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l l★K

Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272

February 26, 2004

Notice 04-11

TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Notice of Proposed Rulemaking Regarding
the Community Reinvestment Act
DETAILS
The Board of Governors, Office of the Comptroller of the Currency, Federal Deposit
Insurance Corporation, and Office of Thrift Supervision have published a joint interagency
notice of proposed rulemaking regarding the Community Reinvestment Act (CRA). The proposal
was developed following the agencies’ review of the CRA regulations, which included an
analysis of about four hundred comments received on an advance notice of proposed rulemaking
(ANPR) on July 19, 2001.
The agencies propose amendments to the CRA regulations in the following two areas:
•

First, to reduce unwarranted burden, the agencies propose to amend the definition
of “small institution” to mean an institution with total assets of less than $500
million, without regard to any holding company assets.

•

Second, to better address abusive lending practices, the agencies propose to
amend the regulations explicitly to provide that an institution’s CRA evaluation
will be adversely affected by evidence of specified discriminatory, illegal, or
abusive credit practices in connection with certain loans.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

-2Also, certain other issues raised in connection with the ANPR will be addressed
through additional interpretations, guidance, and examiner training. Finally, the agencies propose
several enhancements to the data disclosed in CRA public evaluations and CRA disclosure
statements.
The Board must receive comments by April 6, 2004. Please address comments to
Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street
and Constitution Avenue, N.W., Washington, DC 20551. Also, you may mail comments electronically to regs.comments@federalreserve.gov. All comments should refer to Docket No. R1181.
ATTACHMENT
A copy of the joint notice as it appears on pages 5729–47, Vol. 69, No. 25 of the
Federal Register dated February 6, 2004, is attached.
MORE INFORMATION
For more information, please contact Eugene Coy, Banking Supervision Department,
at (214) 922-6201. Paper copies of this notice or previous Federal Reserve Bank notices can be
printed from our web site at www.dallasfed.org/banking/notices/index.html.

5729

Proposed Rules

Federal Register
Vol. 69, No. 25
Friday, February 6, 2004

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 25
[Docket No. 04–06]
RIN 1557–AB98

FEDERAL RESERVE SYSTEM
12 CFR Part 228
[Regulation BB; Docket No. R–1181]

FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 345
RIN 3064–AC50

DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 563e
[No. 2004–04]
RIN 1550–AB48

Community Reinvestment Act
Regulations
AGENCIES: Office of the Comptroller of
the Currency, Treasury (OCC); Board of
Governors of the Federal Reserve
System (Board); Federal Deposit
Insurance Corporation (FDIC); Office of
Thrift Supervision, Treasury (OTS).
ACTION: Joint notice of proposed
rulemaking.
SUMMARY: The OCC, Board, FDIC, and
OTS (collectively, ‘‘we’’ or ‘‘the
agencies’’) have conducted a joint
review of the CRA regulations, fulfilling
the commitment we made when we
adopted the current Community
Reinvestment Act (CRA or ‘‘the Act’’)
regulations in 1995. See 60 FR 22156,
22177 (May 4, 1995). As part of our
review, we published an advance notice
of proposed rulemaking (ANPR) on July
19, 2001, seeking public comment on a

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wide range of questions. 66 FR 37602
(July 19, 2001).
This proposal was developed
following the agencies’ review of the
CRA regulations, which included an
analysis of about four hundred
comments received on the ANPR. The
comments reflected a general consensus
that fundamental elements of the
regulations are sound, but indicated a
profound split over the need for, and
appropriate direction of, change.
Community organizations advocated
‘‘updating’’ the regulations with
expanded requirements to match
developments in the industry and
marketplace; financial institutions were
concerned principally with reducing
burden consistent with maintaining or
improving the regulations’ effectiveness.
The agencies believe the regulations
are essentially sound, but are in need of
some updating to keep pace with
changes in the financial services
industry. Therefore, we are proposing
amendments to the regulations in two
areas. First, to reduce unwarranted
burden consistent with the agencies’
ongoing efforts to identify and reduce
regulatory burden where appropriate
and feasible, we are proposing to amend
the definition of ‘‘small institution’’ to
mean an institution with total assets of
less than $500 million, without regard
to any holding company assets. This
change would take into account
substantial institutional asset growth
and consolidation in the banking and
thrift industries since the definition was
adopted. It also reflects the fact that
small institutions with a sizable holding
company do not appear to find
addressing their CRA responsibilities
any less burdensome than a similarlysized institution without a sizable
holding company. As described below,
this proposal would increase the
number of institutions that are eligible
for evaluation under the small
institution performance standards,
while only slightly reducing the portion
of the nation’s bank and thrift assets
subject to evaluation under the large
retail institution performance standards.
It would better align the definition of
small institution with agency
expectations when revising the
regulations in 1995 about the scope of
coverage for small institutions.

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Second, to better address abusive
lending practices 1 in CRA evaluations,
we are proposing to amend our
regulations specifically to provide that
evidence that an institution, or any of an
institution’s affiliates, the loans of
which have been considered pursuant to
§ ll.22(c), has engaged in specified
discriminatory, illegal, or abusive credit
practices in connection with certain
loans adversely affects the evaluation of
the institution’s CRA performance.
Finally, as described below, we
expect to address certain other issues
raised in connection with the ANPR
through additional interpretations,
guidance, and examiner training. We
also propose several enhancements to
the data disclosed in CRA public
evaluations and CRA disclosure
statements relating to providing
information on loan originations and
purchases, loans covered under the
Home Ownership and Equity Protection
Act (HOEPA) and other high-cost loans,
and affiliate loans.
We encourage comments from the
public and regulated financial
institutions on all aspects of this joint
notice of proposed rulemaking, in order
to ensure a full discussion of the issues.
DATES: Comments must be received by
April 6, 2004.
ADDRESSES: OCC: Please direct your
comments to: Docket No. 04–06,
Communications Division, Public
Information Room, Mailstop 1–5, Office
of the Comptroller of the Currency, 250
E Street, SW., Washington, DC 20219.
However, because paper mail in the
Washington, DC, area and at the OCC is
subject to delay, please consider
submitting your comments by e-mail to
regs.comments@occ.treas.gov, or by fax
to (202) 874–4448. You can make an
appointment to inspect and photocopy
all comments by calling (202) 874–5043.
Board: Comments should refer to
Docket No. R–1181 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
1 The terms ‘‘abusive’’ and ‘‘predatory’’ lending
practices are used interchangeably.

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules

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.
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: Mail: Written comments should
be addressed to Robert E. Feldman,
Executive Secretary, Attention:
Comments, Federal Deposit Insurance
Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Delivery: Comments may be hand
delivered to the guard station at the rear
of the 550 17th Street Building (located
on F Street) on business days between
7 a.m. and 5 p.m.
Facsimile: Send facsimile
transmissions to fax number (202) 898–
3838.
E-mail: You may also electronically
mail comments to comments@fdic.gov.
Public Inspection: Comments may be
inspected and photocopied in the FDIC
Public Information Center, Room 100,
801 17th Street, NW., Washington, DC
20429, between 9 a.m. and 4:30 p.m. on
business days.
OTS: Mail: Send comments to
Regulation Comments, Chief Counsel’s
Office, Office of Thrift Supervision,
1700 G Street, NW., Washington, DC
20552, Attention: No. 2004–04.
Delivery: Hand deliver comments to
the Guard’s Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4
p.m. on business days, Attention:
Regulation Comments, Chief Counsel’s
Office, Attention: No. 2004–04.
Facsimiles: Send facsimile
transmissions to fax number (202) 906–
6518, Attention: No. 2004–04.
E-Mail: Send e-mails to
regs.comments@ots.treas.gov, Attention:
No. 2004–04 and include your name
and telephone number.
Public Inspection: Comments and the
related index will be posted on the OTS
Internet Site at http://www.ots.treas.gov.
In addition, you may inspect comments
at the Public Reading Room, 1700 G
Street, NW., by appointment. To make
an appointment for access, call (202)
906–5922, send an e-mail to
public.info@ots.treas.gov, or send a
facsimile transmission to (202) 906–

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7755. (Prior notice identifying the
material you will be requesting will
assist us in serving you.) Appointments
will be scheduled on business days
between 10 a.m. and 4 p.m. In most
cases, appointments will be available
the next business day following the date
a request is received.
FOR FURTHER INFORMATION CONTACT:
OCC: Michael Bylsma, Director, or
Margaret Hesse, Special Counsel,
Community and Consumer Law
Division, (202) 874–5750; or Karen
Tucker, National Bank Examiner,
Compliance Division, (202) 874–4428,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: Dan S. Sokolov, Senior
Attorney, (202) 452–2412; Kathleen C.
Ryan, Counsel, (202) 452–3667;
Catherine M.J. Gates, Oversight Team
Leader, (202) 452–3946; or William T.
Coffey, Senior Review Examiner, (202)
452–3946, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System, 20th
Street and Constitution Avenue, NW.,
Washington, DC 20551.
FDIC: Robert Mooney, Assistant
Director, (202) 898–3911, Division of
Compliance and Consumer Affairs;
Richard M. Schwartz, Counsel, Legal
Division, (202) 898–7424 or Susan van
den Toorn, Counsel, Legal Division,
(202) 898–8707, Federal Deposit
Insurance Corporation, 550 17th Street,
NW., Washington, DC 20429.
OTS: Celeste Anderson, Project
Manager, Compliance Policy, (202) 906–
7990; Theresa A. Stark, Program
Manager, Compliance Policy, (202) 906–
7054; or Richard Bennett, Counsel
(Banking and Finance), Regulations and
Legislation Division, (202) 906–7409,
Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
Introduction
After considering the comments on
the ANPR published on July 19, 2001
(66 FR 37602), the agencies are jointly
proposing revisions to their regulations
implementing the CRA (12 U.S.C. 2901
et seq.). The proposed regulations
would revise the definition of ‘‘small
institution’’ and expand and clarify the
provisions relating to the effect of
evidence of discriminatory, other illegal,
and abusive credit practices on the
assignment of CRA ratings.
Background
In 1977, Congress enacted the CRA to
encourage insured banks and thrifts to
help meet the credit needs of their
entire communities, including low- and

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moderate-income communities,
consistent with safe and sound lending
practices. In the CRA, Congress found
that regulated financial institutions are
required to demonstrate that their
deposit facilities serve the convenience
and needs of the communities in which
they are chartered to do business, and
that the convenience and needs of
communities include the need for credit
as well as deposit services. The CRA has
come to play an important role in
improving access to credit among
under-served rural and urban
communities.
In 1995, when we adopted major
amendments to regulations
implementing the Community
Reinvestment Act, the agencies
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 review was
initiated in July 2001 with the
publication in the Federal Register of an
advance notice of proposed rulemaking
(66 FR 37602 (July 19, 2001)). We
indicated that we would determine
whether and, if so, how the regulations
should be amended to better evaluate
financial institutions’ performance
under CRA, consistent with the Act’s
authority, mandate, and intent. We
solicited comment on the fundamental
issue of whether any change to the
regulations would be beneficial or
warranted, and on eight discrete aspects
of the regulations. About 400 comment
letters were received, most from banks
and thrifts of varying sizes and their
trade associations (‘‘financial
institutions’’) and local and national
nonprofit community advocacy and
community development organizations
(‘‘community organizations’’).
The comments reflected a general
consensus that fundamental elements of
the regulations are sound, but
demonstrated a disagreement over the
need and reasons for change.
Community organizations advocated
‘‘updating’’ the regulations with
expanded requirements to match
developments in the industry and
marketplace; financial institutions were
concerned principally with reducing
burden consistent with maintaining or
improving the regulations’ effectiveness.
In reviewing these comments, the
agencies were particularly mindful of
the need to balance the desire to make
changes that ‘‘fine tune’’ and improve
the regulations, with the need to avoid
unnecessary and costly disruption to
reasonable CRA policies and procedures

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules
that the industry has had to put into
place under the current rules.
We believe the regulations are
essentially sound, but susceptible to
improvement. Thus, we are proposing
limited amendments. First, to reduce
unwarranted burden, we propose to
amend the definition of ‘‘small
institution’’ to mean an institution with
total assets of less than $500 million,
regardless of the size of its holding
company. This would take into account
significant changes in the marketplace
since 1995, including substantial asset
growth and consolidation. As described
below, this proposal will expand the
number of institutions that are eligible
for evaluation under the streamlined
small institution test while only slightly
reducing the portion of industry assets
subject to the large retail institution test.
Second, to better address abusive
lending practices in CRA evaluations,
we propose to amend the regulations
specifically to provide that the agencies
will take into account, in assessing an
institution’s overall rating, evidence that
the institution, or any affiliate the loans
of which have been included in the
institution’s performance evaluation,
has engaged in illegal credit practices,
including unfair or deceptive practices,
or a pattern or practice of secured
lending based predominantly on the
liquidation or foreclosure value of the
collateral, where the borrower cannot be
expected to be able to make the
payments required under the terms of
the loan. Evidence of such practices
adversely affects the agency’s evaluation
of the institution’s CRA performance.
Review of Issues Raised in Connection
With the ANPR
We commenced our review of the
regulations in July 2001 with an ANPR
soliciting comment on whether the
regulations might more effectively place
performance over process, promote
consistency in evaluations, and avoid
unnecessary burden. We solicited
comment on the fundamental issue of
whether any change to the regulations
would be beneficial or warranted, and
on eight discrete aspects of the
regulations.
The comments we received suggest
that financial institutions and
community organizations agree that the
1995 amendments have succeeded, at
least in part, in shifting the emphasis of
CRA evaluations from process to
performance. The comments also appear
to suggest general agreement that:
• Lending is the most critical CRAcovered activity, although investments
and services should be considered in
some form and to some extent;

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• Evaluation procedures and criteria
should vary with an institution’s size
and type;
• An institution’s performance
should be evaluated in the area
constituting its community;
• Quantitative performance measures
are valuable, though they should be
interpreted in light of qualitative
considerations;
• Careful consideration of
performance context is critical; and
• Activities that promote community
development, however defined, should
be evaluated as a distinct class.
The overall content of the comments
reflects support for the general structure
and features of the regulations, which
we interpret as implying a general
consensus that the regulations are
essentially sound. To be sure, many
comments recommended changes in the
regulations. Community organization
commenters uniformly contended that
the regulations needed to be ‘‘updated’’
and ‘‘strengthened’’ to reflect
intervening changes in the marketplace
that affected financial institutions’
relationships to their communities.
Specifically, community
organizations sought to extend CRA
performance measurement to include (1)
evaluation of the appropriateness of
credit terms and practices; (2) scrutiny
of the performance of nondepository
affiliates of depository institutions; and
(3) assessment of institutions’
performance everywhere they do
business, including areas without
deposit-taking facilities.
Financial institutions, however,
opposed those recommendations,
counseled generally against major
change to the regulations, asked that
reforms be accomplished largely
through other means (for example,
examiner training), and recommended
that any change to the regulations take
into account both process costs and
benefits of change. One financial
institution trade association expressed
the opinion of most financial institution
commenters that no major changes
should be made: ‘‘There is general
agreement among our members that we
do not want to embark on another major
CRA reform process. We do not believe
this would be in the best interest of the
communities or the financial
institutions, as it would entail a major
and protracted distraction from the
business of serving community needs.’’
Financial institutions generally
favored only those amendments
designed to reduce compliance burden,
especially for large retail institutions,
while maintaining or improving the
effectiveness of the regulations.
Institutions near in asset size to the

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5731

small/large institution threshold of $250
million requested that we raise the
threshold markedly to make them
eligible for examination under the small
institution performance standards, and
to relieve them of burdens imposed only
on large institutions, such as data
reporting and the investment test. Large
institutions consistently urged the
agencies to be more flexible in the
evaluation of community development
investments (called ‘‘qualified
investments’’ by the regulations),
including by making qualified
investments optional to one degree or
another and by treating more types of
investments as ‘‘qualified investments.’’
Community organizations, however,
contended that reducing the burdens
associated with the investment test and
data collection and reporting would
come at the expense of meeting
community credit needs.
Large Retail Institutions: Lending,
Investment, and Service Tests
An institution is deemed ‘‘large’’ in a
given year if, at the end of either of the
previous two years, it had assets of $250
million or more or if it is affiliated with
a holding company with total bank or
thrift assets of $1 billion or more. An
institution that meets that definition,
unless it has been designated ‘‘limited
purpose’’ or ‘‘wholesale,’’ or has opted
to be evaluated under an approved
strategic plan, is evaluated under a
three-part large retail institution test.
The large retail institution test is
comprised of the lending, investment,
and service tests. The most heavily
weighted part of that test is the lending
test, under which the agencies consider
the number and amount of loans
originated or purchased by the
institution in its assessment area; the
geographic distribution of its lending;
characteristics, such as income level, of
its borrowers; its community
development lending; and its use of
innovative or flexible lending practices
to address the credit needs of low- or
moderate-income individuals or
geographies in a safe and sound manner.
To facilitate the evaluation, institutions
must collect and report data on small
business loans, small farm loans, and
community development loans, and
may, on an optional basis, collect data
on consumer loans.
Under the investment test, the
agencies consider the dollar amount of
qualified investments, their
innovativeness or complexity, their
responsiveness to credit and community
development needs, and the degree to
which they are not routinely provided
by private investors.

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Under the service test, the agencies
consider an institution’s branch
distribution among geographies of
different income levels; its record of
opening and closing branches,
particularly in low- and moderateincome geographies; the availability and
effectiveness of alternative systems for
delivering retail banking services in
low- and moderate-income geographies
and to low- and moderate-income
individuals; and the range of services
provided in geographies of different
income levels, as well as the extent to
which those services are tailored to
meet the needs of those geographies.
The agencies also consider the extent to
which the institution provides
community development services and
the innovativeness and responsiveness
of those services.
The lending, investment, and service
tests each include an evaluation of
community development activities. A
community development loan,
community development service, or
‘‘qualified investment’’ has a primary
purpose of benefiting low- or moderateincome people with affordable housing
or community services; promoting
economic development by financing
small businesses or small farms; or
revitalizing or stabilizing low- or
moderate-income areas.
The ANPR asked whether the threepart test as a whole, each of its
component tests (lending, investment,
services), and its community
development component are effective in
assessing large institutions’
responsiveness to community credit
needs; whether the test is appropriately
balanced between lending, investments,
and services; and whether it is
appropriately balanced between
quantitative and qualitative measures.
Balance Among Lending, Investments,
and Services
The three-part test places primary
emphasis on lending performance, and
secondary emphasis on investment and
service performance. A majority of
community organization commenters
that addressed the question believed
that lending should continue to receive
more weight than investments or
services. Of financial institutions that
addressed the issue, more than half
agreed. The remainder of industry
commenters generally believed either
that the components should be weighted
equally or that their weights should vary
with performance context. As discussed
below, many financial institutions felt
the investment test is weighted too
heavily, while community organizations
disagreed.

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Based on our review and
consideration of the matter, we are not
proposing to alter the weights of the
three tests, which we continue to
believe are appropriate. We address
specific concerns about each test below.
Balance Between Quantitative and
Qualitative Measures
The component tests primarily
employ quantitative measures (such as
the number and dollar amount of loans
and qualified investments) but also call
for qualitative consideration of an
institution’s activities, including
whether, and to what extent, they are
responsive to community credit needs
and demonstrate innovativeness,
flexibility, or complexity. A large
number of community organizations
indicated that the weight given to
quantitative factors is about right,
though the same commenters often
remarked that the character of activities
(for example, the responsiveness of a
loan to credit needs and the risk of an
investment) should be given more
weight. A few financial institutions
agreed that quantitative factors receive
appropriate weight, but more
institutions indicated that too much
weight is given to quantitative factors
and not enough to contextual
considerations such as an institution’s
business strategy and an activity’s
profitability. Some financial institutions
and community organizations,
contending that ratings are not
sufficiently consistent and predictable,
requested that they be tied to explicit
quantitative performance benchmarks,
while others disagreed with that
suggestion.
Several community organizations and
financial institutions expressed concern
about some of the qualitative factors
specified in the regulations, particularly
the application of the terms
‘‘innovative’’ and ‘‘complex.’’ These
commenters argued that an evaluation
should focus on an activity’s
contribution to meeting community
credit needs, and that its innovativeness
or flexibility should be seen as a means
to that end rather than an end in itself.
They stated that financial institutions
should not be downgraded for failure to
demonstrate their activities are
innovative or complex.
Based on our review and
consideration of the matter, and as
explained below in the context of the
investment test, we may seek to clarify
through interagency guidance how
qualitative considerations should be
employed.

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Loan Purchases and Loan Originations
The regulations weigh loan purchases
and loan originations equally. The
ANPR sought comment on whether loan
purchases should be given less weight
than loan originations. Community
organizations generally favored giving
more weight to loan originations than
purchases, on the grounds that
originations take more effort and that
purchases can be generated solely to
influence CRA ratings rather than for
economic reasons. Financial institutions
that addressed the issue generally stated
that equal weighting of purchases and
originations improves liquidity, making
credit more widely available at lower
prices. The agencies also sought
comment on whether purchases of loans
and purchases of asset-backed securities
should be considered under the same
test instead of separately under the
lending test and the investment test,
respectively. Some community
organizations raised concerns about the
treatment of some types of mortgagebacked securities as qualified
investments.
To improve ‘‘transparency’’ in CRA
evaluations, the agencies propose to
distinguish loan purchases from loan
originations in a public evaluation’s
display of loan data, where pertinent.
We would not, however, weigh loan
purchases less than loan originations.
We seek comment on the proposed
approach.
Investment Test
Although a small number of
commenters objected to any
consideration of investments under
CRA, the comments reveal a general
view that community developmentoriented investments (‘‘qualified
investments,’’ under the regulations)
should be considered to the extent they
help meet community credit needs.
Commenters, nonetheless, disagreed
significantly about whether the current
investment test effectively and
appropriately assesses investments and
about the extent to which assessment of
investments should be mandatory or
optional.
Financial institutions commented that
the investment test is not sufficiently
tailored to market reality, community
needs, or institutions’ capacities.
Several financial institutions said there
are insufficient equity investment
opportunities, especially for smaller
institutions and those serving rural
areas. Some noted that intense
competition for a limited supply of
community development equity
investments has depressed yields,
effectively turning many of the

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investments into grants; some claimed
that institutions had spent resources
transforming would-be loans into equity
investments merely to satisfy the
investment test; and some expressed
concern that institutions were forced to
worry more about making a sufficient
number and amount of investments than
about the effectiveness of their
investments for their communities.
To address these concerns, many
financial institutions favored abolishing
the stand-alone investment test and
making investments optional to one
degree or another. Only two financial
institutions expressly supported
retaining the separate investment test.
Several financial institutions and most
financial institution trade associations
endorsed one or more of the following
three alternatives: (1) Treat investments
solely as ‘‘extra credit;’’ (2) make
investments count towards the lending
or service test; or (3) treat investments
interchangeably with community
development services and loans under a
new community development test.
In contrast, the majority of
community organization commenters
urged the agencies to retain the
investment test. Many of them claimed
that the problem is more often a
shortage of willing investors than an
insufficient number of investment
opportunities. Community organizations
also contended that grants and equity
investments are crucial to meeting the
affordable housing and economic
development needs of low- and
moderate-income areas and individuals.
They stated, for example, that
investments support and expand the
capacity of nonprofit community
development organizations to meet
credit needs. A few community
organizations acknowledged a basis for
some of the financial institutions’
complaints concerning the investment
test, but most of those community
organizations argued that refining,
rather than restructuring, the large retail
institution test would address such
complaints.
Commenters also split over the
appropriateness of the definition of
‘‘community development,’’ which is
incorporated in the definition of
‘‘qualified investment.’’ Financial
institutions asked the agencies to
remove from the definition of
‘‘community development’’ the
requirement that community
development activities target primarily
low- or moderate-income individuals or
areas, and expand the definition to
include community-building activities
that incidentally benefit low- or
moderate-income individuals or areas.
For instance, several financial

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institutions contended that any activity
that helps ‘‘revitalize and stabilize’’ an
area (such as after a natural disaster or
a steady economic decline) should be
considered community development,
even if the activity is not located in, or
targeted to, low- or moderate-income
communities. Other examples of
activities for which they sought
consideration included municipal
bonds and grants to cultural
organizations and other charities. In
contrast, community organizations that
expressed a view favored retaining the
current definition of ‘‘community
development’’ or narrowing it. For
example, many community
organizations sought to limit the
‘‘economic development’’ component of
the definition (which consists of
financing small businesses or small
farms) to financing minority-owned
businesses or farms and businesses or
farms in low- or moderate-income areas.
Apart from the larger debate about the
proper role of an investment component
in the three-part test and the proper
definition of qualified investments,
many commenters sought changes to the
investment test. Several financial
institutions and trade associations felt
that examiners do not grant enough
weight to investments on the books
since the previous examination period.
They contended that this practice
creates pressure to make new
investments more quickly than the
market generated new investment
opportunities, and undermined the
supply of ‘‘patient capital.’’ A few
commenters proposed full consideration
for investments outside assessment
areas to promote more efficient
allocation of community development
capital. Several financial institutions,
trade associations, and community
organizations contended that
insufficient consideration is given to an
investment’s impact on the community,
while too much weight is placed on its
innovativeness or complexity. Some
suggested that the criterion of
‘‘innovative or complex’’ be eliminated
or made subservient to the criterion of
‘‘responsiveness * * * to credit and
community development needs.’’ Some
commenters complained of uncertainty
about ‘‘how much is enough’’ and
inconsistency among agencies and areas
in evaluating investments. A few
financial institutions and community
organizations requested that the
agencies adopt ratings benchmarks (for
instance, ratios of qualified investments
to Tier I capital or total assets). Other
commenters opposed benchmarks as
unnecessarily restrictive.
The comments reflect a general
consensus that qualified investments

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should be considered in some fashion in
CRA evaluations for their ability to meet
community credit needs. The premise of
the agencies’ adoption of a separate
investment test in 1995 was that, for
consideration of investments to be
meaningful, they must be treated as
more than mere ‘‘extra credit’’ that
assured an Outstanding rating for an
institution otherwise rated Satisfactory.
Therefore, the separate investment test
embodies an expectation that an
institution make such investments, or
their equivalent, where feasible and
appropriate.
The comments and other feedback
suggest that the levels and kinds of
expectations under the current
investment test sometimes are
unrealistic or unproductive, or at least
appear that way. It is inevitable that the
supply of, demand for, and quality of
investment opportunities will vary by
region and city; the performance
evaluation is supposed to take those
variations into account. We are
concerned that some institutions
nevertheless believe they are expected
to make equity investments that are
economically unsound. We considered
whether this impression was an
unavoidable result of the current
structure of the investment test or an
avoidable result of the implementation
of that structure.
Some commenters suggested that the
evaluation of community development
activities under three separate
component tests (lending, investment,
service) risks causing institutions to
concern themselves more with meeting
perceived thresholds in each component
test than with maximizing community
impact. This possibility led us to study
alternatives to the existing threecomponent structure of the large retail
institution test.
One alternative we considered was a
two-part large retail institution test
consisting of (1) a community
development test, which would
integrate community development
loans, investments, and services, and (2)
a retail test, which would include retail
loans and services. Under the
community development test we
considered, different community
development activities (loans,
investments, and services) would, at
least in theory, be fungible and
interchangeable so that an institution
would have flexibility to allocate its
community development resources
among different types of community
development activities; a rating on this
test would be based, in part, on some
measure of the total amount of the
institution’s community development
activities.

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A different two-part large retail
institution test we considered would
eliminate the separate investment test
and consider investments within the
lending test, where they would be
treated similarly to community
development loans.
Changing the structure of the large
retail institution test, as entailed in
those alternatives, would not
necessarily yield a substantial net
benefit. Adopting a new test structure
might simply substitute one set of
implementation challenges for another.
The existing regulations have been
criticized by financial institutions and
community organizations alike for not
being clear about ‘‘how much is
enough’’ or how much weight an
activity carries relative to another. A
restructured large retail institution test
would be no less vulnerable to those
criticisms. For example, it would raise
the question of how to compare
investments, loans, and services.
Moreover, the freestanding
investment test has become an integral
part of CRA and the community
development finance markets. We
believe that evaluation of investment
performance under that test has
contributed substantially to the growth
of the market for community
development-oriented investments. That
market has helped institutions to spread
risk and maximize the impact of their
community development capital.
Institutional risk is spread and lowered
by instruments such as securities
backed by mortgages to low- and
moderate-income borrowers. The impact
of community development capital is
maximized by channeling it through
organizations with the knowledge and
skills that optimize its use. Thus, we
believe the investment test has
encouraged community development.
Replacing the investment test might
cloud market expectations and
understandings, injecting a degree of
uncertainty that could be costly, not just
for financial institutions and
community organizations, but also for
local communities. Many commenters
pointed out that it took several years for
them to become comfortable with the
current CRA regulations, and it could
take several years again for affected
parties to adjust to a new regulatory
structure. During that adjustment
period, institutions would likely incur
substantial implementation costs, for
instance, to retrain personnel and,
possibly, to change data collection
procedures. In weighing those factors,
we are mindful of the repeated cautions
from financial institution commenters
about the costs of major changes.

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Thus, we propose to address concerns
about the burdens of the investment test
by means other than replacing or
restructuring it. As explained later in
this notice, we are proposing to raise the
asset-size threshold at which an
institution becomes subject to the large
retail institution test and, therefore, the
investment test. This would respond to
comments that smaller institutions at
times have had difficulty competing for
investments. As noted earlier, the
change would not materially reduce the
portion of the nation’s bank and thrift
assets covered by the large retail
institution test, including the
investment test.
The criticisms the commenters made
of the investment test appear to have
more to do with the implementation of
the regulations than the regulations
themselves. We anticipate developing
additional interagency guidance to
clarify that the investment test is not
intended to be a source of pressure on
institutions to make imprudent equity
investments. Such guidance also may
discuss (1) when community
development activities outside of
assessment areas can be weighted as
heavily as activities inside of
assessment areas; (2) that the criteria of
‘‘innovative’’ and ‘‘complex’’ are not
ends in themselves, but means to the
end of encouraging an institution to
respond to community credit needs; (3)
the weight to be given to investments
from past examination periods, to
commitments for future investments,
and to grants; and (4) how an institution
may demonstrate that an activity’s
‘‘primary purpose’’ is to serve low- and
moderate-income people. We seek
comment on the possible content of
such guidance.
Service Test
Service Delivery Methods
Many commenters addressed the
evaluation of service delivery methods
under the service test. Many community
organizations commented that the test
should emphasize the placement of
bricks-and-mortar branches in low- and
moderate-income areas. A few financial
institutions agreed, but most institutions
that addressed the issue argued that
putting less weight on branches and
more on alternative service delivery
methods was necessary to adequately
measure the provision of services to
low- and moderate-income individuals.
Some community organizations stated
that the weight given to alternative
methods should depend on data
showing their use by low- and
moderate-income individuals, and a

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couple of financial institutions agreed
that such data would be useful.
The comments highlight the fact that
a service delivery method’s appropriate
weight will vary from examination to
examination based on performance
context. Critical factors such as an
institution’s business strategy naturally
vary over time and from institution to
institution. Examiners can address such
variations through their analysis of
performance context. To the extent
guidance or examiner training needs to
be improved to ensure that such factors
are appropriately addressed through the
performance context, we will do so.
Banking Services and Nontraditional
Services for Low- and Moderate-Income
Individuals
Community organizations believed
the service test should show special
concern for the services available to and
used by low- and moderate-income
individuals. Many community
organizations said that financial
institutions should be required to report
data on the distribution of their deposits
by income and other criteria. Many
organizations also said that the service
test should give weight to providing
low-cost services and accounts to lowand moderate-income individuals and
areas; a few said that credit for such
services and accounts should depend on
data demonstrating that they are used.
Many organizations recommended that
‘‘payday lending’’ or ‘‘check cashing’’
activities should hurt, or at least not
help, an institution’s service test rating,
though a few organizations qualified
that check cashing should not prejudice
a rating where the fee for the service is
reasonable. Few financial institutions
addressed those specific issues, but
many voiced general concerns about
increasing data collection burdens or
assessing the appropriateness of a
product or service.
The service test takes into account the
degree to which services are tailored to
meet the needs of low- and moderateincome geographies, whether as
‘‘mainstream’’ retail banking services or
community development services.
Indeed, an Outstanding rating on the
service test is not available unless an
institution’s services ‘‘are tailored to the
convenience and needs of its assessment
area(s), particularly low- or moderateincome geographies or * * *
individuals’’ and the institution is ‘‘a
leader in providing community
development services.’’ We believe that
those provisions properly encourage
institutions to pay close attention to
services for low- and moderate-income
people and areas, and evaluations will

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continue to reflect the effectiveness of
these services as appropriate.
Community Development Services
We also received comment on the
definition and weight of community
development services. Some financial
institutions asked that the service test
rating depend more on community
development services and less on other
elements of the test. Community
development services are limited by the
regulations to services that are financial
in nature. Some commenters contended
that community development services
should include non-financial services,
such as employees’ participation in
volunteer home-renovation programs.
Many community organizations,
however, opposed broadening the
definition. We believe that the
regulations’ linking of community
development services to services that
are financial in nature is consistent with
the purposes of CRA. Therefore, we are
not proposing to change the definition
of community development services or
the weight they receive in the service
test.
Assessment Areas
An institution is evaluated primarily
on its performance within one or more
assessment areas. An institution’s
assessment area(s) is/are the
Metropolitan Statistical Area(s)
(MSA(s)) or contiguous political
subdivision(s) (such as counties, cities,
or towns) that include(s) the census
tracts in which the institution has its
main office, its branches, and its
deposit-taking ATMs, as well as the
surrounding census tracts in which it
has originated or purchased a
substantial portion of its loans. An
institution may adjust the boundaries of
an assessment area to include only those
parts of a political subdivision that it
can reasonably serve. But its assessment
area(s) may not reflect illegal
discrimination, arbitrarily exclude lowor moderate-income geographies, extend
substantially beyond designated
boundaries, or consist of partial census
tracts. Special rules apply to wholesale
and limited-purpose institutions and to
institutions that serve military
personnel.
The ANPR asked whether it was
reasonable to continue to anchor the
regulations’ definition of ‘‘assessment
area’’ in deposit-taking facilities.
Community organizations contended
that substantial portions of lending by
institutions covered by CRA are
nonetheless not subject to CRA
evaluation because of institutions’
increasing use of nonbranch channels
(including agencies, the Internet, and

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telephone) to provide credit outside of
their branch-based assessment areas.
They further commented that an
institution’s assessment area must
include all commercial channels, not
just branches and deposit-taking ATMs.
Thus, many commenters proposed that
an institution’s assessment areas
include all areas in which the
institution has more than a specified
share (many suggested 0.5 percent) of
the lending market or deposit market.
The majority of financial institutions
and trade associations that expressed an
opinion about assessment areas
endorsed continuing to keep the
assessment areas linked to deposittaking facilities. Those commenters
opposed mandatory evaluation outside
of the communities served by deposittaking facilities. Some questioned
whether such an expansion would be
consistent with the Act. Others argued
that an institution needs a substantial
local presence to understand a
community’s needs and to develop and
exploit opportunities to serve those
needs, but requested credit for activities
they might willingly conduct outside
their assessment areas.
Few financial institutions suggested
that an expansion of the assessment area
definition was necessary to
accommodate their choice of business
strategy. To address the challenge of
nonbranch institutions, several
commenters recommended subjecting
them, like wholesale and limitedpurpose institutions, to a community
development test while continuing to
draw assessment areas around their
main offices. Several financial
institutions suggested narrowing the
current definition by removing the
requirement that assessment areas be
delineated around deposit-taking ATMs
because banks do not originate deposit
relationships through ATMs. Others
argued that the requirement should be
removed in special circumstances—for
example, when ATMs are on the
property of an organization closed to
nonemployees.
No definition of ‘‘assessment area’’
will foresee every conceivable bank or
thrift business model. We considered
whether the current definition is
suitable to most financial institutions.
To a large extent, nontraditional
channels in the market today seem to be
used as complements to, rather than
substitutes for, branches and deposittaking ATMs. Even with widespread
access to the Internet by bank and thrift
customers, few banks or thrifts are
Internet-only, without branches. In fact,
it has been reported that some
institutions created with an Internetonly strategy later added branches or

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deposit-taking ATMs. The number of
branchless banks and thrifts that
conduct business through other
channels, such as independent agents,
though growing, is also small. To be
sure, traditional retail institutions
increasingly rely on nontraditional
channels to take deposits and make
loans—including nonbranch or agency
offices, mail, telephone, on-line
computer networks, and agents or
employees of affiliated nonbank
companies. Many of those institutions
still originate a substantial portion of
their CRA-relevant loans (including the
vast majority of their small business
loans) in their branch-based assessment
areas, whether through branches or
other means. In short, the definition of
‘‘assessment area’’ appears adequate to
delineate the relevant communities of
the overwhelming majority of financial
institutions.
Moreover, for institutions that do a
substantial portion of their lending
outside branch areas, the agencies have
interpreted the regulations as giving
examiners flexibility to address, on a
case-by-case basis, institutions that
conduct a substantial part of their
business through nontraditional
channels. For instance, an institution’s
loans to low- and moderate-income
persons and small business and small
farm loans outside of its assessment
area(s) will be considered if it has
adequately addressed the needs of
borrowers within its assessment area(s),
although such loans will not
compensate for poor lending
performance inside the assessment
area(s). An institution with poor retail
lending performance inside the
assessment area may, however,
compensate with exceptionally strong
performance in community
development lending in its assessment
area or a broader statewide or regional
area that includes the assessment area.
The regulations also permit an
institution to propose a strategic plan
tailored to its unique circumstances.
Although limitations in the current
definition of ‘‘assessment area’’ might
grow in significance as the market
evolves, we believe any limitations are
not now so significant or pervasive that
the current definition is fundamentally
ineffective. Moreover, none of the
alternatives we studied seemed to
improve the existing definition
sufficiently to justify the costs of
regulatory change. Many of the
alternative definitional changes to
assessment area we reviewed were not
feasible to implement, and some of them
raised fundamental questions about the
scope and purpose of CRA and entail
political judgments that may be better

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left to elected officials in the first
instance.
For example, we considered
community organizations’ proposal to
expand an assessment area to include
all areas where an institution does a
significant level of business. The
implementation questions raised by the
proposal are many and complex,
including the following: Is the relevant
type of business deposit-taking, lending,
investing, or two or all three of those
types? What is the relevant measure of
the amount of business? Is it the share
of the market? If so, how is the market
defined and where are data obtained? Is
it the share of the institution’s business?
Would an institution, its examiners, and
interested community organizations
know sufficiently early where the
institution’s business would reach
significant levels to adjust their CRA
planning and resource commitments
accordingly? How would institutions,
examiners, and community
organizations cope with the possibility
that an institution’s assessment areas
could change substantially from one
examination period to the next? Could
institutions be expected to have enough
knowledge, expertise, and ability in
areas where they do not have branches
to make informed decisions about
meeting community credit needs and
effectively execute them?
The agencies also considered
comments advocating elimination of the
requirement to delineate assessment
areas around deposit-taking ATMs.
ATMs can generate substantial deposits
and provide a wide range of services,
often substituting for branches with
respect to many functions.
For these reasons, the agencies will
continue to address nontraditional
institutions flexibly, using such
measures as strategic plans, existing
agency interpretations mentioned above
and new guidance as appropriate.
Wholesale and Limited Purpose
Institutions
An institution is a limited-purpose
institution if it offers only a narrow
product line, such as credit card or
motor vehicle loans, to a regional or
broader market. An institution is a
wholesale institution if it is not in the
business of extending home mortgage,
small business, small farm, or consumer
loans to retail customers. Both limited
purpose and wholesale institutions are
evaluated under a community
development test. Under this test, the
agencies consider the number and
amount of community development
loans, qualified investments, or
community development services; the
extent to which such activities are

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innovative, complex, and, in the case of
qualified investments, not routinely
provided by private investors; and the
institution’s responsiveness to credit
and community development needs.
Most financial institutions that
addressed the appropriateness of the
definitions of ‘‘wholesale’’ or ‘‘limited
purpose’’ institution suggested that the
definition of ‘‘limited purpose
institution’’ should be expanded. Some
said it should not be restricted to
institutions with certain product lines,
such as credit cards and auto loans, but
should include any institution,
regardless of its product line, that serves
a narrow customer base. A couple of
financial institution commenters also
sought expansion of the category of
wholesale institutions. Community
organizations, in contrast, contended
that these definitions are not sufficiently
restrictive and that the agencies have
incorrectly designated some large retail
institutions as wholesale or limited
purpose institutions.
Commenters also disagreed about
extending the community development
test now reserved for limited purpose
and wholesale institutions to additional
categories of institutions. Several
financial institutions suggested that
non-branch institutions and other
nontraditional institutions be treated as
limited purpose institutions eligible for
evaluation under a community
development test. Many, but not all,
community organizations opposed
extending the test to other types of
institutions.
Based on our review and
consideration of the matter, we are not
proposing any changes to the
regulations concerning the definitions of
wholesale and limited purpose
institutions or expansion of the
community development test to
additional types of institutions.
Strategic Plan
Every institution has the option to
develop a strategic plan with
measurable goals for meeting the credit
needs of its assessment area(s). An
institution must informally solicit
suggestions from the public while
developing its plan, solicit formal
public comments on its plan, and
submit the plan to its supervisory
agency for approval with any written
comments from the public and an
explanation of how, if at all, those
comments are reflected in the plan.
Relatively few comments addressed
the strategic plan provision. Most of the
financial institutions that addressed the
issue said the option should be retained
though modified; a few community
organizations agreed, while a few others

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said the strategic plan option should be
eliminated. A principal concern of
financial institutions was a perceived
lack of flexibility, for instance, to
modify their goals as the economy or
their business changes. Of equal
concern to them were the requirements
of the plan approval process to solicit
public comment and disclose
information they regard as proprietary.
Based on our review and
consideration of the matter, we are not
proposing any changes to the
regulations concerning strategic plans.
Performance Context
Regardless of type, an institution is
always evaluated in light of its
performance context, including
information about the institution, its
community, its competitors, and its
peers. Relevant information includes
assessment area demographics; product
offerings and business strategy; lending,
investment, and service opportunities in
the assessment area; institutional
capacity and constraints; and
information about the institution’s past
performance and that of similarly
situated lenders.
Many commenters from various
viewpoints emphasized the importance
of considering performance context in
CRA evaluations, but were critical of
how the agencies have developed and
used performance context. Some
commented that examiners do not
adequately solicit and incorporate input
from community organizations and
financial institutions in the
development of performance context,
participants do not have sufficient
guidance about what information to
present to examiners to aid in the
development of the performance
context, and the guidelines examiners
use to determine performance context
(such as selecting an institution’s peers)
are not transparent. Some commented
that performance evaluations do not
adequately tie performance context to
evaluations and that examiners do not
give sufficiently nuanced consideration
to an institution’s business strategy or
local needs.
Based on our review and
consideration of the matter, we believe
that the current regulations provide
sufficient flexibility to address the
concerns that have been raised, and that
performance context issues can be
addressed adequately through examiner
guidance and training.
Data Collection and Reporting
Large institutions are required to
collect and report data on small
business, small farm and community
development loans, and to supplement

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Home Mortgage Disclosure Act (HMDA)
data with property locations for loans
made outside MSAs. In the ANPR we
asked whether these data reporting
requirements are effective and efficient
in assessing CRA performance while
avoiding undue burden.
Most community organizations
believed that the data collection and
reporting requirements could be more
effective in assessing an institution’s
CRA performance. Many of them stated
that more detailed data should be
collected on small business and small
farm lending, including race, sex, loan
cost, purpose of loan, action taken, and
reasons for denial. Many organizations
also asked that the agencies disaggregate
small business and small farm loan data
to the census tract level, and that we
identify the census tract and purpose for
each community development loan.
Many financial institutions
commented that the regulations’ data
collection and reporting provisions are
a significant burden. Some also said that
the data are not useful and fails to
accurately represent a financial
institution’s efforts to meet credit needs;
a few questioned the agencies’ authority
to require data collection and reporting.
They suggested that data collection and
reporting be eliminated or made
optional. However, other financial
institutions commented that no changes
to the regulations’ data provisions are
necessary.
We believe existing reporting
requirements correctly balance burden
and benefit for the institutions that
would remain subject to those
requirements were the definition of
‘‘small institution’’ to be amended as
proposed and discussed in detail below.
The agencies intend to revise the
regulations, however, to enhance the
data disclosed to the public. The
regulations do not now provide for
disclosure of business and farm loans by
geography (census tract) in the CRA
Disclosure Statement the agencies
prepare for every institution’s public
file. Rather, the regulations provide for
aggregation of that data across tracts
within tract-income categories. As we
intend to revise the regulations, they
will provide that the Disclosure
Statement would contain the number
and amount of the institution’s small
business and small farm loans by census
tract. During the 1994–95 CRA
rulemaking, we received comments
expressing concern that disclosing loan
data at the census tract level might
reveal private information about smallbusiness and small-farm borrowers. We
believe that the risk of revealing such
information is likely very small, and
that the benefit to the public of having

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data at the census tract level is
substantial.
We seek comment on whether the
revision properly balances the benefits
of public disclosure against any risk of
unwarranted disclosure of otherwise
private information. We also invite any
specific suggestions for display of the
data.
Public File Requirements
Most community organizations
commenting on the public file
requirements believed that the current
regulations should be maintained. A few
asked that public files be made available
on the Internet.
Most financial institutions addressing
the issue commented that the current
public file requirement is burdensome
and should be revised or eliminated,
though some said no change in the
regulations should be made.
Commenters seeking change stated that
requests for public files are rarely
presented to branches but, rather, are
usually presented to CRA officers; they
suggested that a hard copy of the public
files be maintained at the main office
only, and be available elsewhere upon
request. Others suggested streamlining
the public file by removing all but the
most essential information (such as an
institution’s assessment areas, primary
delivery channels, products, services,
and last performance evaluation).
Based on our review and
consideration of the matter, we are not
proposing any changes to the
regulations concerning public file
requirements.
Small Institutions
In connection with the interagency
rulemaking that culminated in the
revised CRA regulations adopted in
1995, the agencies received a large
number of comments from small
institutions seeking regulatory relief.
These commenters stated that they
incurred significant regulatory burdens
and costs from having to document CRA
performance, and that these burdens
and costs impeded their ability to
improve their CRA performance. The
regulations reflect the agencies’
objectives that the CRA regulations
provide for performance-based
assessment standards that minimize
compliance burden while stimulating
improved performance.
An institution is considered small
under the regulations if, at the end of
either of the two previous years, it had
less than $250 million in assets and was
independent or affiliated with a holding
company with total bank and thrift
assets of less than $1 billion. Under the
regulations, small institutions’ CRA

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performance is evaluated under a
streamlined test that focuses primarily
on lending. The test considers the
institution’s loan-to-deposit ratio; the
percentage of loans in its assessment
areas; its record of lending to borrowers
of different income levels and
businesses and farms of different sizes;
the geographic distribution of its loans;
and its record of taking action, if
warranted, in response to written
complaints about its performance in
helping to meet credit needs in its
assessment areas.
Most small institutions commented
that they were satisfied that the
streamlined test adopted in 1995
substantially reduced their CRA
compliance burden, though many stated
that it was too difficult for a small
institution to achieve an Outstanding
rating. Some of those commenters
sought a way to receive consideration
for their service and investment
activities without undergoing the
evaluation of such activities imposed on
large retail institutions. In contrast,
community organizations generally
believed the performance standards for
small institutions did not effectively
measure the institutions’ contributions
to meeting community credit needs.
Many other commenters stated that
the small institution performance
standards should be available to a larger
number of institutions. Generally, these
commenters raised many of the same
concerns as those that had been raised
in connection with the 1995
rulemaking, primarily that the
regulatory burden of the CRA rules
impedes smaller banks from improving
their CRA performance. Many financial
institutions suggested that, to reduce
undue burden, the agencies raise
significantly the small institution asset
threshold and either raise significantly
or eliminate the holding company
limitation. These commenters supported
these suggestions by citing burdens on
retail institutions that are subject to the
‘‘large institution’’ CRA tests because
they slightly exceed the asset threshold
for small institutions. Financial
institutions singled out two aspects of
the large retail institution test as
particularly burdensome for institutions
just above the threshold. First, they
asserted that those institutions have
difficulty achieving a Low Satisfactory
or better rating on the investment test,
and, as a result, have difficulty
achieving an Outstanding rating overall.
Those institutions are said to encounter
serious challenges competing with
larger institutions for suitable
investments and, as a result, to
sometimes invest in activities
inconsistent with their business

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules

strategy, their own best financial
interests, or community needs.
Second, financial institutions asserted
that data collection and reporting are
proportionally more burdensome for
institutions just above the threshold
than for institutions far above the
threshold. Some commenters asserted
that institutions that exceed the $250
million threshold face a threefold
increase in compliance costs for CRA
due to the need for new personnel, data
collection and reporting costs, and the
particular burdens imposed by the
investment test applicable to large retail
institutions. They asserted that raising
the asset threshold for small institutions
would be consistent with the agencies’
belief in 1995 that the CRA rules should
not impose such regulatory burden.
They also questioned the benefit of
reporting small business and small farm
loan data, especially by institutions that
serve limited geographic areas. Some
commenters suggested that banks be
relieved of reporting such data and that
examiners instead sample files or
review only the data gathered and
maintained by banks pursuant to other
laws or procedures (for example, the
Call Report or Thrift Financial Report).
Financial institutions also commented
that changes in the industry had
rendered the threshold out-of-date. They
pointed to the consolidation in the
banking and thrift industries through
mergers and acquisitions, and the
growing gap between ‘‘megainstitutions’’ and those under $1 billion
in assets. They noted that the number of
institutions considered small, and the
percentage of overall bank and thrift
assets held by those institutions, has
decreased significantly since the 1995
revisions.
Financial institutions suggested
raising the small institution asset-size
threshold from $250 million to amounts
ranging from $500 million to as much as
$2 billion. They also generally suggested
eliminating or raising the $1 billion
holding company threshold. They
contended that affiliation with a large
holding company does not enable an
otherwise small institution to perform
any better under the large retail
institution test than a small institution
without such an affiliation.
Community organizations that
commented on the issue opposed
changing the definition of ‘‘small
institution.’’ These commenters were
primarily concerned that reducing the
number of institutions subject to the
large retail institution test—and,
therefore, the investment test—would
reduce the level of investment in lowand moderate-income urban and rural
communities. Community organizations

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also expressed concerns about the
reduction in publicly available small
business and small farm loan data that
would follow a reduction in the number
of large retail institutions.
The regulations distinguish between
small and large institutions for several
important reasons. Institutions’
capacities to undertake certain
activities, and the burdens of those
activities, vary by asset size, sometimes
disproportionately. Examples of such
activities include identifying,
underwriting, and funding qualified
equity investments, and collecting and
reporting loan data. The case for
imposing certain burdens is sometimes
more compelling with larger institutions
than with smaller ones. For instance,
the number and volume of loans and
services generally tend to increase with
asset size, as do the number of people
and areas served, although the amount
and quality of an institution’s service to
its community certainly is not always
directly related to its size. Furthermore,
evaluation methods appropriately differ
depending on institution size. For
example, the volume of originations of
loans other than home mortgage loans in
the smallest institutions will generally
be small enough that an examiner can
view a substantial sampling of loans
without advance collection and
reporting of data by the institution.
Commenters from various viewpoints
tended to agree that the regulations
should draw a line between small and
large institutions for at least some
purposes. They differed, however, on
where the line should be drawn.
The agencies considered the
institution asset-size and holding
company asset-size thresholds in light
of these comments. When we adopted
the definition in 1995, we indicated that
we included a holding company
limitation to reflect the ability of a
holding company of a certain size (over
$1 billion) to support a bank or thrift
subsidiary’s compliance activities.
Anecdotal evidence, however, suggests
that a relatively small institution with a
sizable holding company often finds
addressing its CRA responsibilities no
less burdensome than does a similarlysized institution without a sizable
holding company. Thus, we are
proposing to eliminate the holding
company limitation on small institution
eligibility.
Several factors led us to propose
raising the asset threshold. First, with
the increase in consolidation at the large
end of the asset size spectrum, the gap
in assets between the smallest and
largest institutions has grown
substantially since the line was drawn
at $250 million in 1995. The compliance

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burden on institutions just above any
threshold, measured as the cost of
compliance relative to asset size,
generally will be proportionally higher
than the burden on institutions far
above the same threshold, because some
compliance costs are fixed. But, the
growing asset gap between the smallest
above-the-threshold institutions and the
largest institutions has meant that the
disproportion in compliance burden has
grown on average. Second, the number
of institutions defined as small has
declined by over 2,000 since the
threshold was set in 1995, and their
percentage of industry assets has
declined substantially. Third, some
asset growth since 1995 has been due to
inflation, not real growth. Fourth, the
agencies are committed to reducing
burden where feasible and appropriate.
For these reasons, we propose to raise
the small institution asset threshold to
$500 million, without reference to
holding company assets. Raising the
asset threshold to $500 million and
eliminating the holding company
limitation would approximately halve
the number of institutions subject to the
large retail institution test (to roughly
11% of all insured depository
institutions), but the percentage of
industry assets subject to the large retail
institution test would decline only
slightly, from a little more than 90% to
a little less than 90%. That decline,
though slight, would more closely align
the current distribution of assets
between small and large banks with the
distribution that was anticipated when
the agencies adopted the definition of
‘‘small institution.’’
The proposed changes would not
diminish in any way the obligation of
all insured depository institutions
subject to CRA to help meet the credit
needs of their communities. Instead, the
changes are meant only to address the
regulatory burden associated with
evaluating institutions under CRA. We
seek comment on whether the proposal
improves the effectiveness of CRA
evaluations, while reducing
unwarranted burden.
Credit Terms and Practices
The regulations provide that
‘‘evidence of discriminatory or other
illegal credit practices adversely affects’’
an agency’s evaluation of an
institution’s CRA performance and may
affect the rating, depending upon
consideration of factors specified in the
regulations. Interagency guidance
explains that this provision applies
when there is evidence of certain
violations of laws including certain
violations of the Equal Credit
Opportunity Act (ECOA), Fair Housing

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Act, Home Ownership and Equity
Protection Act (HOEPA), Real Estate
Settlement Procedures Act (RESPA),
Truth in Lending Act (TILA), and
Federal Trade Commission Act (FTC
Act).2 The guidance further explains
that violations of other provisions of
consumer protection laws generally will
not adversely affect an institution’s CRA
rating, although the violations may be
noted in a CRA performance evaluation.
The ANPR noted that some parties
have maintained that the CRA
regulations should take more account of
whether loans contain abusive terms or
reflect abusive practices, prompting
comments supporting and opposing that
view.
Community organizations uniformly
urged expanding CRA’s role in detecting
and penalizing credit practices deemed
predatory or abusive. Commenters
suggested that the agencies give
‘‘negative’’ credit for loans evidencing
unlawful or otherwise abusive practices,
exclude such loans from evaluation, or
automatically rate an institution making
such loans lower than Satisfactory.
Commenters recommended that the
regulations themselves specify the
practices that will adversely affect a
CRA evaluation, using the list in the
interagency guidance, to include, but
not be limited to, evidence of particular
violations of the Equal Credit
Opportunity Act, Fair Housing Act,
Home Ownership and Equity Protection
Act, Real Estate Settlement Procedures
Act, Truth in Lending Act, and Federal
Trade Commission Act.
Commenters also recommended the
regulations clarify that a number of
particular loan terms or characteristics,
whether or not specifically prohibited
by law, that have been associated with
predatory lending practices should
adversely affect an institution’s CRA
evaluation. These include high fees,
prepayment penalties, single-premium
credit insurance, mandatory arbitration
clauses, frequent refinancing
(‘‘flipping’’), lending without regard to
repayment ability, equity ‘‘stripping,’’
targeting low- or moderate-income
neighborhoods for subprime loans, and
failing to refer qualifying borrowers to
prime financial products. Commenters
also suggested that certain types of
loans, such as payday loans, be
categorically treated as inappropriate
and lead to a rating reduction.
Financial institutions generally
opposed determining under the CRA
whether activities beyond those
identified in the regulations are
2 See ‘‘Interagency Questions and Answers
Regarding Community Reinvestment,’’ 66 FR 36620,
36640 (July 12, 2001).

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predatory or abusive. They noted that
the regulations already expressly
provide that violations of certain laws
can adversely affect a rating. They
contended that abusive credit terms and
practices generally should not be
regulated through CRA because
Congress enacted other laws for that
purpose, and expressed doubt that a
workable regulatory definition of
‘‘predatory lending’’ could be
developed. They also contended that the
increased compliance costs caused by
using CRA examinations to detect and
deter abusive practices would not be
justified because regulated financial
institutions are not responsible for the
bulk of abuses. They urged instead that
the agencies continue to rely on fair
lending and compliance examinations
to detect and deter abuses.
As concern about lending practices
has often focused on nondepository
affiliates, the agencies also solicited and
received comment on the role of affiliate
loans in an institution’s CRA evaluation.
Nondepository institutions are not
covered by the Act, but the regulations
permit an institution to elect, at its
option, to have loans of a nondepository
affiliate considered as part of the
institution’s own record of performance.
An institution must elect consideration
of affiliate loans by assessment area and
lending category. For example, if an
institution elects for examiners to
consider residential mortgage loans of a
particular affiliate, examiners will
evaluate all residential mortgage loans
made in the same assessment area by
any of its affiliates. There can be an
‘‘upside’’ to including an affiliate’s
activities in an institution’s CRA
lending evaluation because affiliate
loans are considered favorably in an
institution’s lending evaluation,
particularly if they increase the number
and amount of lending in low- and
moderate-income areas.
Many community organizations
contended that the problem of predatory
lending lies as much or more in
nondepository affiliates as in
institutions subject to CRA. They
generally urged mandating the inclusion
of affiliate loans in an institution’s CRA
evaluation, instead of letting the
institution decide whether to include
them. Finally, a few commenters
recommended directly subjecting
nonbank affiliates to CRA evaluations
and ratings. Financial institutions
opposed those suggestions.
The agencies believe that predatory
and abusive lending practices are
inconsistent with important national
objectives, including the goals of fair
access to credit, community
development, and stable home

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5739

ownership by the broadest spectrum of
Americans, and are inconsistent with
the purposes of the CRA. We have acted
to attack abusive practices through
rulemakings under various statutes,
supervisory policies, financial literacy
education, and community development
support.
The CRA regulations can play a role
in promoting responsible lending
practices and discouraging abusive
practices, where feasible. The
regulations give the agencies
considerable discretion to determine
whether lending activities help to meet
the credit needs of the community
consistent with safe and sound
practices. The regulations reward with
special consideration efforts to insulate
borrowers from abusive practices.3 And,
as noted above, evidence of certain
illegal credit practices adversely affects
the agency’s evaluation of an
institution’s CRA performance.
The agencies believe that it is
appropriate to enhance how the CRA
regulations address credit practices that
may be discriminatory, illegal, or
otherwise predatory and abusive, and
that are inconsistent with helping to
meet community credit needs in a safe
and sound manner. Therefore, in
response to commenters’
recommendations that the agencies’
CRA regulations address predatory
lending, whether by regulated financial
institutions or an affiliate, the agencies
are proposing to revise and clarify the
regulations in several respects.
First, the agencies plan to specify in
the regulations examples of certain
violations of law that will adversely
affect an agency’s evaluation of an
institution’s CRA performance. The
regulations would specify, in an
illustrative list, that evidence of the
following practices adversely affects an
agency’s evaluation of an institution’s
CRA performance: discrimination
against applicants on a prohibited basis
in violation of, for example, the Equal
Credit Opportunity or Fair Housing
Acts; evidence of illegal referral
practices in violation of section 8 of the
Real Estate Settlement Procedures Act;
evidence of violations of the Truth in
3 For example, the agencies look favorably on
loan programs that feature financial education to
help borrowers avoid unsuitable loans; promote
subprime borrowers to prime terms when
appropriate; report to consumer reporting agencies;
and provide small unsecured consumer loans in a
safe and sound manner, based on borrowers’ ability
to repay, on reasonable terms. Credit for
‘‘community development’’ activities also is
available under the service and investment tests for
providing or supporting financial education or
affordable loans to low- and moderate-income
individuals, the population most vulnerable to
inappropriate practices.

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Lending Act 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;
and evidence of unfair or deceptive
credit practices in violation of section 5
of the Federal Trade Commission Act.
These laws are listed to give an
indication of the types of illegal and
discriminatory credit practices that the
agency may consider. Evidence of
violations of other applicable consumer
protection laws affecting credit
practices, including State laws if
applicable, may also adversely affect the
institution’s CRA evaluation. While no
substantive change will result from
listing these examples, specifying in the
regulation examples of violations that
give rise to adverse CRA consequences
should improve the usefulness of the
regulations by providing critical
information in primary compliance
source material.
The agencies also propose to clarify
that an institution’s evaluation will be
adversely affected by practices
described above in connection with any
type of lending activity described in
ll.22(a) (home mortgage, small
business, small farm, consumer, and
community development loans). This
would also clarify that the agencies may
consider such practices in connection
with consumer loans, even if the
institution did not elect to have such
loans included in its evaluation.
Second, the agencies propose to
explicitly address equity stripping by
revising the regulations to provide that
evidence of a pattern or practice of
extending home mortgage or consumer
loans based predominantly on the
foreclosure or liquidation value of the
collateral by the institution, where the
borrower cannot be expected to be able
to make the payments required under
the terms of the loan,4 also adversely
affects an institution’s overall rating. An
institution may determine that a
borrower can be expected to be able to
make the payments required under the
terms of the loan based, for example, on
information about the borrower’s credit
history, current or expected income,
other resources, and debts; preexisting
customer relationships (such as
accommodation lending); or other
information ordinarily considered by
the institution (or affiliate, as
applicable) and as documented and
verified, stated, or otherwise ordinarily
4 Note that other Federal law, such as HOEPA and
OCC regulations (see 12 CFR parts 7 and 34) contain
similar, but not identically worded, prohibitions on
such lending practices in certain circumstances.

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determined by the institution (or
affiliate, as applicable).
This element of the agencies’ proposal
addresses one of the central
characteristics of predatory lending, and
describes a practice clearly not
consistent with helping to meet the
credit needs of the community. For
example, home-secured loans made
without regard to borrowers’ ability to
repay can lead to unwarranted
foreclosures, which, in turn, undermine
the entire community. To be sure,
equity stripping is not the only potential
lending abuse in home mortgage and
consumer loans, but it is more readily
susceptible to clear definition in a
regulation than many other abuses. The
agencies believe that other abuses not
expressly prohibited by HOEPA, TILA,
RESPA, or ECOA, may be better
addressed on a case-by-case basis under
the unfair-or-deceptive standard of the
FTC Act, rather than by regulatory
definitions. The FTC Act is particularly
well suited to addressing evidence of
predatory lending practices that are not
otherwise prohibited by Federal law.
For example, many practices that have
been criticized as predatory and
abusive, such as loan flipping, the
refinancing of special subsidized
mortgage loans, other forms of equity
stripping, and fee packing, can entail
unfair or deceptive practices that violate
the FTC Act.5
As noted above, this aspect of the
proposal is limited to home mortgage
loans and consumer loans. It does not
cover loans to businesses. Further, the
proposal is not intended to cover loans
such as reverse mortgages that, by their
terms, will be paid from liquidation of
the collateral.
In addition, under the proposed
standard, an institution would
determine that a borrower may be
expected to be able to make the
payments required under the terms of
the loan by considering information it
ordinarily considers in connection with
the type of loan. Depending upon the
institution’s normal procedures in the
circumstances and consistent with safe
and sound underwriting, such
information may or may not be
documented and verified. For example,
many institutions ordinarily do not
verify or even consider income of
people with high net worth or
exemplary records of paying credit
obligations. Note, however, that HOEPA
requires lenders to document the
borrower’s ability to repay a loan subject
to HOEPA, and that HOEPA violations
5 See OCC Advisory Letter 2003–2, ‘‘Guidelines
for National Banks to Guard Against Predatory and
Abusive Lending Practices,’’ February 21, 2003.

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adversely affect an institution’s CRA
evaluation.
The agencies seek comment on
whether the inclusion in the regulations
of a provision to address the pattern or
practice of making home mortgage and
consumer loans based predominantly on
the foreclosure or liquidation value of
the collateral by the institution, where
the borrower cannot be expected to be
able to make the payments required
under the terms of the loan, is sufficient
or whether a different formulation of
that provision would better discourage
abusive lending practices without
risking curtailment of consumers’ access
to credit. We also seek comment on
whether it is feasible to define any other
specific abuses by regulation in a way
that both shields consumers from the
costs of the abuse and avoids
inadvertently curtailing the availability
of credit to consumers.
Third, the agencies propose to clarify
that an institution’s evaluation will be
adversely affected by discriminatory,
other illegal, or abusive credit practices
described in the regulations regardless
of whether the practices involve loans
in the institution’s assessment area(s) or
in any other location or geography. The
regulations currently provide that
evidence of discriminatory or other
illegal credit practices by an institution
can adversely affect the institution’s
rating, and they do not limit the
agencies’ consideration of such
evidence to lending within an
assessment area.
Fourth, the proposed revisions would
clarify that an institution’s CRA
evaluation also can be adversely
affected by evidence of discriminatory,
other illegal, and abusive credit
practices by any affiliate,6 if any loans
of that affiliate have been considered in
the CRA evaluation pursuant to
ll.22(c)(1) and (2). Loans by an
affiliate currently are permitted to be
included in an institution’s evaluation
of an assessment area only, and the
proposal would be similarly limited to
affiliate lending practices within any
assessment area. We seek comment on
whether the agencies should provide in
the regulation that evidence of
discriminatory, other illegal, or abusive
credit practices by an affiliate whose
loans have been considered in an
institution’s evaluation will adversely
affect the institution’s rating whether or
6 An affiliate means any company that controls,
is controlled by, or is under common control with
another company. Generally, for CRA purposes, this
includes companies engaged in lending that are
owned and controlled by bank holding companies
or thrift holding companies, as well as companies
engaged in lending that are direct operating
subsidiaries of an insured bank or thrift.

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not the activities were inside any of the
institution’s assessment areas.
The agencies will consider all
credible evidence of discriminatory,
other illegal, or abusive credit practices
that comes to their attention. Such
information could be obtained from
supervisory examinations (including
safety and soundness examinations and
compliance examinations), CRA
comments in connection with
applications for deposit facilities, and
public sources. However, CRA
examinations themselves generally will
not entail specific evaluation of
individual complaints or specific
evaluation of individual loans for illegal
credit practices or otherwise abusive
lending practices.
With these proposed changes to the
CRA regulations, the agencies seek to
ensure that evidence of predatory and
abusive lending practices are
appropriately considered in an
institution’s CRA evaluation. We
considered suggestions for adopting a
more categorical response to evidence of
an illegal credit practice, such as rating
the institution no higher than Needs to
Improve. We continue to believe an
institution should be evaluated based on
all relevant ratings factors without
mandating a particular rating result.
Further, it may be impractical for the
agencies to try to exclude from CRA
consideration all loans originated in
connection with an illegal or abusive
credit practice because it could require
examiners to identify and segregate each
such loan, and we invite comment on
this issue.
We invite comment on all aspects of
the proposed revisions to section
ll28.(c), including the extent to
which the proposed revisions would
make CRA evaluations more effective in
measuring an institution’s contribution
to community credit needs without
imposing undue burden.
Enhancement of Public Performance
Evaluations
A public performance evaluation is a
written description of an institution’s
record of helping to meet community
credit needs, and includes a rating of
that record. An evaluation is prepared at
the conclusion of every CRA
examination and made available to the
public. The agencies intend to use
publicly available HMDA and CRA data
to disclose the following information in
CRA performance evaluations by
assessment area:
(1) The number, type, and amount of
purchased loans;
(2) The number, type, and amount of
loans of HOEPA loans and of loans for
which rate spread information is

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reported under HMDA (data that will be
available in mid-2005); and
(3) The number, type, and amount of
loans that were originated or purchased
by an affiliate and included in the
institution’s evaluation, and the identity
of such affiliate.
These changes should make it easier
for the public to evaluate the lending by
individual institutions according to
particular factors that many commenters
suggested. They should not impose any
burden on institutions, as it does not
call for any change to data collection or
reporting procedures. The agencies seek
comment on the extent to which the
enhancements of public CRA
performance evaluations described
above will make the evaluations more
effective in communicating to the public
an institution’s contribution to meeting
community credit needs.
Regulatory Analysis
Paperwork Reduction Act
Request for Comment on Proposed
Information Collection
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; FDIC, 3064–
0092; and OTS, 1550–0012). The
Agencies also give notice that, at the
end of the comment period, the
proposed collections of information,
along with an analysis of the comments,
and recommendations received, will be
submitted to OMB for review and
approval.
Comments are invited on:
(a) Whether the collection of
information is necessary for the proper
performance of the Agencys’ 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
(e) Estimates of capital or start up
costs and costs of operation,
maintenance, and purchase of services
to provide information.

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At the end of the comment period, the
comments and recommendations
received will be analyzed to determine
the extent to which the information
collections should be modified prior to
submission to OMB for review and
approval. The comments will also be
summarized or included in the
Agencies’ requests to OMB for approval
of the collections. All comments will
become a matter of public record.
Comments should be addressed to:
OCC: Public Information Room, Office
of the Comptroller of the Currency, 250
E Street, SW., Mail stop 1–5, Attention:
Docket 04–06, Washington, DC 20219;
fax number (202) 874–4448; Internet
address: regs.comments@occ.treas.gov.
Due to delays in paper mail delivery in
the Washington area, commenters are
encouraged to submit their comments
by fax or e-mail. You can make an
appointment to inspect the comments at
the Public Information Room by calling
(202) 874–5043.
Board: Comments should refer to
Docket No. R–1181 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.
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. 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., Attention:
Comments/Executive Secretary, Federal
Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.

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OTS: Information Collection
Comments, Chief Counsel’s Office,
Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552;
send a facsimile transmission to (202)
906–6518; or send an e-mail to
information
collection.comments@ots.treas.gov. OTS
will post comments and the related
index on the OTS Internet site at http:/
/www.ots.treas.gov. In addition,
interested persons may inspect the
comments at the Public Reading Room,
1700 G Street, NW., by appointment. To
make an appointment, call (202) 906–
5922, send an e-mail to
publicinfo@ots.treas.gov, or send a
facsimile transmission to (202) 906–
7755.
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.
OTS: Community Reinvestment—12
CFR 563e.
Frequency of Response: Annual.
Affected Public:
OCC: National banks.
Board: State member banks.
FDIC: Insured nonmember banks.
OTS: Savings associations.
Abstract: This Paperwork Reduction
Act section estimates the burden that
would be associated with the
regulations were the agencies to change
the definition of ‘‘small institution’’ as
proposed, that is, increase the asset
threshold from $250 million to $500
million and eliminate any consideration
of holding-company size. The two
proposed changes, if adopted, would
make ‘‘small’’ approximately 1,350
insured depository institutions that do
not now have that status. That estimate
is based on data for all FDIC-insured
institutions that filed Call or Thrift
Financial Reports on March 31, 2003.
Those data also underlie the estimated
paperwork burden that would be
associated with the regulations if the
proposals were adopted by the agencies.
Estimated Paperwork Burden under
the Proposal:
OCC
Number of Respondents: 2,066.
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

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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:
223,062 hours.
Board
Number of Respondents: 950.
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:
114,350 hours.
FDIC
Number of Respondents: 5,341.
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:
331,358 hours.
OTS
Number of Respondents: 958.
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.
Estimated Total Annual Burden:
116,493 hours.
Regulatory Flexibility Act
OCC: Pursuant to section 605(b) of the
Regulatory Flexibility Act, the OCC

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certifies that since the proposal would
reduce burden and would not raise costs
for small institutions, this proposal will
not have a significant economic impact
on a substantial number of small
entities. This proposal does not impose
any additional paperwork or regulatory
reporting requirements. The proposal
would increase the overall number of
small banks that are permitted to avoid
data collection requirements in 12 CFR
part 25. Accordingly, a regulatory
flexibility analysis is not required.
Board: Pursuant to section 605(b) of
the Regulatory Flexibility Act, the Board
certifies that since the proposal would
reduce burden and would not raise costs
for small institutions, this proposal will
not have a significant economic impact
on a substantial number of small
entities. This proposal does not impose
any additional paperwork or regulatory
reporting requirements. The proposal
would increase the overall number of
small banks that are permitted to avoid
data collection requirements in 12 CFR
part 228. Accordingly, a regulatory
flexibility analysis is not required.
FDIC: Pursuant to section 605(b) of
the Regulatory Flexibility Act, the FDIC
certifies that since the proposal would
reduce burden and would not raise costs
for small institutions, this proposal will
not have a significant economic impact
on a substantial number of small
entities. This proposal does not impose
any additional paperwork or regulatory
reporting requirements. The proposal
would increase the overall number of
small banks that are permitted to avoid
data collection requirements in 12 CFR
part 345. Accordingly, a regulatory
flexibility analysis is not required.
OTS: Pursuant to section 605(b) of the
Regulatory Flexibility Act, the OTS
certifies that since the proposal would
reduce burden and would not raise costs
for small institutions, this proposal will
not have a significant economic impact
on a substantial number of small
entities. This proposal does not impose
any additional paperwork or regulatory
reporting requirements. The proposal
would increase the overall number of
small savings associations that are
permitted to avoid data collection
requirements in 12 CFR part 563e.
Accordingly, a regulatory flexibility
analysis is not required.
OCC and OTS Executive Order 12866
Determination
The OCC and OTS have determined
that their portion of the proposed
rulemaking is not a significant
regulatory action under Executive Order
12866.

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules
OCC and OTS Unfunded Mandates
Reform Act of 1995 Determination
Section 202 of the Unfunded
Mandates Reform Act of 1995, Public
Law 104–4 (Unfunded Mandates Act)
requires that an agency prepare a
budgetary impact statement before
promulgating a rule that includes a
Federal mandate that may result in
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 and OTS have determined that
this final rule will not result in
expenditures by State, local, and tribal
governments, or by the private sector, of
$100 million or more. Accordingly,
neither agency has prepared a budgetary
impact statement or specifically
addressed the regulatory alternatives
considered.
The Treasury and General Government
Appropriations Act, 1999—Assessment
of Impact of Federal Regulation on
Families
The FDIC has determined that this
proposed rule will not affect family
well-being within the meaning of
section 654 of the Treasury and General
Government Appropriations Act, 1999,
Public Law 105–277, 112 Stat. 2681.
Board, FDIC, and OTS Solicitation of
Comments Regarding the Use of ‘‘Plain
Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board,
the FDIC, and the OTS to use ‘‘plain
language’’ in all proposed and final
rules published after January 1, 2000.
The Board, the FDIC, and the OTS invite
comments on whether the proposed
rules are clearly stated and effectively
organized, and how the Board, the FDIC,
and the OTS might make the proposed
text easier to understand.
OCC Solicitation of Comments on Use of
Plain Language
Section 722 of the Gramm-LeachBliley Act, Public Law 106–102, sec.
722, 113 Stat. 1338, 1471 (Nov. 12,
1999), requires the Federal banking
agencies to use plain language in all
proposed and final rules published after
January 1, 2000. The OCC invites your
comments on how to make this proposal
easier to understand. For example:
• Have we organized the material to
suit your needs? If not, how could this
material be better organized?

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• Are the requirements in the
proposed regulation clearly stated? If
not, how could the regulation be more
clearly stated?
• Does the proposed regulation
contain language or jargon that is not
clear? If so, which language requires
clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulation
easier to understand? If so, what
changes to the format would make the
regulation easier to understand?
• What else could we do to make the
regulation easier to understand?
OCC Executive Order 13132
Determination
The Comptroller of the Currency has
determined that this final rule does not
have any Federalism implications, as
required by Executive Order 13132.
OCC Community Bank Comment
Request
The OCC invites your comments on
the impact of this proposal on
community banks. The OCC recognizes
that community banks operate with
more limited resources than larger
institutions and may present a different
risk profile. Thus, the OCC specifically
requests comments on the impact of this
proposal on community banks’ current
resources and available personnel with
the requisite expertise, and whether the
goals of the proposed regulation could
be achieved, for community banks,
through an alternative approach.
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.
12 CFR Part 563e
Community development, Credit,
Investments, Reporting and
recordkeeping requirements, Savings
associations.

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5743

Department of the Treasury
Office of the Comptroller of the
Currency
12 CFR CHAPTER I

Authority and Issuance
For the reasons set forth in the joint
preamble, the Office of the Comptroller
of the Currency proposes to amend part
25 of chapter I of title 12 of the Code
of Federal Regulations as follows:
PART 25—COMMUNITY
REINVESTMENT ACT AND
INTERSTATE DEPOSIT PRODUCTION
REGULATIONS
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.

2. Revise § 25.12(t) to read as follows:
§ 25.12

Definitions.

*

*
*
*
*
(t) Small bank means a bank that, as
of December 31 of either of the prior two
calendar years, had total assets of less
than $500 million.
*
*
*
*
*
3. Revise § 25.28, paragraph (c) to read
as follows:
§ 25.28

Assigned ratings.

*

*
*
*
*
(c) Effect of evidence of
discriminatory, other illegal, and
abusive credit practices.
(1) The OCC’s evaluation of a bank’s
CRA performance is adversely affected
by evidence of the following in any
geography by the bank or in any
assessment area by any affiliate whose
loans have been considered pursuant to
§ 25.22(c):
(i) In connection with any type of
lending activity described in § 25.22(a),
discriminatory or other illegal credit
practices including, but not limited to:
(A) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(B) Violations of the Home Ownership
and Equity Protection Act;
(C) Violations of section 5 of the
Federal Trade Commission Act;
(D) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(E) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(ii) In connection with home mortgage
and secured consumer loans, a pattern
or practice of lending based

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predominantly on the foreclosure or
liquidation value of the collateral by the
bank (or affiliate, as applicable), where
the borrower cannot be expected to be
able to make the payments required
under the terms of the loan.1
(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 selfassessment; and any other relevant
information.
4. Revise § 25.42(h) to read as follows:
§ 25.42 Data collection, reporting, and
disclosure.

*

*
*
*
*
(h) CRA Disclosure Statement. The
OCC prepares annually for each bank
that reports data pursuant to this section
a CRA disclosure statement that
contains, on a State-by-State basis:
(1) For each county (and for each
assessment area smaller than a county)
with a population of 500,000 persons or
fewer in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased by
geography, grouped according to
whether the geography is low-,
moderate-, middle-, or upper-income;
(ii) A list showing each geography in
which the bank reported a small
business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(2) For each county (and for each
assessment area smaller than a county)
with a population in excess of 500,000
persons in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased in each
geography, grouped according to
median income of the geography

1 A bank (or affiliate, as applicable) may
determine that a borrower can be expected to be
able to make the payments required under the terms
of the loan based, for example, on information
about the borrower’s credit history, current or
expected income, other resources, and debts;
preexisting customer relationships; or other
information ordinarily considered, and as
documented and verified, stated, or otherwise
ordinarily determined, by the bank (or affiliate, as
applicable) in connection with the type of lending.

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relative to the area median income, as
follows: less than 10 percent, 10 or more
but less than 20 percent, 20 or more but
less than 30 percent, 30 or more but less
than 40 percent, 40 or more but less
than 50 percent, 50 or more but less
than 60 percent, 60 or more but less
than 70 percent, 70 or more but less
than 80 percent, 80 or more but less
than 90 percent, 90 or more but less
than 100 percent, 100 or more but less
than 110 percent, 110 or more but less
than 120 percent, and 120 percent or
more;
(ii) A list showing each geography in
which the bank reported a small
business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(3) The number and amount of small
business and small farm loans located
inside each assessment area reported by
the bank and the number and amount of
small business and small farm loans
located outside assessment areas
reported by the bank; and
(4) The number and amount of
community development loans reported
as originated or purchased.
*
*
*
*
*
Dated: January 28, 2004.
John D. Hawke, Jr.,
Comptroller of the Currency.

Federal Reserve System
12 CFR CHAPTER II

Authority and Issuance
For the reasons set forth in the joint
preamble, the Board of Governors of the
Federal Reserve System proposes to
amend part 228 of chapter II of title 12
of the Code of Federal Regulations as
follows:
PART 228—COMMUNITY
REINVESTMENT (REGULATION BB)
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.

2. Revise § 228.12(t) to read as
follows:
§ 228.12

Definitions.

*

*
*
*
*
(t) Small bank means a bank that, as
of December 31 of either of the prior two
calendar years, had total assets of less
than $500 million.
*
*
*
*
*
3. Revise § 228.28(c) to read as
follows:
§ 228.28

*

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Assigned ratings.

*

Frm 00016

*

*

Fmt 4702

*

Sfmt 4702

(c) Effect of evidence of
discriminatory, other illegal, and
abusive credit practices. (1) The Board’s
evaluation of a bank’s CRA performance
is adversely affected by evidence of the
following in any geography by the bank
or in any assessment area by any
affiliate whose loans have been
considered pursuant to § 228.22(c):
(i) In connection with any type of
lending activity described in § 228.22(a),
discriminatory or other illegal practices
including, but not limited to:
(A) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(B) Violations of the Home Ownership
and Equity Protection Act;
(C) Violations of section 5 of the
Federal Trade Commission Act;
(D) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(E) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(ii) In connection with home mortgage
and secured consumer loans, a pattern
or practice of lending based
predominantly on the foreclosure or
liquidation value of the collateral by the
bank, where the borrower cannot be
expected to be able to make the
payments required under the terms of
the loan.1
(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 selfassessment; and any other relevant
information.
4. Revise § 228.42(h) to read as
follows:
§ 228.42 Data collection, reporting, and
disclosure.

*

*
*
*
*
(h) CRA Disclosure Statement. The
Board prepares annually for each bank

1 A bank (or affiliate, as applicable) may
determine that a borrower can be expected to be
able to make the payments required under the terms
of the loan based, for example, on information
about the borrower’s credit history, current or
expected income, other resources, and debts;
preexisting customer relationships; or other
information ordinarily considered, and as
documented and verified, stated, or otherwise
ordinarily determined, by the bank (or affiliate, as
applicable) in connection with the type of lending.

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules
that reports data pursuant to this section
a CRA disclosure statement that
contains, on a State-by-State basis:
(1) For each county (and for each
assessment area smaller than a county)
with a population of 500,000 persons or
fewer in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased by
geography, grouped according to
whether the geography is low-,
moderate-, middle-, or upper-income;
(ii) A list showing each geography in
which the bank reported a small
business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(2) For each county (and for each
assessment area smaller than a county)
with a population in excess of 500,000
persons in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased in each
geography, grouped according to
median income of the geography
relative to the area median income, as
follows: Less than 10 percent, 10 or
more but less than 20 percent, 20 or
more but less than 30 percent, 30 or
more but less than 40 percent, 40 or
more but less than 50 percent, 50 or
more but less than 60 percent, 60 or
more but less than 70 percent, 70 or
more but less than 80 percent, 80 or
more but less than 90 percent, 90 or
more but less than 100 percent, 100 or
more but less than 110 percent, 110 or
more but less than 120 percent, and 120
percent or more;
(ii) A list showing each geography in
which the bank reported a small
business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(3) The number and amount of small
business and small farm loans located
inside each assessment area reported by
the bank and the number and amount of
small business and small farm loans
located outside assessment areas
reported by the bank; and
(4) the number and amount of
community development loans reported
as originated or purchased.
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System.

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Jkt 203001

Dated: January 29, 2004.
Jennifer J. Johnson,
Secretary of the Board.

Federal Deposit Insurance Corporation
12 CFR CHAPTER III

Authority and Issuance
For the reasons set forth in the joint
preamble, the Board of Directors of the
Federal Deposit Insurance Corporation
proposes to amend part 345 of chapter
III of title 12 of the Code of Federal
Regulations to read as follows:
PART 345—COMMUNITY
REINVESTMENT
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).

2. Revise § 345.12(t) to read as
follows:
§ 345.12

Definitions.

*

*
*
*
*
(t) Small bank means a bank that, as
of December 31 of either of the prior two
calendar years, had total assets of less
than $500 million.
*
*
*
*
*
3. Revise § 345.28(c) to read as
follows:
§ 345.28

Assigned ratings.

*

*
*
*
*
(c) Effect of evidence of
discriminatory, other illegal, and
abusive credit practices. (1) The FDIC’s
evaluation of a bank’s CRA performance
is adversely affected by evidence of the
following in any geography by the bank
or in any assessment area by any
affiliate whose loans have been
considered pursuant to § 345.22(c):
(i) In connection with any type of
lending activity described in § 345.22(a),
discriminatory or other illegal practices
including, but not limited to:
(A) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(B) Violations of the Home Ownership
and Equity Protection Act;
(C) Violations of section 5 of the
Federal Trade Commission Act;
(D) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(E) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(ii) In connection with home mortgage
and secured consumer loans, a pattern
or practice of lending based
predominantly on the foreclosure or

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5745

liquidation value of the collateral by the
bank, where the borrower cannot be
expected to be able to make the
payments required under the terms of
the loan.1
(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 selfassessment; and any other relevant
information.
*
*
*
*
*
4. Revise § 345.42(h) to read as
follows:
§ 345.42 Data Collection, Reporting, and
Disclosure

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(h) CRA Disclosure Statement. The
FDIC prepares annually for each bank
that reports data pursuant to this section
a CRA disclosure statement that
contains, on a State-by-State basis:
(1) For each county (and for each
assessment area smaller than a county)
with a population of 500,000 persons or
fewer in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased by
geography, grouped according to
whether the geography is low-,
moderate-, middle-, or upper-income;
(ii) A list showing each geography in
which the bank reported a small
business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(2) For each county (and for each
assessment area smaller than a county)
with a population in excess of 500,000
persons in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased in each
geography, grouped according to

1 A bank (or affiliate, as applicable) may
determine that a borrower can be expected to be
able to make the payments required under the terms
of the loan based, for example, on information
about the borrower’s credit history, current or
expected income, other resources, and debts;
preexisting customer relationships; or other
information ordinarily considered, and as
documented and verified, stated, or otherwise
ordinarily determined by the bank (or affiliate, as
applicable) in connection with the type of lending.

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules

median income of the geography
relative to the area median income, as
follows: less than 10 percent, 10 or more
but less than 20 percent, 20 or more but
less than 30 percent, 30 or more but less
than 40 percent, 40 or more but less
than 50 percent, 50 or more but less
than 60 percent, 60 or more but less
than 70 percent, 70 or more but less
than 80 percent, 80 or more but less
than 90 percent, 90 or more but less
than 100 percent, 100 or more but less
than 110 percent, 110 or more but less
than 120 percent, and 120 percent or
more;
(ii) A list showing each geography in
which the bank reported a small
business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(3) The number and amount of small
business and small farm loans located
inside each assessment area reported by
the bank and the number and amount of
small business and small farm loans
located outside assessment areas
reported by the bank; and
(4) The number and amount of
community development loans reported
as originated or purchased.
*
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*
Dated at Washington, DC, this 20th day of
January, 2004.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

Office of Thrift Supervisiion
12 CFR CHAPTER V

For the reasons outlined in the joint
preamble, the Office of Thrift
Supervision proposes to amend part
563e of chapter V of title 12 of the Code
of Federal Regulations as set forth
below:
PART 563e—COMMUNITY
REINVESTMENT
1. The authority citation for part 563e
continues to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464,
1467a, 1814, 1816, 1828(c), and 2901 through
2907.

2. Revise § 563e.12(s) to read as
follows:
§ 563e.12

Definitions.

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*
*
(s) Small savings association means a
savings association that, as of December
31 of either of the prior two calendar
years, had total assets of less than $500
million.
*
*
*
*
*

VerDate jul<14>2003

16:42 Feb 05, 2004

Jkt 203001

3. Revise § 563e.28(c) to read as
follows:
§ 563e.28

*

Assigned ratings.

*

*
*
*
*
(c) Effect of evidence of
discriminatory, other illegal, and
abusive credit practices. (1) The OTS’s
evaluation of a savings association’s
CRA performance is adversely affected
by evidence of the following in any
geography by the savings association or
in any assessment area by any affiliate
whose loans have been considered
pursuant to § 563e.22(c):
(i) In connection with any type of
lending activity described in
§ 563e.22(a), discriminatory or other
illegal practices including, but not
limited to:
(A) Discrimination against applicants
on a prohibited basis in violation, for
example, of the Equal Credit
Opportunity Act or the Fair Housing
Act;
(B) Violations of the Home Ownership
and Equity Protection Act;
(C) Violations of section 5 of the
Federal Trade Commission Act;
(D) Violations of section 8 of the Real
Estate Settlement Procedures Act; and
(E) Violations of the Truth in Lending
Act provisions regarding a consumer’s
right of rescission.
(ii) In connection with home mortgage
and secured consumer loans, a pattern
or practice of lending based
predominantly on the foreclosure or
liquidation value of the collateral by the
savings association, where the borrower
cannot be expected to be able to make
the payments required under the terms
of the loan.1
(2) In determining the effect of
evidence of practices described in
paragraph (c)(1) of this section on the
savings association’s assigned rating, the
OTS considers the nature, extent, and
strength of the evidence of the practices;
the policies and procedures that the
savings association (or affiliate, as
applicable) has in place to prevent the
practices; any corrective action that the
savings association (or affiliate, as
applicable) has taken or has committed
to take, including voluntary corrective
action resulting from self-assessment;
and any other relevant information.
4. Revise § 563e.42(h) to read as
follows:
1 A savings association (or affiliate, as applicable)
may determine that a borrower can be expected to
be able to make the payments required under the
terms of the loan based, for example, on
information about the borrower’s credit history,
current or expected income, other resources, and
debts; preexisting customer relationships; or other
information ordinarily considered, and as
documented and verified, stated, or otherwise
ordinarily determined by the savings association (or
affiliate, as applicable).

PO 00000

Frm 00018

Fmt 4702

Sfmt 4702

§ 563e.42 Data collection, reporting, and
disclosure.

*
*
*
*
(h) CRA Disclosure Statement. The
OTS prepares annually for each savings
association that reports data pursuant to
this section a CRA disclosure statement
that contains, on a State-by-State basis:
(1) For each county (and for each
assessment area smaller than a county)
with a population of 500,000 persons or
fewer in which the savings association
reported a small business or small farm
loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased by
geography, grouped according to
whether the geography is low-,
moderate-, middle-, or upper-income;
(ii) A list showing each geography in
which the savings association reported
a small business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(2) For each county (and for each
assessment area smaller than a county)
with a population in excess of 500,000
persons in which the bank reported a
small business or small farm loan:
(i) The number and amount of small
business and small farm loans reported
as originated or purchased in each
geography, grouped according to
median income of the geography
relative to the area median income, as
follows: Less than 10 percent, 10 or
more but less than 20 percent, 20 or
more but less than 30 percent, 30 or
more but less than 40 percent, 40 or
more but less than 50 percent, 50 or
more but less than 60 percent, 60 or
more but less than 70 percent, 70 or
more but less than 80 percent, 80 or
more but less than 90 percent, 90 or
more but less than 100 percent, 100 or
more but less than 110 percent, 110 or
more but less than 120 percent, and 120
percent or more;
(ii) A list showing each geography in
which the savings association reported
a small business or small farm loan; and
(iii) The number and amount of small
business and small farm loans to
businesses and farms with gross annual
revenues of $1 million or less;
(3) The number and amount of small
business and small farm loans located
inside each assessment area reported by
the savings association and the number
and amount of small business and small
farm loans located outside assessment
areas reported by the savings
association; and

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Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Proposed Rules
(4) The number and amount of
community development loans reported
as originated or purchased.
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Dated: January 22, 2004.
By the Office of Thrift Supervision.
James E. Gilleran,
Director.
[FR Doc. 04–2354 Filed 2–5–04; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P;
6720–01–P

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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102