply to total
compensation, which is defined as all
compensation, other than any severance
payment, provided by an ECIP recipient
to an officer or employee, including
salary, wages, bonuses, awards of stock,
deferred compensation, and other
financial benefits.
A ‘‘senior executive officer’’ means an
ECIP recipient’s president, any vice
president in charge of a principal
business unit division or function (such
as sales, administration, or finance), any
other officer who performs a policy
making function, or any other person
who performs similar policy making
functions.
i. Policies and Procedures Prohibiting
Excessive Compensation
Under the interim final rule, an ECIP
recipient is required to ensure that the
total compensation paid to its senior
executive officers is appropriate and not
excessive. Unless informed otherwise by
Treasury, an ECIP recipient is
considered to have satisfied the
requirements regarding excessive
executive compensation under the
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interim final rule if it maintains
compliance with the guidelines or
standards established by its primary
Federal regulator that address excessive
compensation, corporate practices, and
operations. Specifically, ECIP recipients
that are insured depository institutions
are subject to the Interagency Guidelines
Establishing Standards for Safety and
Soundness as issued by the appropriate
Federal banking agency for the
particular ECIP recipient.10 Bank
holding companies and savings and
loan holding companies are required to
maintain compliance with corporate
practice 11 and operations
requirements 12 issued by the Board of
Governors of the Federal Reserve
System (Federal Reserve Board), and,
under the interim final rule, to ensure
their subsidiary insured depository
institutions adopt and maintain policies
and procedures that are consistent with
the applicable guidelines or standards
established by their primary Federal
regulators that address excessive
compensation. In addition, federally
insured credit unions must maintain
compliance with the requirements on
compensation and benefits for federally
insured credit unions as issued by the
National Credit Union Administration
(NCUA).13 Treasury reserves the
authority to take action as necessary to
address potential anti-evasion concerns
relating to the interim final rule’s
requirements for ECIP participants.
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ii. Limit on Severance Pay
Under the interim final rule, an ECIP
recipient is prohibited from making
excessive severance payments to a
senior executive officer. Severance pay
is defined to include all types of cash
payments, benefits, and other amounts
paid or provided in connection with an
individual’s termination of
employment, except for payment for
services performed or benefits that were
accrued prior to termination of
employment or otherwise accrued with
respect to services performed.
Unless informed otherwise by
Treasury, an ECIP recipient that is an
insured depository institution, bank
holding company, or savings and loan
holding company is considered to have
satisfied the requirements regarding
severance payments if it maintains
compliance with the limits and
10 For national banks and Federal savings
associations, 12 CFR part 30, Appendix A; state
member banks, 12 CFR part 208, Appendix D–1;
and insured state nonmember banks and state
savings associations, 12 CFR part 364, Appendix A.
11 12 CFR 225.4.
12 12 CFR 238.8.
13 12 CFR 701.19(a); 12 CFR 701.21(c)(8); 12 CFR
702.203(b)(10); 12 CFR 702.204(b)(10).
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prohibitions on the ability of insured
depository institutions and their
affiliated holding companies to enter
into contracts to pay and to make golden
parachute and indemnification
payments to institution-affiliated
parties, as issued by the FDIC.14 The
FDIC rules place restrictions on
payments to institution-affiliated parties
whenever an insured depository
institution or depository institution
holding company is in ‘‘troubled
condition,’’ as determined by the
appropriate Federal banking agency. An
ECIP recipient that is not designated in
troubled condition by the appropriate
Federal banking agency during the ECIP
period generally would not be subject to
restrictions on severance payments
under the interim final rule. Similarly,
a federally insured credit union is
considered to have satisfied the
requirements regarding severance
payments if it maintains compliance
with the limits and prohibitions on the
ability of federally insured credit unions
to enter into contracts to pay and to
make golden parachute and
indemnification payments to
institution-affiliated parties as issued by
the NCUA.15 This restriction is designed
to align the requirements of the ECIP
with existing standards applicable to
ECIP recipients under regulations issued
by Federal regulators.
iii. Limit on Excessive or Luxury
Expenditures
Under the interim final rule, ECIP
recipients are required to establish and
maintain policies designed to eliminate
excessive or luxury expenditures. The
term ‘‘excessive or luxury expenditures’’
is defined as excessive expenditures on
any of the following to the extent such
expenditures are not reasonable
expenditures for staff development,
reasonable performance incentives, or
other similar reasonable measures
conducted in the normal course of the
ECIP recipient’s business operations: (1)
Entertainment or events; (2) office and
facility renovations; (3) aviation or other
transportation services; (4) tax gross-ups
(i.e., reimbursement of taxes owed with
respect to any compensation); and (5)
other similar items, activities, or events
for which the ECIP recipient may
reasonably anticipate incurring
expenses, or reimbursing an employee
for incurring expenses. Capital
investments, including investments in
technology, equipment, and similar
items that expand the long-term
capability of an ECIP recipient to
provide products and services to its
14 12
15 12
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CFR part 750.
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customers and community are not
excessive or luxury expenditures.
The interim final rule requires an
ECIP recipient to adopt and maintain an
‘‘excessive or luxury expenditures
policy’’ that sets forth written standards
applicable to the ECIP recipient and its
employees that address the five
categories of expenses set forth in the
definition of ‘‘excessive or luxury
expenditures’’ and that are reasonably
designed to eliminate excessive or
luxury expenditures. The standards
must (1) identify the types or categories
of expenditures which are prohibited;
(2) identify the types or categories of
expenditures for which prior approval is
required (which may include a
threshold expenditure amount per item,
activity, or event or a threshold
expenditure amount per employee
receiving the item or participating in the
activity or event); (3) provide reasonable
approval procedures for expenditures
requiring prior approval; (4) require the
ECIP recipient to deliver a certification,
executed by two senior executive
officers (one of which must be either the
ECIP recipient’s chief executive officer
(or individual performing a similar
function) (defined as the ‘‘principal
executive officer’’) or its chief financial
officer (or individual performing a
similar function) (defined as the
‘‘principal financial officer’’) that the
approval of any expenditure requiring
the prior approval of any senior
executive officer, any executive officer
of a substantially similar level of
responsibility, or the ECIP recipient’s
board of directors (or a committee of
such board of directors) was properly
obtained with respect to each such
expenditure; (5) require the prompt
internal reporting of violations to an
appropriate person or persons identified
in this policy; and (6) mandate
accountability for adherence to the
policy. The requirement to establish a
policy regarding excessive or luxury
expenditures is intended to promote the
integrity of ECIP by ensuring that the
funds provided under the Program are
used to provide loans, grants, and
forbearance, without restricting ECIP
participants’ discretion to establish
policies and procedures that are tailored
to meet the needs and business
objectives of their respective
organizations.
To facilitate compliance with this
requirement, Treasury is making
available to ECIP recipients a form of
excessive or luxury expenditures policy
in Appendix A to the interim final rule.
An ECIP recipient may use this form to
satisfy the requirement in the interim
final rule to adopt and maintain an
excessive or luxury expenditures policy.
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Alternatively, an ECIP recipient may use
other forms or existing policies relating
to excessive or luxury expenditures, but
such other forms or policies must satisfy
all the requirements of the interim final
rule.
iv. Material Changes to Policies or
Procedures
An ECIP recipient must obtain prior
approval from Treasury before making
any material change to the policies or
procedures that it maintains for
purposes of compliance with the
compensation, severance pay and
excessive or luxury expenditures
requirements described in the preceding
discussion.16 A change to such policies
or procedures will be considered
material if the change is likely to have
a negative effect on the financial
condition of the ECIP recipient, limit
the ability of the ECIP recipient to make
payments under the terms of an ECIP
instrument, or otherwise impair the
ECIP recipient’s ability to meet its
obligations to Treasury under the
Program. An ECIP recipient would bear
the initial responsibility for determining
whether a change in policy or
procedures is material; however,
Treasury would retain the authority to
take enforcement as appropriate (i.e., an
ECIP recipient should not revise its
compensation policy to permit or pay
excessive compensation if its cash is
insufficient to pay dividends on ECIP
instruments). A request by an ECIP
recipient to make a material change to
its compensation, severance pay, or
excessive or luxury expenditures
policies or procedures must be
submitted to Treasury in writing at least
30 days prior to the effective date of the
policy change. The notice will be
deemed approved 30 days after the ECIP
submits the notice to Treasury unless
prior to the expiration of the 30-day
period Treasury (i) objects to the
proposed change or (ii) notifies the ECIP
recipient that additional time is
required in order to better evaluate the
impact of the proposed change to policy
or procedures.
Treasury specifically solicits
comments from members of the public
concerning the following issues:
Question #1: Are the restrictions on
compensation sufficiently tailored to
facilitate the ECIP Program objectives
without discouraging participation in
the program?
Question #2: Are there other
reasonable alternatives to the Program’s
16 Disclosures by ECIP recipients of any proposed
material changes to any such policies or procedures
will be subject to their Federal regulators’
applicable restrictions in respect of the disclosure
of confidential supervisory information.
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excessive or luxury expenditures policy
requirement that would be as effective
in ensuring that funds provided under
the Program are used to provide loans,
grants, and forbearance, without
restricting ECIP participant discretion to
establish policies and procedures that
are tailored to meet the needs and
business objectives of their respective
organizations?
Question #3: What additional
guidance or clarification regarding the
compensation and expenditure
restrictions would help facilitate
compliance with these restrictions and
ensure that the restrictions are working
as intended?
2. Restrictions on Dividends, Share
Buybacks, and Other Capital
Distributions
The restrictions on dividends, share
buybacks, and other capital
distributions under the interim final
rule include two components. The first
is a prohibition on discretionary
dividends, share buybacks and other
capital distributions on non-senior
securities if an ECIP recipient has not (i)
for preferred stock issued to Treasury,
paid in full the dividends for the last
completed dividend period, or (ii) for
instruments issued to Treasury other
than in the form of preferred stock, such
as subordinated debt, paid all amounts
due and payable and all amounts
previously deferred under the terms of
the instruments. The second is a limit
on dividends, share buybacks, and other
capital distributions based on separate
earnings-based tests for (i) insured
depository institutions, bank holding
companies and savings and loan
holding companies, on the one hand,
and (ii) federally insured credit unions,
on the other.
However, the interim final rule
provides an exception from these
restrictions for ECIP recipients that are
S corporations or other pass-through
entities for purposes of the Internal
Revenue Code of 1986. The interim final
rule will permit S corporations and
other pass-through entities to make
capital distributions to the extent
reasonably required to cover its owners’
tax obligations in respect of the entity’s
earnings. Such distributions shall be
subject to an annual reconciliation, with
any surplus or deficiency to be
deducted or added to distributions, as
applicable, in the following year.
The exemption for tax-related
distributions in the interim final rule
does not supersede otherwise applicable
limitations or determinations with
respect to distributions established by
an ECIP recipient’s Federal regulators.
Accordingly, tax-related distributions
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permitted under the interim final rule
must also comply with any applicable
limitations or determinations
established by an ECIP recipient’s
Federal regulators.
Similar to the restrictions on
executive compensation described
above, these limitations on capital
distributions are intended to ensure that
the funds provided under ECIP have the
effect intended by Section 104A of the
Act, and are not to provide undue
compensation to an ECIP recipient’s
shareholders or owners. In addition,
these restrictions serve to protect the
taxpayer’s financial interest in
connection with the instruments issued
by an ECIP recipient to Treasury in
connection with the Program.
i. Restriction on Dividends, Share
Buybacks and Other Capital
Distributions
The interim final rule defines ‘‘nonsenior securities’’ as any equity interests
in or other instruments issued by an
ECIP recipient that are pari passu with
or junior to Treasury’s investment, or
equity interests in or other instruments
issued by a depository institution
holding company of which the ECIP
recipient is a subsidiary. Under the
interim final rule, an ECIP recipient will
be prohibited from making capital
distributions, such as declaring or
paying any dividend on, or purchasing
or redeeming, any non-senior securities
unless (i) if Treasury holds shares of
preferred stock, the company has paid
in full dividends on the preferred stock
with respect to the last completed
dividend period (prior to the current
dividend period); or (ii) if Treasury
holds an instrument other than
preferred stock (e.g., subordinated debt),
all amounts due and payable on the
instrument have been paid in full, and
no deferred amounts are unpaid. These
restrictions reflect customary
contractual protections to prevent an
ECIP recipient from making
discretionary distributions on nonsenior securities if payments are not
being made to Treasury on its
investment. These restrictions would
not prevent an ECIP recipient from
making required, non-discretionary
payments on non-senior securities, such
as payments required at stated maturity
in accordance with an instrument’s
terms, or payments of interest that may
not be deferred.17
For these purposes, a ‘‘capital
distributions’’ are defined as (i)
dividends, including discretionary
17 Such payments may be subject to limitations
established by an ECIP recipient’s primary Federal
regulator.
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dividends, on non-senior securities and
any other payments on a share of stock
or other equity or equivalent interest,
(ii) payments, including interest
payments, on non-senior securities that
the issuer has full discretion to
permanently or temporarily suspend
without triggering a default, (iii)
redemptions or repurchases of nonsenior securities or (iv) any similar
transaction that Treasury determines to
be in substance a capital distribution.
Excluded from this definition, however,
are (a) redemptions or repurchases of
shares that are part of an employee stock
ownership plan for an ECIP recipient
that is not publicly traded, provided
that the repurchase is required solely by
virtue of the Employee Retirement
Income Security Act of 1974, as
amended; (b) in the case of federally
insured credit unions, payments of
dividends and interest (as defined by 12
CFR 707.2(h) and (o)) on accounts held
by their members and redemptions of
membership share interests upon
voluntary or involuntary terminations of
membership by a credit union or its
members, as applicable; and (c) solely in
the case of the earnings test described
below, redemptions or repurchases of
non-senior securities if the issuer of the
non-senior securities being repurchased
or redeemed funds the redemption or
repurchase by issuing at least a
corresponding amount of new nonsenior securities that rank equally in
liquidation with, receive the same
capital treatment as and, if applicable,
have a stated maturity date no earlier
than the non-senior securities being
redeemed or repurchased. An
extraordinary or special dividend
(which excludes an ordinary dividend
on a special share account) by a
federally insured credit union is a
capital distribution and is not subject to
the exclusion for payments of dividends
and interest by credit unions on
accounts held by their members.
ii. Limit on the Amount of Capital
Distributions
Under the interim final rule, an ECIP
recipient will be required to obtain prior
approval from Treasury in order to make
capital distributions in excess of the
following earnings-based tests.
Treasury determined that the limits
on capital distributions are appropriate
based on a review of publicly available
data regarding average dividend rates
among banking organizations with $10
billion or less in total assets, in the
period before the Covid-19 pandemic.
Thus, the limitation on capital
distributions strikes an appropriate
balance between allowing ECIP
recipients to make capital distributions
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and helping to ensure that the proceeds
of the ECIP investment are used to
expand lending to low- and moderateincome and other targeted populations.
A. Earnings Test for Insured Depository
Institutions, Bank Holding Companies,
and Savings and Loan Holding
Companies
The interim final rule provides that,
without prior approval from Treasury,
an ECIP recipient that is an insured
depository institution, bank holding
company, or savings and loan holding
company may not make a capital
distribution if the total capital
distributions made during the calendar
year, including the proposed capital
distribution, exceeds its ‘‘eligible
distributable income,’’ which is
calculated as the sum of the ECIP
recipient’s (a) year-to-date net income as
of the end of the most recent calendar
quarter, plus net income for the two
preceding calendar years, less (b) any
dividends or capital distributions for the
year to date as of the end of the most
recent calendar quarter, and for the two
preceding calendar years, where each
amount is calculated in accordance with
the instructions to the Call Report or
applicable reporting form. While
approval may be awarded by Treasury
to make capital distributions, the
interim final rule confirms that such
approval does not supersede any
applicable regulatory requirements of
the ECIP recipient’s appropriate Federal
banking agency, or other actions taken
by such agency.
The ‘‘eligible distributable income’’
limit is similar to other existing earnings
limitations on payments of dividends
that apply to certain insured depository
institutions.18 In light of this similarity,
an ECIP recipient could calculate
eligible distributable income with
respect to capital distributions, by
applying the methodology set forth in
12 CFR 5.64 or 12 CFR 208.5, as
applicable, with respect to dividends,
by substituting ‘‘capital distributions’’
for ‘‘dividends.’’ In addition, in the case
of 12 CFR 208.5, an ECIP recipient that
is not an insured depository institution
would use net income, as reported in
the ECIP recipient’s FR Y–9C or FR Y–
9SP, instead of net income as reported
in the Reports of Condition and Income.
Treasury anticipates that the operational
impact the capital distribution approval
requirement will be nominal and that
the approval requirement will provide
18 See, e.g., 12 U.S.C. 60 (national banks), 12 CFR
5.64 (national banks), and 12 CFR 208.5 (state
member banks).
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13453
meaningful support for the objectives of
the Program.
B. Earnings Test for Federally Insured
Credit Unions
Consistent with existing distribution
limitations applicable to federally
insured credit unions,19 the interim
final rule provides that, without prior
approval by Treasury, an ECIP recipient
that is a federally insured credit union
may not make a capital distribution on
any non-senior securities if the
distribution would (i) in the case of a
dividend, be payable from retained
earnings (as defined in 12 CFR 702.2(f))
other than undivided earnings; or (ii)
cause the credit union’s net worth
classification to fall below ‘‘adequately
capitalized’’ (as defined in 12 CFR
702.102(a)(2)).
3. Exemptive Relief
Under the interim final rule, Treasury
retains authority to grant waivers or
exemptions from the restrictions under
the interim final rule on dividends,
share buybacks, and other capital
distributions. Such relief may be
granted broadly to all ECIP recipients or
to particular entities. In considering
whether to grant exemptive relief,
Treasury will consider whether the
relief is necessary or appropriate to
achieve the goals of the ECIP or to
protect the public interest. Such relief
may be granted based on terms and
conditions as determined by Treasury,
and in making determinations regarding
requests for exemptive relief, Treasury
may consult with the primary Federal
regulator when deemed appropriate.
4. Annual Certification and Enforcement
Each ECIP recipient will be required
to submit to Treasury on an annual basis
a certification executed by two senior
executive officers (one of which must be
either the ECIP recipient’s principal
executive officer or principal financial
officer) that the ECIP recipient is in
compliance with each of the excessive
compensation, severance payments,
excessive or luxury expenditures
requirements and restrictions on capital
distributions set forth in the interim
final rule. If an ECIP recipient certifies
that it satisfies the severance payments
requirements, Treasury expects that the
certification will address only
compliance with the requirements and
will neither address whether the ECIP
recipient is in troubled condition for
purposes of 12 CFR parts 359 and 750,
as applicable, nor contain any
confidential supervisory information
subject to applicable disclosure
19 See
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12 CFR 702.403.
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restrictions promulgated by the ECIP
recipients’ Federal regulators.
The interim final rule is promulgated
under Section 104A of the Act, and
agreements between ECIP recipients and
Treasury in connection with the
Program will be entered into under the
Act. Treasury may take action or
directly address noncompliance with
the requirements of this interim final
rule or Program agreements. In addition,
Treasury may, in its discretion, inform
the appropriate Federal banking
agencies of any apparent violations by
ECIP recipients of the interim final rule
or Program agreements between ECIP
recipients and Treasury.20
Treasury specifically solicits
comments from members of the public
concerning the following issues:
Question #4: Are the restrictions on
dividends, share buybacks, and other
capital distributions sufficiently tailored
to facilitate the ECIP Program objectives
without discouraging participation in
the program?
Question #5: What would be the
advantages and disadvantages of
aligning limitations on capital
distributions under the interim final rule
with limitations applicable to each
entity pursuant to the requirements of
its appropriate Federal banking
regulator? What are the advantages and
disadvantages of calculating eligible
distributable income based on (i)
income as of the end of the most recent
calendar quarter and (ii) year to date
reported net income? What are the
advantages and disadvantages of
calculating the capital distribution
limitation using (i) year-to-date
dividends or capital distributions; (ii)
reported dividends or capital
distributions; and (iii) year-to-date
dividends or capital distributions as of
the end of the most recent calendar
quarter?
IV. Regulatory Analyses
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A. Administrative Procedure Act
Pursuant to authority at 5 U.S.C.
553(b)(B), the interim final rule is
exempt from the rulemaking
requirements of the Administrative
Procedure Act (APA) (5 U.S.C. 551 et
seq.), including the requirement to
provide prior notice and an opportunity
for public comment for the good cause
shown in Sections I and II of this
SUPPLEMENTARY INFORMATION.
B. National Environmental Policy Act
The interim final rule has been
reviewed in accordance with 12 CFR
part 1815, the CDFI Fund’s
20 See,
e.g., 12 U.S.C. 4717(b).
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environmental quality regulations
published pursuant to the National
Environmental Protection Act of 1969
(NEPA). It is the determination of
Treasury that the interim final rule does
not constitute a major Federal action
significantly affecting the quality of the
human environment and, in accordance
with NEPA and the CDFI Fund’s
environmental quality regulations at 12
CFR part 1815, neither an
Environmental Assessment nor an
Environmental Impact Statement is
required.
Treasury has determined for good cause
that general notice and opportunity for
public comment is unnecessary, and
therefore is not issuing a notice of
proposed rulemaking. Because no notice
of proposed rulemaking is required for
this interim final rule, the provisions of
the RFA do not apply. Nevertheless,
Treasury seeks comment on whether,
and the extent to which, the interim
final rule would affect a significant
number of small entities.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521) (PRA) states that
no agency may conduct or sponsor, nor
is the respondent required to respond
to, an information collection unless it
displays a currently valid OMB control
number.
The interim final rule will add current
information collections for excessive or
luxury expenditure policy and
exemptive relief requests to the ECIP
application process. The ‘‘excessive or
luxury policy’’ collection requirements
include the adoption and maintenance
of the policy (detailed in section 1(iii));
written notices of change (detailed in
section 1(iv)); and annual certifications
(detailed in section 4). The exemptive
relief requests are detailed in section 3.
The addition of these collections will
increase total annual burden by 44,014
hours: The policy requirements are
expected to take 1,100 respondents 40
hours to complete for an annual burden
of 44,000 hours, and it is estimated that
55 (or 5%) of respondents will submit
an exemptive relief request that will
take 15 minutes to complete, for an
annual burden of 14 hours. The OMB
Control Number for the Emergency
Capital Investment Program information
collection is 1505–0267.
Comments concerning suggestions for
reducing the burden of collections of
information should be directed to the
Deputy Director for Policy and
Programs, Community Development
Financial Institutions Fund, 601 13th
Street, NW, Suite 200 South,
Washington, DC 20005.
This interim final rule is
economically significant for the
purposes of Executive Orders 12866 and
13563. Treasury, however, is proceeding
under the emergency provision at
Executive Order 12866 section 6(a)(3)(D)
based on the need to move
expeditiously to mitigate the current
economic conditions arising from the
COVID–19 emergency, as discussed in
Section II of this Supplementary
Information.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.) requires an agency
to consider whether the rules it
proposes will have a significant
economic impact on a substantial
number of small entities. The RFA
applies only to rules for which an
agency publishes a general notice of
proposed rulemaking pursuant to 5
U.S.C. 553(b). As discussed above,
consistent with 5 U.S.C. 553(b)(B),
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E. Regulatory Planning and Review
F. Executive Order 13132
This interim final rule does not have
federalism implications as defined in
Executive Order 13132. It will not have
substantial direct effects on the States,
on the relationship between the
National Government and the States, or
on the distribution of power and
responsibilities among the various
levels of government, as specified in the
executive order. As such it does not
warrant the preparation of a federalism
assessment.
G. Congressional Review Act
The Administrator of the Office of
Management and Budget’s Office of
Information and Regulatory Affairs
(OIRA) has determined that this is a
major rule for purposes the
Congressional Review Act (CRA) (5
U.S.C. 804(2) et seq.). Under the CRA,
a major rule takes effect 60 days after
the rule is published in the Federal
Register. 5 U.S.C. 801(a)(3).
Notwithstanding this requirement, the
CRA allows agencies to dispense with
the requirements of section 801 when
the agency for good cause finds that
such procedure would be impracticable,
unnecessary, or contrary to the public
interest and the rule shall take effect at
such time as the agency promulgating
the rule determines. 5 U.S.C. 808(2).
Pursuant to § 808(2), Treasury, for the
good cause shown in sections I and II of
this SUPPLEMENTARY INFORMATION, finds
that a 60-day delay to provide public
notice is impracticable and contrary to
the public interest.
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List of Subjects in 31 CFR Part 35
Executive compensation.
■ For the reasons set forth in the
preamble, 31 CFR subtitle A is amended
by adding part 35 to read as follows:
PART 35—EMERGENCY CAPITAL
INVESTMENT PROGRAM
Subpart A—[Reserved]
Subpart B—Compensation and Capital
Distributions
Sec.
35.20 Purpose, applicability, and general
provisions.
35.21 Definitions.
35.22 Restrictions on compensation.
35.23 Restrictions on dividends, share
buybacks, and other capital
distributions.
35.24 Annual certification.
35.25 Exemptive relief.
Appendix A to 31 CFR Part 35—Emergency
Capital Investment Program Model
Excessive or Luxury Expenditures Policy
Authority: Consolidated Appropriations
Act, 2021 (Pub. L. 116–260), Division N, Title
V, Subtitle B; Community Development
Banking and Financial Institutions Act of
1994 (enacted as part of the Riegle
Community and Regulatory Improvement Act
of 1994 (Pub. L. 103–325)), as amended (12
U.S.C. 4701 et seq.), Section 104A.
Subpart A [Reserved]
Subpart B—Compensation and Capital
Distributions
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§ 35.20 Purpose, applicability and general
provisions.
(a) Purpose. Pursuant Section 104A of
the Community Development Banking
and Financial Institutions Act of 1994
(Act), as added by the Consolidated
Appropriations Act, 2021 (Pub. L. 116–
260), this subpart establishes
restrictions on executive compensation,
dividend payments, and share buybacks
for recipients of capital investments
under the Department of the Treasury’s
Emergency Capital Investment Program
(ECIP or Program), as well as additional
criteria for participation in the Program
that the Secretary has determined are
appropriate in furtherance of the
Program goals.
(b) Applicability. This subpart applies
on a consolidated basis to any insured
depository institution, bank holding
company, savings and loan holding
company, or federally insured credit
union that issues preferred stock or a
subordinated debt instrument to the
Department of the Treasury under the
Program (an ECIP recipient, as defined
in § 35.21 of this subpart). An ECIP
recipient must comply with the
requirements of this subpart during the
ECIP period.
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(c) Limitation of authority. Nothing in
this subpart shall be interpreted to limit
the authority of the appropriate Federal
banking agency to take action under
other provisions of law, including
action to address unsafe or unsound
practices or conditions, deficient capital
levels, or violations of law or regulation,
under section 8 of the Federal Deposit
Insurance Act, section 8 of the Bank
Holding Company Act, or section 10 of
the Home Owners’ Loan Act, or the
Federal Credit Union Act, as may be
applicable.
§ 35.21
Definitions.
Except as modified in this regulation
or unless the context otherwise requires,
the terms used in this regulation have
the same meaning as set forth in the
relevant statutes. For purposes of this
subpart:
Act means the Community
Development Banking and Financial
Institutions Act of 1994, as amended (12
U.S.C. 4701 et seq.).
Appropriate Federal banking agency
has the same meaning as in 12 U.S.C.
1813 and also includes the NCUA with
respect to a federally insured credit
union.
Capital distributions means:
(1) Dividends, including discretionary
dividends, on non-senior securities and
any other payments on a share of stock
or other equity or equivalent interest;
(2) Payments, including interest
payments, on non-senior securities, that
the issuer has full discretion to
permanently or temporarily suspend
without triggering a default;
(3) Redemptions or repurchases of
non-senior securities; or
(4) Any similar transaction that the
Department of the Treasury determines
to be in substance a capital distribution;
(5) Provided, that a ‘‘capital
distribution’’ does not include:
(i) Redemptions or repurchases of
shares that are part of an employee stock
ownership plan for an ECIP recipient
that is not publicly traded, provided
that the repurchase is required solely by
virtue of the Employee Retirement
Income Security Act of 1974, as
amended;
(ii) In the case of federally insured
credit unions:
(A) Payments of dividends and
interest (as defined by 12 CFR 707.2(h)
and (o)) on accounts held by their
members; provided that this exclusion
does not apply to any extraordinary or
special dividend by a credit union; or
(B) Redemptions of membership share
interests upon voluntary or involuntary
terminations of membership by a credit
union or its members, as applicable; and
(iii) Solely in the case of § 35.23(b)
(Limit on amount of capital
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distributions), redemptions or
repurchases of non-senior securities if
the issuer of the non-senior securities
being repurchased or redeemed fully
funds the redemption or repurchase by
issuing at least a corresponding amount
of new non-senior securities that rank
equally in liquidation with, receive the
same capital treatment as and, if
applicable, have a stated maturity date
no earlier than the non-senior securities
being redeemed or repurchased.
ECIP means the Emergency Capital
Investment Program established under
Section 104A of the Community
Development Banking and Financial
Institutions Act of 1994, as amended.
ECIP investment means any preferred
stock, subordinated debt, or other
instrument (including any successor to
any such instrument) issued by an ECIP
recipient to the Department of the
Treasury under the ECIP.
ECIP investment agreement means the
agreement between an ECIP recipient
and the Department of the Treasury
with respect to the ECIP investment in
that ECIP recipient.
ECIP investment date means the date
on which an ECIP recipient first issued
an ECIP investment.
ECIP period means the period from
the ECIP investment date until the
earliest of:
(1) The date on which the ECIP
recipient has fully redeemed or repaid
the ECIP investment received under
ECIP;
(2) The date on which the investment
the ECIP recipient received under the
ECIP is no longer held, in full or in part,
by the Department of the Treasury or
any affiliate thereof; and
(3) Ten years after the ECIP
investment date.
ECIP recipient means any entity that
has received a capital investment under
the ECIP.
Excessive or luxury expenditures
means:
(1) Excessive expenditures on any of
the following to the extent such
expenditures are not reasonable
expenditures for staff development,
reasonable performance incentives, or
other similar reasonable measures
conducted in the normal course of the
ECIP recipient’s business operations:
(i) Entertainment or events;
(ii) Office and facility renovations;
(iii) Aviation or other transportation
services;
(iv) Tax gross-ups; and
(v) Other similar items, activities, or
events for which the ECIP recipient may
reasonably anticipate incurring
expenses, or reimbursing an employee
for incurring expenses;
(2) Provided, that reasonable capital
investments in technology, equipment,
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and similar items that expand the longterm capability of an ECIP recipient to
provide products and services to its
customers and community are not
excessive or luxury expenditures.
Excessive or luxury expenditures
policy means written standards
applicable to the ECIP recipient and its
employees that address the five
categories of expenses set forth in the
definition of ‘‘excessive or luxury
expenditures,’’ and that are reasonably
designed to eliminate excessive and
luxury expenditures. Such written
standards must:
(1) Identify the types or categories of
expenditures which are prohibited
(which may include a threshold
expenditure amount per item, activity,
or event or a threshold expenditure
amount per employee receiving the item
or participating in the activity or event);
(2) Identify the types or categories of
expenditures for which prior approval is
required (which may include a
threshold expenditure amount per item,
activity, or event or a threshold
expenditure amount per employee
receiving the item or participating in the
activity or event);
(3) Provide reasonable approval
procedures for expenditures requiring
prior approval;
(4) Require the ECIP recipient to
deliver a certification, executed by two
senior executive officers (one of which
must be its principal executive officer or
principal financial officer) certifying
that the approval of any expenditure
requiring the prior approval of any
senior executive officer, any executive
officer of a substantially similar level of
responsibility, or the ECIP recipient’s
board of directors (or a committee of
such board of directors), was properly
obtained with respect to each such
expenditure;
(5) Require the prompt internal
reporting of violations to an appropriate
person or persons identified in this
policy; and
(6) Mandate accountability for
adherence to the policy.
FDIC means the Federal Deposit
Insurance Corporation.
Federal Reserve Board means the
Board of Governors of the Federal
Reserve System.
NCUA means the National Credit
Union Administration.
Non-senior security means any equity
interest or equivalent interest (including
but not limited to membership share
interests in the case of a credit union)
or any other interest in, or instrument
issued by, an ECIP recipient that is pari
passu with, or junior to, the ECIP
investment with respect to capital
distributions or ranking in liquidation,
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including but not limited to the
common stock (or equivalent equity
interest) of the ECIP recipient, or any
equity interest or equivalent interest or
any other interest in or instrument
issued by a depository institution
holding company of which the ECIP
recipient is a subsidiary.
OCC means the Office of the
Comptroller of the Currency.
Principal executive officer means the
chief executive officer of an ECIP
recipient (or individual performing a
similar function).
Principal financial officer means the
chief financial officer of an ECIP
recipient (or individual performing a
similar function).
Senior executive officer means an
ECIP recipient’s president, any vice
president in charge of a principal
business unit, division or function, any
other officer who performs a policy
making function, or any other person
who performs similar policy making
functions.
Severance payment means any
payment or benefit provided to an
officer or employee of an ECIP recipient
in connection with any termination of
such officer or employee’s employment
with the ECIP recipient (including
resignation, severance, retirement, or
constructive termination), except for
payment for services performed or
benefits accrued. A severance payment
includes cash payments, health care
benefits, perquisites, the enhancement
or acceleration of any payment or
vesting of any payment or benefit, or
any other in-kind benefit payable or
provided in connection with any
termination of an officer or employee of
the ECIP recipient.
Total compensation means all
compensation, other than any severance
payment, provided by an ECIP recipient
to an officer or employee, including
salary, wages, bonuses, awards of stock,
deferred compensation, and other
financial benefits.
§ 35.22
Restrictions on compensation.
(a) Restriction on executive
compensation. An ECIP recipient must
ensure that the total compensation paid
to its senior executive officers is
appropriate and not excessive. Unless
informed otherwise by the Department
of the Treasury, an ECIP recipient is
considered to have satisfied the
requirements regarding executive
compensation in this section if it, and,
if applicable, all insured depository
institution subsidiaries of the ECIP
recipient, maintains compliance with
the following (or any successor
requirement, as applicable):
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(1) For an ECIP recipient or subsidiary
of an ECIP recipient that is an insured
depository institution, except for
federally insured credit unions, the
Interagency Guidelines Establishing
Standards for Safety and Soundness as
issued by the appropriate Federal
banking agency for the ECIP recipient or
subsidiary (i.e., for national banks and
Federal savings associations, 12 CFR
part 30, appendix A; state member
banks, 12 CFR part 208, appendix D–1;
insured state nonmember banks and
state savings associations, 12 CFR part
364, appendix A);
(2) For an ECIP recipient that is a
bank holding company, the
requirements for corporate practices of
bank holding companies as issued by
the Federal Reserve Board at 12 CFR
225.4;
(3) For an ECIP recipient that is a
savings and loan holding company, the
requirements regarding safe and sound
operations of savings and loan holding
companies as issued by the Federal
Reserve Board at 12 CFR 238.8; and
(4) For an ECIP recipient that is a
federally insured credit union, the
requirements on compensation and
benefits for federally insured credit
unions as issued by the NCUA at 12
CFR 701.19(a); 12 CFR 701.21(c)(8); 12
CFR 702.203(b)(10); and 12 CFR
702.204(b)(10).
(b) Restriction on severance
payments. An ECIP recipient shall not
make excessive severance payments to
any senior executive officer. Unless
informed otherwise by the Department
of the Treasury, an ECIP is considered
to have satisfied the requirements
regarding severance payments in this
section if it maintains compliance with
the following (or any successor
requirement, as applicable):
(1) For an ECIP recipient that is an
insured depository institution, a bank
holding company or a savings and loan
holding company, the limits and
prohibitions to enter into contracts to
pay and to make golden parachute and
indemnification payments to
institution-affiliated parties to the extent
applicable to the ECIP recipient, as
issued by the FDIC at 12 CFR part 359;
and
(2) For an ECIP recipient that is a
federally insured credit union, the
limits and prohibitions on the ability of
federally insured credit unions to enter
into contracts to pay and to make golden
parachute and indemnification
payments to institution-affiliated parties
as issued by the NCUA at 12 CFR 750.1.
(c) Excessive or luxury expenditures.
(1) Ninety days after an ECIP investment
date with respect to an ECIP recipient,
the board of directors of the ECIP
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recipient must adopt an excessive or
luxury expenditures policy, provide
such policy to the Department of the
Treasury and the ECIP recipient’s
appropriate Federal banking agency,
and post the text of such policy on its
internet website, if the ECIP recipient
maintains an internet website.
(2) If, after adopting an excessive or
luxury expenditures policy, the board of
directors of the ECIP recipient makes
any material amendments to such
policy, within ninety days of the
adoption of the amended policy the
board of directors must provide the
amended policy to the Department of
the Treasury and the ECIP recipient’s
appropriate Federal banking agency and
post the amended policy on its internet
website, if the ECIP recipient maintains
an internet website.
(3) The ECIP recipient must maintain,
and continue the disclosure of any
material amendments to, the excessive
or luxury expenditures policy during
the ECIP period, unless the Department
of the Treasury determines that
discontinuation of the policy would not
be contrary to the public interest.
(d) Material changes in policies or
procedures. An ECIP recipient must
obtain prior approval from the
Department of the Treasury before
making any material change to the
policies or procedures that it maintains
for purposes of compliance with
paragraph (a), (b), or (c) of this section.
A change to the compensation,
severance pay, or excessive or luxury
expenditures policies or procedures will
be considered material for purposes of
this section if the change is likely to
have a negative effect on the financial
condition of the ECIP recipient, limit
the ability of the ECIP recipient to make
payments under the terms of an ECIP
instrument, or otherwise impair the
ECIP recipient’s ability to meet its
obligations to the Department of the
Treasury under the ECIP.
(1) A request to make a material
change to compensation, severance pay
or excessive luxury expenditures
policies or procedures, must be
submitted by an ECIP recipient in
writing and received by the Department
of the Treasury at least thirty days prior
to the effective date of the policy
change. The request should describe the
change, reason for the change, and
anticipated financial or other impact of
the change on the condition of the ECIP
recipient.
(2) The request will be deemed
approved thirty days after the ECIP
recipient has provided a complete
request to the Department of the
Treasury, unless, prior to the expiration
of the thirty-day period, the Department
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of the Treasury objects to the proposed
change or notifies the ECIP recipient
that additional time is required in order
to complete review of the proposed
change to policy or procedures
§ 35.23 Restrictions on dividends, share
buybacks, and other capital distributions.
(a) Restriction on capital distributions
due to nonpayment. An ECIP recipient
shall not make any capital distribution
on a non-senior security, unless:
(1) If the ECIP investment is in the
form of preferred stock, the ECIP
recipient has paid in full the dividends
for the last completed dividend period
on the preferred stock; or
(2) If the ECIP investment is in a form
other than preferred stock (including,
subordinated debt), the ECIP recipient
has paid in full the principal, interest,
and other amounts due and payable
under the terms of the ECIP investment,
and no amount that has been deferred
remains unpaid.
(b) Limit on amount of capital
distributions. (1) If an ECIP recipient is
an insured depository institution, bank
holding company, or savings and loan
holding company, the ECIP recipient
shall obtain the approval of the
Department of the Treasury prior to
making any capital distribution if the
total of capital distributions made
during the calendar year, including the
proposed capital distribution, exceeds
its eligible distributable income;
provided, however, that any prior
approval of a capital distribution by the
Department of the Treasury does not
supersede any applicable regulatory
requirements of the ECIP recipient’s
appropriate Federal banking agency, or
other actions taken by such agency. For
purposes of this paragraph, ‘‘eligible
distributable income’’ means the sum of
the ECIP recipient’s reported year-todate net income as of the end of the
most recent calendar quarter, plus net
income for the two preceding calendar
years, less any dividends or
distributions for the year to date as of
the end of the most recent calendar
quarter and the two preceding calendar
years, where each amount is calculated
in accordance with the instructions to
the Call Report or applicable reporting
form.
(2) If the ECIP recipient is federally
insured credit union, the ECIP recipient
shall obtain the Department of the
Treasury’s prior approval to make any
capital distributions if the distribution
would:
(i) In the case of a dividend, be
payable from retained earnings (as
defined in 12 CFR 702.2(f)) other than
undivided earnings; or
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13457
(ii) Cause the ECIP recipient’s net
worth classification to fall below
‘‘adequately capitalized’’ (as defined in
12 CFR 702.102(a)(2)).
(c) Exception for Subchapter S
Corporations and other pass-through
entities. Notwithstanding anything to
the contrary in paragraphs (a) and (b) of
this section, any ECIP recipient that is
an S corporation, as defined in 26 U.S.C.
1361(a), or other pass-through entity
may make capital distributions, to the
extent reasonably required to cover its
owners’ tax obligations in respect to the
entity’s earnings. Such distributions
shall be subject to an annual
reconciliation, with any surplus or
deficiency to be deducted or added to
distributions, as applicable, in the
following year. Any tax-related
distributions permitted under this
paragraph (c) must also comply with
any applicable limitations or
determinations established by an ECIP
recipient’s Federal regulators.
§ 35.24
Annual certification
On an annual basis an ECIP recipient
shall, in accordance with the terms and
conditions of its ECIP investment
agreement, submit to the Department of
the Treasury a certification executed by
two senior executive officers (one of
which must be either its principal
executive officer or principal financial
officer) that the ECIP recipient is in
compliance with each of the excessive
compensation, severance pay, and
excessive or luxury expenditures
requirements and restrictions on capital
distributions set forth in §§ 35.22 and
35.23.
§ 35.25
Exemptive relief.
The Department of the Treasury may
grant exemptions or waivers from some
or all of the restrictions on share
buybacks and dividend payments under
this part if such exemption or waiver is
necessary or appropriate to effectuate
the goals of the ECIP or to protect the
public interest. Such exemptions or
waivers may be subject to such terms
and conditions as deemed necessary or
appropriate by the Department of the
Treasury.
Appendix A to 31 CFR Part 35—
Emergency Capital Investment Program
Model Excessive or Luxury
Expenditures Policy
I. Introduction
A participant in the Emergency Capital
Investment Program (ECIP recipient, as
defined at 31 CFR 35.21) is required to
establish and maintain policies designed to
eliminate excessive or luxury expenditures.
The term ‘‘excessive or luxury expenditures’’
means excessive expenditures on any of the
following to the extent such expenditures are
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not reasonable expenditures for staff
development, reasonable performance
incentives, or other similar reasonable
measures conducted in the normal course of
the ECIP recipient’s business operations: (1)
Entertainment or events; (2) office and
facility renovations; (3) aviation or other
transportation services; (4) tax gross-ups; and
(5) other similar items, activities, or events
for which the ECIP recipient may reasonably
anticipate incurring expenses, or reimbursing
an employee for incurring expenses.
(1) To facilitate compliance with this
requirement, the Department of the Treasury
is making available a model excessive or
luxury expenditures policy. An ECIP
recipient may refer to this model policy for
guidance in satisfying the requirement at 31
CFR 35.22(c) to adopt and maintain an
excessive or luxury expenditures policy.
Alternatively, ECIP recipients may use other
forms of, or existing policies relating to,
excessive or luxury expenditures, provided
that such other forms or policies satisfy all
the requirements of the regulation at 31 CFR
35.22(c).
(2) An ECIP recipient’s luxury or excessive
expenditure policy should be posted on the
ECIP recipient’s website. Any material
amendments to an ECIP recipient’s excessive
or luxury expenditures policy must made in
accordance with the provisions set forth in
31 CFR 35.22(d) (Material changes in policies
or procedures). If the ECIP recipient makes
any material amendments to this policy, then
the ECIP recipient must submit a copy of the
amended policy to the Department of the
Treasury and post the amended policy on the
ECIP recipient’s website. ECIP recipients
should refer to 31 CFR part 35, subpart B for
additional information regarding definitions
of terms used in the model policy, disclosure,
material changes, certification, and other
compliance requirements.
II. Model Excessive or Luxury Expenditures
Policy
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A. Purpose
The purpose of this policy is to establish
parameters and internal controls governing
the expenditures of [NAME OF ECIP
RECIPIENT] (together with its subsidiaries
and controlled affiliates, referred to hereafter
as the Organization). Expenditures of the
Organization should be customary, prudent,
consistent with applicable laws and
regulations, and reasonably related to the
Organization’s business objectives and needs.
This policy identifies expenditures that are
excessive or luxury expenditures, creates
processes that are reasonably designed to
eliminate such expenditures, and establishes
accountability for compliance. Routine
operating expenses, capital expenditures, and
other reasonable expenses are not prohibited
by this policy.
B. Authority
The Organization has authority to provide
compensation and benefits that are
reasonable. This policy establishes a
prohibition on expenditures that are
excessive or luxury expenditures as required
by the Department of the Treasury’s
Emergency Capital Investment Program
regulations (31 CFR part 35), and as may be
required by other statutes and regulations.
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16:19 Mar 08, 2021
Jkt 253001
C. Responsibility
This policy is the responsibility of the
Organization’s board of directors (board). The
board has approved this policy and will
review compliance with this policy no less
frequently than annually, and summary data
on excessive or luxury expenditures will be
reported to the board as part of the
compliance review.
D. Scope
This policy applies to all employees,
officers, and directors of the Organization
with regard to any expenditure of the
Organization. In making any expenditure on
behalf of the Organization, employees,
officers, and directors should consider
whether the expenditure is an excessive or
luxury expenditure that is prohibited under
this policy.
E. Excessive or Luxury Expenditures
‘‘Excessive or luxury expenditures’’ means
excessive expenditures on any of the
following to the extent not reasonable or
appropriate expenditures for business
development, staff development, reasonable
performance incentives, or other similar
reasonable measures conducted in the
normal course of the Organization’s business
operations:
(1) Entertainment or events. This category
includes fees, dues, tickets costs related to
social, athletic, artistic and dining clubs,
activities, celebrations or other events, and
similar expenditures. Expenditures for
charitable contributions and charitable
events are not prohibited under this policy.
Entertainment or events expenditures in an
amount less than $lll per instance, and
$lll on an annual aggregate basis per
individual, are exempt from this policy.
(2) Office and facility renovations. This
category includes costs and allowances for
office renovation, including expenditures
related to furniture, art, office
personalization, interior finishing, design
and decoration, and similar expenditures.
Office and facility renovations expenditures
in an amount less than $lll per instance,
and $lll on an annual aggregate basis per
individual, are exempt from this policy.
(3) Aviation or other transportation
services. (i) This category includes charter
fees, tickets, slip or docking fees, vehicle
installment payments, reservation and travel
agent expenses, and similar expenditures
associated with transportation services (e.g.,
airline, train, rental cars, or vans). Mileage
reimbursable according to current Internal
Revenue Service mileage rates is exempt
from this policy. Transportation services in
an amount less than $lll per instance,
and $lll on an annual aggregate basis per
individual, are exempt from this policy.
(ii) The principal executive officer may
establish or delegate to an appropriate
executive officer the authority to establish
processes for reimbursement of reasonable
travel expenditures, which processes must be
reviewed by executive management no less
frequently than annually.
(4) Tax gross-ups. This category includes
any reimbursement of taxes owed with
respect to any compensation. This category
does not apply to tax equalization agreements
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Frm 00016
Fmt 4700
Sfmt 4700
for employees subject to tax from a non-U.S.
jurisdiction.
(5) Other similar items, activities, or events
for which the Organization may reasonably
anticipate incurring expenses or reimbursing
an employee for incurring expenses. (i)
Expenditures related to other items not listed
in the preceding categories are exempt from
this policy in an amount less than $lll
per instance, and together with all
expenditures permitted under this policy,
may not exceed $lll on an annual
aggregate basis per individual.
(ii) For the avoidance of doubt, reasonable
capital investments in technology,
equipment, and similar items that expand the
long-term capability of an ECIP recipient to
provide products and services to its
customers and community are not excessive
or luxury expenditures.
(iii) The principal executive officer may
establish or delegate to an appropriate
executive officer the authority to establish
processes for the evaluation and approval of
expenditures in the preceding categories that
are not luxury or excessive expenditures and
that are not otherwise exempt from this
policy. These processes must be reviewed by
executive management no less frequently
than annually, as well as any additional
threshold expenditure amounts per item,
activity, or event, or a threshold expenditure
amount per employee receiving the item or
participating in the activity or event under
this policy. Such approvals must be reported
to the board of directors (which may be in
an appropriate summary form) no less
frequently than annually.
F. Exceptions or Violations
(1) Any exception or violation of this
policy must be promptly reported to the
Organization’s (i) principal executive officer,
(ii) officer with primary responsibility for the
Organization’s compliance function, or (iii)
officer designated with primary
responsibility for overseeing the
administration, monitoring, and compliance
with this policy. Exceptions and violations
must be reported to the board of directors no
less frequently than annually, or more
frequently as the nature and severity of
violation may warrant. All employees,
officers, and directors of the Organization
must adhere to this policy and will be held
accountable for compliance. Any employee
or officer who violates this policy may be
subject to disciplinary action up to and
including termination of employment.
(2) Any employee or officer that is aware
of any circumstance that may indicate a
violation of this policy is required to report
such circumstance to their supervisor or the
Organization’s principal compliance officer
or compliance group. The Organization
prohibits retaliation against any employee or
officer for making a good faith report of
actual or suspected violations of the
Organization’s code of conduct, laws,
regulations, or other Organization policies,
including this policy. A finding of retaliation
against any such employee or officer may
result in disciplinary action up to and
including termination. Failure to promptly
report known violations by others may also
be deemed a violation of the Organization’s
code of conduct.
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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Rules and Regulations
(3) Employees and officers may ask
questions, raise concerns, or report instances
of non-compliance with this policy and/or
any of the existing underlying relevant
policies by contacting the following:
[COMPLIANCE HELP LINE OR E–MAIL].
G. Certification
On an annual basis, the ECIP recipient will
deliver to the Department of the Treasury a
certification, executed by two senior
executive officers (one of which must be
either the ECIP recipient’s principal
executive officer or principal financial
officer) certifying that (i) the Organization is
in compliance with this policy and (ii) the
approval of any expenditure requiring the
prior approval of any senior executive officer,
any executive officer of a substantially
similar level of responsibility, or the board of
directors (or a committee of such board), was
properly obtained with respect to each such
expenditure.
David Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2021–04900 Filed 3–5–21; 11:15 am]
BILLING CODE 4810–AK–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 62
[EPA–R03–OAR–2019–0527.; FRL–10020–
90–Region 3]
Approval and Promulgation of State
Air Quality Plans for Designated
Facilities and Pollutants; State of
Maryland; Control of Emissions From
Existing Sewage Sludge Incineration
Units; Correction
Environmental Protection
Agency (EPA).
ACTION: Final rule; correction.
AGENCY:
The Environmental Protection
Agency (EPA) issued a final rule on
February 9, 2021 entitled ‘‘Approval
and Promulgation of State Air Quality
Plans for Designated Facilities and
Pollutants; State of Maryland; Control of
Emissions from Existing Sewage Sludge
Incineration Units.’’ This document
corrects an error in the rule language of
the final rule pertaining to EPA’s
approval of Maryland’s negative
declaration regarding the existence of
Sewage Sludge Incineration (SSI) units
in the state submitted by the State of
Maryland.
DATES: Effective on March 11, 2021.
FOR FURTHER INFORMATION CONTACT:
Matthew Willson, Permits Branch
(3AD10), Air & Radiation Division, U.S.
Environmental Protection Agency,
Region III, 1650 Arch Street,
Philadelphia, Pennsylvania 19103. The
telephone number is (215) 814–5795.
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SUMMARY:
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16:19 Mar 08, 2021
Jkt 253001
Mr. Willson can also be reached via
electronic mail at Willson.Matthew@
epa.gov.
SUPPLEMENTARY INFORMATION: On
February 9, 2021, (86 FR 8699), EPA
published a final rule action
announcing our approval of Maryland’s
negative declaration regarding the
existence of SSI units in the state. In the
document, we inadvertently indicated
that a section should be added to the
Code of Federal Regulations (CFR) at 40
CFR 62.4690 for air emissions from
existing SSI units. The intent of the rule
was to add a section for air emissions
from existing SSI units at 40 CFR
62.5170. This document corrects the
erroneous language.
Need for Correction
As published, the final rule would
amend subpart T, which is for the
approval of state plans for designated
facilities and pollutants for the state of
Louisiana. The intent of the final rule
was to change the approval of state
plans for designated facilities and
pollutants for the State of Maryland.
This correction will ensure that the
correct section of the CFR, which for
Maryland is subpart V, is amended.
Section 553 of the Administrative
Procedure Act, 5 U.S.C. 553(b)(3)(B),
provides that, when an agency for good
cause finds that notice and public
procedure are impracticable,
unnecessary or contrary to the public
interest, the agency may issue a rule
without providing notice and an
opportunity for public comment. We
have determined that there is good
cause for making this rule final without
prior proposal and opportunity for
comment because we are merely
correcting an incorrect citation in a
previous action. Thus, notice and public
procedure are unnecessary. We find that
this constitutes good cause under 5
U.S.C. 553(b)(3)(B).
In FR doc. 2021–02617 appearing on
page 8699 in the Federal Register of
Tuesday, February 9, 2021 the following
corrections are made:
Subpart V—[Corrected]
1. On page 8700, in the third column,
in part 62, in amendment 2, the
instruction ‘‘Add an undesignated
center heading and § 62.4690 to read as
follows:’’ is corrected to read ‘‘Add an
undesignated center heading and
§ 62.5170 to read as follows:’’
■ 2. On page 8700, in the third column,
the section heading ‘‘§ 62.4690
Identification of plan—negative
declaration.’’ is corrected to read
‘‘§ 62.5170 Identification of plan—
negative declaration.’’
■
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13459
Dated: March 3, 2021.
Diana Esher,
Acting Regional Administrator EPA Region
III.
[FR Doc. 2021–04827 Filed 3–8–21; 8:45 am]
BILLING CODE 6560–50–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 180
[EPA–HQ–OPP–2018–0551; FRL–10019–19]
Fluindapyr; Pesticide Tolerances
Environmental Protection
Agency (EPA).
ACTION: Final rule.
AGENCY:
This regulation establishes
tolerances for residues of fluindapyr in
or on multiple commodities which are
identified and discussed later in this
document. FMC Corporation requested
these tolerances under the Federal Food,
Drug, and Cosmetic Act (FFDCA).
DATES: This regulation is effective
March 9, 2021. Objections and requests
for hearings must be received on or
before May 10, 2021, and must be filed
in accordance with the instructions
provided in 40 CFR part 178 (see also
Unit I.C. of the SUPPLEMENTARY
INFORMATION).
SUMMARY:
The docket for this action,
identified by docket identification (ID)
number EPA–HQ–OPP–2018–0551, is
available at https://www.regulations.gov
or at the Office of Pesticide Programs
Regulatory Public Docket (OPP Docket)
in the Environmental Protection Agency
Docket Center (EPA/DC), West William
Jefferson Clinton Bldg., Rm. 3334, 1301
Constitution Ave. NW, Washington, DC
20460–0001. The Public Reading Room
is open from 8:30 a.m. to 4:30 p.m.,
Monday through Friday, excluding legal
holidays. The telephone number for the
Public Reading Room is (202) 566–1744,
and the telephone number for the OPP
Docket is (703) 305–5805.
Due to the public health concerns
related to COVID–19, the EPA Docket
Center (EPA/DC) and Reading Room is
closed to visitors with limited
exceptions. The staff continues to
provide remote customer service via
email, phone, and webform. For the
latest status information on EPA/DC
services and docket access, visit https://
www.epa.gov/dockets.
FOR FURTHER INFORMATION CONTACT:
Marietta Echeverria, Registration
Division (7505P), Office of Pesticide
Programs, Environmental Protection
Agency, 1200 Pennsylvania Ave. NW,
Washington, DC 20460–0001; main
ADDRESSES:
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Agencies
[Federal Register Volume 86, Number 44 (Tuesday, March 9, 2021)]
[Rules and Regulations]
[Pages 13449-13459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04900]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
31 CFR Part 35
[Docket No. TREAS-DO-2021-0004]
RIN 1505-AC76
Emergency Capital Investment Program--Restrictions on Executive
Compensation, Share Buybacks, and Dividends
AGENCY: Department of the Treasury.
ACTION: Interim final rule and request for public comment.
-----------------------------------------------------------------------
SUMMARY: Section 104A of the Community Development Banking and
Financial Institutions Act of 1994, which was added by the Consolidated
Appropriations Act, 2021, establishes the Emergency Capital Investment
Program to support capital investments in low- and moderate-income
community financial institutions. The program is available to eligible
minority depository institutions and community development financial
institutions that are insured depository institutions, bank holding
companies, savings and loan holding companies, or federally insured
credit unions. Under Section 104A, the Secretary of the Treasury is
required to issue rules setting restrictions on executive compensation,
share buybacks, and dividend payments for recipients of capital
investments under the program. This interim final rule establishes
these restrictions.
DATES:
Effective date: This interim final rule is effective March 9, 2021.
Comment date: Comments must be received on or before April 8, 2021.
ADDRESSES: You may submit comments identified by number TREAS-DO-2021-
0004 through the Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments.
Treasury will post all comments on www.regulations.gov. If you wish
to submit confidential business information (CBI) as defined in the
User Notice at www.regulations.gov, please send an email to
[email protected]. Highlight the information that you consider
to be CBI and explain why you believe Treasury should hold this
information as confidential. Treasury will review the information and
make the final determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: For further information regarding this
interim final rule contact Brian Donovan, Emergency Capital Investment
Program, Treasury, at (202) 653-0371 or [email protected], or
Eric Froman, Assistant General Counsel (Banking and Finance), Treasury,
at (202) 622-1942 or [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background Information
II. Comments and Immediate Effective Date
III. Interim Final Rule
A. Background on the ECIP
B. Overview of the Interim Final Rule
1. Restrictions on Compensation
2. Restrictions on Dividends, Share Buybacks, and Other Capital
Distributions
IV. Regulatory Analyses
A. Administrative Procedure Act
B. National Environmental Policy Act
C. Paperwork Reduction Act
D. Regulatory Flexibility Act
E. Regulatory Planning and Review
F. Executive Order 13132
G. Congressional Review Act
I. Background Information
On December 27, 2020, the Consolidated Appropriations Act, 2021
(Pub. L. 116-260), was signed into law. It added Section 104A of the
Community Development Banking and Financial Institutions Act of 1994
(the Act) (12 U.S.C. 4701 et seq.), which was enacted as part of the
Riegle Community Development and Regulatory Improvement Act of 1994
(Pub. L. 103-325). Section 104A authorizes the Secretary of the
Treasury to establish the Emergency Capital Investment Program (ECIP or
Program) to make investments in low- and moderate-income community
financial institutions. These investments are to support the efforts of
low- and moderate-income community financial institutions to, among
other things, provide loans, grants, and forbearance for small
businesses, minority-owned businesses, and consumers, especially in
low-income and underserved communities, including persistent poverty
counties, which may be disproportionately impacted by the economic
effects of the COVID-19 pandemic.
Under Section 104A(h) of the Act, the Department of the Treasury
(Treasury) must issue rules setting restrictions on executive
compensation, share buybacks, and dividend payments for recipients of
capital investments under ECIP. This rulemaking establishes those
restrictions, which are described in section III below.
II. Comments and Immediate Effective Date
ECIP is intended to be used to make investments in low- and
moderate-income community financial institutions expeditiously.\1\
Section 104A(h) of the Act requires Treasury to issue rules no later
than 30 days after the statute's effective date that set restrictions
on executive compensation, share buybacks, and dividend payments for
recipients of capital investments under ECIP. This legislative mandate,
along with the dramatic and ongoing effects of the COVID-19 pandemic--
the public health crisis, continuing closures of small businesses and
minority-owned businesses, and heightened consumer unemployment,
especially in low-income and underserved communities--provides good
cause for Treasury to issue this interim final rule without advance
notice and public comment and to dispense with the 30-day delayed
effective date provided in the Administrative Procedure Act (5 U.S.C.
553). The immediate effective date of this interim final rule will
benefit low- and moderate-income community financial institutions, as
well as the communities served by such institutions, by allowing low-
and moderate-income community financial institutions to expeditiously
apply for capital investments with a full understanding of the
executive compensation, share buyback, and dividend payment
restrictions that will
[[Page 13450]]
apply to participants in the Program. Otherwise, potential recipients
of capital investments under ECIP could decide not to participate in
the Program or to delay their applications for a material period of
time pending the establishment of these requirements, which would
reduce or delay the provision of much-needed assistance to communities
that have suffered economic impairment due to the COVID-19 pandemic.
Although this interim final rule is effective immediately, comments are
solicited from the public on all aspects of the interim final rule.
Comments must be submitted on or before April 8, 2021. Treasury will
consider these comments and the need for making any revisions as a
result of these comments.
---------------------------------------------------------------------------
\1\ For example, section 104A(d)(1) of the Act requires Treasury
to begin accepting applications for capital investments under ECIP
within 30 days after enactment of the statute, and section
104A(h)(1) requires Treasury to issue rules setting restrictions on
executive compensation, share buybacks, and dividend payments for
ECIP recipients within 30 days after enactment of the statute.
---------------------------------------------------------------------------
III. Interim Final Rule
A. Background on the ECIP
The purpose of ECIP is to support the efforts of low- and moderate-
income community financial institutions to, among other things, provide
loans, grants, and forbearance for small businesses, minority-owned
businesses, and consumers, especially in low-income and underserved
communities, including persistent poverty counties, which may be
disproportionately impacted by the economic effects of the COVID-19
pandemic.\2\ To support these objectives, the Act makes up to $9
billion available to Treasury to make capital investments in minority
depository institutions and community development financial
institutions that are (1) insured depository institutions that are not
controlled by eligible bank holding companies or eligible savings and
loan holding companies, (2) bank holding companies, (3) savings and
loan holding companies, or (4) federally insured credit unions. Certain
additional eligibility criteria apply, including a requirement for
applicants to provide Treasury with an investment and lending plan that
provides certain specified information concerning the applicant's
lending history and plans.\3\
---------------------------------------------------------------------------
\2\ Section 104A(b)(2) of the Act.
\3\ Sections 104A(d)(3)-(4), 104A(i) of the Act.
---------------------------------------------------------------------------
A community development financial institution or minority
depository institution that submits an application and is selected to
participate in the Program (ECIP recipient) will receive a capital
investment from Treasury.4 5 Consistent with statutory
requirements, the investment by Treasury will take the form of
preferred stock, except in cases where Treasury determines that an
institution cannot feasibly issue preferred stock, Treasury may
purchase subordinated debt instruments.\6\ The statute sets forth
certain economic terms of the capital investments under ECIP \7\ and
limitations on the amount of capital investments Treasury may purchase
from individual institutions.\8\ In addition, the statute prohibits
institutions with certain types of conflicts of interest from
participating in ECIP.\9\ Treasury's authority to make new capital
investments in ECIP will end six months after the date on which the
national emergency concerning the COVID-19 outbreak declared by the
President on March 13, 2020 under the National Emergencies Act (50
U.S.C. 1601 et seq.) terminates.
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\4\ An ECIP capital investment may be treated as equity or
subordinated debt for accounting purposes depending on the type of
instrument issued and the corporate form and regulatory
classification of the ECIP participant.
\5\ Currently, the only Federal credit unions that may accept
these types of investments as secondary capital under the secondary
capital rules of the National Credit Union Administration (NCUA) are
those with a designation of low-income status. See 12 CFR 701.34(b).
Credit unions that do not meet the low-income credit union
designation may participate through the issuance of subordinated
debt, but the subordinated debt would not be secondary capital.
\6\ Section 104(d)(5)(B) of the Act.
\7\ Sections 104A(d)(5)-(8) of the Act.
\8\ Sections 104A(e), (f) of the Act.
\9\ Section 104A(h) of the Act.
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B. Overview of the Interim Final Rule
This interim final rule establishes restrictions on executive
compensation, share buybacks, and dividend payments, as required by the
Act. In developing these restrictions, Treasury has considered two
primary objectives. First, these restrictions should seek to promote
the integrity of ECIP by ensuring that the funds provided under the
Program are used to provide loans, grants, and forbearance for small
businesses, minority-owned businesses, and consumers, especially in
low-income and underserved communities. Second, the restrictions
generally should seek to encourage a large number of minority
depository institutions and community development financial
institutions to participate in ECIP, because the Program will have the
most beneficial impact on the intended communities if a broad range of
institutions participate in the Program.
The restrictions under this interim final rule generally apply to
an ECIP recipient during the ``ECIP period,'' defined as the period
from the date the ECIP makes its investment until the earliest of (i)
the date on which the ECIP recipient has fully redeemed or repaid the
capital investment received under ECIP; (ii) the date on which the
capital investment the ECIP recipient received under ECIP is no longer
held, in full or in part, by Treasury or a Treasury affiliate, or a
custodian, trustee, or agent acting on behalf of Treasury or a Treasury
affiliate, and (iii) the date that is ten years after the ECIP
investment date. The restrictions apply to the ECIP recipient on a
consolidated basis. Treasury anticipates that the ECIP period will
provide sufficient time to ensure that ECIP investments are deployed in
a manner that supports the statutory objectives. Accordingly, the
requirements of the interim final rule will cease to apply when the
ECIP investment is no longer held by Treasury or an entity established
by Treasury (Treasury affiliate).
1. Restrictions on Compensation
The restrictions on executive compensation under the interim final
rule include (i) a requirement to ensure that the total compensation
paid to senior executive officers is appropriate and not excessive;
(ii) a restriction on severance pay for an ECIP recipient's senior
executive officers if the ECIP recipient is in troubled condition; and
(iii) a requirement to adopt policies and procedures prohibiting
excessive or luxury expenditures (as defined below). Each of these
compensation-related restrictions is intended to help ensure that the
proceeds of ECIP investments have the effect intended by Section 104A
of the Act and are not to fund excessive compensation for ECIP
recipients' executives.
The restrictions on excess compensation apply to total
compensation, which is defined as all compensation, other than any
severance payment, provided by an ECIP recipient to an officer or
employee, including salary, wages, bonuses, awards of stock, deferred
compensation, and other financial benefits.
A ``senior executive officer'' means an ECIP recipient's president,
any vice president in charge of a principal business unit division or
function (such as sales, administration, or finance), any other officer
who performs a policy making function, or any other person who performs
similar policy making functions.
i. Policies and Procedures Prohibiting Excessive Compensation
Under the interim final rule, an ECIP recipient is required to
ensure that the total compensation paid to its senior executive
officers is appropriate and not excessive. Unless informed otherwise by
Treasury, an ECIP recipient is considered to have satisfied the
requirements regarding excessive executive compensation under the
[[Page 13451]]
interim final rule if it maintains compliance with the guidelines or
standards established by its primary Federal regulator that address
excessive compensation, corporate practices, and operations.
Specifically, ECIP recipients that are insured depository institutions
are subject to the Interagency Guidelines Establishing Standards for
Safety and Soundness as issued by the appropriate Federal banking
agency for the particular ECIP recipient.\10\ Bank holding companies
and savings and loan holding companies are required to maintain
compliance with corporate practice \11\ and operations requirements
\12\ issued by the Board of Governors of the Federal Reserve System
(Federal Reserve Board), and, under the interim final rule, to ensure
their subsidiary insured depository institutions adopt and maintain
policies and procedures that are consistent with the applicable
guidelines or standards established by their primary Federal regulators
that address excessive compensation. In addition, federally insured
credit unions must maintain compliance with the requirements on
compensation and benefits for federally insured credit unions as issued
by the National Credit Union Administration (NCUA).\13\ Treasury
reserves the authority to take action as necessary to address potential
anti-evasion concerns relating to the interim final rule's requirements
for ECIP participants.
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\10\ For national banks and Federal savings associations, 12 CFR
part 30, Appendix A; state member banks, 12 CFR part 208, Appendix
D-1; and insured state nonmember banks and state savings
associations, 12 CFR part 364, Appendix A.
\11\ 12 CFR 225.4.
\12\ 12 CFR 238.8.
\13\ 12 CFR 701.19(a); 12 CFR 701.21(c)(8); 12 CFR
702.203(b)(10); 12 CFR 702.204(b)(10).
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ii. Limit on Severance Pay
Under the interim final rule, an ECIP recipient is prohibited from
making excessive severance payments to a senior executive officer.
Severance pay is defined to include all types of cash payments,
benefits, and other amounts paid or provided in connection with an
individual's termination of employment, except for payment for services
performed or benefits that were accrued prior to termination of
employment or otherwise accrued with respect to services performed.
Unless informed otherwise by Treasury, an ECIP recipient that is an
insured depository institution, bank holding company, or savings and
loan holding company is considered to have satisfied the requirements
regarding severance payments if it maintains compliance with the limits
and prohibitions on the ability of insured depository institutions and
their affiliated holding companies to enter into contracts to pay and
to make golden parachute and indemnification payments to institution-
affiliated parties, as issued by the FDIC.\14\ The FDIC rules place
restrictions on payments to institution-affiliated parties whenever an
insured depository institution or depository institution holding
company is in ``troubled condition,'' as determined by the appropriate
Federal banking agency. An ECIP recipient that is not designated in
troubled condition by the appropriate Federal banking agency during the
ECIP period generally would not be subject to restrictions on severance
payments under the interim final rule. Similarly, a federally insured
credit union is considered to have satisfied the requirements regarding
severance payments if it maintains compliance with the limits and
prohibitions on the ability of federally insured credit unions to enter
into contracts to pay and to make golden parachute and indemnification
payments to institution-affiliated parties as issued by the NCUA.\15\
This restriction is designed to align the requirements of the ECIP with
existing standards applicable to ECIP recipients under regulations
issued by Federal regulators.
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\14\ 12 CFR part 359.
\15\ 12 CFR part 750.
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iii. Limit on Excessive or Luxury Expenditures
Under the interim final rule, ECIP recipients are required to
establish and maintain policies designed to eliminate excessive or
luxury expenditures. The term ``excessive or luxury expenditures'' is
defined as excessive expenditures on any of the following to the extent
such expenditures are not reasonable expenditures for staff
development, reasonable performance incentives, or other similar
reasonable measures conducted in the normal course of the ECIP
recipient's business operations: (1) Entertainment or events; (2)
office and facility renovations; (3) aviation or other transportation
services; (4) tax gross-ups (i.e., reimbursement of taxes owed with
respect to any compensation); and (5) other similar items, activities,
or events for which the ECIP recipient may reasonably anticipate
incurring expenses, or reimbursing an employee for incurring expenses.
Capital investments, including investments in technology, equipment,
and similar items that expand the long-term capability of an ECIP
recipient to provide products and services to its customers and
community are not excessive or luxury expenditures.
The interim final rule requires an ECIP recipient to adopt and
maintain an ``excessive or luxury expenditures policy'' that sets forth
written standards applicable to the ECIP recipient and its employees
that address the five categories of expenses set forth in the
definition of ``excessive or luxury expenditures'' and that are
reasonably designed to eliminate excessive or luxury expenditures. The
standards must (1) identify the types or categories of expenditures
which are prohibited; (2) identify the types or categories of
expenditures for which prior approval is required (which may include a
threshold expenditure amount per item, activity, or event or a
threshold expenditure amount per employee receiving the item or
participating in the activity or event); (3) provide reasonable
approval procedures for expenditures requiring prior approval; (4)
require the ECIP recipient to deliver a certification, executed by two
senior executive officers (one of which must be either the ECIP
recipient's chief executive officer (or individual performing a similar
function) (defined as the ``principal executive officer'') or its chief
financial officer (or individual performing a similar function)
(defined as the ``principal financial officer'') that the approval of
any expenditure requiring the prior approval of any senior executive
officer, any executive officer of a substantially similar level of
responsibility, or the ECIP recipient's board of directors (or a
committee of such board of directors) was properly obtained with
respect to each such expenditure; (5) require the prompt internal
reporting of violations to an appropriate person or persons identified
in this policy; and (6) mandate accountability for adherence to the
policy. The requirement to establish a policy regarding excessive or
luxury expenditures is intended to promote the integrity of ECIP by
ensuring that the funds provided under the Program are used to provide
loans, grants, and forbearance, without restricting ECIP participants'
discretion to establish policies and procedures that are tailored to
meet the needs and business objectives of their respective
organizations.
To facilitate compliance with this requirement, Treasury is making
available to ECIP recipients a form of excessive or luxury expenditures
policy in Appendix A to the interim final rule. An ECIP recipient may
use this form to satisfy the requirement in the interim final rule to
adopt and maintain an excessive or luxury expenditures policy.
[[Page 13452]]
Alternatively, an ECIP recipient may use other forms or existing
policies relating to excessive or luxury expenditures, but such other
forms or policies must satisfy all the requirements of the interim
final rule.
iv. Material Changes to Policies or Procedures
An ECIP recipient must obtain prior approval from Treasury before
making any material change to the policies or procedures that it
maintains for purposes of compliance with the compensation, severance
pay and excessive or luxury expenditures requirements described in the
preceding discussion.\16\ A change to such policies or procedures will
be considered material if the change is likely to have a negative
effect on the financial condition of the ECIP recipient, limit the
ability of the ECIP recipient to make payments under the terms of an
ECIP instrument, or otherwise impair the ECIP recipient's ability to
meet its obligations to Treasury under the Program. An ECIP recipient
would bear the initial responsibility for determining whether a change
in policy or procedures is material; however, Treasury would retain the
authority to take enforcement as appropriate (i.e., an ECIP recipient
should not revise its compensation policy to permit or pay excessive
compensation if its cash is insufficient to pay dividends on ECIP
instruments). A request by an ECIP recipient to make a material change
to its compensation, severance pay, or excessive or luxury expenditures
policies or procedures must be submitted to Treasury in writing at
least 30 days prior to the effective date of the policy change. The
notice will be deemed approved 30 days after the ECIP submits the
notice to Treasury unless prior to the expiration of the 30-day period
Treasury (i) objects to the proposed change or (ii) notifies the ECIP
recipient that additional time is required in order to better evaluate
the impact of the proposed change to policy or procedures.
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\16\ Disclosures by ECIP recipients of any proposed material
changes to any such policies or procedures will be subject to their
Federal regulators' applicable restrictions in respect of the
disclosure of confidential supervisory information.
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Treasury specifically solicits comments from members of the public
concerning the following issues:
Question #1: Are the restrictions on compensation sufficiently
tailored to facilitate the ECIP Program objectives without discouraging
participation in the program?
Question #2: Are there other reasonable alternatives to the
Program's excessive or luxury expenditures policy requirement that
would be as effective in ensuring that funds provided under the Program
are used to provide loans, grants, and forbearance, without restricting
ECIP participant discretion to establish policies and procedures that
are tailored to meet the needs and business objectives of their
respective organizations?
Question #3: What additional guidance or clarification regarding
the compensation and expenditure restrictions would help facilitate
compliance with these restrictions and ensure that the restrictions are
working as intended?
2. Restrictions on Dividends, Share Buybacks, and Other Capital
Distributions
The restrictions on dividends, share buybacks, and other capital
distributions under the interim final rule include two components. The
first is a prohibition on discretionary dividends, share buybacks and
other capital distributions on non-senior securities if an ECIP
recipient has not (i) for preferred stock issued to Treasury, paid in
full the dividends for the last completed dividend period, or (ii) for
instruments issued to Treasury other than in the form of preferred
stock, such as subordinated debt, paid all amounts due and payable and
all amounts previously deferred under the terms of the instruments. The
second is a limit on dividends, share buybacks, and other capital
distributions based on separate earnings-based tests for (i) insured
depository institutions, bank holding companies and savings and loan
holding companies, on the one hand, and (ii) federally insured credit
unions, on the other.
However, the interim final rule provides an exception from these
restrictions for ECIP recipients that are S corporations or other pass-
through entities for purposes of the Internal Revenue Code of 1986. The
interim final rule will permit S corporations and other pass-through
entities to make capital distributions to the extent reasonably
required to cover its owners' tax obligations in respect of the
entity's earnings. Such distributions shall be subject to an annual
reconciliation, with any surplus or deficiency to be deducted or added
to distributions, as applicable, in the following year.
The exemption for tax-related distributions in the interim final
rule does not supersede otherwise applicable limitations or
determinations with respect to distributions established by an ECIP
recipient's Federal regulators. Accordingly, tax-related distributions
permitted under the interim final rule must also comply with any
applicable limitations or determinations established by an ECIP
recipient's Federal regulators.
Similar to the restrictions on executive compensation described
above, these limitations on capital distributions are intended to
ensure that the funds provided under ECIP have the effect intended by
Section 104A of the Act, and are not to provide undue compensation to
an ECIP recipient's shareholders or owners. In addition, these
restrictions serve to protect the taxpayer's financial interest in
connection with the instruments issued by an ECIP recipient to Treasury
in connection with the Program.
i. Restriction on Dividends, Share Buybacks and Other Capital
Distributions
The interim final rule defines ``non-senior securities'' as any
equity interests in or other instruments issued by an ECIP recipient
that are pari passu with or junior to Treasury's investment, or equity
interests in or other instruments issued by a depository institution
holding company of which the ECIP recipient is a subsidiary. Under the
interim final rule, an ECIP recipient will be prohibited from making
capital distributions, such as declaring or paying any dividend on, or
purchasing or redeeming, any non-senior securities unless (i) if
Treasury holds shares of preferred stock, the company has paid in full
dividends on the preferred stock with respect to the last completed
dividend period (prior to the current dividend period); or (ii) if
Treasury holds an instrument other than preferred stock (e.g.,
subordinated debt), all amounts due and payable on the instrument have
been paid in full, and no deferred amounts are unpaid. These
restrictions reflect customary contractual protections to prevent an
ECIP recipient from making discretionary distributions on non-senior
securities if payments are not being made to Treasury on its
investment. These restrictions would not prevent an ECIP recipient from
making required, non-discretionary payments on non-senior securities,
such as payments required at stated maturity in accordance with an
instrument's terms, or payments of interest that may not be
deferred.\17\
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\17\ Such payments may be subject to limitations established by
an ECIP recipient's primary Federal regulator.
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For these purposes, a ``capital distributions'' are defined as (i)
dividends, including discretionary
[[Page 13453]]
dividends, on non-senior securities and any other payments on a share
of stock or other equity or equivalent interest, (ii) payments,
including interest payments, on non-senior securities that the issuer
has full discretion to permanently or temporarily suspend without
triggering a default, (iii) redemptions or repurchases of non-senior
securities or (iv) any similar transaction that Treasury determines to
be in substance a capital distribution. Excluded from this definition,
however, are (a) redemptions or repurchases of shares that are part of
an employee stock ownership plan for an ECIP recipient that is not
publicly traded, provided that the repurchase is required solely by
virtue of the Employee Retirement Income Security Act of 1974, as
amended; (b) in the case of federally insured credit unions, payments
of dividends and interest (as defined by 12 CFR 707.2(h) and (o)) on
accounts held by their members and redemptions of membership share
interests upon voluntary or involuntary terminations of membership by a
credit union or its members, as applicable; and (c) solely in the case
of the earnings test described below, redemptions or repurchases of
non-senior securities if the issuer of the non-senior securities being
repurchased or redeemed funds the redemption or repurchase by issuing
at least a corresponding amount of new non-senior securities that rank
equally in liquidation with, receive the same capital treatment as and,
if applicable, have a stated maturity date no earlier than the non-
senior securities being redeemed or repurchased. An extraordinary or
special dividend (which excludes an ordinary dividend on a special
share account) by a federally insured credit union is a capital
distribution and is not subject to the exclusion for payments of
dividends and interest by credit unions on accounts held by their
members.
ii. Limit on the Amount of Capital Distributions
Under the interim final rule, an ECIP recipient will be required to
obtain prior approval from Treasury in order to make capital
distributions in excess of the following earnings-based tests.
Treasury determined that the limits on capital distributions are
appropriate based on a review of publicly available data regarding
average dividend rates among banking organizations with $10 billion or
less in total assets, in the period before the Covid-19 pandemic. Thus,
the limitation on capital distributions strikes an appropriate balance
between allowing ECIP recipients to make capital distributions and
helping to ensure that the proceeds of the ECIP investment are used to
expand lending to low- and moderate-income and other targeted
populations.
A. Earnings Test for Insured Depository Institutions, Bank Holding
Companies, and Savings and Loan Holding Companies
The interim final rule provides that, without prior approval from
Treasury, an ECIP recipient that is an insured depository institution,
bank holding company, or savings and loan holding company may not make
a capital distribution if the total capital distributions made during
the calendar year, including the proposed capital distribution, exceeds
its ``eligible distributable income,'' which is calculated as the sum
of the ECIP recipient's (a) year-to-date net income as of the end of
the most recent calendar quarter, plus net income for the two preceding
calendar years, less (b) any dividends or capital distributions for the
year to date as of the end of the most recent calendar quarter, and for
the two preceding calendar years, where each amount is calculated in
accordance with the instructions to the Call Report or applicable
reporting form. While approval may be awarded by Treasury to make
capital distributions, the interim final rule confirms that such
approval does not supersede any applicable regulatory requirements of
the ECIP recipient's appropriate Federal banking agency, or other
actions taken by such agency.
The ``eligible distributable income'' limit is similar to other
existing earnings limitations on payments of dividends that apply to
certain insured depository institutions.\18\ In light of this
similarity, an ECIP recipient could calculate eligible distributable
income with respect to capital distributions, by applying the
methodology set forth in 12 CFR 5.64 or 12 CFR 208.5, as applicable,
with respect to dividends, by substituting ``capital distributions''
for ``dividends.'' In addition, in the case of 12 CFR 208.5, an ECIP
recipient that is not an insured depository institution would use net
income, as reported in the ECIP recipient's FR Y-9C or FR Y-9SP,
instead of net income as reported in the Reports of Condition and
Income. Treasury anticipates that the operational impact the capital
distribution approval requirement will be nominal and that the approval
requirement will provide meaningful support for the objectives of the
Program.
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\18\ See, e.g., 12 U.S.C. 60 (national banks), 12 CFR 5.64
(national banks), and 12 CFR 208.5 (state member banks).
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B. Earnings Test for Federally Insured Credit Unions
Consistent with existing distribution limitations applicable to
federally insured credit unions,\19\ the interim final rule provides
that, without prior approval by Treasury, an ECIP recipient that is a
federally insured credit union may not make a capital distribution on
any non-senior securities if the distribution would (i) in the case of
a dividend, be payable from retained earnings (as defined in 12 CFR
702.2(f)) other than undivided earnings; or (ii) cause the credit
union's net worth classification to fall below ``adequately
capitalized'' (as defined in 12 CFR 702.102(a)(2)).
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\19\ See 12 CFR 702.403.
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3. Exemptive Relief
Under the interim final rule, Treasury retains authority to grant
waivers or exemptions from the restrictions under the interim final
rule on dividends, share buybacks, and other capital distributions.
Such relief may be granted broadly to all ECIP recipients or to
particular entities. In considering whether to grant exemptive relief,
Treasury will consider whether the relief is necessary or appropriate
to achieve the goals of the ECIP or to protect the public interest.
Such relief may be granted based on terms and conditions as determined
by Treasury, and in making determinations regarding requests for
exemptive relief, Treasury may consult with the primary Federal
regulator when deemed appropriate.
4. Annual Certification and Enforcement
Each ECIP recipient will be required to submit to Treasury on an
annual basis a certification executed by two senior executive officers
(one of which must be either the ECIP recipient's principal executive
officer or principal financial officer) that the ECIP recipient is in
compliance with each of the excessive compensation, severance payments,
excessive or luxury expenditures requirements and restrictions on
capital distributions set forth in the interim final rule. If an ECIP
recipient certifies that it satisfies the severance payments
requirements, Treasury expects that the certification will address only
compliance with the requirements and will neither address whether the
ECIP recipient is in troubled condition for purposes of 12 CFR parts
359 and 750, as applicable, nor contain any confidential supervisory
information subject to applicable disclosure
[[Page 13454]]
restrictions promulgated by the ECIP recipients' Federal regulators.
The interim final rule is promulgated under Section 104A of the
Act, and agreements between ECIP recipients and Treasury in connection
with the Program will be entered into under the Act. Treasury may take
action or directly address noncompliance with the requirements of this
interim final rule or Program agreements. In addition, Treasury may, in
its discretion, inform the appropriate Federal banking agencies of any
apparent violations by ECIP recipients of the interim final rule or
Program agreements between ECIP recipients and Treasury.\20\
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\20\ See, e.g., 12 U.S.C. 4717(b).
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Treasury specifically solicits comments from members of the public
concerning the following issues:
Question #4: Are the restrictions on dividends, share buybacks, and
other capital distributions sufficiently tailored to facilitate the
ECIP Program objectives without discouraging participation in the
program?
Question #5: What would be the advantages and disadvantages of
aligning limitations on capital distributions under the interim final
rule with limitations applicable to each entity pursuant to the
requirements of its appropriate Federal banking regulator? What are the
advantages and disadvantages of calculating eligible distributable
income based on (i) income as of the end of the most recent calendar
quarter and (ii) year to date reported net income? What are the
advantages and disadvantages of calculating the capital distribution
limitation using (i) year-to-date dividends or capital distributions;
(ii) reported dividends or capital distributions; and (iii) year-to-
date dividends or capital distributions as of the end of the most
recent calendar quarter?
IV. Regulatory Analyses
A. Administrative Procedure Act
Pursuant to authority at 5 U.S.C. 553(b)(B), the interim final rule
is exempt from the rulemaking requirements of the Administrative
Procedure Act (APA) (5 U.S.C. 551 et seq.), including the requirement
to provide prior notice and an opportunity for public comment for the
good cause shown in Sections I and II of this SUPPLEMENTARY
INFORMATION.
B. National Environmental Policy Act
The interim final rule has been reviewed in accordance with 12 CFR
part 1815, the CDFI Fund's environmental quality regulations published
pursuant to the National Environmental Protection Act of 1969 (NEPA).
It is the determination of Treasury that the interim final rule does
not constitute a major Federal action significantly affecting the
quality of the human environment and, in accordance with NEPA and the
CDFI Fund's environmental quality regulations at 12 CFR part 1815,
neither an Environmental Assessment nor an Environmental Impact
Statement is required.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA)
states that no agency may conduct or sponsor, nor is the respondent
required to respond to, an information collection unless it displays a
currently valid OMB control number.
The interim final rule will add current information collections for
excessive or luxury expenditure policy and exemptive relief requests to
the ECIP application process. The ``excessive or luxury policy''
collection requirements include the adoption and maintenance of the
policy (detailed in section 1(iii)); written notices of change
(detailed in section 1(iv)); and annual certifications (detailed in
section 4). The exemptive relief requests are detailed in section 3.
The addition of these collections will increase total annual burden by
44,014 hours: The policy requirements are expected to take 1,100
respondents 40 hours to complete for an annual burden of 44,000 hours,
and it is estimated that 55 (or 5%) of respondents will submit an
exemptive relief request that will take 15 minutes to complete, for an
annual burden of 14 hours. The OMB Control Number for the Emergency
Capital Investment Program information collection is 1505-0267.
Comments concerning suggestions for reducing the burden of
collections of information should be directed to the Deputy Director
for Policy and Programs, Community Development Financial Institutions
Fund, 601 13th Street, NW, Suite 200 South, Washington, DC 20005.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
requires an agency to consider whether the rules it proposes will have
a significant economic impact on a substantial number of small
entities. The RFA applies only to rules for which an agency publishes a
general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). As
discussed above, consistent with 5 U.S.C. 553(b)(B), Treasury has
determined for good cause that general notice and opportunity for
public comment is unnecessary, and therefore is not issuing a notice of
proposed rulemaking. Because no notice of proposed rulemaking is
required for this interim final rule, the provisions of the RFA do not
apply. Nevertheless, Treasury seeks comment on whether, and the extent
to which, the interim final rule would affect a significant number of
small entities.
E. Regulatory Planning and Review
This interim final rule is economically significant for the
purposes of Executive Orders 12866 and 13563. Treasury, however, is
proceeding under the emergency provision at Executive Order 12866
section 6(a)(3)(D) based on the need to move expeditiously to mitigate
the current economic conditions arising from the COVID-19 emergency, as
discussed in Section II of this Supplementary Information.
F. Executive Order 13132
This interim final rule does not have federalism implications as
defined in Executive Order 13132. It will not have substantial direct
effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in the executive order. As such it does not warrant the preparation of
a federalism assessment.
G. Congressional Review Act
The Administrator of the Office of Management and Budget's Office
of Information and Regulatory Affairs (OIRA) has determined that this
is a major rule for purposes the Congressional Review Act (CRA) (5
U.S.C. 804(2) et seq.). Under the CRA, a major rule takes effect 60
days after the rule is published in the Federal Register. 5 U.S.C.
801(a)(3).
Notwithstanding this requirement, the CRA allows agencies to
dispense with the requirements of section 801 when the agency for good
cause finds that such procedure would be impracticable, unnecessary, or
contrary to the public interest and the rule shall take effect at such
time as the agency promulgating the rule determines. 5 U.S.C. 808(2).
Pursuant to Sec. 808(2), Treasury, for the good cause shown in
sections I and II of this SUPPLEMENTARY INFORMATION, finds that a 60-
day delay to provide public notice is impracticable and contrary to the
public interest.
[[Page 13455]]
List of Subjects in 31 CFR Part 35
Executive compensation.
0
For the reasons set forth in the preamble, 31 CFR subtitle A is amended
by adding part 35 to read as follows:
PART 35--EMERGENCY CAPITAL INVESTMENT PROGRAM
Subpart A--[Reserved]
Subpart B--Compensation and Capital Distributions
Sec.
35.20 Purpose, applicability, and general provisions.
35.21 Definitions.
35.22 Restrictions on compensation.
35.23 Restrictions on dividends, share buybacks, and other capital
distributions.
35.24 Annual certification.
35.25 Exemptive relief.
Appendix A to 31 CFR Part 35--Emergency Capital Investment Program
Model Excessive or Luxury Expenditures Policy
Authority: Consolidated Appropriations Act, 2021 (Pub. L. 116-
260), Division N, Title V, Subtitle B; Community Development Banking
and Financial Institutions Act of 1994 (enacted as part of the
Riegle Community and Regulatory Improvement Act of 1994 (Pub. L.
103-325)), as amended (12 U.S.C. 4701 et seq.), Section 104A.
Subpart A [Reserved]
Subpart B--Compensation and Capital Distributions
Sec. 35.20 Purpose, applicability and general provisions.
(a) Purpose. Pursuant Section 104A of the Community Development
Banking and Financial Institutions Act of 1994 (Act), as added by the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260), this subpart
establishes restrictions on executive compensation, dividend payments,
and share buybacks for recipients of capital investments under the
Department of the Treasury's Emergency Capital Investment Program (ECIP
or Program), as well as additional criteria for participation in the
Program that the Secretary has determined are appropriate in
furtherance of the Program goals.
(b) Applicability. This subpart applies on a consolidated basis to
any insured depository institution, bank holding company, savings and
loan holding company, or federally insured credit union that issues
preferred stock or a subordinated debt instrument to the Department of
the Treasury under the Program (an ECIP recipient, as defined in Sec.
35.21 of this subpart). An ECIP recipient must comply with the
requirements of this subpart during the ECIP period.
(c) Limitation of authority. Nothing in this subpart shall be
interpreted to limit the authority of the appropriate Federal banking
agency to take action under other provisions of law, including action
to address unsafe or unsound practices or conditions, deficient capital
levels, or violations of law or regulation, under section 8 of the
Federal Deposit Insurance Act, section 8 of the Bank Holding Company
Act, or section 10 of the Home Owners' Loan Act, or the Federal Credit
Union Act, as may be applicable.
Sec. 35.21 Definitions.
Except as modified in this regulation or unless the context
otherwise requires, the terms used in this regulation have the same
meaning as set forth in the relevant statutes. For purposes of this
subpart:
Act means the Community Development Banking and Financial
Institutions Act of 1994, as amended (12 U.S.C. 4701 et seq.).
Appropriate Federal banking agency has the same meaning as in 12
U.S.C. 1813 and also includes the NCUA with respect to a federally
insured credit union.
Capital distributions means:
(1) Dividends, including discretionary dividends, on non-senior
securities and any other payments on a share of stock or other equity
or equivalent interest;
(2) Payments, including interest payments, on non-senior
securities, that the issuer has full discretion to permanently or
temporarily suspend without triggering a default;
(3) Redemptions or repurchases of non-senior securities; or
(4) Any similar transaction that the Department of the Treasury
determines to be in substance a capital distribution;
(5) Provided, that a ``capital distribution'' does not include:
(i) Redemptions or repurchases of shares that are part of an
employee stock ownership plan for an ECIP recipient that is not
publicly traded, provided that the repurchase is required solely by
virtue of the Employee Retirement Income Security Act of 1974, as
amended;
(ii) In the case of federally insured credit unions:
(A) Payments of dividends and interest (as defined by 12 CFR
707.2(h) and (o)) on accounts held by their members; provided that this
exclusion does not apply to any extraordinary or special dividend by a
credit union; or
(B) Redemptions of membership share interests upon voluntary or
involuntary terminations of membership by a credit union or its
members, as applicable; and
(iii) Solely in the case of Sec. 35.23(b) (Limit on amount of
capital distributions), redemptions or repurchases of non-senior
securities if the issuer of the non-senior securities being repurchased
or redeemed fully funds the redemption or repurchase by issuing at
least a corresponding amount of new non-senior securities that rank
equally in liquidation with, receive the same capital treatment as and,
if applicable, have a stated maturity date no earlier than the non-
senior securities being redeemed or repurchased.
ECIP means the Emergency Capital Investment Program established
under Section 104A of the Community Development Banking and Financial
Institutions Act of 1994, as amended.
ECIP investment means any preferred stock, subordinated debt, or
other instrument (including any successor to any such instrument)
issued by an ECIP recipient to the Department of the Treasury under the
ECIP.
ECIP investment agreement means the agreement between an ECIP
recipient and the Department of the Treasury with respect to the ECIP
investment in that ECIP recipient.
ECIP investment date means the date on which an ECIP recipient
first issued an ECIP investment.
ECIP period means the period from the ECIP investment date until
the earliest of:
(1) The date on which the ECIP recipient has fully redeemed or
repaid the ECIP investment received under ECIP;
(2) The date on which the investment the ECIP recipient received
under the ECIP is no longer held, in full or in part, by the Department
of the Treasury or any affiliate thereof; and
(3) Ten years after the ECIP investment date.
ECIP recipient means any entity that has received a capital
investment under the ECIP.
Excessive or luxury expenditures means:
(1) Excessive expenditures on any of the following to the extent
such expenditures are not reasonable expenditures for staff
development, reasonable performance incentives, or other similar
reasonable measures conducted in the normal course of the ECIP
recipient's business operations:
(i) Entertainment or events;
(ii) Office and facility renovations;
(iii) Aviation or other transportation services;
(iv) Tax gross-ups; and
(v) Other similar items, activities, or events for which the ECIP
recipient may reasonably anticipate incurring expenses, or reimbursing
an employee for incurring expenses;
(2) Provided, that reasonable capital investments in technology,
equipment,
[[Page 13456]]
and similar items that expand the long-term capability of an ECIP
recipient to provide products and services to its customers and
community are not excessive or luxury expenditures.
Excessive or luxury expenditures policy means written standards
applicable to the ECIP recipient and its employees that address the
five categories of expenses set forth in the definition of ``excessive
or luxury expenditures,'' and that are reasonably designed to eliminate
excessive and luxury expenditures. Such written standards must:
(1) Identify the types or categories of expenditures which are
prohibited (which may include a threshold expenditure amount per item,
activity, or event or a threshold expenditure amount per employee
receiving the item or participating in the activity or event);
(2) Identify the types or categories of expenditures for which
prior approval is required (which may include a threshold expenditure
amount per item, activity, or event or a threshold expenditure amount
per employee receiving the item or participating in the activity or
event);
(3) Provide reasonable approval procedures for expenditures
requiring prior approval;
(4) Require the ECIP recipient to deliver a certification, executed
by two senior executive officers (one of which must be its principal
executive officer or principal financial officer) certifying that the
approval of any expenditure requiring the prior approval of any senior
executive officer, any executive officer of a substantially similar
level of responsibility, or the ECIP recipient's board of directors (or
a committee of such board of directors), was properly obtained with
respect to each such expenditure;
(5) Require the prompt internal reporting of violations to an
appropriate person or persons identified in this policy; and
(6) Mandate accountability for adherence to the policy.
FDIC means the Federal Deposit Insurance Corporation.
Federal Reserve Board means the Board of Governors of the Federal
Reserve System.
NCUA means the National Credit Union Administration.
Non-senior security means any equity interest or equivalent
interest (including but not limited to membership share interests in
the case of a credit union) or any other interest in, or instrument
issued by, an ECIP recipient that is pari passu with, or junior to, the
ECIP investment with respect to capital distributions or ranking in
liquidation, including but not limited to the common stock (or
equivalent equity interest) of the ECIP recipient, or any equity
interest or equivalent interest or any other interest in or instrument
issued by a depository institution holding company of which the ECIP
recipient is a subsidiary.
OCC means the Office of the Comptroller of the Currency.
Principal executive officer means the chief executive officer of an
ECIP recipient (or individual performing a similar function).
Principal financial officer means the chief financial officer of an
ECIP recipient (or individual performing a similar function).
Senior executive officer means an ECIP recipient's president, any
vice president in charge of a principal business unit, division or
function, any other officer who performs a policy making function, or
any other person who performs similar policy making functions.
Severance payment means any payment or benefit provided to an
officer or employee of an ECIP recipient in connection with any
termination of such officer or employee's employment with the ECIP
recipient (including resignation, severance, retirement, or
constructive termination), except for payment for services performed or
benefits accrued. A severance payment includes cash payments, health
care benefits, perquisites, the enhancement or acceleration of any
payment or vesting of any payment or benefit, or any other in-kind
benefit payable or provided in connection with any termination of an
officer or employee of the ECIP recipient.
Total compensation means all compensation, other than any severance
payment, provided by an ECIP recipient to an officer or employee,
including salary, wages, bonuses, awards of stock, deferred
compensation, and other financial benefits.
Sec. 35.22 Restrictions on compensation.
(a) Restriction on executive compensation. An ECIP recipient must
ensure that the total compensation paid to its senior executive
officers is appropriate and not excessive. Unless informed otherwise by
the Department of the Treasury, an ECIP recipient is considered to have
satisfied the requirements regarding executive compensation in this
section if it, and, if applicable, all insured depository institution
subsidiaries of the ECIP recipient, maintains compliance with the
following (or any successor requirement, as applicable):
(1) For an ECIP recipient or subsidiary of an ECIP recipient that
is an insured depository institution, except for federally insured
credit unions, the Interagency Guidelines Establishing Standards for
Safety and Soundness as issued by the appropriate Federal banking
agency for the ECIP recipient or subsidiary (i.e., for national banks
and Federal savings associations, 12 CFR part 30, appendix A; state
member banks, 12 CFR part 208, appendix D-1; insured state nonmember
banks and state savings associations, 12 CFR part 364, appendix A);
(2) For an ECIP recipient that is a bank holding company, the
requirements for corporate practices of bank holding companies as
issued by the Federal Reserve Board at 12 CFR 225.4;
(3) For an ECIP recipient that is a savings and loan holding
company, the requirements regarding safe and sound operations of
savings and loan holding companies as issued by the Federal Reserve
Board at 12 CFR 238.8; and
(4) For an ECIP recipient that is a federally insured credit union,
the requirements on compensation and benefits for federally insured
credit unions as issued by the NCUA at 12 CFR 701.19(a); 12 CFR
701.21(c)(8); 12 CFR 702.203(b)(10); and 12 CFR 702.204(b)(10).
(b) Restriction on severance payments. An ECIP recipient shall not
make excessive severance payments to any senior executive officer.
Unless informed otherwise by the Department of the Treasury, an ECIP is
considered to have satisfied the requirements regarding severance
payments in this section if it maintains compliance with the following
(or any successor requirement, as applicable):
(1) For an ECIP recipient that is an insured depository
institution, a bank holding company or a savings and loan holding
company, the limits and prohibitions to enter into contracts to pay and
to make golden parachute and indemnification payments to institution-
affiliated parties to the extent applicable to the ECIP recipient, as
issued by the FDIC at 12 CFR part 359; and
(2) For an ECIP recipient that is a federally insured credit union,
the limits and prohibitions on the ability of federally insured credit
unions to enter into contracts to pay and to make golden parachute and
indemnification payments to institution-affiliated parties as issued by
the NCUA at 12 CFR 750.1.
(c) Excessive or luxury expenditures. (1) Ninety days after an ECIP
investment date with respect to an ECIP recipient, the board of
directors of the ECIP
[[Page 13457]]
recipient must adopt an excessive or luxury expenditures policy,
provide such policy to the Department of the Treasury and the ECIP
recipient's appropriate Federal banking agency, and post the text of
such policy on its internet website, if the ECIP recipient maintains an
internet website.
(2) If, after adopting an excessive or luxury expenditures policy,
the board of directors of the ECIP recipient makes any material
amendments to such policy, within ninety days of the adoption of the
amended policy the board of directors must provide the amended policy
to the Department of the Treasury and the ECIP recipient's appropriate
Federal banking agency and post the amended policy on its internet
website, if the ECIP recipient maintains an internet website.
(3) The ECIP recipient must maintain, and continue the disclosure
of any material amendments to, the excessive or luxury expenditures
policy during the ECIP period, unless the Department of the Treasury
determines that discontinuation of the policy would not be contrary to
the public interest.
(d) Material changes in policies or procedures. An ECIP recipient
must obtain prior approval from the Department of the Treasury before
making any material change to the policies or procedures that it
maintains for purposes of compliance with paragraph (a), (b), or (c) of
this section. A change to the compensation, severance pay, or excessive
or luxury expenditures policies or procedures will be considered
material for purposes of this section if the change is likely to have a
negative effect on the financial condition of the ECIP recipient, limit
the ability of the ECIP recipient to make payments under the terms of
an ECIP instrument, or otherwise impair the ECIP recipient's ability to
meet its obligations to the Department of the Treasury under the ECIP.
(1) A request to make a material change to compensation, severance
pay or excessive luxury expenditures policies or procedures, must be
submitted by an ECIP recipient in writing and received by the
Department of the Treasury at least thirty days prior to the effective
date of the policy change. The request should describe the change,
reason for the change, and anticipated financial or other impact of the
change on the condition of the ECIP recipient.
(2) The request will be deemed approved thirty days after the ECIP
recipient has provided a complete request to the Department of the
Treasury, unless, prior to the expiration of the thirty-day period, the
Department of the Treasury objects to the proposed change or notifies
the ECIP recipient that additional time is required in order to
complete review of the proposed change to policy or procedures
Sec. 35.23 Restrictions on dividends, share buybacks, and other
capital distributions.
(a) Restriction on capital distributions due to nonpayment. An ECIP
recipient shall not make any capital distribution on a non-senior
security, unless:
(1) If the ECIP investment is in the form of preferred stock, the
ECIP recipient has paid in full the dividends for the last completed
dividend period on the preferred stock; or
(2) If the ECIP investment is in a form other than preferred stock
(including, subordinated debt), the ECIP recipient has paid in full the
principal, interest, and other amounts due and payable under the terms
of the ECIP investment, and no amount that has been deferred remains
unpaid.
(b) Limit on amount of capital distributions. (1) If an ECIP
recipient is an insured depository institution, bank holding company,
or savings and loan holding company, the ECIP recipient shall obtain
the approval of the Department of the Treasury prior to making any
capital distribution if the total of capital distributions made during
the calendar year, including the proposed capital distribution, exceeds
its eligible distributable income; provided, however, that any prior
approval of a capital distribution by the Department of the Treasury
does not supersede any applicable regulatory requirements of the ECIP
recipient's appropriate Federal banking agency, or other actions taken
by such agency. For purposes of this paragraph, ``eligible
distributable income'' means the sum of the ECIP recipient's reported
year-to-date net income as of the end of the most recent calendar
quarter, plus net income for the two preceding calendar years, less any
dividends or distributions for the year to date as of the end of the
most recent calendar quarter and the two preceding calendar years,
where each amount is calculated in accordance with the instructions to
the Call Report or applicable reporting form.
(2) If the ECIP recipient is federally insured credit union, the
ECIP recipient shall obtain the Department of the Treasury's prior
approval to make any capital distributions if the distribution would:
(i) In the case of a dividend, be payable from retained earnings
(as defined in 12 CFR 702.2(f)) other than undivided earnings; or
(ii) Cause the ECIP recipient's net worth classification to fall
below ``adequately capitalized'' (as defined in 12 CFR 702.102(a)(2)).
(c) Exception for Subchapter S Corporations and other pass-through
entities. Notwithstanding anything to the contrary in paragraphs (a)
and (b) of this section, any ECIP recipient that is an S corporation,
as defined in 26 U.S.C. 1361(a), or other pass-through entity may make
capital distributions, to the extent reasonably required to cover its
owners' tax obligations in respect to the entity's earnings. Such
distributions shall be subject to an annual reconciliation, with any
surplus or deficiency to be deducted or added to distributions, as
applicable, in the following year. Any tax-related distributions
permitted under this paragraph (c) must also comply with any applicable
limitations or determinations established by an ECIP recipient's
Federal regulators.
Sec. 35.24 Annual certification
On an annual basis an ECIP recipient shall, in accordance with the
terms and conditions of its ECIP investment agreement, submit to the
Department of the Treasury a certification executed by two senior
executive officers (one of which must be either its principal executive
officer or principal financial officer) that the ECIP recipient is in
compliance with each of the excessive compensation, severance pay, and
excessive or luxury expenditures requirements and restrictions on
capital distributions set forth in Sec. Sec. 35.22 and 35.23.
Sec. 35.25 Exemptive relief.
The Department of the Treasury may grant exemptions or waivers from
some or all of the restrictions on share buybacks and dividend payments
under this part if such exemption or waiver is necessary or appropriate
to effectuate the goals of the ECIP or to protect the public interest.
Such exemptions or waivers may be subject to such terms and conditions
as deemed necessary or appropriate by the Department of the Treasury.
Appendix A to 31 CFR Part 35--Emergency Capital Investment Program
Model Excessive or Luxury Expenditures Policy
I. Introduction
A participant in the Emergency Capital Investment Program (ECIP
recipient, as defined at 31 CFR 35.21) is required to establish and
maintain policies designed to eliminate excessive or luxury
expenditures. The term ``excessive or luxury expenditures'' means
excessive expenditures on any of the following to the extent such
expenditures are
[[Page 13458]]
not reasonable expenditures for staff development, reasonable
performance incentives, or other similar reasonable measures
conducted in the normal course of the ECIP recipient's business
operations: (1) Entertainment or events; (2) office and facility
renovations; (3) aviation or other transportation services; (4) tax
gross-ups; and (5) other similar items, activities, or events for
which the ECIP recipient may reasonably anticipate incurring
expenses, or reimbursing an employee for incurring expenses.
(1) To facilitate compliance with this requirement, the
Department of the Treasury is making available a model excessive or
luxury expenditures policy. An ECIP recipient may refer to this
model policy for guidance in satisfying the requirement at 31 CFR
35.22(c) to adopt and maintain an excessive or luxury expenditures
policy. Alternatively, ECIP recipients may use other forms of, or
existing policies relating to, excessive or luxury expenditures,
provided that such other forms or policies satisfy all the
requirements of the regulation at 31 CFR 35.22(c).
(2) An ECIP recipient's luxury or excessive expenditure policy
should be posted on the ECIP recipient's website. Any material
amendments to an ECIP recipient's excessive or luxury expenditures
policy must made in accordance with the provisions set forth in 31
CFR 35.22(d) (Material changes in policies or procedures). If the
ECIP recipient makes any material amendments to this policy, then
the ECIP recipient must submit a copy of the amended policy to the
Department of the Treasury and post the amended policy on the ECIP
recipient's website. ECIP recipients should refer to 31 CFR part 35,
subpart B for additional information regarding definitions of terms
used in the model policy, disclosure, material changes,
certification, and other compliance requirements.
II. Model Excessive or Luxury Expenditures Policy
A. Purpose
The purpose of this policy is to establish parameters and
internal controls governing the expenditures of [NAME OF ECIP
RECIPIENT] (together with its subsidiaries and controlled
affiliates, referred to hereafter as the Organization). Expenditures
of the Organization should be customary, prudent, consistent with
applicable laws and regulations, and reasonably related to the
Organization's business objectives and needs. This policy identifies
expenditures that are excessive or luxury expenditures, creates
processes that are reasonably designed to eliminate such
expenditures, and establishes accountability for compliance. Routine
operating expenses, capital expenditures, and other reasonable
expenses are not prohibited by this policy.
B. Authority
The Organization has authority to provide compensation and
benefits that are reasonable. This policy establishes a prohibition
on expenditures that are excessive or luxury expenditures as
required by the Department of the Treasury's Emergency Capital
Investment Program regulations (31 CFR part 35), and as may be
required by other statutes and regulations.
C. Responsibility
This policy is the responsibility of the Organization's board of
directors (board). The board has approved this policy and will
review compliance with this policy no less frequently than annually,
and summary data on excessive or luxury expenditures will be
reported to the board as part of the compliance review.
D. Scope
This policy applies to all employees, officers, and directors of
the Organization with regard to any expenditure of the Organization.
In making any expenditure on behalf of the Organization, employees,
officers, and directors should consider whether the expenditure is
an excessive or luxury expenditure that is prohibited under this
policy.
E. Excessive or Luxury Expenditures
``Excessive or luxury expenditures'' means excessive
expenditures on any of the following to the extent not reasonable or
appropriate expenditures for business development, staff
development, reasonable performance incentives, or other similar
reasonable measures conducted in the normal course of the
Organization's business operations:
(1) Entertainment or events. This category includes fees, dues,
tickets costs related to social, athletic, artistic and dining
clubs, activities, celebrations or other events, and similar
expenditures. Expenditures for charitable contributions and
charitable events are not prohibited under this policy.
Entertainment or events expenditures in an amount less than $___ per
instance, and $___ on an annual aggregate basis per individual, are
exempt from this policy.
(2) Office and facility renovations. This category includes
costs and allowances for office renovation, including expenditures
related to furniture, art, office personalization, interior
finishing, design and decoration, and similar expenditures. Office
and facility renovations expenditures in an amount less than $___
per instance, and $___ on an annual aggregate basis per individual,
are exempt from this policy.
(3) Aviation or other transportation services. (i) This category
includes charter fees, tickets, slip or docking fees, vehicle
installment payments, reservation and travel agent expenses, and
similar expenditures associated with transportation services (e.g.,
airline, train, rental cars, or vans). Mileage reimbursable
according to current Internal Revenue Service mileage rates is
exempt from this policy. Transportation services in an amount less
than $___ per instance, and $___ on an annual aggregate basis per
individual, are exempt from this policy.
(ii) The principal executive officer may establish or delegate
to an appropriate executive officer the authority to establish
processes for reimbursement of reasonable travel expenditures, which
processes must be reviewed by executive management no less
frequently than annually.
(4) Tax gross-ups. This category includes any reimbursement of
taxes owed with respect to any compensation. This category does not
apply to tax equalization agreements for employees subject to tax
from a non-U.S. jurisdiction.
(5) Other similar items, activities, or events for which the
Organization may reasonably anticipate incurring expenses or
reimbursing an employee for incurring expenses. (i) Expenditures
related to other items not listed in the preceding categories are
exempt from this policy in an amount less than $___ per instance,
and together with all expenditures permitted under this policy, may
not exceed $___ on an annual aggregate basis per individual.
(ii) For the avoidance of doubt, reasonable capital investments
in technology, equipment, and similar items that expand the long-
term capability of an ECIP recipient to provide products and
services to its customers and community are not excessive or luxury
expenditures.
(iii) The principal executive officer may establish or delegate
to an appropriate executive officer the authority to establish
processes for the evaluation and approval of expenditures in the
preceding categories that are not luxury or excessive expenditures
and that are not otherwise exempt from this policy. These processes
must be reviewed by executive management no less frequently than
annually, as well as any additional threshold expenditure amounts
per item, activity, or event, or a threshold expenditure amount per
employee receiving the item or participating in the activity or
event under this policy. Such approvals must be reported to the
board of directors (which may be in an appropriate summary form) no
less frequently than annually.
F. Exceptions or Violations
(1) Any exception or violation of this policy must be promptly
reported to the Organization's (i) principal executive officer, (ii)
officer with primary responsibility for the Organization's
compliance function, or (iii) officer designated with primary
responsibility for overseeing the administration, monitoring, and
compliance with this policy. Exceptions and violations must be
reported to the board of directors no less frequently than annually,
or more frequently as the nature and severity of violation may
warrant. All employees, officers, and directors of the Organization
must adhere to this policy and will be held accountable for
compliance. Any employee or officer who violates this policy may be
subject to disciplinary action up to and including termination of
employment.
(2) Any employee or officer that is aware of any circumstance
that may indicate a violation of this policy is required to report
such circumstance to their supervisor or the Organization's
principal compliance officer or compliance group. The Organization
prohibits retaliation against any employee or officer for making a
good faith report of actual or suspected violations of the
Organization's code of conduct, laws, regulations, or other
Organization policies, including this policy. A finding of
retaliation against any such employee or officer may result in
disciplinary action up to and including termination. Failure to
promptly report known violations by others may also be deemed a
violation of the Organization's code of conduct.
[[Page 13459]]
(3) Employees and officers may ask questions, raise concerns, or
report instances of non-compliance with this policy and/or any of
the existing underlying relevant policies by contacting the
following: [COMPLIANCE HELP LINE OR E-MAIL].
G. Certification
On an annual basis, the ECIP recipient will deliver to the
Department of the Treasury a certification, executed by two senior
executive officers (one of which must be either the ECIP recipient's
principal executive officer or principal financial officer)
certifying that (i) the Organization is in compliance with this
policy and (ii) the approval of any expenditure requiring the prior
approval of any senior executive officer, any executive officer of a
substantially similar level of responsibility, or the board of
directors (or a committee of such board), was properly obtained with
respect to each such expenditure.
David Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2021-04900 Filed 3-5-21; 11:15 am]
BILLING CODE 4810-AK-P