Community Reinvestment Act Joint Final Rules
FederalAgency guidance
Ask Donna
How this section applies to your facts.
FDIC Financial Institution Letters › Community Reinvestment Act Joint Final Rules
Text
44256
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
List of Subjects in 7 CFR Part 946
Marketing agreements, Potatoes,
Reporting and recordkeeping
requirements.
I For the reasons set forth in the
preamble, 7 CFR part 946 is amended as
follows:
PART 946—IRISH POTATOES GROWN
IN WASHINGTON
I 1. The authority citation for 7 CFR part
946 continues to read as follows:
Authority: 7 U.S.C. 601–674.
I 2. In § 946.120, paragraph (a) is revised
to read as follows:
§ 946.120
Application.
(a) Whenever shipments for special
purposes pursuant to § 946.54 are
relieved in whole or in part from
regulations issued under § 946.52, each
handler desiring to make shipments of
potatoes for the following purposes
shall submit an application to the
committee, prior to initiating such
shipments, for a special purpose
certificate permitting such shipments:
(1) Charity: Provided, That handlers
making shipments for charity of 1,000
pounds or less are exempt from these
application requirements;
(2) Prepeeling;
(3) Canning, freezing, and ‘‘other
processing’’;
(4) Grading or storing at any specified
location in Morrow or Umatilla
Counties in the State of Oregon; and
(5) Experimentation.
*
*
*
*
*
I 3. Section 946.336 is amended by:
I A. Revising paragraph (d)(1)(vi);
I B. Removing paragraph (d)(1)(vii);
I C. Redesignating paragraph (d)(1)(viii)
as paragraph (d)(1)(vii);
I D. Revising paragraph (d)(2);
I E. Revising the introductory text of
paragraph (e)(2);
I F. Revising paragraph (e)(3)(iii);
I G. Removing paragraph (e)(5);
I H. Redesignating paragraph (e)(6) as
paragraph (e)(5);
I I. Adding a new paragraph (e)(6), (e)(7),
and (e)(8); and
I J. Revising paragraph (g)(1) to read as
follows:
§ 946.336
Handling regulation.
*
*
*
*
*
(d) * * *
(1) * * *
(vi) Grading or storing at any specified
location in Morrow or Umatilla
Counties in the State of Oregon;
*
*
*
*
*
(2) Shipments of potatoes for the
purposes specified in paragraphs
h (e)(6) as
paragraph (e)(5);
I I. Adding a new paragraph (e)(6), (e)(7),
and (e)(8); and
I J. Revising paragraph (g)(1) to read as
follows:
§ 946.336
Handling regulation.
*
*
*
*
*
(d) * * *
(1) * * *
(vi) Grading or storing at any specified
location in Morrow or Umatilla
Counties in the State of Oregon;
*
*
*
*
*
(2) Shipments of potatoes for the
purposes specified in paragraphs
(d)(1)(i) through (vii) of this section
shall be exempt from the inspection
requirements specified in paragraph (g)
of this section, except that shipments
pursuant to paragraph (d)(1)(vi) of this
section shall comply with the
inspection requirements of paragraph
(e)(2) of this section. Shipments
specified in paragraphs (d)(1)(i), (ii),
(iii), (v) and (vii) of this section shall be
exempt from assessment requirements
as specified in § 946.248 and established
pursuant to § 946.41
(e) * * *
(2) Handlers desiring to ship potatoes
for grading or storing to any specified
location in Morrow or Umatilla
Counties in the State of Oregon shall:
*
*
*
*
*
(3) * * *
(iii) Upon request by the committee,
furnish reports, or cause reports to be
furnished, for each shipment pursuant
to the applicable Special Purpose
Certificate;
*
*
*
*
*
(6) Handlers diverting potatoes to
livestock feed are not required to apply
for a Special Purpose Certificate nor
report such shipments to the committee.
(7) Each handler desiring to make
shipments of potatoes for charity shall:
uest by the committee,
furnish reports, or cause reports to be
furnished, for each shipment pursuant
to the applicable Special Purpose
Certificate;
*
*
*
*
*
(6) Handlers diverting potatoes to
livestock feed are not required to apply
for a Special Purpose Certificate nor
report such shipments to the committee.
(7) Each handler desiring to make
shipments of potatoes for charity shall:
(i) First apply to the committee for,
and obtain, a Special Purpose Certificate
for the purpose of making shipments for
charity: Provided, That shipments for
charity of 1,000 pounds or less are
exempt from the application and
reporting requirements: And provided
further, That potatoes previously
graded, assessed, and inspected in
preparation for shipment to the fresh
market are exempt from the application
and reporting requirements.
(ii) Each handler shipping potatoes to
charity must inform the recipient that
the potatoes cannot be resold or
otherwise placed in commercial market
channels.
(8) Each handler making shipments of
seed potatoes shall furnish, at the
request of the committee, reports on the
total volume of seed potatoes handled.
*
*
*
*
*
(g) * * *
(1) Except when relieved by
paragraphs (d) or (f) of this section, no
person may handle any potatoes unless
a Federal-State Inspection Notesheet or
certificate covering them has been
issued by an authorized representative
of the Federal-State Inspection Service
and the document is valid at the time of
shipment.
*
*
*
*
*
Dated: July 27, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 05–15170 Filed 8–1–05; 8:45 am]
BILLING CODE 3410–02–U
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 25
[Docket No. 05–11]
RIN 1557–AB98
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No
s valid at the time of
shipment.
*
*
*
*
*
Dated: July 27, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 05–15170 Filed 8–1–05; 8:45 am]
BILLING CODE 3410–02–U
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 25
[Docket No. 05–11]
RIN 1557–AB98
FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No. R–1225]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 345
RIN 3064–AC89
Community Reinvestment Act
Regulations
AGENCIES: Office of the Comptroller of
the Currency, Treasury (OCC); Board of
Governors of the Federal Reserve
System (Board); and Federal Deposit
Insurance Corporation (FDIC).
ACTION: Joint final rule.
SUMMARY: The OCC, Board, and FDIC
(collectively, ‘‘federal banking agencies’’
or ‘‘the agencies’’) are issuing this joint
final rule that revises certain provisions
of our rules implementing the
Community Reinvestment Act (CRA).
The agencies are taking this action after
carefully considering public comments
received in response to the joint notice
of proposed rulemaking published on
March 11, 2005 (the ‘‘March proposal’’).
The joint final rule addresses regulatory
burden imposed on small banks with an
asset size between $250 million and $1
billion by exempting them from CRA
loan data collection and reporting
obligations. It also exempts such banks
from the large bank lending, investment,
and service tests, and makes them
eligible for evaluation under the small
bank lending test and a flexible new
community development test. Holding
company affiliation is no longer a factor
in determining which CRA evaluation
standards apply to a bank. In addition,
the joint final rule revises the term
‘‘community development’’ to include
activities to revitalize and stabilize
distressed or underserved rural areas
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
olding
company affiliation is no longer a factor
in determining which CRA evaluation
standards apply to a bank. In addition,
the joint final rule revises the term
‘‘community development’’ to include
activities to revitalize and stabilize
distressed or underserved rural areas
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44257
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
1 12 U.S.C. 2903.
2 For a more detailed history of CRA rulemaking
activities by the banking agencies since 2001, please
refer to the supplementary information published in
the Federal Register with the joint notice of
proposed rulemaking (70 FR 12148, 12149 (Mar. 11,
2005)).
and designated disaster areas. Finally, it
adopts without change the amendments
to the regulations to address the impact
on a bank’s CRA rating of evidence of
discrimination or other credit practices
that violate an applicable law, rule, or
regulation.
EFFECTIVE DATE: This joint final rule is
effective September 1, 2005.
FOR FURTHER INFORMATION CONTACT:
OCC: Michael Bylsma, Director, or
Margaret Hesse, Special Counsel,
Community and Consumer Law
Division, (202) 874–5750; Karen Tucker,
National Bank Examiner, Compliance
Division, (202) 874–4428; or Patrick T.
Tierney, Senior Attorney, Legislative
and Regulatory Activities (202) 874–
5090, Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: Anjanette M. Kichline,
Oversight Senior Review Examiner,
, Special Counsel,
Community and Consumer Law
Division, (202) 874–5750; Karen Tucker,
National Bank Examiner, Compliance
Division, (202) 874–4428; or Patrick T.
Tierney, Senior Attorney, Legislative
and Regulatory Activities (202) 874–
5090, Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: Anjanette M. Kichline,
Oversight Senior Review Examiner,
(202) 785–6054; Catherine M.J. Gates,
Oversight Team Leader, (202) 452–3946;
Kathleen C. Ryan, Counsel, (202) 452–
3667; or Dan S. Sokolov, Senior
Attorney, (202) 452–2412, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
FDIC: Richard M. Schwartz, Counsel,
Legal Division, (202) 898–7424; Susan
van den Toorn, Counsel, Legal Division,
(202) 898–8707; or Robert W. Mooney,
Chief, CRA and Fair Lending Policy
Section, Division of Supervision and
Consumer Protection, (202) 898–3911;
Federal Deposit Insurance Corporation,
550 17th Street, NW., Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
Background
The CRA requires the federal banking
and thrift agencies to assess the record
of each insured depository institution of
meeting the credit needs of its entire
community, including low- and
moderate-income neighborhoods,
consistent with the safe and sound
operation of the institution, and to take
that record into account when the
agency evaluates an application by the
institution for a deposit facility.1
Rulemaking History
In 1995, when the OCC, the Board, the
FDIC, and the Office of Thrift
Supervision (OTS) (collectively,
‘‘federal banking and thrift agencies’’ or
‘‘the four agencies’’) adopted major
amendments to regulations
implementing the Community
Reinvestment Act, they committed to
reviewing the amended regulations in
2002 for their effectiveness in placing
performance over process, promoting
consistency in evaluations, and
eliminating unnecessary burden
e of Thrift
Supervision (OTS) (collectively,
‘‘federal banking and thrift agencies’’ or
‘‘the four agencies’’) adopted major
amendments to regulations
implementing the Community
Reinvestment Act, they committed to
reviewing the amended regulations in
2002 for their effectiveness in placing
performance over process, promoting
consistency in evaluations, and
eliminating unnecessary burden. (60 FR
22156, 22177 (May 4, 1995)). The
federal banking and thrift agencies
indicated that they would determine
whether and, if so, how the regulations
should be amended to better evaluate
financial institutions’ performance
under the CRA, consistent with the
Act’s authority, mandate, and intent.
The four agencies’ review was
initiated in July 2001 with publication
in the Federal Register of an advance
notice of proposed rulemaking
requesting comment on whether the
regulations were effective in meeting the
stated goals of the 1995 rulemaking and
whether any changes should be made to
the rules (66 FR 37602 (July 19, 2001)).
The approximately 400 comments
reflected a consensus that certain
fundamental elements of the regulations
are sound, but demonstrated a
disagreement over the need and reasons
for change.
In February 2004, the four agencies
published a notice of proposed
rulemaking (69 FR 5729 (Feb. 6, 2004)).
Among other things, the proposal would
have increased the small bank asset size
threshold to $500 million, without
regard to holding company affiliation.
Commenters were deeply split on this
proposal, with financial institutions and
their trade associations urging
additional burden relief for more
institutions and community
organizations opposed to allowing any
additional financial institutions to be
evaluated as ‘‘small’’ institutions. On
July 16, 2004, the OCC and the Board
announced that they would not proceed
with their respective February 2004
proposals. The OCC did not formally
withdraw the proposal, but did not
adopt it
associations urging
additional burden relief for more
institutions and community
organizations opposed to allowing any
additional financial institutions to be
evaluated as ‘‘small’’ institutions. On
July 16, 2004, the OCC and the Board
announced that they would not proceed
with their respective February 2004
proposals. The OCC did not formally
withdraw the proposal, but did not
adopt it. The Board formally withdrew
its proposal.
On August 18, 2004, the OTS
published a final rule that expanded the
category of ‘‘small savings associations’’
under the OTS’’ CRA regulations to
those with under $1 billion in assets,
regardless of holding company
affiliation (69 FR 51155 (Aug. 18,
2004)). Following its publication of a
notice of proposed rulemaking in
November 2004, the OTS also adopted
a final rule that allows a thrift that is
evaluated as a large retail institution to
determine the weight that will be
assigned to lending, investments, and
services in its CRA evaluation. (70 FR
10023 (Mar. 2, 2005)).
On August 20, 2004, the FDIC issued
a proposal on the CRA evaluation of
banks defined as ‘‘small’’ (69 FR 51611
(Aug. 20, 2004)). The FDIC proposal
would have expanded the category of
‘‘small banks’’ to those under $1 billion,
regardless of any holding-company size
or affiliation. For small banks with
assets between $250 million and $1
billion, the FDIC proposal would have
added to the five performance criteria of
the current streamlined small bank test
a new sixth criterion taking into account
a bank’s record of community
development lending, investments, or
services, but also asked for comment on
whether those community development
activities should be evaluated in a
separate test. The FDIC received over
11,000 comments in response to its
proposal
have
added to the five performance criteria of
the current streamlined small bank test
a new sixth criterion taking into account
a bank’s record of community
development lending, investments, or
services, but also asked for comment on
whether those community development
activities should be evaluated in a
separate test. The FDIC received over
11,000 comments in response to its
proposal. Banks and their trade
associations supported a change in the
small bank dollar threshold, primarily
as a way to reduce administrative
burden, but expressed mixed views on
whether community development
activities should be evaluated as a sixth
criterion in the small bank evaluation or
as a separate test. Community
organizations almost universally
opposed any increase in the small bank
threshold. However, these commenters
generally supported the proposal to
require such banks to be evaluated
under a separately rated community
development test in addition to the
small bank lending test, if the small
bank threshold were to be increased.2
The Proposed Rule
The OCC, the Board, and the FDIC
jointly issued the proposed amendments
to their CRA regulations, which were
published in the Federal Register on
March 11, 2005. The proposal was
developed after thorough consideration
of all the comments that the agencies
had received in response to their
previous proposals. The March proposal
responded to community banks
concerned about regulatory burden by
extending eligibility for streamlined
lending evaluations and the exemption
from data reporting to banks under $1
billion, without regard to holding
company assets. The new proposal also
provided an adjustment of this
threshold for inflation, based on
changes to the Consumer Price Index
evious proposals. The March proposal
responded to community banks
concerned about regulatory burden by
extending eligibility for streamlined
lending evaluations and the exemption
from data reporting to banks under $1
billion, without regard to holding
company assets. The new proposal also
provided an adjustment of this
threshold for inflation, based on
changes to the Consumer Price Index.
The proposal addressed the concerns
of community organizations that had
urged the federal banking and thrift
agencies to continue to evaluate
community development participation
by providing that the community
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00039
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44258
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
development records of banks between
$250 million and $1 billion, termed
‘‘intermediate small banks,’’ would be
separately evaluated and rated, but
provided a new, more streamlined basis
than the current rule for doing so. Under
the proposal, an intermediate small
bank would not be eligible for an overall
rating of ‘‘satisfactory’’ unless it
received ratings of ‘‘satisfactory’’ on
both the lending and community
development tests.
The proposal also responded to
suggestions from both community banks
and community organizations that the
current definition of ‘‘community
development’’ was too narrow by
proposing to expand the definition of
community development activities to
include certain activities in underserved
rural areas and designated disaster
areas. Finally, the proposal provided
that evidence of discrimination, or
evidence of credit practices that violate
an applicable law, rule, or regulation,
could adversely affect an agency’s
evaluation of a bank’s CRA performance
and included an illustrative list of such
practices
nity development activities to
include certain activities in underserved
rural areas and designated disaster
areas. Finally, the proposal provided
that evidence of discrimination, or
evidence of credit practices that violate
an applicable law, rule, or regulation,
could adversely affect an agency’s
evaluation of a bank’s CRA performance
and included an illustrative list of such
practices.
Together, the agencies received over
10,000 public comments, including
identical comments sent to each agency,
from consumer and community
organizations, banks and bank trade
associations, academics, Federal and
State Government representatives, and
individuals. In general, commenters
recognized that the proposal had the
potential to strike an appropriate
balance between the need to provide
meaningful regulatory relief to small
banks and the need to preserve and
encourage meaningful community
development activities by those banks.
The Final Rule
Increase in Size Threshold for Small
Banks From $250 Million to $1 Billion
Comments on Proposed Rule
The agencies proposed to reduce
undue regulatory burden by extending
eligibility for streamlined lending
evaluations and the exemption from
data reporting to banks under $1 billion
without regard to holding company
affiliation. In addition, the agencies
proposed to define small banks with
assets between $250 million and $1
billion as ‘‘intermediate small banks.’’
The proposal also would annually
adjust the asset size for small and
intermediate small banks based on
changes to the Consumer Price Index.
Most community organizations
opposed the proposal to raise the small
bank threshold to $1 billion while most
banks supported the increase.
Community organizations expressed a
concern that an increase in the
threshold would cause banks to reduce
their investments and services in low-
and moderate-income areas
mall and
intermediate small banks based on
changes to the Consumer Price Index.
Most community organizations
opposed the proposal to raise the small
bank threshold to $1 billion while most
banks supported the increase.
Community organizations expressed a
concern that an increase in the
threshold would cause banks to reduce
their investments and services in low-
and moderate-income areas. Although
they preferred that the agencies not
increase the threshold, a number of
community organization commenters
noted that the proposed evaluation of
intermediate small banks under a
community development test and the
streamlined lending test was a notable
improvement over the previous
proposals to raise the small bank
threshold.
Community organizations also
expressed concern that an increase in
the small bank threshold would reduce
public data on small business, small
farm, and community development
loans. Community organizations
objected to this result on the basis that
communities would lack the means to
evaluate the small business and small
farm lending of intermediate small
banks. A few community organizations
offered specific examples of how they or
others have used information about
such lending, including, for example, a
series of studies examining
impediments to capital formation by
business owners in low- and moderate-
income areas. Some community
organizations asserted that intermediate
small banks make more small business,
small farm and community
development loans, as a percentage of
bank assets, than larger banks. Thus,
they believe that the loss of the
intermediate small bank lending data
will significantly affect the relevance of
the remaining data, particularly in
markets that include numbers of
intermediate small banks. Some
commenters also noted that the proposal
would affect the Home Mortgage
Disclosure Act (HMDA) requirements to
report certain loans outside of a
Metropolitan Statistical Area (MSA) for
intermediate small banks
he
intermediate small bank lending data
will significantly affect the relevance of
the remaining data, particularly in
markets that include numbers of
intermediate small banks. Some
commenters also noted that the proposal
would affect the Home Mortgage
Disclosure Act (HMDA) requirements to
report certain loans outside of a
Metropolitan Statistical Area (MSA) for
intermediate small banks.
The vast majority of bank and bank
trade association commenters noted that
increasing the small bank threshold
would provide substantial and needed
regulatory burden reduction because
intermediate small banks would be
relieved of the obligation to collect and
report information about small business,
small farm, and community
development loans. They also noted
that, given the inclusion of the
community development test for
intermediate small banks, elimination of
the data collection and reporting
requirements was the principal
regulatory relief component of the
proposed amendments. However, a few
banks stated that this relief would not
be realized fully if banks continue to
collect information about community
development loans, investments, and
services, and provide it to examiners for
use in evaluating the bank’s
performance under the proposed
community development test.
A number of banks and their trade
associations commented that the small
bank size threshold should be raised to
$1 billion without creating a tier of
intermediate small banks that would be
subject to the proposed community
development test. A few bank
commenters suggested defining an
intermediate small bank subject to the
new community development test as a
bank with assets between $500 million
and $1 billion, and to permit
institutions with less than $500 million
in assets to be evaluated solely under
the streamlined small bank lending test
diate small banks that would be
subject to the proposed community
development test. A few bank
commenters suggested defining an
intermediate small bank subject to the
new community development test as a
bank with assets between $500 million
and $1 billion, and to permit
institutions with less than $500 million
in assets to be evaluated solely under
the streamlined small bank lending test.
Some community organization
commenters criticized the proposal to
adjust the asset threshold annually for
small and intermediate small banks
based on changes to the Consumer Price
Index (CPI) because it could increase the
number of banks that are exempt from
the large bank evaluation standards and
further decrease the availability of small
business, small farm, and community
development loan data. Most banks that
commented on the issue supported
tying the small and intermediate small
bank thresholds to changes in the CPI.
Provisions of Final Rule
The joint final rule retains the
proposed asset size threshold for small
banks of less than $1 billion and the
annual adjustment to the threshold
based on changes to the Consumer Price
Index. The text of the ‘‘small bank’’
definition describing the ‘‘intermediate
small bank’’ category has been revised
for clarity. The federal banking agencies
believe that raising the asset size
threshold provides important regulatory
relief for community banks. As
discussed below, the final rule also will
preserve and encourage meaningful
CRA activities by intermediate small
banks by means of a new community
development test.
As a result of the rule change, data on
the distribution of small business loans
and small farm loans extended by
intermediate small banks will no longer
be publicly available. In revising the
rule, the agencies have considered the
adequacy of substitute sources of
information
d encourage meaningful
CRA activities by intermediate small
banks by means of a new community
development test.
As a result of the rule change, data on
the distribution of small business loans
and small farm loans extended by
intermediate small banks will no longer
be publicly available. In revising the
rule, the agencies have considered the
adequacy of substitute sources of
information. Call Report data, although
lacking the loan-location and business-
size information in the CRA data,
provide the public with annual
outstanding amounts of small business
and small farm loans. Moreover, an
intermediate small bank’s CRA
performance evaluation includes, as
appropriate, a description of its small
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00040
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44259
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
3 Even were the proposal not adopted,
intermediate small banks would continue to be
exempt from reporting loan location information on
mortgage loans made in counties with populations
of less than 30,000.
business and small farm lending
performance, as well as a description of
any community development loans the
bank has made. These sources will give
the public information on intermediate
small banks’ records of extending small
business, small farm, and community
development loans. On balance, the
agencies believe the costs of the
mandatory data collection and reporting
by intermediate small banks, including
the fixed costs that weigh more heavily
on smaller banks, outweigh the benefits.
Further, under the CRA and HMDA
regulations, large banks generally must
collect and report information about the
location of property securing home
loans located outside of MSAs and
metropolitan divisions in which the
institution has a home or branch office,
or outside any MSA (12 CFR 203.4(e)).
But for small banks, collecting and
reporting this location information is
optional
enefits.
Further, under the CRA and HMDA
regulations, large banks generally must
collect and report information about the
location of property securing home
loans located outside of MSAs and
metropolitan divisions in which the
institution has a home or branch office,
or outside any MSA (12 CFR 203.4(e)).
But for small banks, collecting and
reporting this location information is
optional. Thus, under this joint final
rule, intermediate small banks will no
longer be required to collect and report
information on the location of mortgage
loans outside MSAs and metropolitan
divisions in which the banks have home
or branch offices.
Summary information about where
such mortgage loans were made, and
detailed information about the
applicants or borrowers, will
nevertheless continue to be available.
Mortgage loan location information is
summarized in the CRA performance
evaluation as part of the evaluation of
the geographic distribution of a bank’s
loans, as appropriate. Moreover, some
newly designated intermediate small
banks may opt to report loan location
information as some small banks have
done in the past. Furthermore,
intermediate small banks covered by
HMDA will continue to report borrower
or applicant race, ethnicity, gender, and
income even when property location
need not be reported. The agencies
believe that the additional value of
requiring intermediate small banks to
report loan location information on all
of their mortgage loans does not justify
the cost of reporting such information.3
Although an intermediate small bank
will no longer be required to collect and
report data on small business or small
farm loans or on the location of certain
nonmetropolitan mortgage loans, the
agencies will continue to evaluate such
lending under the streamlined lending
test if it constitutes a major product line
of the bank
oans does not justify
the cost of reporting such information.3
Although an intermediate small bank
will no longer be required to collect and
report data on small business or small
farm loans or on the location of certain
nonmetropolitan mortgage loans, the
agencies will continue to evaluate such
lending under the streamlined lending
test if it constitutes a major product line
of the bank.
Community Development Test for
Intermediate Small Banks
Comments on Proposed Rule
The March proposal would have
added a new community development
test that would be separately rated in
CRA examinations for intermediate
small banks. The new community
development test would evaluate an
intermediate small bank’s community
development loans, qualified
investments, and community
development services, resulting in a
single rating for community
development performance. Overall CRA
ratings for intermediate small banks
would be based on ratings for this
community development test and the
streamlined small bank lending test.
Most community organization
commenters generally favored the
retention of the large bank lending,
investment, and service tests for
evaluation of all banks with assets of
$250 million or more. On the other
hand, many of these commenters noted
that the proposed intermediate small
bank examination standards—the
streamlined small bank lending test plus
the proposed community development
test—were significantly preferable to
permitting additional banks to be
evaluated under only the streamlined
small bank lending test. In this regard,
community organizations strongly
supported the provision in the proposed
rule to require an intermediate small
bank to receive a ‘‘satisfactory’’ rating
on both the community development
and the small bank lending tests in
order to receive an overall ‘‘satisfactory’’
rating.
Many bank commenters opposed the
creation of separate new standards for
intermediate small banks
In this regard,
community organizations strongly
supported the provision in the proposed
rule to require an intermediate small
bank to receive a ‘‘satisfactory’’ rating
on both the community development
and the small bank lending tests in
order to receive an overall ‘‘satisfactory’’
rating.
Many bank commenters opposed the
creation of separate new standards for
intermediate small banks. For example,
many community bankers commented
that all banks under $1 billion should be
examined solely under the streamlined
lending test. Some bank and bank trade
associations urged the agencies to adopt
final rules that assign greater weight to
retail lending than to community
development in the overall evaluation of
an intermediate small bank’s CRA
performance. A few commenters stated
that, under the proposal, community
development would receive greater
weight in an intermediate small bank’s
overall rating than it does under the
large bank lending, investment, and
service tests that currently apply to such
banks. They urged the agencies to
clarify that intermediate small banks, at
their option, could continue to choose
to be evaluated under the large bank
lending, investment, and service tests.
Regarding the activities evaluated
under the proposed community
development test, most community
organizations stated that an institution
should be required to engage in all three
activities—community development
loans, qualified investments, and
community development services—in
order to earn a ‘‘satisfactory’’ rating on
the community development test.
Although community organizations
believed that an institution’s rating on
the community development test should
take account of bank capacity and
community opportunities for
community development, they asserted
that the primary consideration should
be the institution’s responsiveness to
community needs
ervices—in
order to earn a ‘‘satisfactory’’ rating on
the community development test.
Although community organizations
believed that an institution’s rating on
the community development test should
take account of bank capacity and
community opportunities for
community development, they asserted
that the primary consideration should
be the institution’s responsiveness to
community needs. Moreover, many
community organizations requested that
the community development test also
evaluate an intermediate small bank’s
provision of community development
services through branches located in
low- and moderate-income areas.
Many banks and bank trade
associations commented favorably on
the flexibility that the community
development test offered. Some large
banks requested that the proposed
community development test be made
available to banks with assets of $1
billion or more as a substitute for the
existing investment and service tests.
Provisions of Final Rule
The final rule adopts the proposed
community development test for
intermediate small banks without
change. The number and amount of
community development loans, the
number and amount of qualified
investments, and the provision of
community development services, by an
intermediate small bank, and the bank’s
responsiveness through such activities
to community development lending,
investment, and services needs, will be
evaluated in the context of the bank’s
capacities, business strategy, the needs
of the relevant community, and the
number and types of opportunities for
community development activities. The
agencies believe that, given these
performance context factors, the
community development test will
provide a better framework for assessing
community development performance
by intermediate small banks than the
separate lending, investment, and
service tests
trategy, the needs
of the relevant community, and the
number and types of opportunities for
community development activities. The
agencies believe that, given these
performance context factors, the
community development test will
provide a better framework for assessing
community development performance
by intermediate small banks than the
separate lending, investment, and
service tests. As noted in the preamble
to the proposed rule, the community
development test will be applied
flexibly to permit a bank to apply its
resources strategically to the types of
community development activities
(loans, investments, and services) that
are most responsive to helping to meet
community needs, even when those
activities are not necessarily innovative,
complex, or new. (‘‘Innovativeness’’ and
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00041
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44260
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
4 As discussed in the supplementary information
published with the proposed rule, the agencies
anticipate that examiners will exercise their
discretion, using performance context, to assign
appropriate weight in a bank’s current period rating
to prior-period outstanding investments that reflect
a substantial financial commitment or outlay by the
bank designed to have a multi-year impact, in
addition to investments made during the current
examination cycle.
5 60 FR 22156, 22163 (May 4, 1995).
6 Id.
7 A few commenters requested that the
community development test be available to banks
with assets of more than $1 billion, for the sake of
increasing flexibility for those banks, too. The
agencies have not made this change. However, a
large bank seeking more flexibility than it finds in
the present three-part test can consider a strategic
plan. See 12 CFR 25.27, 228.27, & 345.27.
8 See Interagency Questions and Answers
Regarding Community Reinvestment (‘‘Q&A’’), 66
FR 36620 et seq
ssets of more than $1 billion, for the sake of
increasing flexibility for those banks, too. The
agencies have not made this change. However, a
large bank seeking more flexibility than it finds in
the present three-part test can consider a strategic
plan. See 12 CFR 25.27, 228.27, & 345.27.
8 See Interagency Questions and Answers
Regarding Community Reinvestment (‘‘Q&A’’), 66
FR 36620 et seq. (July 12, 2001) (Q&Al.12(i)–5 and
–6).
9 See 12 CFR 25.21(a)(3), 228.21(a)(3), &
345.21(a)(3).
10 Staff interpretations of activities that ‘‘revitalize
or stabilize’’ an area can be found in
Q&Al.12(h)(4)–1 and .12(i)–4.
11 The scarcity is both absolute and relative. Only
15 percent of nonmetropolitan tracts are now
classified as ‘‘low- or moderate-income,’’ and 59
percent of nonmetropolitan counties lack a single
low- or moderate-income tract. In comparison, 31
percent of metropolitan tracts are classified as ‘‘low-
or moderate-income’’ and only 18 percent of
metropolitan counties lack a single low- or
moderate-income tract. See Robert B. Avery, Glenn
B. Canner, et al., ‘‘Community Banks and Rural
Development: Research Relating to Proposals to
Revise the Regulations That Implement the
Community Reinvestment Act,’’ Federal Reserve
Bulletin, Spring 2005, Table 14, pp. 224–225.
‘‘complexity,’’ factors examiners
consider when evaluating a large bank
under the lending, investment, and
service tests, are not factors in the
intermediate small banks’ community
development test.) The agencies will
incorporate these considerations as
appropriate into examination guidance
and procedures to ensure flexible
application of the standards.
In providing this flexibility for
intermediate small banks, the federal
banking agencies do not intend to
suggest that a bank may simply ignore
one or more categories of community
development or arbitrarily decrease the
level of such activities
s will
incorporate these considerations as
appropriate into examination guidance
and procedures to ensure flexible
application of the standards.
In providing this flexibility for
intermediate small banks, the federal
banking agencies do not intend to
suggest that a bank may simply ignore
one or more categories of community
development or arbitrarily decrease the
level of such activities. Nor does the
joint final rule prescribe any required
threshold level or allocation of
community development loans,
qualified investments, and community
development services for these banks.
Instead, the OCC, the FDIC, and the
Board expect that a bank will
appropriately assess the needs in its
community, engage in different types of
community development activities
based on those needs and the bank’s
capacities, and that it will take
reasonable steps to apply its community
development resources strategically to
meet those needs.4 As the agencies
indicated on adoption of the 1995
regulation, the agencies will expect a
bank to make an assessment using
information normally used to develop a
business plan or identify potential
markets and customers.5 Examiners will
consider the bank’s assessment of
community needs along with
information from community,
government, civic, and other sources to
gain a working knowledge of
community needs.6 The flexibility
inherent in the community development
test will allow intermediate small banks
to focus on meeting the substance of
community needs through these means,
without undue regulatory consequences
from the form of the response.
Under the joint final rule, retail
banking services provided by
intermediate small banks will no longer
be evaluated in a separate service test.
Instead, the extent to which such banks
provide community development
services to low- and moderate-income
people will be taken into account in the
community development test
,
without undue regulatory consequences
from the form of the response.
Under the joint final rule, retail
banking services provided by
intermediate small banks will no longer
be evaluated in a separate service test.
Instead, the extent to which such banks
provide community development
services to low- and moderate-income
people will be taken into account in the
community development test. Thus, the
federal banking agencies will consider
not only the types of services provided
to benefit low- and moderate-income
people, such as low-cost bank checking
accounts and low-cost remittance
services, but also the provision and
availability of services to low- and
moderate-income people, including
through branches and other facilities
located in low- and moderate-income
areas.
The federal banking agencies believe
that providing flexibility to intermediate
small banks in how they apply their
community development resources to
respond to community needs through
the strategic use of loans, investments,
and services will reduce burden on
these banks while making the
evaluation of their community
development records more effective.7
The agencies are making a non-
substantive change to the proposed
criteria for a ‘‘satisfactory’’ rating on the
community development test (in
Appendix A, Ratings, paragraph
(d)(2)(i)) to conform those criteria to the
other ratings criteria. Under the
proposal, a ‘‘satisfactory’’ rating would
have required an intermediate small
bank to demonstrate ‘‘adequate
responsiveness to the community
development needs of its assessment
area(s) or a broader statewide or regional
area that includes the bank’s assessment
area(s) through community
development loans, qualified
investments, and community
development services.’’ In the final rule,
the agencies deleted the phrase ‘‘or a
broader statewide or regional area that
includes the bank’s assessment area(s)’’
from the criteria for a ‘‘satisfactory’’
rating on the community development
test in order to conform
l
area that includes the bank’s assessment
area(s) through community
development loans, qualified
investments, and community
development services.’’ In the final rule,
the agencies deleted the phrase ‘‘or a
broader statewide or regional area that
includes the bank’s assessment area(s)’’
from the criteria for a ‘‘satisfactory’’
rating on the community development
test in order to conform the manner in
which the term ‘‘assessment area’’ is
used in other parts of Appendix A.
Examiners will, however, continue to
evaluate a bank’s community
development activities in the broader
statewide or regional area that includes
its assessment area(s) according to
existing interagency guidance.8
The agencies are not revising the
provision in the existing regulations that
permits any small bank, including an
intermediate small bank, to choose to be
evaluated under the large bank lending,
investment, and service tests at its
option. Any small bank that opts to be
evaluated under the lending,
investment, and service tests will be
required to collect and report small
business, small farm, and community
development loan data.9
Community Development Definition
Comments on Proposed Rule
The regulations’ present definition of
‘‘community development’’ covers four
categories of activity. Three categories
(affordable housing, community
services, and economic development)
are defined in terms of the activity’s
targeting of specific persons (low- or
moderate-income people in the first two
categories, small farms or businesses in
the third). A fourth category
(revitalization or stabilization activities)
is defined in terms of the activity’s
targeting of specific areas, namely, low-
or moderate-income census tracts.
The OCC, the FDIC, and the Board
proposed to amend two of the
categories—activities that revitalize or
stabilize an area, and affordable
housing
n the first two
categories, small farms or businesses in
the third). A fourth category
(revitalization or stabilization activities)
is defined in terms of the activity’s
targeting of specific areas, namely, low-
or moderate-income census tracts.
The OCC, the FDIC, and the Board
proposed to amend two of the
categories—activities that revitalize or
stabilize an area, and affordable
housing. Under one proposed
amendment, a bank’s support for
activities that revitalize or stabilize an
area would receive consideration not
only in low- or moderate-income census
tracts (referred to as ‘‘geographies’’ in
the regulations), but also in
‘‘underserved rural areas.’’ 10 The
proposal would thus expand the
number and kinds of rural areas in
which bank activities that revitalize or
stabilize communities are eligible for
community development consideration
(referred to herein as ‘‘eligible rural
tracts’’). The proposal responded to the
scarcity of eligible rural tracts, which
appeared to limit the effectiveness of the
regulations in encouraging rural
community development.11 The
proposed amendment would also give
consideration to bank activities that
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00042
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44261
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
12 Staff interpretations of ‘‘affordable housing’’
can be found in Q&A l.12(h)(1)–1.
13 On the whole, community organizations did
not express a strong preference between raising the
threshold income for a moderate-income tract to
90% of nonmetropolitan state median income and
changing the baseline against which a tract’s
income is measured to the state median income.
They generally opposed, however, a threshold of
100% of nonmetropolitan state median income.
Some organizations that favored using the CDFI
Fund distress criteria suggested that additional
criteria also be considered.
revitalize or stabilize designated disaster
areas
politan state median income and
changing the baseline against which a tract’s
income is measured to the state median income.
They generally opposed, however, a threshold of
100% of nonmetropolitan state median income.
Some organizations that favored using the CDFI
Fund distress criteria suggested that additional
criteria also be considered.
revitalize or stabilize designated disaster
areas.
The agencies sought comment on
three general alternatives for increasing
the number and kinds of rural tracts in
which bank activities are eligible for
community development consideration.
The first alternative was to expand the
definition of ‘‘low- or moderate-income’’
tracts in rural areas. Two specific
options were raised: increasing the
threshold for a low- or moderate-income
tract from a median income of 80
percent of the state nonmetropolitan
median income to 90 percent, or
changing the baseline against which a
nonmetropolitan tract’s median income
is compared to the median income of
the entire state (not just its
nonmetropolitan parts). The second
alternative was to retain the present
definition of a tract’s income status, but
identify a set of rural tracts that, while
not low- or moderate-income, were
nonetheless shown by other relevant
indicators to be ‘‘underserved’’ or
otherwise in need of bank support to
revitalize or stabilize. Specific
indicators on which the agencies sought
comment were rates of poverty,
unemployment, and population loss
used as ‘‘distress’’ indicators by the
Community Development Financial
Institutions (CDFI) Fund, United States
Department of the Treasury. The third
alternative was to consider as eligible
any rural area that had been designated
by a Federal, State, tribal, or local
government as in need of revitalization
or stabilization
comment were rates of poverty,
unemployment, and population loss
used as ‘‘distress’’ indicators by the
Community Development Financial
Institutions (CDFI) Fund, United States
Department of the Treasury. The third
alternative was to consider as eligible
any rural area that had been designated
by a Federal, State, tribal, or local
government as in need of revitalization
or stabilization.
Under another proposed amendment,
bank support for affordable housing
would receive consideration in
‘‘underserved rural areas’’ or designated
disaster areas even if the housing
benefited individuals not defined as
‘‘low- or moderate-income.’’ 12 The
agencies indicated that the proposal’s
premise was that affordable housing—in
addition to other activities that
revitalize and stabilize underserved
rural areas—may meet a critical need of
individuals in certain underserved rural
areas, even if those individuals may not
meet the technical requirements of the
definition of ‘‘low- or moderate-income’’
in the regulation.
Banks and community organizations
alike generally supported expanding the
definition of ‘‘community development’’
to make bank activities eligible for
community development consideration
in a larger number of rural areas. Banks
argued that having few or no eligible
tracts in their assessment areas meant
they felt pressure to make community
development investments outside of
their assessment areas merely for the
sake of their CRA evaluations.
Bank commenters suggested that
‘‘rural’’ be defined using existing
government definitions. Some
commenters suggested using the Office
of Management and Budget’s concept of
nonmetropolitan areas (areas outside
Metropolitan Statistical Areas, or
MSAs), though a few requested
flexibility to treat certain parts of MSAs
as rural, too. Others suggested the
Census Bureau’s definition of ‘‘rural.’’
Some suggested using several criteria,
including population density
rnment definitions. Some
commenters suggested using the Office
of Management and Budget’s concept of
nonmetropolitan areas (areas outside
Metropolitan Statistical Areas, or
MSAs), though a few requested
flexibility to treat certain parts of MSAs
as rural, too. Others suggested the
Census Bureau’s definition of ‘‘rural.’’
Some suggested using several criteria,
including population density.
Banks asked that any rule
distinguishing ‘‘underserved’’ rural
areas be simple. Some expressed
concern that using the CDFI Fund
distress criteria would be complicated
and cause uncertainty, but some
indicated the criteria were appropriate.
Many banks suggested that an area be
eligible regardless of its income if
targeted by a government agency for
redevelopment. Community banks
expressed a strong preference that a
bank’s support for meeting community
needs such as education, infrastructure,
and healthcare be considered as
‘‘community development’’ in rural
communities of all kinds, not just
‘‘underserved’’ or low- or moderate-
income communities.
Community organizations disagreed
that all rural areas should be eligible,
but agreed that more rural areas should
be eligible than are now. Many
requested that the agencies consider
both expanding the standard for
classifying rural tracts as ‘‘low- or
moderate-income’’ and adopting criteria
such as the distress criteria of the CDFI
Fund to identify additional eligible
tracts.13 At the same time, community
organizations generally sought to keep
the proportion of eligible rural tracts in
rough parity with the proportion of
eligible urban tracts.
Like bank commenters, community
organizations offered a variety of
suggestions for defining ‘‘rural.’’ For
example, some suggested including any
area with a population of less than
10,000, while others suggested using
several criteria, including population,
household income, the area’s economic
base, and distance from a metropolitan
area
rity with the proportion of
eligible urban tracts.
Like bank commenters, community
organizations offered a variety of
suggestions for defining ‘‘rural.’’ For
example, some suggested including any
area with a population of less than
10,000, while others suggested using
several criteria, including population,
household income, the area’s economic
base, and distance from a metropolitan
area. Some cautioned against treating
exurbs of large MSAs as ‘‘rural.’’
As noted above, banks and
community organizations alike
generally supported expanding the
‘‘community development’’ definition to
include activities that benefit
underserved rural areas. Few comments
distinguished between the proposal to
amend the ‘‘revitalize or stabilize’’
category and the proposal to amend the
‘‘affordable housing’’ category but,
among those that did comment
specifically on a category, more
commented specifically in favor of
expanding the ‘‘revitalize or stabilize’’
category.
Banks favored revising the definition
of ‘‘community development’’ to
include activities in a designated
disaster area. They noted that such areas
are easily identified and have special
redevelopment needs. Some, but not all,
community organizations opposed the
revision. Organizations that opposed,
and those that did not oppose, the
revision shared the view that the
regulation should not give consideration
to bank responses to disasters that do
not meet the needs of affected low- or
moderate-income people.
Provisions of Final Rule
The agencies are revising the
definition of ‘‘community development’’
to increase the number and kinds of
rural tracts in which bank activities are
eligible for community development
consideration
shared the view that the
regulation should not give consideration
to bank responses to disasters that do
not meet the needs of affected low- or
moderate-income people.
Provisions of Final Rule
The agencies are revising the
definition of ‘‘community development’’
to increase the number and kinds of
rural tracts in which bank activities are
eligible for community development
consideration. In doing so, the agencies
are revising the ‘‘revitalize or stabilize’’
category of the definition of
‘‘community development’’ to provide
that activities that revitalize or stabilize
areas designated by the agencies as
‘‘distressed or underserved
nonmetropolitan middle-income
geographies’’ will qualify as community
development activities.
The final rule uses the term
‘‘nonmetropolitan,’’ which means an
area outside of an MSA, to refer to rural
areas. The final rule also describes
qualifying rural geographies as
‘‘distressed or underserved,’’ while the
proposal used only the term
‘‘underserved.’’ The agencies believe
that the phrase ‘‘distressed or
underserved’’ better describes the
eligible geographies that will be
designated using the factors discussed
more fully below.
Eligible rural tracts will continue to
include tracts currently defined as ‘‘low-
income’’ or as ‘‘moderate-income,’’ and
the agencies have not revised the
definitions of those terms. Eligible rural
tracts will also include middle-income,
nonmetropolitan tracts designated by
the agencies as distressed or
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00043
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
ontinue to
include tracts currently defined as ‘‘low-
income’’ or as ‘‘moderate-income,’’ and
the agencies have not revised the
definitions of those terms. Eligible rural
tracts will also include middle-income,
nonmetropolitan tracts designated by
the agencies as distressed or
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00043
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44262
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
14 The Web site address is: http://www.ffiec.gov.
15 12 CFR 1805.201(b)(3). The CDFI Fund uses
other criteria, as well, including an income trigger
different from the definition of ‘‘low- or moderate-
income’’ under the CRA regulations. The other
criteria, however, will not be used in the CRA
regulation’s definition of ‘‘community
development.’’
16 The codes can be found at http://
www.ers.usda.gov/Briefing/Rurality/urbaninf/. The
agencies are considering designating middle-
income tracts in the counties coded ‘‘7,’’ ‘‘10,’’
‘‘11,’’ or ‘‘12.’’ The counties coded ‘‘11’’ or ‘‘12’’
have population densities under five people per
square mile, are not adjacent to either a
metropolitan or micropolitan area, and do not have
a town with a population greater than 10,000. The
counties coded ‘‘7’’ or ‘‘10’’ have population
densities between five and seven people per square
mile and do not have a town with a population
greater than 2,500, though they border a
micropolitan or small metropolitan area. These
counties are concentrated in the Great Plains, but
appear elsewhere, too. A map at the Web site shows
where these counties are located.
17 In contrast to the lack of census tracts in rural
areas that meet the regulation’s definition of ‘‘low-
or moderate-income’’ geography, there is not a
comparable lack of individuals residing in rural
areas who meet the regulation’s definition of ‘‘low-
or moderate-income’’ individuals
e Great Plains, but
appear elsewhere, too. A map at the Web site shows
where these counties are located.
17 In contrast to the lack of census tracts in rural
areas that meet the regulation’s definition of ‘‘low-
or moderate-income’’ geography, there is not a
comparable lack of individuals residing in rural
areas who meet the regulation’s definition of ‘‘low-
or moderate-income’’ individuals. Under the
regulation’s definition of a ‘‘low- or moderate-
income’’ individuals, the average nonmetropolitan
middle-income tract has a low- and moderate-
income population of 38 percent.
18 For guidance on application of the ‘‘primary
purpose’’ standard, see Q&A l.12(i)–7.
underserved based on either or both of
two sets of criteria: criteria indicating a
community is in distress (rates of
poverty, unemployment, and population
loss), and criteria indicating a
community may have difficulty meeting
essential community needs (population
size, density, and dispersion).
The agencies believe that using these
criteria to identify eligible areas has
advantages over simply expanding the
definition of ‘‘low- or moderate-income’’
tracts for rural areas. The distress
criteria permit a more careful targeting
of the middle-income tracts that are
most in need of revitalization or
stabilization. Simply changing the
definition of ‘‘moderate-income’’ to
include some presently middle-income
tracts would (a) fail to cover many rural
middle-income tracts in distress and (b)
cover many tracts not necessarily in
distress, or in less distress than other
rural tracts that would not be covered.
In addition, some rural communities,
albeit middle-income and not
necessarily in distress, have such small
and thinly distributed populations that
they have difficulty financing the fixed
costs of essential community needs such
as essential infrastructure and
community facilities; moreover,
residents may have to travel long
distances to reach certain facilities, such
as hospitals
vered.
In addition, some rural communities,
albeit middle-income and not
necessarily in distress, have such small
and thinly distributed populations that
they have difficulty financing the fixed
costs of essential community needs such
as essential infrastructure and
community facilities; moreover,
residents may have to travel long
distances to reach certain facilities, such
as hospitals. The challenges facing such
communities are reflected in several
comments suggesting the agencies use
factors such as population size, density,
and distance from a population center to
identify eligible areas. Simply changing
the definition of ‘‘moderate-income’’ to
include some presently middle-income
tracts would not effectively identify
those communities either. Finally,
changing the definition of ‘‘low- or
moderate-income tract’’ for one purpose
(evaluating community development
activities) but not for other purposes
(evaluating retail lending and service
activities) could create confusion and
the appearance of inconsistency.
To facilitate planning, the agencies
will publish a list of eligible rural tracts
that are distressed or underserved on
the Web site of the Federal Financial
Institutions Examination Council.14
Year-to-year changes in the tracts
designated based on the distress criteria
are expected to be minimal; to account
for such changes the agencies will
specify a uniform lag period—of at least
one year—for removal from the list of
any tract designated based on those
criteria. The lag will help promote
investments that take an extended
period to arrange. A qualifying loan,
investment, or service in the area will
count so long as the bank made, or
entered into a binding commitment to
make, the loan or investment or
provided, or entered into a binding
commitment to provide, the service
while the area was designated or during
the lag period.
The ‘‘distressed or underserved’’
designations will be based on objective
criteria
eriod to arrange. A qualifying loan,
investment, or service in the area will
count so long as the bank made, or
entered into a binding commitment to
make, the loan or investment or
provided, or entered into a binding
commitment to provide, the service
while the area was designated or during
the lag period.
The ‘‘distressed or underserved’’
designations will be based on objective
criteria. A middle-income,
nonmetropolitan tract will be
designated if it is in a county that meets
one or more of the following triggers
that the CDFI Fund employs as ‘‘distress
criteria’’: (1) An unemployment rate of
at least 1.5 times the national average,
(2) a poverty rate of 20 percent or more,
or (3) a population loss of 10 percent or
more between the previous and most
recent decennial census or a net
migration loss of 5 percent or more over
the five-year period preceding the most
recent census.15 Activities qualify for
‘‘revitalize or stabilize’’ community
development consideration in these
tracts, like in low- or moderate-income
tracts, based on the regulation and
applicable interagency guidance.
A middle-income, nonmetropolitan
tract will also be designated if it meets
criteria for population size, density, and
dispersion that indicate the area’s
population is sufficiently small, thin,
and distant from a population center
that the tract is likely to have difficulty
financing the fixed costs of meeting
essential community needs
n the regulation and
applicable interagency guidance.
A middle-income, nonmetropolitan
tract will also be designated if it meets
criteria for population size, density, and
dispersion that indicate the area’s
population is sufficiently small, thin,
and distant from a population center
that the tract is likely to have difficulty
financing the fixed costs of meeting
essential community needs. The
agencies will use as the basis for the
designations the ‘‘urban influence
codes’’ maintained by the Economic
Research Service of the United States
Department of Agriculture.16 In areas so
designated, bank financing for
construction, expansion, improvement,
maintenance, or operation of essential
infrastructure or facilities for health
services, education, public safety,
public services, industrial parks, or
affordable housing generally will be
considered to meet essential community
needs, so long as the infrastructure or
facility serves low- and moderate-
income individuals. Other bank
activities in such areas generally will
not qualify for revitalization or
stabilization consideration, unless the
area meets the distress criteria. In these
cases, the agencies will continue to
decide on a case-by-case basis whether
a particular activity qualifies for such
consideration based on the regulation
and applicable interagency guidance.
The agencies are also revising the
definition of ‘‘community development’’
to make bank activities to revitalize or
stabilize designated disaster areas
eligible for CRA consideration. Disaster
areas may be designated by Federal or
State Governments. Such designations
include, for example, Major Disaster
Declarations administered by the
Federal Emergency Management
Agency. A designation will expire for
purposes of CRA when it expires
according to the applicable law under
which it was declared
alize or
stabilize designated disaster areas
eligible for CRA consideration. Disaster
areas may be designated by Federal or
State Governments. Such designations
include, for example, Major Disaster
Declarations administered by the
Federal Emergency Management
Agency. A designation will expire for
purposes of CRA when it expires
according to the applicable law under
which it was declared. As the agencies
indicated with the proposal, examiners
will give significant weight to the extent
to which a bank’s revitalization
activities in a disaster area benefit low-
or moderate-income individuals.
The final rule does not incorporate
the specific proposal to amend the
‘‘affordable housing’’ category of the
community development definition.
The proposal would have included
affordable housing that benefits
individuals who reside in underserved
rural areas or designated disaster areas,
even if the individuals are not
technically ‘‘low- or moderate-income.’’
The agencies believe it is appropriate to
maintain the focus of the separate
‘‘affordable housing’’ category on
characteristics of the residents of the
housing, and not to expand this category
to consider characteristics of the
residents’ communities without regard
to the residents’ income-level
characteristics.17 Thus, under the
regulation, a bank activity that has a
primary purpose of providing housing
affordable to low- or moderate-income
individuals continues to qualify as
‘‘community development’’ regardless
of the location of the housing.18 In
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00044
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
nts’ income-level
characteristics.17 Thus, under the
regulation, a bank activity that has a
primary purpose of providing housing
affordable to low- or moderate-income
individuals continues to qualify as
‘‘community development’’ regardless
of the location of the housing.18 In
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00044
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44263
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
19 Evidence of credit practices that violate other
laws, rules or regulations, including a federal
banking agency regulation or a State law, if
applicable, also may adversely affect a bank’s CRA
evaluation.
20 See Q&A_.28(c)–1.
addition, such an activity may receive
additional weight in the evaluation if
the examiner determines that the
activity helps to revitalize or stabilize a
low- or moderate-income census tract, a
distressed or underserved rural area, or
a designated disaster area. However, as
described previously, a bank activity
that provides affordable housing, but
not necessarily for low- or moderate-
income individuals, may qualify as an
activity that revitalizes or stabilizes an
eligible nonmetropolitan area. For
example, a bank activity that provides
housing for middle- or upper-income
individuals in an eligible rural area
qualifies as ‘‘community development’’
when part of a bona fide plan to
revitalize or stabilize the community by
attracting a major new employer that
will offer significant long-term
employment opportunities to low- and
moderate-income members of the
community.
Effect of Certain Credit Practices on
CRA Evaluations
Comments on Proposed Rule
The OCC, the FDIC, and the Board
proposed to revise the regulations to
address the impact on a bank’s CRA
rating of evidence of discrimination or
other illegal credit practices
or new employer that
will offer significant long-term
employment opportunities to low- and
moderate-income members of the
community.
Effect of Certain Credit Practices on
CRA Evaluations
Comments on Proposed Rule
The OCC, the FDIC, and the Board
proposed to revise the regulations to
address the impact on a bank’s CRA
rating of evidence of discrimination or
other illegal credit practices. The
agencies proposed that evidence of
discrimination, or evidence of credit
practices that violate an applicable law,
rule, or regulation, would adversely
affect an agency’s evaluation of a bank’s
CRA performance. The agencies also
proposed to revise the regulations to
include an illustrative list of such
practices. This list includes evidence of
discrimination against applicants on a
prohibited basis in violation of, for
example, the Equal Credit Opportunity
(15 U.S.C. 1691 et seq.) or Fair Housing
Acts (42 U.S.C. 3601 et seq.); evidence
of illegal referral practices in violation
of section 8 of the Real Estate Settlement
Procedures Act (12 U.S.C. 2607);
evidence of violations of the Truth in
Lending Act (15 U.S.C. 1601 et seq.)
concerning a consumer’s right to rescind
a credit transaction secured by a
principal residence; evidence of
violations of the Home Ownership and
Equity Protection Act (15 U.S.C. 1639);
and evidence of unfair or deceptive
credit practices in violation of section 5
of the Federal Trade Commission Act
(15 U.S.C. 45(a)(1)).19
Further, the March proposal clarified
that a bank’s evaluation could be
adversely affected by such practices
regardless of whether the practices
involve loans in the bank’s assessment
area(s) or in any other location or
geography. In addition, as proposed, a
bank’s CRA evaluation also could be
adversely affected by evidence of such
practices by any affiliate in connection
with loans in the bank’s assessment
area(s), if any loans of that affiliate have
been considered in the bank’s CRA
evaluation
egardless of whether the practices
involve loans in the bank’s assessment
area(s) or in any other location or
geography. In addition, as proposed, a
bank’s CRA evaluation also could be
adversely affected by evidence of such
practices by any affiliate in connection
with loans in the bank’s assessment
area(s), if any loans of that affiliate have
been considered in the bank’s CRA
evaluation.
Most community organizations
strongly supported the proposal. Many
of these commenters recommended that
the provision should be expanded to
include evidence of discriminatory or
other illegal credit practices by any
affiliate of a bank, whether or not such
affiliate’s loans were included in the
bank’s CRA evaluation. Some bank and
bank trade association commenters
opposed the standard as unnecessary
because other legal remedies are
available to address discriminatory or
other illegal credit practices. Many of
these commenters also opposed
extending the ‘‘illegal credit practices’’
standard to loans by an affiliate that are
considered in a bank’s lending
performance. Furthermore, a few large
banks were concerned that their CRA
performance will be adversely affected
by ‘‘technical’’ violations of law.
Provisions of Final Rule
The joint final rule adopts without
change the proposed amendments to the
agencies’ regulations that address the
impact on a bank’s CRA rating of
evidence of discrimination or other
illegal credit practices. The final rule
states that evidence of discrimination,
or evidence of credit practices that
violate an applicable law, rule, or
regulation, adversely affects an agency’s
evaluation of a bank’s CRA
performance. The rule includes an
illustrative, but not comprehensive, list
of such practices. It also provides that
a bank’s evaluation is adversely affected
by such practices by the bank regardless
of whether the practices involve loans
in the bank’s assessment area(s) or in
any other location or geography
w, rule, or
regulation, adversely affects an agency’s
evaluation of a bank’s CRA
performance. The rule includes an
illustrative, but not comprehensive, list
of such practices. It also provides that
a bank’s evaluation is adversely affected
by such practices by the bank regardless
of whether the practices involve loans
in the bank’s assessment area(s) or in
any other location or geography. The
rule also provides that a bank’s CRA
evaluation is also adversely affected by
evidence of discrimination or other
illegal credit practices by any affiliate in
connection with loans inside the bank’s
assessment area(s), if any loans of that
affiliate have been considered in the
bank’s CRA evaluation. The adverse
effect on the bank’s CRA rating of illegal
credit practices by an affiliate is limited
to affiliate loans within the bank’s
assessment area(s) because, under the
regulations, a bank may not elect to
include as part of its CRA evaluation
affiliate loans outside the bank’s
assessment area(s).
The agencies believe that providing in
the CRA regulations examples of
violations that give rise to adverse CRA
consequences, rather than having such
examples solely in interagency guidance
on the regulations,20 will improve the
usefulness of the regulations and
provide critical information in primary
compliance source material. Further,
because affiliate loans may be included
by a bank in it’s lending evaluation for
favorable consideration, evidence of
discrimination or other illegal credit
practices in an affiliate’s loans in an
assessment area of the bank can
adversely affect the bank’s CRA rating,
if loans by that affiliate have been
considered in the bank’s CRA
evaluation. The agencies believe that the
same CRA standards generally should
apply to loans included in the bank’s
CRA lending record that are made by an
affiliate in the bank’s assessment area
and those that are made by the bank in
any geography
an
assessment area of the bank can
adversely affect the bank’s CRA rating,
if loans by that affiliate have been
considered in the bank’s CRA
evaluation. The agencies believe that the
same CRA standards generally should
apply to loans included in the bank’s
CRA lending record that are made by an
affiliate in the bank’s assessment area
and those that are made by the bank in
any geography.
Interagency Guidance
The agencies intend to issue
interagency CRA guidance for comment
in the near future. The guidance will
address new provisions adopted in this
joint final rule and related issues (for
example, the appropriate lag period for
removal of a census tract from the list
of designated distressed or underserved
nonmetropolitan middle-income
geographies). The guidance will also
conform existing interagency questions
and answers to the regulatory revisions,
where needed.
Effective Date
The joint final rule becomes effective
September 1, 2005. The agencies will
issue interim interagency examination
procedures for the community
development test applicable to
intermediate small banks in advance of
the effective date of the regulation.
Section 302 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (CDRI), Pub.
L. 103–325, authorizes a banking agency
to issue a rule that contains additional
reporting, disclosure, or other
requirements to be effective before the
first day of the calendar quarter that
begins on or after the date on which the
regulations are published in final form
if the agency finds good cause for an
earlier effective date. 12 U.S.C.
4802(b)(1). This joint final rule takes
effect September 1, 2005. As discussed
earlier in this ‘‘Supplementary
Information,’’ the changes adopted by
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00045
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
te on which the
regulations are published in final form
if the agency finds good cause for an
earlier effective date. 12 U.S.C.
4802(b)(1). This joint final rule takes
effect September 1, 2005. As discussed
earlier in this ‘‘Supplementary
Information,’’ the changes adopted by
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00045
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44264
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
this joint final rule reduce regulatory
burden by extending eligibility for
streamlined lending evaluations and the
exemption from data reporting to banks
under $1 billion without regard to
holding company affiliation. Because
this joint final rule eliminates data
collection and reporting burden for
banks with assets between $250 million
and $1 billion, and banks with assets
below $250 million that are affiliated
with a holding company with bank and
thrift assets of $1 billion or above, and
will provide greater flexibility in the
CRA evaluations of such institutions,
the agencies find good cause for the
September 1, 2005, effective date.
Regulatory Flexibility Act
OCC and FDIC: Under section 605(b)
of the Regulatory Flexibility Act (RFA),
5 U.S.C. 605(b), the regulatory flexibility
analysis otherwise required under
section 604 of the RFA is not required
if an agency certifies, along with a
statement providing the factual basis for
such certification, that the rule will not
have a significant economic impact on
a substantial number of small entities.
The OCC and the FDIC have reviewed
the impact of this joint final rule on
small banks and certify that the joint
final rule will not have a significant
economic impact on a substantial
number of small entities.
The Small Business Administration
(SBA) has defined ‘‘small entities’’ for
banking purposes as a bank or savings
institution with less than $150 million
in assets. See 13 CFR 121.201
OCC and the FDIC have reviewed
the impact of this joint final rule on
small banks and certify that the joint
final rule will not have a significant
economic impact on a substantial
number of small entities.
The Small Business Administration
(SBA) has defined ‘‘small entities’’ for
banking purposes as a bank or savings
institution with less than $150 million
in assets. See 13 CFR 121.201. This joint
final rule primarily affects banks with
assets of at least $250 million and under
$1 billion. The amendments decrease
the regulatory burden for banks within
that asset range by relieving them of
certain reporting and recordkeeping
requirements applicable to larger
institutions.
The elimination of the $1 billion
holding company threshold as a factor
in determining whether banks will be
subject to the streamlined CRA
examination or the more in-depth CRA
examination applicable to larger
institutions will affect a limited number
of small banks, which are affiliated with
holding companies with assets over $1
billion. The FDIC estimates that only
110 of approximately 5,300 FDIC-
regulated banks had assets of under
$150 million and were affiliated with a
holding company with over $1 billion in
assets. The OCC estimates that only 36
of approximately 2,000 OCC-regulated
banks met these criteria. Because so few
small banks will be affected by the
revisions to Parts 25 and 345, a
regulatory flexibility analysis is not
required. Furthermore, the OCC and the
FDIC did not receive any comments
regarding the March proposal’s
economic impact on small banks with
assets of under $150 million.
Board: The Board has prepared a final
regulatory flexibility analysis as
required by the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.).
1. Statement of the need for and
objectives of the final rule
y analysis is not
required. Furthermore, the OCC and the
FDIC did not receive any comments
regarding the March proposal’s
economic impact on small banks with
assets of under $150 million.
Board: The Board has prepared a final
regulatory flexibility analysis as
required by the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.).
1. Statement of the need for and
objectives of the final rule. As described
in the SUPPLEMENTARY INFORMATION
section, the Board, together with the
Office of the Comptroller of the
Currency and the Federal Deposit
Insurance Corporation, seeks to improve
the effectiveness of the CRA regulations
in placing performance over process,
promoting consistency in evaluations,
and eliminating unnecessary burden.
The final rule is intended to reduce
unnecessary burden while maintaining
or improving CRA’s effectiveness in
evaluating performance.
2. Summary of issues raised by
comments in response to the initial
regulatory flexibility analysis. The
Board received several comments on
matters raised in its initial regulatory
flexibility analysis. As described more
fully in the SUPPLEMENTARY INFORMATION
section, a number of commenters
supported expansion of the number and
kinds of rural census tracts eligible for
community development consideration.
Several banks expressed concern that
definitions of eligible rural census tracts
would impose burden on them to
document an activity’s qualification,
and urged the use of simple, objective
definitions, including if possible the use
of definitions from existing federal
programs. In response, the final rule
defines ‘‘distressed or underserved’’
rural areas with reference to objective
criteria set forth by the Department of
the Treasury (CDFI Fund) and the
Department of Agriculture, and it
defines ‘‘rural’’ with reference to
objective criteria set forth by the Office
of Management and Budget
luding if possible the use
of definitions from existing federal
programs. In response, the final rule
defines ‘‘distressed or underserved’’
rural areas with reference to objective
criteria set forth by the Department of
the Treasury (CDFI Fund) and the
Department of Agriculture, and it
defines ‘‘rural’’ with reference to
objective criteria set forth by the Office
of Management and Budget. The
agencies also have agreed that the
Federal Financial Institutions
Examination Council will publish and
update an annual list of eligible rural
census tracts, and will allow for a lag
time before a tract loses its designation.
As is also described in the
SUPPLEMENTARY INFORMATION section, the
agencies received a number of
comments on provisions regarding the
effect of evidence of illegal credit
practices on CRA evaluations. Several
commenters asserted that the proposal
amounted to superimposing consumer
credit laws onto CRA examinations and
ratings. The Board notes that these
provisions of the final rule would not
subject any banks of any size to
consumer credit laws to which they are
not already subject; and hence, would
not place new compliance, reporting, or
recordkeeping requirements on small
institutions.
3. Description of small entities
affected by the final rule. The final rule
applies to all state-chartered banks that
are members of the Federal Reserve
System; there are approximately 922
such banks. The RFA requires the Board
to consider the effect of the final rule on
small entities, which are defined for
RFA purposes as all banks with assets
of less than $150 million. There are 419
state member banks with assets of less
than $150 million. All but about 12 state
member banks with assets of less than
$150 million are already subject to a
streamlined CRA evaluation that is not
affected by this final rule
Board
to consider the effect of the final rule on
small entities, which are defined for
RFA purposes as all banks with assets
of less than $150 million. There are 419
state member banks with assets of less
than $150 million. All but about 12 state
member banks with assets of less than
$150 million are already subject to a
streamlined CRA evaluation that is not
affected by this final rule. The rule
eliminates data reporting requirements
for these 12 state member banks by
eliminating holding-company affiliation
as a disqualification for treatment as a
‘‘small bank’’ under the CRA
regulations.
4. Reporting, recordkeeping, and
other compliance requirements. The
final rule does not impose any new
reporting or recordkeeping
requirements, as defined in section 603
of the RFA. As noted, the rule
eliminates holding-company affiliation
as a disqualification for treatment as a
‘‘small bank’’ under the CRA
regulations. Accordingly, the rule
eliminates data reporting requirements
for about 12 state member banks with
assets of less than $150 million. As
noted above, all other state member
banks with assets of less than $150
million are already exempt from this
reporting requirement.
As is described in section 2 of this
regulatory flexibility analysis, the Board
believes that the revisions to the
definition of ‘‘community development’’
do not place additional compliance
costs or burdens on small institutions.
The Board believes the same of the
provisions regarding the effect of
evidence of illegal credit practices on
CRA evaluations.
5. Steps taken to minimize the
economic impact on small entities. The
final rule maintains the approach of the
existing CRA regulations in exempting
small entities from reporting
requirements and providing for
streamlined lending evaluations for
small entities. A complete exemption of
small entities from all of the CRA’s
requirements would be impermissible
under the CRA statute
uations.
5. Steps taken to minimize the
economic impact on small entities. The
final rule maintains the approach of the
existing CRA regulations in exempting
small entities from reporting
requirements and providing for
streamlined lending evaluations for
small entities. A complete exemption of
small entities from all of the CRA’s
requirements would be impermissible
under the CRA statute. As noted, of 419
state member banks with assets of less
than $150 million, all but 12 already
were subject to a streamlined CRA
process. The final rule minimizes the
economic impact on small entities by
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00046
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44265
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
making these 12 state member banks
eligible for the streamlined CRA
process.
Executive Order 12866
The OCC has determined that this
joint final rule is not a significant
regulatory action under Executive Order
12866.
Unfunded Mandates Reform Act of
1995
Section 202 of the Unfunded
Mandates Reform Act of 1995, Pub. L.
104–4 (2 U.S.C. 1532) (Unfunded
Mandates Act), requires that an agency
prepare a budgetary impact statement
before promulgating any rule likely to
result in a Federal mandate that may
result in the expenditure by State, local,
and tribal governments, in the aggregate,
or by the private sector of $100 million
or more in any one year. If a budgetary
impact statement is required, section
205 of the Unfunded Mandates Act also
requires an agency to identify and
consider a reasonable number of
regulatory alternatives before
promulgating a rule. The OCC has
determined that the joint final rule will
not result in expenditures by State,
local, and tribal governments, or by the
private sector, of $100 million or more
in any one year. Accordingly, the joint
final rule is not subject to section 202
of the Unfunded Mandates Act
n agency to identify and
consider a reasonable number of
regulatory alternatives before
promulgating a rule. The OCC has
determined that the joint final rule will
not result in expenditures by State,
local, and tribal governments, or by the
private sector, of $100 million or more
in any one year. Accordingly, the joint
final rule is not subject to section 202
of the Unfunded Mandates Act.
Paperwork Reduction Act
In accordance with the requirements
of the Paperwork Reduction Act of 1995,
the agencies may not conduct or
sponsor, and the respondent is not
required to respond to, an information
collection unless it displays a currently
valid Office of Management and Budget
(OMB) control number (OCC, 1557–
0160; Board, 7100–0197; and FDIC,
3064–0092).
The OCC and the FDIC submitted
their documentation to OMB for review
and approval and the information
collections have been approved. The
Board has approved this revised
information collection under its
delegated authority from OMB.
Title of Information Collection:
OCC: Community Reinvestment Act
Regulation—12 CFR 25.
Board: Recordkeeping, Reporting, and
Disclosure Requirements in Connection
with Regulation BB (Community
Reinvestment Act).
FDIC: Community Reinvestment—12
CFR 345.
Frequency of Response: Annual.
Affected Public:
OCC: National banks.
Board: State member banks.
FDIC: State nonmember banks.
Abstract: This Paperwork Reduction
Act section estimates the burden that
will be associated with the regulations
due to the changes to the definition of
‘‘small bank’’ to increase the asset
threshold from $250 million to $1
billion and eliminate any consideration
of holding-company size. Under the two
changes, approximately 1,200 additional
banks would be evaluated as small or
intermediate small banks. That estimate
is based on data for all FDIC-insured
institutions that filed Call Reports for
year-end 2004
e changes to the definition of
‘‘small bank’’ to increase the asset
threshold from $250 million to $1
billion and eliminate any consideration
of holding-company size. Under the two
changes, approximately 1,200 additional
banks would be evaluated as small or
intermediate small banks. That estimate
is based on data for all FDIC-insured
institutions that filed Call Reports for
year-end 2004. The change to adopt a
separate community development test
in the performance standards for
intermediate small banks will have no
impact on paperwork burden because
the evaluation is based on information
prepared by examiners.
Estimated Paperwork Burden under
the Proposal:
OCC:
Number of Respondents: 1,853.
Estimated Time per Response: Small
business and small farm loan register,
219 hours; consumer loan data, 326
hours; other loan data, 25 hours;
assessment area delineation, 2 hours;
small business and small farm loan data,
8 hours; community development loan
data, 13 hours; HMDA out-of-MSA loan
data, 253 hours; data on lending by a
consortium or third party, 17 hours;
affiliated lending data, 38 hours; request
for designation as a wholesale or limited
purpose bank, 4 hours; strategic plan,
275 hours; and public file, 10 hours.
Total Estimated Annual Burden:
160,542 hours.
Board:
Number of Respondents: 914.
Estimated Time per Response: Small
business and small farm loan register,
219 hours; consumer loan data, 326
hours; other loan data, 25 hours;
assessment area delineation, 2 hours;
small business and small farm loan data,
8 hours; community development loan
data, 13 hours; HMDA out-of-MSA loan
data, 253 hours; data on lending by a
consortium or third party, 17 hours;
affiliated lending data, 38 hours; request
for designation as a wholesale or limited
purpose bank, 4 hours; and public file,
10 hours.
Total Estimated Annual Burden:
97,017 hours.
FDIC:
Number of Respondents: 5,264
and small farm loan data,
8 hours; community development loan
data, 13 hours; HMDA out-of-MSA loan
data, 253 hours; data on lending by a
consortium or third party, 17 hours;
affiliated lending data, 38 hours; request
for designation as a wholesale or limited
purpose bank, 4 hours; and public file,
10 hours.
Total Estimated Annual Burden:
97,017 hours.
FDIC:
Number of Respondents: 5,264.
Estimated Time per Response: Small
business and small farm loan register,
219 hours; consumer loan data, 326
hours; other loan data, 25 hours;
assessment area delineation, 2 hours;
small business and small farm loan data,
8 hours; community development loan
data, 13 hours; HMDA out-of-MSA loan
data, 253 hours; data on lending by a
consortium or third party, 17 hours;
affiliated lending data, 38 hours; request
for designation as a wholesale or limited
purpose bank, 4 hours; and public file,
10 hours.
Total Estimated Annual Burden:
203,589 hours.
Comment Request:
Comments continue to be invited on:
(a) Whether the collection of
information is necessary for the proper
performance of the agencies’ functions,
including whether the information has
practical utility;
(b) The accuracy of the estimates of
the burden of the information
collection, including the validity of the
methodology and assumptions used;
(c) Ways to enhance the quality,
utility, and clarity of the information to
be collected;
(d) Ways to minimize the burden of
the information collection on
respondents, including through the use
of automated collection techniques or
other forms of information technology;
and
tes of
the burden of the information
collection, including the validity of the
methodology and assumptions used;
(c) Ways to enhance the quality,
utility, and clarity of the information to
be collected;
(d) Ways to minimize the burden of
the information collection on
respondents, including through the use
of automated collection techniques or
other forms of information technology;
and
(e) Estimates of capital or start up
costs and costs of operation,
maintenance, and purchase of services
to provide information.
Comments should be addressed to:
OCC: Mary H. Gottlieb or Camille
Dixon, Office of the Comptroller of the
Currency, Legislative and Regulatory
Activities Division, Attention: Docket
No. 05–11, 250 E Street, SW., Mailstop
8–4, Washington, DC 20219. Due to
delays in paper mail in the Washington
area, commenters are encouraged to
submit their comments by fax to (202)
874–4889 or by e-mail to
camille.dixon@occ.treas.gov.
Board: Comments should refer to
Docket No. R–1225 and may be mailed
to Jennifer J. Johnson, Secretary, Board
of Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
Please consider submitting your
comments through the Board’s Web site
at http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm, by
e-mail to
regs.comments@federalreserve.gov, or
by fax to the Office of the Secretary at
(202) 452–3819 or (202) 452–3102.
Rules proposed by the Board and other
Federal agencies may also be viewed
and commented on at http://
www.regulations.gov. All public
comments are available from the Board’s
Web site at http://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
except as necessary for technical
reasons. Accordingly, your comments
will not be edited to remove any
identifying or contact information.
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00047
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
public
comments are available from the Board’s
Web site at http://
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
except as necessary for technical
reasons. Accordingly, your comments
will not be edited to remove any
identifying or contact information.
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00047
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44266
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
Public comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (C
and 20th Streets, NW.) between 9 a.m.
and 5 p.m. on weekdays.
FDIC: Leneta G. Gregorie, Legal
Division, Room MB–3082, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429. All
comments should refer to the title of the
proposed collection. In the alternative,
comments may be hand-delivered to the
guard station at the rear of the 17th
Street Building (located on F Street), on
business days between 7 a.m. and 5
p.m.; submitted via the Agency Web
site: http://www.FDIC.gov/regulations/
laws/federal/propose.html; or submitted
by e-mail: comments@FDIC.gov.
Comments received will be posted
without change to http://www.FDIC.gov/
regulations/laws/federal/propose.html,
including any personal information
provided. Comments may also be
inspected and photocopied in the FDIC
Public Information Center, Room 100,
801 17th Street, NW., Washington, DC,
between 9 a.m. and 4:30 p.m. on
business days.
Comments should also be sent to
Mark D. Menchik, Desk Officer, Office
of Information and Regulatory Affairs,
Office of Management and Budget,
Room 10235, 725 17th Street, NW.,
Washington, DC 20503. Comments may
also be sent by e-mail to
Mark_D._Menchik@omb.eop.gov.
Executive Order 13132
The OCC has determined that this
joint final rule does not have any
Federalism implications as required by
Executive Order 13132
to
Mark D. Menchik, Desk Officer, Office
of Information and Regulatory Affairs,
Office of Management and Budget,
Room 10235, 725 17th Street, NW.,
Washington, DC 20503. Comments may
also be sent by e-mail to
Mark_D._Menchik@omb.eop.gov.
Executive Order 13132
The OCC has determined that this
joint final rule does not have any
Federalism implications as required by
Executive Order 13132.
List of Subjects
12 CFR Part 25
Community development, Credit,
Investments, National banks, Reporting
and recordkeeping requirements.
12 CFR Part 228
Banks, Banking, Community
development, Credit, Investments,
Reporting and recordkeeping
requirements.
12 CFR Part 345
Banks, Banking, Community
development, Credit, Investments,
Reporting and recordkeeping
requirements.
Department of the Treasury
Office of the Comptroller of the
Currency
12 CFR Chapter I
Authority and Issuance
I For the reasons discussed in the joint
preamble, part 25 of chapter I of title 12
of the Code of Federal Regulations is
amended as follows:
PART 25—COMMUNITY
REINVESTMENT ACT AND
INTERSTATE DEPOSIT PRODUCTION
REGULATIONS
I 1. The authority citation for part 25
continues to read as follows:
Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36,
93a, 161, 215, 215a, 481, 1814, 1816, 1828(c),
1835a, 2901 through 2907, and 3101 through
3111.
I 2. In § 25.12, revise paragraphs (g)(4)
and (u) to read as follows:
§ 25.12
Definitions.
*
*
*
*
*
(g) Community development means:
*
*
*
*
*
(4) Activities that revitalize or
stabilize—
rity citation for part 25
continues to read as follows:
Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36,
93a, 161, 215, 215a, 481, 1814, 1816, 1828(c),
1835a, 2901 through 2907, and 3101 through
3111.
I 2. In § 25.12, revise paragraphs (g)(4)
and (u) to read as follows:
§ 25.12
Definitions.
*
*
*
*
*
(g) Community development means:
*
*
*
*
*
(4) Activities that revitalize or
stabilize—
(i) Low-or moderate-income
geographies;
(ii) Designated disaster areas; or
(iii) Distressed or underserved
nonmetropolitan middle-income
geographies designated by the Board of
Governors of the Federal Reserve
System, Federal Deposit Insurance
Corporation, and OCC, based on—
(A) Rates of poverty, unemployment,
and population loss; or
(B) Population size, density, and
dispersion. Activities revitalize and
stabilize geographies designated based
on population size, density, and
dispersion if they help to meet essential
community needs, including needs of
low- and moderate-income individuals.
*
*
*
*
*
(u) Small bank—(1) Definition. Small
bank means a bank that, as of December
31 of either of the prior two calendar
years, had assets of less than $1 billion.
Intermediate small bank means a small
bank with assets of at least $250 million
as of December 31 of both of the prior
two calendar years and less than $1
billion as of December 31 of either of the
prior two calendar years.
(2) Adjustment. The dollar figures in
paragraph (u)(1) of this section shall be
adjusted annually and published by the
OCC, based on the year-to-year change
in the average of the Consumer Price
Index for Urban Wage Earners and
Clerical Workers, not seasonally
adjusted, for each twelve-month period
ending in November, with rounding to
the nearest million.
*
*
*
*
*
I 3. Revise § 25.26 to read as follows:
§ 25.26
Small bank performance
standards.
section shall be
adjusted annually and published by the
OCC, based on the year-to-year change
in the average of the Consumer Price
Index for Urban Wage Earners and
Clerical Workers, not seasonally
adjusted, for each twelve-month period
ending in November, with rounding to
the nearest million.
*
*
*
*
*
I 3. Revise § 25.26 to read as follows:
§ 25.26
Small bank performance
standards.
(a) Performance criteria—(1) Small
banks with assets of less than $250
million. The OCC evaluates the record
of a small bank that is not, or that was
not during the prior calendar year, an
intermediate small bank, of helping to
meet the credit needs of its assessment
area(s) pursuant to the criteria set forth
in paragraph (b) of this section.
(2) Intermediate small banks. The
OCC evaluates the record of a small
bank that is, or that was during the prior
calendar year, an intermediate small
bank, of helping to meet the credit
needs of its assessment area(s) pursuant
to the criteria set forth in paragraphs (b)
and (c) of this section.
(b) Lending test. A small bank’s
lending performance is evaluated
pursuant to the following criteria:
(1) The bank’s loan-to-deposit ratio,
adjusted for seasonal variation, and, as
appropriate, other lending-related
activities, such as loan originations for
sale to the secondary markets,
community development loans, or
qualified investments;
(2) The percentage of loans and, as
appropriate, other lending-related
activities located in the bank’s
assessment area(s);
(3) The bank’s record of lending to
and, as appropriate, engaging in other
lending-related activities for borrowers
of different income levels and
businesses and farms of different sizes;
(4) The geographic distribution of the
bank’s loans; and
(5) The bank’s record of taking action,
if warranted, in response to written
complaints about its performance in
helping to meet credit needs in its
assessment area(s).
lending to
and, as appropriate, engaging in other
lending-related activities for borrowers
of different income levels and
businesses and farms of different sizes;
(4) The geographic distribution of the
bank’s loans; and
(5) The bank’s record of taking action,
if warranted, in response to written
complaints about its performance in
helping to meet credit needs in its
assessment area(s).
(c) Community development test. An
intermediate small bank’s community
development performance also is
evaluated pursuant to the following
criteria:
(1) The number and amount of
community development loans;
(2) The number and amount of
qualified investments;
(3) The extent to which the bank
provides community development
services; and
(4) The bank’s responsiveness through
such activities to community
development lending, investment, and
services needs.
I 4. Revise § 25.28, paragraph (c) to read
as follows:
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00048
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44267
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
§ 25.28
Assigned ratings.
*
*
*
*
*
(c) Effect of evidence of
discriminatory or other illegal credit
practices.
(1) The OCC’s evaluation of a bank’s
CRA performance is adversely affected
by evidence of discriminatory or other
illegal credit practices in any geography
by the bank or in any assessment area
by any affiliate whose loans have been
considered as part of the bank’s lending
performance. In connection with any
type of lending activity described in
§ 25.22(a), evidence of discriminatory or
other credit practices that violate an
applicable law, rule, or regulation
includes, but is not limited to:
other
illegal credit practices in any geography
by the bank or in any assessment area
by any affiliate whose loans have been
considered as part of the bank’s lending
performance. In connection with any
type of lending activity described in
§ 25.22(a), evidence of discriminatory or
other credit practices that violate an
applicable law, rule, or regulation
includes, but is not limited to:
(i) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(ii) Violations of the Home Ownership
and Equity Protection Act;
(iii) Violations of section 5 of the
Federal Trade Commission Act;
(iv) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(v) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(2) In determining the effect of
evidence of practices described in
paragraph (c)(1) of this section on the
bank’s assigned rating, the OCC
considers the nature, extent, and
strength of the evidence of the practices;
the policies and procedures that the
bank (or affiliate, as applicable) has in
place to prevent the practices; any
corrective action that the bank (or
affiliate, as applicable) has taken or has
committed to take, including voluntary
corrective action resulting from self-
assessment; and any other relevant
information.
I 5. In Appendix A to part 25, revise
paragraph (d) to read as follows:
Appendix A to Part 25—Ratings
*
*
*
*
*
or affiliate, as applicable) has in
place to prevent the practices; any
corrective action that the bank (or
affiliate, as applicable) has taken or has
committed to take, including voluntary
corrective action resulting from self-
assessment; and any other relevant
information.
I 5. In Appendix A to part 25, revise
paragraph (d) to read as follows:
Appendix A to Part 25—Ratings
*
*
*
*
*
(d) Banks evaluated under the small bank
performance standards. (1) Lending test
ratings. (i) Eligibility for a satisfactory
lending test rating. The OCC rates a small
bank’s lending performance ‘‘satisfactory’’ if,
in general, the bank demonstrates:
(A) A reasonable loan-to-deposit ratio
(considering seasonal variations) given the
bank’s size, financial condition, the credit
needs of its assessment area(s), and taking
into account, as appropriate, other lending-
related activities such as loan originations for
sale to the secondary markets and
community development loans and qualified
investments;
(B) A majority of its loans and, as
appropriate, other lending-related activities,
are in its assessment area;
(C) A distribution of loans to and, as
appropriate, other lending-related activities
for individuals of different income levels
(including low- and moderate-income
individuals) and businesses and farms of
different sizes that is reasonable given the
demographics of the bank’s assessment
area(s);
(D) A record of taking appropriate action,
when warranted, in response to written
complaints, if any, about the bank’s
performance in helping to meet the credit
needs of its assessment area(s); and
(E) A reasonable geographic distribution of
loans given the bank’s assessment area(s).
(ii) Eligibility for an ‘‘outstanding’’ lending
test rating. A small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under this paragraph and exceeds some or all
of those standards may warrant consideration
for a lending test rating of ‘‘outstanding.’’
s of its assessment area(s); and
(E) A reasonable geographic distribution of
loans given the bank’s assessment area(s).
(ii) Eligibility for an ‘‘outstanding’’ lending
test rating. A small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under this paragraph and exceeds some or all
of those standards may warrant consideration
for a lending test rating of ‘‘outstanding.’’
(iii) Needs to improve or substantial
noncompliance ratings. A small bank may
also receive a lending test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standard
for a ‘‘satisfactory’’ rating.
(2) Community development test ratings for
intermediate small banks—(i) Eligibility for a
satisfactory community development test
rating. The OCC rates an intermediate small
bank’s community development performance
‘‘satisfactory’’ if the bank demonstrates
adequate responsiveness to the community
development needs of its assessment area(s)
through community development loans,
qualified investments, and community
development services. The adequacy of the
bank’s response will depend on its capacity
for such community development activities,
its assessment area’s need for such
community development activities, and the
availability of such opportunities for
community development in the bank’s
assessment area(s).
(ii) Eligibility for an outstanding
community development test rating. The
OCC rates an intermediate small bank’s
community development performance
‘‘outstanding’’ if the bank demonstrates
excellent responsiveness to community
development needs in its assessment area(s)
through community development loans,
qualified investments, and community
development services, as appropriate,
considering the bank’s capacity and the need
and availability of such opportunities for
community development in the bank’s
assessment area(s).
erformance
‘‘outstanding’’ if the bank demonstrates
excellent responsiveness to community
development needs in its assessment area(s)
through community development loans,
qualified investments, and community
development services, as appropriate,
considering the bank’s capacity and the need
and availability of such opportunities for
community development in the bank’s
assessment area(s).
(iii) Needs to improve or substantial
noncompliance ratings. An intermediate
small bank may also receive a community
development test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
(3) Overall rating—(i) Eligibility for a
satisfactory overall rating. No intermediate
small bank may receive an assigned overall
rating of ‘‘satisfactory’’ unless it receives a
rating of at least ‘‘satisfactory’’ on both the
lending test and the community development
test.
(ii) Eligibility for an outstanding overall
rating. (A) An intermediate small bank that
receives an ‘‘outstanding’’ rating on one test
and at least ‘‘satisfactory’’ on the other test
may receive an assigned overall rating of
‘‘outstanding.’’
(B) A small bank that is not an
intermediate small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under the lending test and exceeds some or
all of those standards may warrant
consideration for an overall rating of
‘‘outstanding.’’ In assessing whether a bank’s
performance is ‘‘outstanding,’’ the OCC
considers the extent to which the bank
exceeds each of the performance standards
for a ‘‘satisfactory’’ rating and its
performance in making qualified investments
and its performance in providing branches
and other services and delivery systems that
enhance credit availability in its assessment
area(s).
‘outstanding.’’ In assessing whether a bank’s
performance is ‘‘outstanding,’’ the OCC
considers the extent to which the bank
exceeds each of the performance standards
for a ‘‘satisfactory’’ rating and its
performance in making qualified investments
and its performance in providing branches
and other services and delivery systems that
enhance credit availability in its assessment
area(s).
(iii) Needs to improve or substantial
noncompliance overall ratings. A small bank
may also receive a rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
*
*
*
*
*
Federal Reserve System
12 CFR Chapter II
Authority and Issuance
I For the reasons set forth in the joint
preamble, the Board of Governors of the
Federal Reserve System amends part 228
of chapter II of title 12 of the Code of
Federal Regulations as follows:
PART 228—COMMUNITY
REINVESTMENT (REGULATION BB)
I 1. The authority citation for part 228
continues to read as follows:
Authority: 12 U.S.C. 321, 325, 1828(c),
1842, 1843, 1844, and 2901 et seq.
I 2. In § 228.12, revise paragraphs (g)(4)
and (u) to read as follows:
§ 228.12
Definitions.
*
*
*
*
*
(g) Community development means:
*
*
*
*
*
(4) Activities that revitalize or
stabilize—
(i) Low-or moderate-income
geographies;
(ii) Designated disaster areas; or
for part 228
continues to read as follows:
Authority: 12 U.S.C. 321, 325, 1828(c),
1842, 1843, 1844, and 2901 et seq.
I 2. In § 228.12, revise paragraphs (g)(4)
and (u) to read as follows:
§ 228.12
Definitions.
*
*
*
*
*
(g) Community development means:
*
*
*
*
*
(4) Activities that revitalize or
stabilize—
(i) Low-or moderate-income
geographies;
(ii) Designated disaster areas; or
(iii) Distressed or underserved
nonmetropolitan middle-income
geographies designated by the Board,
Federal Deposit Insurance Corporation,
and Office of the Comptroller of the
Currency, based on—
(A) Rates of poverty, unemployment,
and population loss; or
(B) Population size, density, and
dispersion. Activities revitalize and
stabilize geographies designated based
on population size, density, and
dispersion if they help to meet essential
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00049
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44268
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
community needs, including needs of
low- and moderate-income individuals.
*
*
*
*
*
(u) Small bank—(1) Definition. Small
bank means a bank that, as of December
31 of either of the prior two calendar
years, had assets of less than $1 billion.
Intermediate small bank means a small
bank with assets of at least $250 million
as of December 31 of both of the prior
two calendar years and less than $1
billion as of December 31 of either of the
prior two calendar years.
(2) Adjustment. The dollar figures in
paragraph (u)(1) of this section shall be
adjusted annually and published by the
Board, based on the year-to-year change
in the average of the Consumer Price
Index for Urban Wage Earners and
Clerical Workers, not seasonally
adjusted, for each twelve-month period
ending in November, with rounding to
the nearest million.
*
*
*
*
*
I 3. Revise § 228.26 to read as follows:
§ 228.26
Small bank performance
standards.
tion shall be
adjusted annually and published by the
Board, based on the year-to-year change
in the average of the Consumer Price
Index for Urban Wage Earners and
Clerical Workers, not seasonally
adjusted, for each twelve-month period
ending in November, with rounding to
the nearest million.
*
*
*
*
*
I 3. Revise § 228.26 to read as follows:
§ 228.26
Small bank performance
standards.
(a) Performance criteria—(1) Small
banks with assets of less than $250
million. The Board evaluates the record
of a small bank that is not, or that was
not during the prior calendar year, an
intermediate small bank, of helping to
meet the credit needs of its assessment
area(s) pursuant to the criteria set forth
in paragraph (b) of this section.
(2) Intermediate small banks. The
Board evaluates the record of a small
bank that is, or that was during the prior
calendar year, an intermediate small
bank, of helping to meet the credit
needs of its assessment area(s) pursuant
to the criteria set forth in paragraphs (b)
and (c) of this section.
(b) Lending test. A small bank’s
lending performance is evaluated
pursuant to the following criteria:
(1) The bank’s loan-to-deposit ratio,
adjusted for seasonal variation, and, as
appropriate, other lending-related
activities, such as loan originations for
sale to the secondary markets,
community development loans, or
qualified investments;
(2) The percentage of loans and, as
appropriate, other lending-related
activities located in the bank’s
assessment area(s);
(3) The bank’s record of lending to
and, as appropriate, engaging in other
lending-related activities for borrowers
of different income levels and
businesses and farms of different sizes;
(4) The geographic distribution of the
bank’s loans; and
(5) The bank’s record of taking action,
if warranted, in response to written
complaints about its performance in
helping to meet credit needs in its
assessment area(s).
lending to
and, as appropriate, engaging in other
lending-related activities for borrowers
of different income levels and
businesses and farms of different sizes;
(4) The geographic distribution of the
bank’s loans; and
(5) The bank’s record of taking action,
if warranted, in response to written
complaints about its performance in
helping to meet credit needs in its
assessment area(s).
(c) Community development test. An
intermediate small bank’s community
development performance also is
evaluated pursuant to the following
criteria:
(1) The number and amount of
community development loans;
(2) The number and amount of
qualified investments;
(3) The extent to which the bank
provides community development
services; and
(4) The bank’s responsiveness through
such activities to community
development lending, investment, and
services needs.
I 4. Revise § 228.28(c) to read as follows:
§ 228.28
Assigned ratings.
*
*
*
*
*
(c) Effect of evidence of
discriminatory or other illegal credit
practices. (1) The Board’s evaluation of
a bank’s CRA performance is adversely
affected by evidence of discriminatory
or other illegal credit practices in any
geography by the bank or in any
assessment area by any affiliate whose
loans have been considered as part of
the bank’s lending performance. In
connection with any type of lending
activity described in § 228.22(a),
evidence of discriminatory or other
credit practices that violate an
applicable law, rule, or regulation
includes, but is not limited to:
(i) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(ii) Violations of the Home Ownership
and Equity Protection Act;
(iii) Violations of section 5 of the
Federal Trade Commission Act;
(iv) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
ludes, but is not limited to:
(i) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(ii) Violations of the Home Ownership
and Equity Protection Act;
(iii) Violations of section 5 of the
Federal Trade Commission Act;
(iv) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(v) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(2) In determining the effect of
evidence of practices described in
paragraph (c)(1) of this section on the
bank’s assigned rating, the Board
considers the nature, extent, and
strength of the evidence of the practices;
the policies and procedures that the
bank (or affiliate, as applicable) has in
place to prevent the practices; any
corrective action that the bank (or
affiliate, as applicable) has taken or has
committed to take, including voluntary
corrective action resulting from self-
assessment; and any other relevant
information.
I 5. In Appendix A to part 228, revise
paragraph (d) to read as follows:
Appendix A to Part 228—Ratings
*
*
*
*
*
(d) Banks evaluated under the small bank
performance standards. (1) Lending test
ratings. (i) Eligibility for a satisfactory
lending test rating. The Board rates a small
bank’s lending performance ‘‘satisfactory’’ if,
in general, the bank demonstrates:
(A) A reasonable loan-to-deposit ratio
(considering seasonal variations) given the
bank’s size, financial condition, the credit
needs of its assessment area(s), and taking
into account, as appropriate, other lending-
related activities such as loan originations for
sale to the secondary markets and
community development loans and qualified
investments;
(B) A majority of its loans and, as
appropriate, other lending-related activities,
are in its assessment area;
(C) A distribution of loans to and, as
appropriate, other lending-related activities
for individuals of different income levels
(includ
ding-
related activities such as loan originations for
sale to the secondary markets and
community development loans and qualified
investments;
(B) A majority of its loans and, as
appropriate, other lending-related activities,
are in its assessment area;
(C) A distribution of loans to and, as
appropriate, other lending-related activities
for individuals of different income levels
(including low- and moderate-income
individuals) and businesses and farms of
different sizes that is reasonable given the
demographics of the bank’s assessment
area(s);
(D) A record of taking appropriate action,
when warranted, in response to written
complaints, if any, about the bank’s
performance in helping to meet the credit
needs of its assessment area(s); and
(E) A reasonable geographic distribution of
loans given the bank’s assessment area(s).
(ii) Eligibility for an ‘‘outstanding’’ lending
test rating. A small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under this paragraph and exceeds some or all
of those standards may warrant consideration
for a lending test rating of ‘‘outstanding.’’
(iii) Needs to improve or substantial
noncompliance ratings. A small bank may
also receive a lending test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standard
for a ‘‘satisfactory’’ rating.
(2) Community development test ratings for
intermediate small banks—(i) Eligibility for a
satisfactory community development test
rating. The Board rates an intermediate small
bank’s community development performance
‘‘satisfactory’’ if the bank demonstrates
adequate responsiveness to the community
development needs of its assessment area(s)
through community development loans,
qualified investments, and community
development services
rmediate small banks—(i) Eligibility for a
satisfactory community development test
rating. The Board rates an intermediate small
bank’s community development performance
‘‘satisfactory’’ if the bank demonstrates
adequate responsiveness to the community
development needs of its assessment area(s)
through community development loans,
qualified investments, and community
development services. The adequacy of the
bank’s response will depend on its capacity
for such community development activities,
its assessment area’s need for such
community development activities, and the
availability of such opportunities for
community development in the bank’s
assessment area(s).
(ii) Eligibility for an outstanding
community development test rating. The
Board rates an intermediate small bank’s
community development performance
‘‘outstanding’’ if the bank demonstrates
excellent responsiveness to community
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00050
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44269
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
development needs in its assessment area(s)
through community development loans,
qualified investments, and community
development services, as appropriate,
considering the bank’s capacity and the need
and availability of such opportunities for
community development in the bank’s
assessment area(s).
(iii) Needs to improve or substantial
noncompliance ratings. An intermediate
small bank may also receive a community
development test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
such opportunities for
community development in the bank’s
assessment area(s).
(iii) Needs to improve or substantial
noncompliance ratings. An intermediate
small bank may also receive a community
development test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
(3) Overall rating—(i) Eligibility for a
satisfactory overall rating. No intermediate
small bank may receive an assigned overall
rating of ‘‘satisfactory’’ unless it receives a
rating of at least ‘‘satisfactory’’ on both the
lending test and the community development
test.
(ii) Eligibility for an outstanding overall
rating. (A) An intermediate small bank that
receives an ‘‘outstanding’’ rating on one test
and at least ‘‘satisfactory’’ on the other test
may receive an assigned overall rating of
‘‘outstanding.’’
(B) A small bank that is not an
intermediate small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under the lending test and exceeds some or
all of those standards may warrant
consideration for an overall rating of
‘‘outstanding.’’ In assessing whether a bank’s
performance is ‘‘outstanding,’’ the Board
considers the extent to which the bank
exceeds each of the performance standards
for a ‘‘satisfactory’’ rating and its
performance in making qualified investments
and its performance in providing branches
and other services and delivery systems that
enhance credit availability in its assessment
area(s).
utstanding.’’ In assessing whether a bank’s
performance is ‘‘outstanding,’’ the Board
considers the extent to which the bank
exceeds each of the performance standards
for a ‘‘satisfactory’’ rating and its
performance in making qualified investments
and its performance in providing branches
and other services and delivery systems that
enhance credit availability in its assessment
area(s).
(iii) Needs to improve or substantial
noncompliance overall ratings. A small bank
may also receive a rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
*
*
*
*
*
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
I For the reasons set forth in the joint
preamble, the Board of Directors of the
Federal Deposit Insurance Corporation
amends part 345 of chapter III of title 12
of the Code of Federal Regulations to
read as follows:
PART 345—COMMUNITY
REINVESTMENT
I 1. The authority citation for part 345
continues to read as follows:
Authority: 12 U.S.C. 1814–1817, 1819–
1820, 1828, 1831u and 2901–2907, 3103–
3104, and 3108(a).
I 2. In § 345.12, revise paragraphs (g)(4)
and (u) to read as follows:
§ 345.12
Definitions.
*
*
*
*
*
(g) Community development means:
*
*
*
*
*
(4) Activities that revitalize or
stabilize—
(i) Low-or moderate-income
geographies;
(ii) Designated disaster areas; or
(iii) Distressed or underserved
nonmetropolitan middle-income
geographies designated by the Board of
Governors of the Federal Reserve
System, FDIC, and Office of the
Comptroller of the Currency, based on—
(A) Rates of poverty, unemployment,
and population loss; or
(B) Population size, density, and
dispersion. Activities revitalize and
stabilize geographies designated based
on population size, density, and
dispersion if they help to meet essential
community needs, including needs of
low- and moderate-income individuals.
*
*
*
*
*
and Office of the
Comptroller of the Currency, based on—
(A) Rates of poverty, unemployment,
and population loss; or
(B) Population size, density, and
dispersion. Activities revitalize and
stabilize geographies designated based
on population size, density, and
dispersion if they help to meet essential
community needs, including needs of
low- and moderate-income individuals.
*
*
*
*
*
(u) Small bank—(1) Definition. Small
bank means a bank that, as of December
31 of either of the prior two calendar
years, had assets of less than $1 billion.
Intermediate small bank means a small
bank with assets of at least $250 million
as of December 31 of both of the prior
two calendar years and less than $1
billion as of December 31 of either of the
prior two calendar years.
(2) Adjustment. The dollar figures in
paragraph (u)(1) of this section shall be
adjusted annually and published by the
FDIC, based on the year-to-year change
in the average of the Consumer Price
Index for Urban Wage Earners and
Clerical Workers, not seasonally
adjusted, for each twelve-month period
ending in November, with rounding to
the nearest million.
*
*
*
*
*
I 3. Revise § 345.26 to read as follows:
§ 345.26
Small bank performance
standards.
(a) Performance criteria—(1) Small
banks with assets of less than $250
million. The FDIC evaluates the record
of a small bank that is not, or that was
not during the prior calendar year, an
intermediate small bank, of helping to
meet the credit needs of its assessment
area(s) pursuant to the criteria set forth
in paragraph (b) of this section.
(2) Intermediate small banks. The
FDIC evaluates the record of a small
bank that is, or that was during the prior
calendar year, an intermediate small
bank, of helping to meet the credit
needs of its assessment area(s) pursuant
to the criteria set forth in paragraphs (b)
and (c) of this section.
its assessment
area(s) pursuant to the criteria set forth
in paragraph (b) of this section.
(2) Intermediate small banks. The
FDIC evaluates the record of a small
bank that is, or that was during the prior
calendar year, an intermediate small
bank, of helping to meet the credit
needs of its assessment area(s) pursuant
to the criteria set forth in paragraphs (b)
and (c) of this section.
(b) Lending test. A small bank’s
lending performance is evaluated
pursuant to the following criteria:
(1) The bank’s loan-to-deposit ratio,
adjusted for seasonal variation, and, as
appropriate, other lending-related
activities, such as loan originations for
sale to the secondary markets,
community development loans, or
qualified investments;
(2) The percentage of loans and, as
appropriate, other lending-related
activities located in the bank’s
assessment area(s);
(3) The bank’s record of lending to
and, as appropriate, engaging in other
lending-related activities for borrowers
of different income levels and
businesses and farms of different sizes;
(4) The geographic distribution of the
bank’s loans; and
(5) The bank’s record of taking action,
if warranted, in response to written
complaints about its performance in
helping to meet credit needs in its
assessment area(s).
(c) Community development test. An
intermediate small bank’s community
development performance also is
evaluated pursuant to the following
criteria:
(1) The number and amount of
community development loans;
(2) The number and amount of
qualified investments;
(3) The extent to which the bank
provides community development
services; and
(4) The bank’s responsiveness through
such activities to community
development lending, investment, and
services needs.
I 4. Revise § 345.28(c) to read as follows:
§ 345.28
Assigned ratings.
*
*
*
*
*
) The number and amount of
community development loans;
(2) The number and amount of
qualified investments;
(3) The extent to which the bank
provides community development
services; and
(4) The bank’s responsiveness through
such activities to community
development lending, investment, and
services needs.
I 4. Revise § 345.28(c) to read as follows:
§ 345.28
Assigned ratings.
*
*
*
*
*
(c) Effect of evidence of
discriminatory or other illegal credit
practices. (1) The FDIC’s evaluation of a
bank’s CRA performance is adversely
affected by evidence of discriminatory
or other illegal credit practices in any
geography by the bank or in any
assessment area by any affiliate whose
loans have been considered as part of
the bank’s lending performance. In
connection with any type of lending
activity described in § 345.22(a),
evidence of discriminatory or other
credit practices that violate an
applicable law, rule, or regulation
includes, but is not limited to:
(i) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00051
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44270
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
(ii) Violations of the Home Ownership
and Equity Protection Act;
(iii) Violations of section 5 of the
Federal Trade Commission Act;
(iv) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
Aug 01, 2005
Jkt 205001
PO 00000
Frm 00051
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
44270
Federal Register / Vol. 70, No. 147 / Tuesday, August 2, 2005 / Rules and Regulations
(ii) Violations of the Home Ownership
and Equity Protection Act;
(iii) Violations of section 5 of the
Federal Trade Commission Act;
(iv) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(v) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(2) In determining the effect of
evidence of practices described in
paragraph (c)(1) of this section on the
bank’s assigned rating, the FDIC
considers the nature, extent, and
strength of the evidence of the practices;
the policies and procedures that the
bank (or affiliate, as applicable) has in
place to prevent the practices; any
corrective action that the bank (or
affiliate, as applicable) has taken or has
committed to take, including voluntary
corrective action resulting from self-
assessment; and any other relevant
information.
I 5. In Appendix A to part 345, revise
paragraph (d) to read as follows:
Appendix A to Part 345—Ratings
*
*
*
*
*
(d) Banks evaluated under the small bank
performance standards—(1) Lending test
ratings.
(i) Eligibility for a satisfactory lending test
rating. The FDIC rates a small bank’s lending
performance ‘‘satisfactory’’ if, in general, the
bank demonstrates:
(A) A reasonable loan-to-deposit ratio
(considering seasonal variations) given the
bank’s size, financial condition, the credit
needs of its assessment area(s), and taking
into account, as appropriate, other lending-
related activities such as loan originations for
sale to the secondary markets and
community development loans and qualified
investments;
(B) A majority of its loans and, as
appropriate, other lending-related activities,
are in its assessment area;
(C) A distribution of loans to and, as
appropriate, other lending-related activities
for individuals of different income levels
(includin
ng-
related activities such as loan originations for
sale to the secondary markets and
community development loans and qualified
investments;
(B) A majority of its loans and, as
appropriate, other lending-related activities,
are in its assessment area;
(C) A distribution of loans to and, as
appropriate, other lending-related activities
for individuals of different income levels
(including low- and moderate-income
individuals) and businesses and farms of
different sizes that is reasonable given the
demographics of the bank’s assessment
area(s);
(D) A record of taking appropriate action,
when warranted, in response to written
complaints, if any, about the bank’s
performance in helping to meet the credit
needs of its assessment area(s); and
(E) A reasonable geographic distribution of
loans given the bank’s assessment area(s).
(ii) Eligibility for an ‘‘outstanding’’ lending
test rating. A small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under this paragraph and exceeds some or all
of those standards may warrant consideration
for a lending test rating of ‘‘outstanding.’’
(iii) Needs to improve or substantial
noncompliance ratings. A small bank may
also receive a lending test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standard
for a ‘‘satisfactory’’ rating.
(2) Community development test ratings for
intermediate small banks—(i) Eligibility for a
satisfactory community development test
rating. The FDIC rates an intermediate small
bank’s community development performance
‘‘satisfactory’’ if the bank demonstrates
adequate responsiveness to the community
development needs of its assessment area(s)
through community development loans,
qualified investments, and community
development services
ermediate small banks—(i) Eligibility for a
satisfactory community development test
rating. The FDIC rates an intermediate small
bank’s community development performance
‘‘satisfactory’’ if the bank demonstrates
adequate responsiveness to the community
development needs of its assessment area(s)
through community development loans,
qualified investments, and community
development services. The adequacy of the
bank’s response will depend on its capacity
for such community development activities,
its assessment area’s need for such
community development activities, and the
availability of such opportunities for
community development in the bank’s
assessment area(s).
(ii) Eligibility for an outstanding
community development test rating. The
FDIC rates an intermediate small bank’s
community development performance
‘‘outstanding’’ if the bank demonstrates
excellent responsiveness to community
development needs in its assessment area(s)
through community development loans,
qualified investments, and community
development services, as appropriate,
considering the bank’s capacity and the need
and availability of such opportunities for
community development in the bank’s
assessment area(s).
(iii) Needs to improve or substantial
noncompliance ratings. An intermediate
small bank may also receive a community
development test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
such opportunities for
community development in the bank’s
assessment area(s).
(iii) Needs to improve or substantial
noncompliance ratings. An intermediate
small bank may also receive a community
development test rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
(3) Overall rating—(i) Eligibility for a
satisfactory overall rating. No intermediate
small bank may receive an assigned overall
rating of ‘‘satisfactory’’ unless it receives a
rating of at least ‘‘satisfactory’’ on both the
lending test and the community development
test.
(ii) Eligibility for an outstanding overall
rating. (A) An intermediate small bank that
receives an ‘‘outstanding’’ rating on one test
and at least ‘‘satisfactory’’ on the other test
may receive an assigned overall rating of
‘‘outstanding.’’
(B) A small bank that is not an
intermediate small bank that meets each of
the standards for a ‘‘satisfactory’’ rating
under the lending test and exceeds some or
all of those standards may warrant
consideration for an overall rating of
‘‘outstanding.’’ In assessing whether a bank’s
performance is ‘‘outstanding,’’ the FDIC
considers the extent to which the bank
exceeds each of the performance standards
for a ‘‘satisfactory’’ rating and its
performance in making qualified investments
and its performance in providing branches
and other services and delivery systems that
enhance credit availability in its assessment
area(s).
outstanding.’’ In assessing whether a bank’s
performance is ‘‘outstanding,’’ the FDIC
considers the extent to which the bank
exceeds each of the performance standards
for a ‘‘satisfactory’’ rating and its
performance in making qualified investments
and its performance in providing branches
and other services and delivery systems that
enhance credit availability in its assessment
area(s).
(iii) Needs to improve or substantial
noncompliance overall ratings. A small bank
may also receive a rating of ‘‘needs to
improve’’ or ‘‘substantial noncompliance’’
depending on the degree to which its
performance has failed to meet the standards
for a ‘‘satisfactory’’ rating.
*
*
*
*
*
Dated: July 19, 2005.
Julie L. Williams,
Acting Comptroller of the Currency.
By order of the Board of Governors of the
Federal Reserve System, July 26, 2005.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 19th day of
July, 2005.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 05–15227 Filed 8–1–05; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 335
RIN 3064–AC88
Securities of Nonmember Insured
Banks
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The FDIC is adopting a final
rule amending part 335 of its regulations
with one nonsubstantive change from
the interim final rule published on
March 31, 2005, in the Federal Register
(see 70 FR 16398). The final rule adopts
amendments to the FDIC’s securities
disclosure regulations applicable to
state nonmember banks with securities
required to be registered under section
12 of the Securities Exchange Act of
1934 (Exchange Act). The final rule
reflects amendments to the Securities
Exchange Act of 1934 made by the
Sarbanes-Oxley Act of 2002 (Sarbanes-
Oxley Act), and accommodates certain
operational changes within the FDIC
the FDIC’s securities
disclosure regulations applicable to
state nonmember banks with securities
required to be registered under section
12 of the Securities Exchange Act of
1934 (Exchange Act). The final rule
reflects amendments to the Securities
Exchange Act of 1934 made by the
Sarbanes-Oxley Act of 2002 (Sarbanes-
Oxley Act), and accommodates certain
operational changes within the FDIC.
The rule also incorporates through cross
reference changes in regulations
adopted by the Securities Exchange and
Commission (SEC) into the provisions of
the FDIC’s securities regulations.
Incorporation by reference will assure
that the FDIC’s regulations remain
substantially similar to the SEC’s
regulations, as required by law.
DATES: These amendments are effective
on August 2, 2005.
FOR FURTHER INFORMATION CONTACT:
Dennis Chapman, Senior Staff
Accountant, Division of Supervision
and Consumer Protection, (202) 898–
8922; Mary Frank, Senior Financial
Analyst, Division of Supervision and
VerDate jul<14>2003
15:06 Aug 01, 2005
Jkt 205001
PO 00000
Frm 00052
Fmt 4700
Sfmt 4700
E:\FR\FM\02AUR1.SGM
02AUR1
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.