Real Estate Lending Standards, 33570-33574 [2021-12973]
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33570
Federal Register / Vol. 86, No. 120 / Friday, June 25, 2021 / Proposed Rules
Authority: 7 U.S.C. 2131–2159; 7 CFR
2.22, 2.80, and 371.7.
2. Amend § 2.38:
a. By lifting the stay on paragraph (l);
b. In paragraph (l)(2):
i. In the first sentence by removing the
date ‘‘July 29, 2013’’ and adding
‘‘[DATE 180 DAYS AFTER EFFECTIVE
DATE OF FINAL RULE]’’ in its place;
■ ii. In the next to last sentence by
removing the words ‘‘and training
records’’; and
■ ii. By revising the last sentence; and
■ c. By revising paragraph (l)(3).
The revisions read as follows:
■
■
■
■
§ 2.38
Miscellaneous.
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*
*
*
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*
(l) * * *
(2) * * * The APHIS Contingency
Plan form may be used to keep and
maintain the information required by
paragraph (l)(1) of this section and this
paragraph (l)(2).
(3) The facility must provide training
for its personnel regarding their roles
and responsibilities as outlined in the
plan. For current registrants, training of
facility personnel must be completed
within 60 days of the research facility
putting their plan in place; for research
facilities registered after [DATE 180
DAYS AFTER EFFECTIVE DATE OF
FINAL RULE] training of facility
personnel must be completed within 60
days of the facility putting its
contingency plan in place. To fulfill this
training requirement, employees hired
30 days or more before the contingency
plan is put in place must be trained by
the date the facility puts its contingency
plan in place. For employees hired less
than 30 days before that date or after
that date, training must be conducted
within 30 days of their start date. Any
changes to the plan as a result of the
annual review must be communicated
to employees through training which
must be conducted within 30 days of
making the changes.
■ 3. Amend § 2.134:
■ a. By lifting the stay on the section;
■ b. In paragraph (b):
■ i. In the first sentence by removing the
date ‘‘July 29, 2013’’ and adding
‘‘[DATE 180 DAYS AFTER EFFECTIVE
DATE OF FINAL RULE]’’ in its place;
■ ii. In the fifth sentence by removing
the words ‘‘and training records’’; and
■ iii. By revising the last sentence; and
■ c. By revising paragraph (c).
The revisions read as follows:
§ 2.134
Contingency planning.
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*
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*
*
(b) * * * The APHIS Contingency
Plan form may be used to keep and
maintain the information required by
§ 2.38(l)(1) and (2).
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(c) Dealers, exhibitors, intermediate
handlers, and carriers must provide
training for their personnel regarding
their roles and responsibilities as
outlined in the plan. For current
licensees and registrants, training of
dealer, exhibitor, intermediate handler,
and carrier personnel must be
completed within 60 days of the
licensee and registrant putting their
contingency plan in place; for new
dealers, exhibitors, intermediate
handlers, or carriers licensed or
registered after [DATE 180 DAYS
AFTER EFFECTIVE DATE OF FINAL
RULE], training of personnel must be
completed within 60 days of the dealer,
exhibitor, intermediate handler, or
carrier putting their contingency plan in
place. To fulfill this requirement,
employees hired 30 days or more before
the contingency plan is put in place
must be trained by the date the licensee
or registrant puts their contingency plan
in place. For employees hired less than
30 days before that date or after that
date, training must be conducted within
30 days of their start date. Any changes
to the plan as a result of the annual
review must be communicated to
employees through training which must
be conducted within 30 days of making
the changes.
Done in Washington, DC, this 16th day of
June 2021.
Mae Wu,
Deputy Under Secretary for Marketing and
Regulatory Programs.
[FR Doc. 2021–13152 Filed 6–24–21; 8:45 am]
BILLING CODE 3410–34–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 365
RIN 3064–AF72
Real Estate Lending Standards
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking
and request for comment.
AGENCY:
The FDIC is inviting comment
on a proposed rule to amend
Interagency Guidelines for Real Estate
Lending Policies (Real Estate Lending
Standards). The purpose of the
proposed rule is to align the Real Estate
Lending Standards with the community
bank leverage ratio (CBLR) rule, which
does not require electing institutions to
calculate tier 2 capital or total capital.
The proposed rule would allow a
consistent approach for calculating the
ratio of loans in excess of the
SUMMARY:
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supervisory loan-to-value limits (LTV
Limits) at all FDIC-supervised
institutions, using a methodology that
approximates the historical
methodology the FDIC has followed for
calculating this measurement without
requiring institutions to calculate tier 2
capital. The proposed rule would also
avoid any regulatory burden that could
arise if an FDIC-supervised institution
subsequently decides to switch between
different capital frameworks.
DATES: Comments must be received by
July 26, 2021.
ADDRESSES: Interested parties are
encouraged to submit written
comments. Commenters should use the
title ‘‘Real Estate Lending Standards
(RIN 3064–AF72)’’ to facilitate the
organization of comments. Interested
parties are invited to submit written
comments, identified by RIN 3064–
AF72, by any of the following methods:
• FDIC website: https://www.fdic.gov/
resources/regulations/federal-registerpublications/.
• Mail: James P. Sheesley, Assistant
Executive Secretary, Attention:
Comments/Legal ESS (RIN 3064–AF72),
Federal Deposit Insurance Corporation,
550 17th Street NW, Washington, DC
20429.
• Hand Delivery/Courier: The guard
station at the rear of the 550 17th Street
NW, building (located on F Street) on
business days between 7:00 a.m. and
5:00 p.m.
• Email: Comments@FDIC.gov.
Comments submitted must include
‘‘RIN 3064–AF72.’’
Please include your name, affiliation,
address, email address, and telephone
number(s) in your comment. All
statements received, including
attachments and other supporting
materials, are part of the public record
and are subject to public disclosure.
You should submit only information
that you wish to make publicly
available.
Please note: All comments received
will be posted generally without change
to https://www.fdic.gov/resources/
regulations/federal-registerpublications/, including any personal
information provided.
FOR FURTHER INFORMATION CONTACT:
Alicia R. Marks, Examination
Specialist, Division of Risk Management
and Supervision, (202) 898–6660,
AMarks@FDIC.gov; Navid K.
Choudhury, Counsel, (202) 898–6526, or
Catherine S. Wood, Counsel, (202) 898–
3788, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC 20429. For the hearing
impaired only, TDD users may contact
(202) 925–4618.
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Federal Register / Vol. 86, No. 120 / Friday, June 25, 2021 / Proposed Rules
SUPPLEMENTARY INFORMATION:
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I. Policy Objectives
The policy objective of the proposed
rule is to provide consistent calculations
of the ratios of loans in excess of the
supervisory LTV Limits between
banking organizations that elect, and
those that do not elect, to adopt the
CBLR framework, while not including
capital ratios that some institutions are
not required to compute or report. The
proposed rule would amend the Real
Estate Lending Standards set forth in
Appendix A of 12 CFR part 365.
Section 201 of the Economic Growth,
Regulatory Relief, and Consumer
Protection Act (EGRRCPA) directs the
FDIC, the Board of Governors of the
Federal Reserve System (FRB), and the
Office of the Comptroller of the
Currency (OCC) (collectively, the
agencies) to develop a community bank
leverage ratio for qualifying community
banking organizations. The CBLR
framework is intended to simplify
regulatory capital requirements and
provide material regulatory compliance
burden relief to the qualifying
community banking organizations that
opt into it. In particular, banking
organizations that opt into the CBLR
framework do not have to calculate the
metrics associated with the applicable
risk-based capital requirements in the
agencies’ capital rules (generally
applicable rule), including total capital.
The Real Estate Lending Standards set
forth in Appendix A of 12 CFR part 365,
as they apply to FDIC-supervised banks,
contain a tier 1 capital threshold for
institutions electing to adopt the CBLR
and a total capital threshold for other
banks. The proposed rule would
provide a consistent treatment for all
FDIC-supervised banks without
requiring the computation of total
capital. The proposed amendment is
described in more detail in Section III,
below.
II. Background
The Real Estate Lending Standards,
which were issued pursuant to section
304 of the Federal Deposit Insurance
Corporation Improvement Act of 1991,
12 U.S.C. 1828(o), prescribe standards
for real estate lending to be used by
FDIC-supervised institutions in
adopting internal real estate lending
policies. Section 201 of the EGRRCPA
amended provisions in the Dodd-Frank
Wall Street Reform and Consumer
Protection Act relative to the capital
rules administered by the agencies. The
CBLR rule was issued by the agencies to
implement section 201 of the EGRRCPA,
and it provides a simple measure of
capital adequacy for community
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banking organizations that meet certain
qualifying criteria.1 The FDIC is issuing
this proposal to amend part 365 in
response to changes in the type of
capital information available after the
implementation of the CBLR rule.
Qualifying community banking
organizations 2 that elect to use the
CBLR framework (Electing CBOs) may
calculate their CBLR without calculating
tier 2 capital, and are therefore not
required to calculate or report tier 2
capital or total capital.3 The proposed
revision to the Real Estate Lending
Standards would allow a consistent
approach for calculating loans in excess
of the supervisory LTV Limits without
having to calculate tier 2 or total capital
as currently included in part 365 and its
Appendix.
The proposal would also ensure that
the FDIC’s regulation regarding
supervisory LTV Limits is consistent
with how examiners are calculating
credit concentrations, as provided by a
statement issued by the agencies on
March 30, 2020. The statement provided
that the agencies’ examiners will use
tier 1 capital plus the appropriate
allowance for credit losses as the
denominator when calculating credit
concentrations.4
III. Revisions to the Real Estate Lending
Standards
The FDIC is proposing to amend the
Real Estate Lending Standards so all
FDIC-supervised institutions, both
Electing CBOs and other insured
financial institutions, would calculate
the ratio of loans in excess of the
supervisory LTV Limits using tier 1
capital plus the appropriate allowance
for credit losses 5 in the denominator.
The proposed amendment would
provide a consistent approach for
calculating the ratio of loans in excess
of the supervisory LTV Limits for all
FDIC-supervised institutions. The
1 85
FR 64003 (Oct. 9, 2020).
FDIC’s CBLR rule defines qualifying
community banking organizations as ‘‘an FDICsupervised institution that is not an advanced
approaches FDIC-supervised institution’’ with less
than $10 billion in total consolidated assets that
meet other qualifying criteria, including a leverage
ratio (equal to tier 1 capital divided by average total
consolidated assets) of greater than 9 percent. 12
CFR 324.12(a)(2).
3 Total capital is defined as the sum of tier 1
capital and tier 2 capital. See 12 CFR 324.2.
4 See the Joint Statement on Adjustment to the
Calculation for Credit Concentration Ratios (FIL–
31–2020).
5 Banking organizations that have not adopted the
current expected credit losses (CECL) methodology
will use tier 1 capital plus the allowance for loan
and lease losses (ALLL) as the denominator.
Banking organizations that have adopted the CECL
methodology will use tier 1 capital plus the portion
of the allowance for credit losses (ACL) attributable
to loans and leases.
2 The
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proposed amendment would also
approximate the historical methodology
specified in the Real Estate Lending
Standards for calculating the loans in
excess of the supervisory LTV Limits
without creating any regulatory burden
for Electing CBOs and other banking
organizations.6 Further, the FDIC is
proposing this approach to provide
regulatory clarity and avoid any
regulatory burden that could arise if
Electing CBOs subsequently decide to
switch between the CBLR framework
and the generally applicable capital
rules. The FDIC is proposing to amend
the Real Estate Lending Standards only
relative to the calculation of loans in
excess of the supervisory LTV Limits
due to the change in the type of capital
information that will be available, and
is not considering any revisions to other
sections of the Real Estate Lending
Standards. Additionally, due to a
publishing error which excluded the
third paragraph in this section in the
Code of Federal Regulations in prior
versions, the FDIC is including the
complete text of the section on loans in
excess of the supervisory loan-to-value
limits.
IV. Expected Effects
As of September 30, 2020, the FDIC
supervises 3,245 insured depository
institutions. The proposed revision to
the Real Estate Lending Standards, if
adopted, would apply to all FDICsupervised institutions. The effect of the
proposed revisions at an individual
bank would depend on whether the
amount of its current or future real
estate loans with loan-to-value ratios
that exceed the supervisory LTV
thresholds is greater than, or less than,
the sum of its tier 1 capital and
allowance (or credit reserve in the case
of CECL adopters) for loan and lease
losses. Allowance levels, credit reserves,
and the volume of real estate loans and
their loan to value ratios can vary
considerably over time. Moreover, the
FDIC does not have comprehensive
information about the distribution of
current loan to value ratios. For these
6 The proposed amendment approximates the
historical methodology in the sense that both the
proposed and historical approach for calculating
the ratio of loans in excess of the LTV Limits
involve adding a measure of loss absorbing capacity
to tier 1 capital, and an institution’s ALLL (or ACL)
is a component of tier 2 capital. Under the agencies’
capital rules an institution’s entire amount of ALLL
or ACL could be included in its tier 2 capital,
depending on the amount of its risk-weighted assets
base. Based on December 31, 2019, Call Report
data—the last Call Report date prior to the
introduction of the CBLR framework—96.0 percent
of FDIC-supervised institutions reported that their
entire ALLL or ACL was included in their tier 2
capital, and 50.5 percent reported that their tier 2
capital was entirely composed of their ALLL.
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reasons, it is not possible to identify
how many institutions have real estate
loans that exceed the supervisory LTV
thresholds that would be directly
implicated by either the current Real
Estate Lending Standards or the
proposed revisions.
Currently, 3,080 FDIC supervised
institutions have total real estate loans
that exceed the tier 1 capital plus
allowance or reserve benchmark in the
proposed revision and are thus
potentially affected by the proposed
revisions depending on the distribution
of their loan to value ratios. In
comparison, 3,088 FDIC supervised
institutions have total real estate loans
exceeding the current total capital
benchmark and are thus potentially
affected by the current Real Estate
Lending Standards. As described in
more detail below, the population of
banks potentially subject to the Real
Estate Lending Standards is therefore
almost unchanged by these proposed
revisions, and their substantive effects
are likely to be minimal.7
The FDIC believes that a threshold of
‘‘tier 1 capital plus an allowance for
credit losses’’ is consistent with the way
the FDIC and institutions historically
have applied the Real Estate Lending
Standards. Also, the typical (or median)
FDIC-supervised institution that had not
elected the CBLR framework reported
no difference between the amount of its
allowance for credit losses and its tier
2 capital.8 Consequently, although the
FDIC does not have information about
the amount of real estate loans at each
institution that currently exceeds, or
could exceed, the supervisory LTV
limits, the FDIC does not expect the
proposed rule to have material effects
on the safety-and-soundness of, or
compliance costs incurred by, FDICsupervised institutions.
V. Alternatives
The FDIC considered two alternatives,
however it believes that none are
preferable to the proposal. The
alternatives are discussed below.
First, the FDIC considered making no
change to its Real Estate Lending
Standards. The FDIC is not in favor of
this approach because the FDIC does not
favor an approach in which some banks
use a tier 1 capital threshold and other
banks use a total capital threshold, and
because the existing provision could be
confusing for institutions.
Second, the FDIC considered revising
its Real Estate Lending Standards so that
both Electing CBOs and other
institutions would use tier 1 capital in
7 September
8 September
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place of total capital for the purpose of
calculating the supervisory LTV Limits.
While this would subject both Electing
CBOs and other institutions to the same
approach, because the amount of tier 1
capital at an institution is typically less
than the amount of total capital, this
alternative would result in a relative
tightening of the supervisory standards
with respect to loans made in excess of
the supervisory LTV Limits. The FDIC
believes that the general level of the
current supervisory LTV Limits, which
would be retained by this proposed rule,
is appropriately reflective of the safety
and soundness risk of depository
institutions, and therefore the FDIC does
not consider this alternative preferable
to the proposed rule.
VI. Request for Comments
The FDIC invites comment on all
aspects of the proposed rule. In
particular, the FDIC invites comment on
the use of tier 1 capital plus the
appropriate allowance for credit losses
in the denominator to calculate the level
of loans in excess of the supervisory
LTV Limits. Additionally, what
alternative capital metric for the
denominator when calculating loans in
excess of the supervisory LTV Limits
should the FDIC consider?
IV. Regulatory Analysis
A. Proposed Waiver of Delayed Effective
Date
The FDIC proposes to make all
provisions of the rule effective upon
publication of the final rule in the
Federal Register. The Administrative
Procedure Act (APA) allows for an
effective date of less than 30 days after
publication ‘‘as otherwise provided by
the agency for good cause found and
published with the rule.’’ 9 The purpose
of the 30-day waiting period prescribed
in APA section 553(d)(3) is to give
affected parties a reasonable time to
adjust their behavior and prepare before
the final rule takes effect. The FDIC
believes that this waiting period would
be unnecessary as the proposed rule, if
codified, would likely lift burdens on
FDIC-supervised institutions by
allowing them to calculate the ratio of
loans in excess of the supervisory LTV
Limits without calculating tier 2 capital,
and would also ensure that the
approach is consistent, regardless of the
institutions’ CBLR election status.
Consequently, the FDIC believes it
would have good cause for the final rule
to become effective upon publication.
The FDIC invites comment on
whether good cause exists to waive the
95
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delayed effective date of the rule once
finalized.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
generally requires that, in connection
with a proposed rule, an agency prepare
and make available for public comment
an initial regulatory flexibility analysis
that describes the impact of the
proposed rule on small entities.10
However, a regulatory flexibility
analysis is not required if the agency
certifies that the rule will not have a
significant economic impact on a
substantial number of small entities,
and publishes its certification and a
short explanatory statement in the
Federal Register together with the rule.
The Small Business Administration
(SBA) has defined ‘‘small entities’’ to
include banking organizations with total
assets of less than or equal to $600
million.11 Generally, the FDIC considers
a significant effect to be a quantified
effect in excess of 5 percent of total
annual salaries and benefits per
institution, or 2.5 percent of total
noninterest expenses. The FDIC believes
that effects in excess of these thresholds
typically represent significant effects for
FDIC-supervised institutions. For the
reasons provided below, the FDIC
certifies that the proposed rule will not
have a significant economic impact on
a substantial number of small banking
organizations. Accordingly, a regulatory
flexibility analysis is not required.
As of September 30, 2020, the FDIC
supervised 3,245 institutions, of which
2,434 were ‘‘small entities’’ for purposes
of the RFA.12 The effect of the proposed
revisions at an individual bank would
depend on whether the amount of its
current or future real estate loans with
loan-to-value ratios that exceed the
supervisory LTV thresholds is greater
than, or less than, the sum of its tier 1
capital and allowance (or credit reserve
in the case of CECL adopters) for loan
and lease losses. Allowance levels,
credit reserves, and the volume of real
estate loans and their loan to value
ratios can vary considerably over time.
Moreover, the FDIC does not have
10 5
U.S.C. 601 et seq.
SBA defines a small banking organization
as having $600 million or less in assets, where ‘‘a
financial institution’s assets are determined by
averaging the assets reported on its four quarterly
financial statements for the preceding year.’’ 13 CFR
121.201 n.8 (2019). ‘‘SBA counts the receipts,
employees, or other measure of size of the concern
whose size is at issue and all of its domestic and
foreign affiliates. . . .’’ 13 CFR 121.103(a)(6)
(2019). Following these regulations, the FDIC uses
a covered entity’s affiliated and acquired assets,
averaged over the preceding four quarters, to
determine whether the covered entity is ‘‘small’’ for
the purposes of RFA.
12 September 30, 2020, Call Report data.
11 The
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Federal Register / Vol. 86, No. 120 / Friday, June 25, 2021 / Proposed Rules
comprehensive information about the
distribution of current loan to value
ratios. For these reasons, it is not
possible to identify how many
institutions have real estate loans that
exceed the supervisory LTV thresholds
that would be directly implicated by
either the current Guidelines or the
proposed revisions.
Currently, 2,305 small, FDIC
supervised institutions have total real
estate loans that exceed the tier 1 capital
plus allowance or reserve benchmark in
the proposed revision and are thus
potentially affected by the proposed
revisions depending on the distribution
of their loan to value ratios. In
comparison, 2,312 small, FDIC
supervised institutions have total real
estate loans exceeding the current total
capital benchmark and are thus
potentially affected by the current Real
Estate Lending Standards. As described
in more detail below, the population of
banks potentially subject to the Real
Estate Lending Standards is therefore
almost unchanged by these proposed
revisions, and their substantive effects
are likely to be minimal.13
The FDIC believes that a threshold of
‘‘tier 1 capital plus an allowance for
credit losses’’ is consistent with the way
the FDIC and institutions historically
have applied the Real Estate Lending
Standards. Also, the typical (or median)
small, FDIC-supervised institution that
had not elected the CBLR framework
reported no difference between the
amount of its allowance for credit losses
and its tier 2 capital.14 Consequently,
although the FDIC does not have
information about the amount of real
estate loans at each small institution
that currently exceeds, or could exceed,
the supervisory LTV limits, the FDIC
does not expect the proposed rule to
have material effects on the safety-andsoundness of, or compliance costs
incurred by, small FDIC-supervised
institutions. However, small institutions
may have to incur some costs associated
with making the necessary changes to
their systems and processes in order to
comply with the terms of the proposed
rule. The FDIC believes that any such
costs are likely to be minimal given that
all small institutions already calculate
tier 1 capital and the allowance for
credit losses and had been subject to the
previous thresholds for many years
before the changes in the capital rules.
Therefore, and based on the preceding
discussion, the FDIC certifies that the
proposed rule, if codified as written,
would not significantly affect a
substantial number of small entities.
The FDIC invites comments on all
aspects of the supporting information
provided in this section, and in
particular, whether the proposed rule
would have any significant effects on
small entities that the FDIC has not
identified.
C. Paperwork Reduction Act
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(PRA),15 the FDIC may not conduct or
sponsor, and a respondent is not
required to respond to, an information
collection unless it displays a currentlyvalid Office of Management and Budget
(OMB) control number. The FDIC has
reviewed this proposed rule and
determined that it would not introduce
any new or revise any collection of
information pursuant to the PRA.
Therefore, no submissions will be made
to OMB with respect to this proposed
rule.
D. Riegle Community Development and
Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the
Riegle Community Development and
Regulatory Improvement Act
(RCDRIA),16 in determining the effective
date and administrative compliance
requirements for new regulations that
impose additional reporting, disclosure,
or other requirements on insured
depository institution, each Federal
banking agency must consider,
consistent with principles of safety and
soundness and the public interest, any
administrative burdens that such
regulations would place on depository
institutions, including small depository
institutions, and customers of
depository institutions, as well as the
benefits of such regulations. In addition,
section 302(b) of RCDRIA requires new
regulations and amendments to
regulations that impose additional
reporting, disclosures, or other new
requirements on insured depository
institutions generally to take effect on
the first day of a calendar quarter that
begins on or after the date on which the
regulations are published in final
form.17
The FDIC believes that this proposed
rule, if implemented, would not impose
new reporting, disclosure, or other
requirements, and would likely instead
reduce such burdens by allowing
Electing CBOs to avoid calculating and
reporting tier 2 capital, as would be
required under the current Real Estate
Lending Standards. Additionally, even
if this proposed rule could be
U.S.C. 3501–3521.
U.S.C. 4802(a).
17 Id. at 4802(b).
considered subject to the requirements
of section 302(b) of RCDRIA, the FDIC
believes that there is good cause under
section 302(b)(1)(A) to have the rule
become effective upon publication in
the Federal Register for the same
reasons that it believes good cause exists
under the APA (see Proposed Waiver of
Delayed Effective Date, supra). The
FDIC invites comment on the
applicability of section 302(b) of
RCDRIA to the proposed rule and, if it
is applicable, whether good cause exists
to waive the delayed effective date of
the rule once finalized.
E. Solicitation of Comments on Use of
Plain Language
Section 722 of the Gramm-LeachBliley Act 18 requires the Federal
banking agencies to use plain language
in all proposed and final rules
published after January 1, 2000. The
FDIC has sought to present the proposed
rule in a simple and straightforward
manner and invites comment on the use
of plain language.
List of Subjects in 12 CFR Part 365
Banks, Banking, Mortgages, Savings
associations.
PART 365—REAL ESTATE LENDING
STANDARDS
Authority and Issuance
For the reasons stated in the
preamble, the Federal Deposit Insurance
Corporation proposes to amend part 365
of chapter III of title 12 of the Code of
Federal Regulations as follows:
■ 1. The authority citation for part 365
continues to read as follows:
Authority: 12 U.S.C. 1828(o) and 5101 et
seq.
2. Amend Appendix A to Subpart A
by revising the section titled ‘‘Loans in
Excess of the Supervisory Loan-to-Value
Limits’’ to read as follows:
■
Appendix A to Subpart A of Part 365—
Interagency Guidelines for Real Estate
Lending Policies
*
*
*
*
*
Loans in Excess of the Supervisory Loan-toValue Limits
The agencies recognize that appropriate
loan-to-value limits vary not only among
categories of real estate loans but also among
individual loans. Therefore, it may be
appropriate in individual cases to originate
or purchase loans with loan-to-value ratios in
excess of the supervisory loan-to-value
limits, based on the support provided by
other credit factors. Such loans should be
identified in the institution’s records, and
15 44
13 Id.
16 12
14 Id.
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Federal Register / Vol. 86, No. 120 / Friday, June 25, 2021 / Proposed Rules
their aggregate amount reported at least
quarterly to the institution’s board of
directors. (See additional reporting
requirements described under ‘‘Exceptions to
the General Policy.’’)
The aggregate amount of all loans in excess
of the supervisory loan-to-value limits should
not exceed 100 percent of total capital.4
Moreover, within the aggregate limit, total
loans for all commercial, agricultural,
multifamily or other non-1-to-4 family
residential properties should not exceed 30
percent of total capital. An institution will
come under increased supervisory scrutiny
as the total of such loans approaches these
levels.
In determining the aggregate amount of
such loans, institutions should: (a) Include
all loans secured by the same property if any
one of those loans exceeds the supervisory
loan-to-value limits; and (b) include the
recourse obligation of any such loan sold
with recourse. Conversely, a loan should no
longer be reported to the directors as part of
aggregate totals when reduction in principal
or senior liens, or additional contribution of
collateral or equity (e.g., improvements to the
real property securing the loan), bring the
loan-to-value ratio into compliance with
supervisory limits.
*
*
*
*
*
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on June 15, 2021.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2021–12973 Filed 6–24–21; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2021–0451; Project
Identifier AD–2021–00007–T]
RIN 2120–AA64
Airworthiness Directives; The Boeing
Company Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
The FAA proposes to
supersede Airworthiness Directive (AD)
2019–01–08, which applies to certain
The Boeing Company Model 777–200,
lotter on DSK11XQN23PROD with PROPOSALS1
SUMMARY:
4 For the purposes of these Guidelines, for state
non-member banks and state savings associations,
‘‘total capital’’ refers to the FDIC-supervised
institution’s tier 1 capital, as defined in § 324.2 of
this chapter, plus the allowance for loan and leases
losses or the allowance for credit losses attributable
to loans and leases, as applicable. The allowance for
credit losses attributable to loans and leases is
applicable for institutions that have adopted the
Current Expected Credit Losses methodology.
VerDate Sep<11>2014
16:54 Jun 24, 2021
Jkt 253001
–200LR, –300, and –300ER series
airplanes. AD 2019–01–08 requires
modifications for galley mounted
attendant seat fittings. Since the FAA
issued AD 2019–01–08, the FAA
determined that additional airplanes are
subject to the unsafe condition. This
proposed AD would retain the
requirements of AD 2019–01–18 and
expand the applicability to include
additional airplanes. The FAA is
proposing this AD to address the unsafe
condition on these products.
DATES: The FAA must receive comments
on this proposed AD August 9, 2021.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations,
M–30, West Building Ground Floor,
Room W12–140, 1200 New Jersey
Avenue SE, Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this NPRM, contact Boeing Commercial
Airplanes, Attention: Contractual & Data
Services (C&DS), 2600 Westminster
Blvd., MC 110–SK57, Seal Beach, CA
90740–5600; telephone 562–797–1717;
internet https://
www.myboeingfleet.com. You may view
this service information at the FAA,
Airworthiness Products Section,
Operational Safety Branch, 2200 South
216th St., Des Moines, WA. For
information on the availability of this
material at the FAA, call 206–231–3195.
It is also available at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2021–
0451.
Examining the AD Docket
You may examine the AD docket at
https://www.regulations.gov by
searching for and locating Docket No.
FAA–2021–0451; or in person at Docket
Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The AD docket contains this
NPRM, any comments received, and
other information. The street address for
Docket Operations is listed above.
FOR FURTHER INFORMATION CONTACT:
Brandon Lucero, Aerospace Engineer,
Cabin Safety and Environmental
Systems Section, FAA, Seattle ACO
Branch, 2200 South 216th St., Des
Moines, WA 98198; phone and fax: 206–
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
231–3569; email: brandon.lucero@
faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
The FAA invites you to send any
written relevant data, views, or
arguments about this proposal. Send
your comments to an address listed
under ADDRESSES. Include ‘‘Docket No.
FAA–2021–0451; Project Identifier AD–
2021–00007–T’’ at the beginning of your
comments. The most helpful comments
reference a specific portion of the
proposal, explain the reason for any
recommended change, and include
supporting data. The FAA will consider
all comments received by the closing
date and may amend the proposal
because of those comments.
Except for Confidential Business
Information (CBI) as described in the
following paragraph, and other
information as described in 14 CFR
11.35, the FAA will post all comments
received, without change, to https://
www.regulations.gov, including any
personal information you provide. The
agency will also post a report
summarizing each substantive verbal
contact received about this proposed
AD.
Confidential Business Information
CBI is commercial or financial
information that is both customarily and
actually treated as private by its owner.
Under the Freedom of Information Act
(FOIA) (5 U.S.C. 552), CBI is exempt
from public disclosure. If your
comments responsive to this NPRM
contain commercial or financial
information that is customarily treated
as private, that you actually treat as
private, and that is relevant or
responsive to this NPRM, it is important
that you clearly designate the submitted
comments as CBI. Please mark each
page of your submission containing CBI
as ‘‘PROPIN.’’ The FAA will treat such
marked submissions as confidential
under the FOIA, and they will not be
placed in the public docket of this
NPRM. Submissions containing CBI
should be sent to Brandon Lucero,
Aerospace Engineer, Cabin Safety and
Environmental Systems Section, FAA,
Seattle ACO Branch, 2200 South 216th
St., Des Moines, WA 98198; phone and
fax: 206–231–3569; email:
brandon.lucero@faa.gov. Any
commentary that the FAA receives
which is not specifically designated as
CBI will be placed in the public docket
for this rulemaking.
Background
The FAA issued AD 2019–01–08,
Amendment 39–19547 (84 FR 4318,
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]]>Agencies
[Federal Register Volume 86, Number 120 (Friday, June 25, 2021)]
[Proposed Rules]
[Pages 33570-33574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12973]
=======================================================================
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 365
RIN 3064-AF72
Real Estate Lending Standards
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice of proposed rulemaking and request for comment.
-----------------------------------------------------------------------
SUMMARY: The FDIC is inviting comment on a proposed rule to amend
Interagency Guidelines for Real Estate Lending Policies (Real Estate
Lending Standards). The purpose of the proposed rule is to align the
Real Estate Lending Standards with the community bank leverage ratio
(CBLR) rule, which does not require electing institutions to calculate
tier 2 capital or total capital. The proposed rule would allow a
consistent approach for calculating the ratio of loans in excess of the
supervisory loan-to-value limits (LTV Limits) at all FDIC-supervised
institutions, using a methodology that approximates the historical
methodology the FDIC has followed for calculating this measurement
without requiring institutions to calculate tier 2 capital. The
proposed rule would also avoid any regulatory burden that could arise
if an FDIC-supervised institution subsequently decides to switch
between different capital frameworks.
DATES: Comments must be received by July 26, 2021.
ADDRESSES: Interested parties are encouraged to submit written
comments. Commenters should use the title ``Real Estate Lending
Standards (RIN 3064-AF72)'' to facilitate the organization of comments.
Interested parties are invited to submit written comments, identified
by RIN 3064-AF72, by any of the following methods:
FDIC website: https://www.fdic.gov/resources/regulations/federal-register-publications/.
Mail: James P. Sheesley, Assistant Executive Secretary,
Attention: Comments/Legal ESS (RIN 3064-AF72), Federal Deposit
Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
Hand Delivery/Courier: The guard station at the rear of
the 550 17th Street NW, building (located on F Street) on business days
between 7:00 a.m. and 5:00 p.m.
Email: [email protected]. Comments submitted must include
``RIN 3064-AF72.''
Please include your name, affiliation, address, email address, and
telephone number(s) in your comment. All statements received, including
attachments and other supporting materials, are part of the public
record and are subject to public disclosure. You should submit only
information that you wish to make publicly available.
Please note: All comments received will be posted generally without
change to https://www.fdic.gov/resources/regulations/federal-register-publications/, including any personal information provided.
FOR FURTHER INFORMATION CONTACT:
Alicia R. Marks, Examination Specialist, Division of Risk
Management and Supervision, (202) 898-6660, [email protected]; Navid K.
Choudhury, Counsel, (202) 898-6526, or Catherine S. Wood, Counsel,
(202) 898-3788, Federal Deposit Insurance Corporation, 550 17th Street
NW, Washington, DC 20429. For the hearing impaired only, TDD users may
contact (202) 925-4618.
[[Page 33571]]
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The policy objective of the proposed rule is to provide consistent
calculations of the ratios of loans in excess of the supervisory LTV
Limits between banking organizations that elect, and those that do not
elect, to adopt the CBLR framework, while not including capital ratios
that some institutions are not required to compute or report. The
proposed rule would amend the Real Estate Lending Standards set forth
in Appendix A of 12 CFR part 365.
Section 201 of the Economic Growth, Regulatory Relief, and Consumer
Protection Act (EGRRCPA) directs the FDIC, the Board of Governors of
the Federal Reserve System (FRB), and the Office of the Comptroller of
the Currency (OCC) (collectively, the agencies) to develop a community
bank leverage ratio for qualifying community banking organizations. The
CBLR framework is intended to simplify regulatory capital requirements
and provide material regulatory compliance burden relief to the
qualifying community banking organizations that opt into it. In
particular, banking organizations that opt into the CBLR framework do
not have to calculate the metrics associated with the applicable risk-
based capital requirements in the agencies' capital rules (generally
applicable rule), including total capital.
The Real Estate Lending Standards set forth in Appendix A of 12 CFR
part 365, as they apply to FDIC-supervised banks, contain a tier 1
capital threshold for institutions electing to adopt the CBLR and a
total capital threshold for other banks. The proposed rule would
provide a consistent treatment for all FDIC-supervised banks without
requiring the computation of total capital. The proposed amendment is
described in more detail in Section III, below.
II. Background
The Real Estate Lending Standards, which were issued pursuant to
section 304 of the Federal Deposit Insurance Corporation Improvement
Act of 1991, 12 U.S.C. 1828(o), prescribe standards for real estate
lending to be used by FDIC-supervised institutions in adopting internal
real estate lending policies. Section 201 of the EGRRCPA amended
provisions in the Dodd-Frank Wall Street Reform and Consumer Protection
Act relative to the capital rules administered by the agencies. The
CBLR rule was issued by the agencies to implement section 201 of the
EGRRCPA, and it provides a simple measure of capital adequacy for
community banking organizations that meet certain qualifying
criteria.\1\ The FDIC is issuing this proposal to amend part 365 in
response to changes in the type of capital information available after
the implementation of the CBLR rule. Qualifying community banking
organizations \2\ that elect to use the CBLR framework (Electing CBOs)
may calculate their CBLR without calculating tier 2 capital, and are
therefore not required to calculate or report tier 2 capital or total
capital.\3\ The proposed revision to the Real Estate Lending Standards
would allow a consistent approach for calculating loans in excess of
the supervisory LTV Limits without having to calculate tier 2 or total
capital as currently included in part 365 and its Appendix.
---------------------------------------------------------------------------
\1\ 85 FR 64003 (Oct. 9, 2020).
\2\ The FDIC's CBLR rule defines qualifying community banking
organizations as ``an FDIC-supervised institution that is not an
advanced approaches FDIC-supervised institution'' with less than $10
billion in total consolidated assets that meet other qualifying
criteria, including a leverage ratio (equal to tier 1 capital
divided by average total consolidated assets) of greater than 9
percent. 12 CFR 324.12(a)(2).
\3\ Total capital is defined as the sum of tier 1 capital and
tier 2 capital. See 12 CFR 324.2.
---------------------------------------------------------------------------
The proposal would also ensure that the FDIC's regulation regarding
supervisory LTV Limits is consistent with how examiners are calculating
credit concentrations, as provided by a statement issued by the
agencies on March 30, 2020. The statement provided that the agencies'
examiners will use tier 1 capital plus the appropriate allowance for
credit losses as the denominator when calculating credit
concentrations.\4\
---------------------------------------------------------------------------
\4\ See the Joint Statement on Adjustment to the Calculation for
Credit Concentration Ratios (FIL-31-2020).
---------------------------------------------------------------------------
III. Revisions to the Real Estate Lending Standards
The FDIC is proposing to amend the Real Estate Lending Standards so
all FDIC-supervised institutions, both Electing CBOs and other insured
financial institutions, would calculate the ratio of loans in excess of
the supervisory LTV Limits using tier 1 capital plus the appropriate
allowance for credit losses \5\ in the denominator. The proposed
amendment would provide a consistent approach for calculating the ratio
of loans in excess of the supervisory LTV Limits for all FDIC-
supervised institutions. The proposed amendment would also approximate
the historical methodology specified in the Real Estate Lending
Standards for calculating the loans in excess of the supervisory LTV
Limits without creating any regulatory burden for Electing CBOs and
other banking organizations.\6\ Further, the FDIC is proposing this
approach to provide regulatory clarity and avoid any regulatory burden
that could arise if Electing CBOs subsequently decide to switch between
the CBLR framework and the generally applicable capital rules. The FDIC
is proposing to amend the Real Estate Lending Standards only relative
to the calculation of loans in excess of the supervisory LTV Limits due
to the change in the type of capital information that will be
available, and is not considering any revisions to other sections of
the Real Estate Lending Standards. Additionally, due to a publishing
error which excluded the third paragraph in this section in the Code of
Federal Regulations in prior versions, the FDIC is including the
complete text of the section on loans in excess of the supervisory
loan-to-value limits.
---------------------------------------------------------------------------
\5\ Banking organizations that have not adopted the current
expected credit losses (CECL) methodology will use tier 1 capital
plus the allowance for loan and lease losses (ALLL) as the
denominator. Banking organizations that have adopted the CECL
methodology will use tier 1 capital plus the portion of the
allowance for credit losses (ACL) attributable to loans and leases.
\6\ The proposed amendment approximates the historical
methodology in the sense that both the proposed and historical
approach for calculating the ratio of loans in excess of the LTV
Limits involve adding a measure of loss absorbing capacity to tier 1
capital, and an institution's ALLL (or ACL) is a component of tier 2
capital. Under the agencies' capital rules an institution's entire
amount of ALLL or ACL could be included in its tier 2 capital,
depending on the amount of its risk-weighted assets base. Based on
December 31, 2019, Call Report data--the last Call Report date prior
to the introduction of the CBLR framework--96.0 percent of FDIC-
supervised institutions reported that their entire ALLL or ACL was
included in their tier 2 capital, and 50.5 percent reported that
their tier 2 capital was entirely composed of their ALLL.
---------------------------------------------------------------------------
IV. Expected Effects
As of September 30, 2020, the FDIC supervises 3,245 insured
depository institutions. The proposed revision to the Real Estate
Lending Standards, if adopted, would apply to all FDIC-supervised
institutions. The effect of the proposed revisions at an individual
bank would depend on whether the amount of its current or future real
estate loans with loan-to-value ratios that exceed the supervisory LTV
thresholds is greater than, or less than, the sum of its tier 1 capital
and allowance (or credit reserve in the case of CECL adopters) for loan
and lease losses. Allowance levels, credit reserves, and the volume of
real estate loans and their loan to value ratios can vary considerably
over time. Moreover, the FDIC does not have comprehensive information
about the distribution of current loan to value ratios. For these
[[Page 33572]]
reasons, it is not possible to identify how many institutions have real
estate loans that exceed the supervisory LTV thresholds that would be
directly implicated by either the current Real Estate Lending Standards
or the proposed revisions.
Currently, 3,080 FDIC supervised institutions have total real
estate loans that exceed the tier 1 capital plus allowance or reserve
benchmark in the proposed revision and are thus potentially affected by
the proposed revisions depending on the distribution of their loan to
value ratios. In comparison, 3,088 FDIC supervised institutions have
total real estate loans exceeding the current total capital benchmark
and are thus potentially affected by the current Real Estate Lending
Standards. As described in more detail below, the population of banks
potentially subject to the Real Estate Lending Standards is therefore
almost unchanged by these proposed revisions, and their substantive
effects are likely to be minimal.\7\
---------------------------------------------------------------------------
\7\ September 30, 2020, Call Report data.
---------------------------------------------------------------------------
The FDIC believes that a threshold of ``tier 1 capital plus an
allowance for credit losses'' is consistent with the way the FDIC and
institutions historically have applied the Real Estate Lending
Standards. Also, the typical (or median) FDIC-supervised institution
that had not elected the CBLR framework reported no difference between
the amount of its allowance for credit losses and its tier 2
capital.\8\ Consequently, although the FDIC does not have information
about the amount of real estate loans at each institution that
currently exceeds, or could exceed, the supervisory LTV limits, the
FDIC does not expect the proposed rule to have material effects on the
safety-and-soundness of, or compliance costs incurred by, FDIC-
supervised institutions.
---------------------------------------------------------------------------
\8\ September 30, 2020, Call Report data.
---------------------------------------------------------------------------
V. Alternatives
The FDIC considered two alternatives, however it believes that none
are preferable to the proposal. The alternatives are discussed below.
First, the FDIC considered making no change to its Real Estate
Lending Standards. The FDIC is not in favor of this approach because
the FDIC does not favor an approach in which some banks use a tier 1
capital threshold and other banks use a total capital threshold, and
because the existing provision could be confusing for institutions.
Second, the FDIC considered revising its Real Estate Lending
Standards so that both Electing CBOs and other institutions would use
tier 1 capital in place of total capital for the purpose of calculating
the supervisory LTV Limits. While this would subject both Electing CBOs
and other institutions to the same approach, because the amount of tier
1 capital at an institution is typically less than the amount of total
capital, this alternative would result in a relative tightening of the
supervisory standards with respect to loans made in excess of the
supervisory LTV Limits. The FDIC believes that the general level of the
current supervisory LTV Limits, which would be retained by this
proposed rule, is appropriately reflective of the safety and soundness
risk of depository institutions, and therefore the FDIC does not
consider this alternative preferable to the proposed rule.
VI. Request for Comments
The FDIC invites comment on all aspects of the proposed rule. In
particular, the FDIC invites comment on the use of tier 1 capital plus
the appropriate allowance for credit losses in the denominator to
calculate the level of loans in excess of the supervisory LTV Limits.
Additionally, what alternative capital metric for the denominator when
calculating loans in excess of the supervisory LTV Limits should the
FDIC consider?
IV. Regulatory Analysis
A. Proposed Waiver of Delayed Effective Date
The FDIC proposes to make all provisions of the rule effective upon
publication of the final rule in the Federal Register. The
Administrative Procedure Act (APA) allows for an effective date of less
than 30 days after publication ``as otherwise provided by the agency
for good cause found and published with the rule.'' \9\ The purpose of
the 30-day waiting period prescribed in APA section 553(d)(3) is to
give affected parties a reasonable time to adjust their behavior and
prepare before the final rule takes effect. The FDIC believes that this
waiting period would be unnecessary as the proposed rule, if codified,
would likely lift burdens on FDIC-supervised institutions by allowing
them to calculate the ratio of loans in excess of the supervisory LTV
Limits without calculating tier 2 capital, and would also ensure that
the approach is consistent, regardless of the institutions' CBLR
election status. Consequently, the FDIC believes it would have good
cause for the final rule to become effective upon publication.
---------------------------------------------------------------------------
\9\ 5 U.S.C. 553(d)(3).
---------------------------------------------------------------------------
The FDIC invites comment on whether good cause exists to waive the
delayed effective date of the rule once finalized.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a proposed rule, an agency prepare and make available
for public comment an initial regulatory flexibility analysis that
describes the impact of the proposed rule on small entities.\10\
However, a regulatory flexibility analysis is not required if the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities, and publishes its
certification and a short explanatory statement in the Federal Register
together with the rule. The Small Business Administration (SBA) has
defined ``small entities'' to include banking organizations with total
assets of less than or equal to $600 million.\11\ Generally, the FDIC
considers a significant effect to be a quantified effect in excess of 5
percent of total annual salaries and benefits per institution, or 2.5
percent of total noninterest expenses. The FDIC believes that effects
in excess of these thresholds typically represent significant effects
for FDIC-supervised institutions. For the reasons provided below, the
FDIC certifies that the proposed rule will not have a significant
economic impact on a substantial number of small banking organizations.
Accordingly, a regulatory flexibility analysis is not required.
---------------------------------------------------------------------------
\10\ 5 U.S.C. 601 et seq.
\11\ The SBA defines a small banking organization as having $600
million or less in assets, where ``a financial institution's assets
are determined by averaging the assets reported on its four
quarterly financial statements for the preceding year.'' 13 CFR
121.201 n.8 (2019). ``SBA counts the receipts, employees, or other
measure of size of the concern whose size is at issue and all of its
domestic and foreign affiliates. . . .'' 13 CFR 121.103(a)(6)
(2019). Following these regulations, the FDIC uses a covered
entity's affiliated and acquired assets, averaged over the preceding
four quarters, to determine whether the covered entity is ``small''
for the purposes of RFA.
---------------------------------------------------------------------------
As of September 30, 2020, the FDIC supervised 3,245 institutions,
of which 2,434 were ``small entities'' for purposes of the RFA.\12\ The
effect of the proposed revisions at an individual bank would depend on
whether the amount of its current or future real estate loans with
loan-to-value ratios that exceed the supervisory LTV thresholds is
greater than, or less than, the sum of its tier 1 capital and allowance
(or credit reserve in the case of CECL adopters) for loan and lease
losses. Allowance levels, credit reserves, and the volume of real
estate loans and their loan to value ratios can vary considerably over
time. Moreover, the FDIC does not have
[[Page 33573]]
comprehensive information about the distribution of current loan to
value ratios. For these reasons, it is not possible to identify how
many institutions have real estate loans that exceed the supervisory
LTV thresholds that would be directly implicated by either the current
Guidelines or the proposed revisions.
---------------------------------------------------------------------------
\12\ September 30, 2020, Call Report data.
---------------------------------------------------------------------------
Currently, 2,305 small, FDIC supervised institutions have total
real estate loans that exceed the tier 1 capital plus allowance or
reserve benchmark in the proposed revision and are thus potentially
affected by the proposed revisions depending on the distribution of
their loan to value ratios. In comparison, 2,312 small, FDIC supervised
institutions have total real estate loans exceeding the current total
capital benchmark and are thus potentially affected by the current Real
Estate Lending Standards. As described in more detail below, the
population of banks potentially subject to the Real Estate Lending
Standards is therefore almost unchanged by these proposed revisions,
and their substantive effects are likely to be minimal.\13\
---------------------------------------------------------------------------
\13\ Id.
---------------------------------------------------------------------------
The FDIC believes that a threshold of ``tier 1 capital plus an
allowance for credit losses'' is consistent with the way the FDIC and
institutions historically have applied the Real Estate Lending
Standards. Also, the typical (or median) small, FDIC-supervised
institution that had not elected the CBLR framework reported no
difference between the amount of its allowance for credit losses and
its tier 2 capital.\14\ Consequently, although the FDIC does not have
information about the amount of real estate loans at each small
institution that currently exceeds, or could exceed, the supervisory
LTV limits, the FDIC does not expect the proposed rule to have material
effects on the safety-and-soundness of, or compliance costs incurred
by, small FDIC-supervised institutions. However, small institutions may
have to incur some costs associated with making the necessary changes
to their systems and processes in order to comply with the terms of the
proposed rule. The FDIC believes that any such costs are likely to be
minimal given that all small institutions already calculate tier 1
capital and the allowance for credit losses and had been subject to the
previous thresholds for many years before the changes in the capital
rules.
---------------------------------------------------------------------------
\14\ Id.
---------------------------------------------------------------------------
Therefore, and based on the preceding discussion, the FDIC
certifies that the proposed rule, if codified as written, would not
significantly affect a substantial number of small entities.
The FDIC invites comments on all aspects of the supporting
information provided in this section, and in particular, whether the
proposed rule would have any significant effects on small entities that
the FDIC has not identified.
C. Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA),\15\ the FDIC may not conduct or sponsor, and a
respondent is not required to respond to, an information collection
unless it displays a currently-valid Office of Management and Budget
(OMB) control number. The FDIC has reviewed this proposed rule and
determined that it would not introduce any new or revise any collection
of information pursuant to the PRA. Therefore, no submissions will be
made to OMB with respect to this proposed rule.
---------------------------------------------------------------------------
\15\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------
D. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\16\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institution, each Federal banking agency must
consider, consistent with principles of safety and soundness and the
public interest, any administrative burdens that such regulations would
place on depository institutions, including small depository
institutions, and customers of depository institutions, as well as the
benefits of such regulations. In addition, section 302(b) of RCDRIA
requires new regulations and amendments to regulations that impose
additional reporting, disclosures, or other new requirements on insured
depository institutions generally to take effect on the first day of a
calendar quarter that begins on or after the date on which the
regulations are published in final form.\17\
---------------------------------------------------------------------------
\16\ 12 U.S.C. 4802(a).
\17\ Id. at 4802(b).
---------------------------------------------------------------------------
The FDIC believes that this proposed rule, if implemented, would
not impose new reporting, disclosure, or other requirements, and would
likely instead reduce such burdens by allowing Electing CBOs to avoid
calculating and reporting tier 2 capital, as would be required under
the current Real Estate Lending Standards. Additionally, even if this
proposed rule could be considered subject to the requirements of
section 302(b) of RCDRIA, the FDIC believes that there is good cause
under section 302(b)(1)(A) to have the rule become effective upon
publication in the Federal Register for the same reasons that it
believes good cause exists under the APA (see Proposed Waiver of
Delayed Effective Date, supra). The FDIC invites comment on the
applicability of section 302(b) of RCDRIA to the proposed rule and, if
it is applicable, whether good cause exists to waive the delayed
effective date of the rule once finalized.
E. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \18\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The FDIC has sought to present the
proposed rule in a simple and straightforward manner and invites
comment on the use of plain language.
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\18\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
(1999).
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List of Subjects in 12 CFR Part 365
Banks, Banking, Mortgages, Savings associations.
PART 365--REAL ESTATE LENDING STANDARDS
Authority and Issuance
For the reasons stated in the preamble, the Federal Deposit
Insurance Corporation proposes to amend part 365 of chapter III of
title 12 of the Code of Federal Regulations as follows:
0
1. The authority citation for part 365 continues to read as follows:
Authority: 12 U.S.C. 1828(o) and 5101 et seq.
0
2. Amend Appendix A to Subpart A by revising the section titled ``Loans
in Excess of the Supervisory Loan-to-Value Limits'' to read as follows:
Appendix A to Subpart A of Part 365--Interagency Guidelines for Real
Estate Lending Policies
* * * * *
Loans in Excess of the Supervisory Loan-to-Value Limits
The agencies recognize that appropriate loan-to-value limits
vary not only among categories of real estate loans but also among
individual loans. Therefore, it may be appropriate in individual
cases to originate or purchase loans with loan-to-value ratios in
excess of the supervisory loan-to-value limits, based on the support
provided by other credit factors. Such loans should be identified in
the institution's records, and
[[Page 33574]]
their aggregate amount reported at least quarterly to the
institution's board of directors. (See additional reporting
requirements described under ``Exceptions to the General Policy.'')
The aggregate amount of all loans in excess of the supervisory
loan-to-value limits should not exceed 100 percent of total
capital.\4\ Moreover, within the aggregate limit, total loans for
all commercial, agricultural, multifamily or other non-1-to-4 family
residential properties should not exceed 30 percent of total
capital. An institution will come under increased supervisory
scrutiny as the total of such loans approaches these levels.
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\4\ For the purposes of these Guidelines, for state non-member
banks and state savings associations, ``total capital'' refers to
the FDIC-supervised institution's tier 1 capital, as defined in
Sec. 324.2 of this chapter, plus the allowance for loan and leases
losses or the allowance for credit losses attributable to loans and
leases, as applicable. The allowance for credit losses attributable
to loans and leases is applicable for institutions that have adopted
the Current Expected Credit Losses methodology.
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In determining the aggregate amount of such loans, institutions
should: (a) Include all loans secured by the same property if any
one of those loans exceeds the supervisory loan-to-value limits; and
(b) include the recourse obligation of any such loan sold with
recourse. Conversely, a loan should no longer be reported to the
directors as part of aggregate totals when reduction in principal or
senior liens, or additional contribution of collateral or equity
(e.g., improvements to the real property securing the loan), bring
the loan-to-value ratio into compliance with supervisory limits.
* * * * *
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on June 15, 2021.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2021-12973 Filed 6-24-21; 8:45 am]
BILLING CODE 6714-01-P
