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Federal Reserve Bank OF DALLAS ROBERT D. M C T E E R , J R . DALLAS, TEXAS p re s id e n t AND C H IE F E X E C U T IV E O F F IC E R April 4, 1997 75265-5906 Notice 97-31 TO: The Chief Executive Officer o f each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Prohibition Against Use of Interstate Branches Primarily for Deposit Production DETAILS The Board o f Governors o f the Federal Reserve System, along with the Office o f the Comptroller o f the Currency and the Federal Deposit Insurance Corporation, is requesting public comment on a proposal to adopt uniform regulations to implement Section 109 o f the RiegleNeal Interstate Banking and Branching Efficiency Act o f 1994 (Interstate Act). The proposed rule would prohibit any bank from establishing or acquiring a branch or branches outside its home state under the Interstate Act primarily for deposit production. In addition, the rule would provide guidelines for determining whether such bank is reasonably helping to meet the credit needs o f the communities served by the interstate branches. The Board must receive comments by May 2, 1997. Please address comments to William W. Wiles, Secretary, Board o f Governors o f the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551. All comments should refer to Dockei No. R-0962. ATTACHMENT A copy o f the Board’s notice as it appears on pages 12729-38, Vol. 62, No. 51, o f the Federal Register dated March 17, 1997, is attached. 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. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) MORE INFORMATION For more information, please contact Dean Pankonien at (214) 922-6154. For additional copies o f this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Monday March 17, 1997 Part IV Department of the Treasury Office of the Comptroller of the Currency Federal Reserve System Federal Deposit Insurance Corporation 12 CFR Part 25, et al. Prohibition Against Use of Interstate Branches Primarily for Deposit Production; Proposed Rule 12729 12730 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12CFR Part 25 [Docket No. 97-04] RIN 1557-AB50 FEDERAL RESERVE SYSTEM 12CFR Parts 208 and 211 [Regulations H and K; Docket No. R-0962] FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 369 RIN 3064—AB97 Prohibition Against Use of interstate Branches Primarily for Deposit Production AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); and Federal Deposit Insurance Corporation (FDIC). ACTION: Joint notice of proposed rulemaking. The OCC, Board, and FDIC (collectively, agencies) propose to adopt uniform regulations to implement section 109 (section 109) of the RiegleNeal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Act). As required by section 109, the proposed rule would prohibit any bank from establishing or acquiring a branch or branches outside of its home state under the Interstate Act primarily for the purpose of deposit production, and would provide guidelines for determining whether such bank is reasonably helping to meet the credit needs of the communities served by the interstate branches. DATES: Comments must be received on or before May 2, 1997. SUMMARY: ADDRESSES: requires the agencies to prescribe Governors of the Federal Reserve uniform rules that prohibit the use of System, 20th Street and Constitution the authority under the Interstate Act to Avenue, NW., Washington, DC 20551. engage in interstate branching primarily Comments also may be delivered to the for the purpose of deposit production.2 Board’s mail room between 8:45 and The agencies must also provide 5:15 p.m. on weekdays, and to the guidelines to ensure that banks that security control room at all other times. operate such branches are reasonably The mail room and the security control helping to meet the credit needs of the room are accessible from the courtyard communities served by the branches. entrance on 20th Street between Constitution Avenue and C Street, NW., Congress enacted section 109 to ensure that the new interstate branching Comments may be inspected in Room MP-500 of the Martin Building between authority provided by the Interstate Act would not result in the taking of 9:00 a.m. and 5:00 p.m. weekdays, deposits from a community without except as provided in 12 CFR 261.8 of the Board’s Rules Regarding Availability concern for the credit needs of that community. See H.R. Rep. No. 651, of Information. 103d Cong., 2d Sess. 62 (1994). FDIC: Written comments should be The agencies’ proposed uniform rules directed to Jerry L. Langley, Executive apply to any bank that establishes or Secretary, Attention: Room F-400, acquires, directly or indirectly, a branch Federal Deposit Insurance Corporation, under the authority of the Interstate Act 550 17th Street NW., Washington, DC or amendments made by the Interstate 20429. Comments may be hand delivered to Room F -4 0 0 ,1776 F Street Act. These branches are referred to as “covered interstate branches.” The NW., Washington, DC 20429 on proposed rules provide that, beginning business days between 8:30 a.m. and 5 no earlier than one year after a bank p.m. (Fax number (202) 898-3838; establishes or acquires a covered Internet address: comments@fdic.gov). interstate branch, the appropriate Comments will be available for agency will determine whether inspection and photocopying in Room 7118, 550 17th Street, NW., Washington, reasonably available data exist that will DC 20429, between 9 a.m. and 4:30 p.m. enable the agency to perform a “loan-todeposit ratio screen.” on business days. The loan-to-deposit ratio screen FOR FURTHER INFORMATION CONTACT: compares the bank’s loan-to-deposit OCC: Neil M. Robinson, Senior ratio within the state where the bank’s Attorney, or Kevin L. Lee, Senior covered interstate branch is located (covered interstate branch loan-toAttorney, Community & Consumer Law deposit ratio) with the loan-to-deposit Division (202) 874-5750; or Andrew T. ratio of banks whose home state is that Gutierrez, Attorney, Legislative and state (host state loan-to-deposit ratio). If Regulatory Activities Division (202) the loan-to deposit ratio screen indicates 874-5090. Board: Diane Koonjy, Senior that the bank’s covered interstate branch Attorney, (202) 452-3274, Lawranne loan-to-deposit ratio is at least 50 Stewart, Senior Attorney, (202) 452percent of the host state loan-to-deposit 3513, or, with respect to foreign banks, ratio, no further analysis is required. Christopher Clubb, Senior Attorney, However, if the appropriate agency (202) 452-3778, Legal Division; or determines that the bank’s covered Shawn McNulty, Assistant Director, interstate branch loan-to-deposit ratio is (202) 452-3946, Division of Consumer less than 50 percent of the host state and Community Affairs. loan-to-deposit ratio, or determines that FDIC: Louise Kotoshirodo, Review reasonably available data do not exist Examiner, Division of Consumer Affairs that will permit the agency to determine (202) 942-3599; Doris L. Marsh, the bank’s covered interstate branch Examination Specialist, Division of Supervision (202) 898-8905; or Gladys 2 Before th e Interstate Act, foreign banks were Cruz Gallagher, Counsel, Legal Division perm itted to establish agencies and lim ited branches outside their hom e state u n d er the (202) 898-3833. International Banking Act (IBA) (12 U.S.C. 3101 et OCC: Comments should be directed to Docket No. 97-04, Communications Division, First Floor, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219. SUPPLEMENTARY INFORMATION: Comments will be available for Background inspection and photocopying at that address. In addition, comments may be The Interstate A ct1 provides sent by facsimile transmission to FAX expanded authority for a domestic or number (202) 874-5274, or by electronic foreign bank to establish or acquire a mail to branch in a state other than the bank’s REGS.COMMENTS@OCC.TREAS.GOV. home state (host state). Section 109 Board: Comments should refer to Docket No. R-0962, and may be mailed 1 Pub. L. 103-328, 108 Stat. 2338, 12 U.S.C. to William W. Wiles, Secretary, Board of 1835a. seq.). Since this authority was not conferred by the Interstate Act, or any am endm ent by th e Interstate Act to any other provision of law, banks that only establish interstate agencies and lim ited branches u n d er the IBA are not covered by section 109. Domestic banks m ay also have branches located outside a ban k ’s hom e state that are not w ithin the scope of section 109 because they are not established or acquired pursuant to authority in the Interstate Act. For example, dom estic banks may have branches grandfathered u n d er the McFadden Act (12 U.S.C. 36) and branches retained following an interstate relocation u n der 12 U.S.C. 30. Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules loan-to-deposit ratio, the agency will perform a “credit needs determination.” Under the credit needs determination, the appropriate agency will review the loan portfolio of the bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank in the host state. Consistent with section 109, the agencies will consider the following in making a credit needs determination: (1) Whether the covered interstate branches were formerly part of a failed or failing depository institution; (2) whether the covered interstate branches were acquired under circumstances where there was a low loan-to-deposit ratio because of the nature of the acquired institution’s business; (3) whether the covered interstate branches have a higher concentration of commercial or credit card lending, trust services, or other specialized activities; (4) the ratings received by the bank under the Community Reinvestment Act of 1977 (CRA)(12 U.S.C. 2901 et seq.); (5) economic conditions, including the level of loan demand, within the communities served by the covered interstate branches; and (6) the safe and sound operation and condition of the bank. If the appropriate agency concludes after taking these considerations into account that the bank is not reasonably helping to meet the credit needs of the communities served by the bank in the host state: (1) The appropriate agency may order that covered interstate branches in the host state be closed unless the bank provides reasonable assurances to the satisfaction of the appropriate agency that the bank has an acceptable plan that will reasonably help to meet the credit needs of the communities served by the bank in the host state; and (2) the bank may not open a new covered interstate branch in the host state unless the bank provides reasonable assurances to the satisfaction of the appropriate agency that the bank will reasonably help to meet the credit needs of the community that the new branch will serve. Before exercising the authority to order closure of branches, the agencies will issue a notice of intent to close covered interstate branches to the bank and schedule a hearing under the provisions of section 8(h) of the Federal Deposit Insurance Act (12 U.S.C. 1818(h)). Regulatory Burden and Limitations on Available Data The language of section 109 and its legislative history indicate that Congress intended that the provision not impose any additional regulatory or paperwork burdens on any institution. See H. Rep. No. 651, 103d Cong., 2nd Sess. 62 (1994). Section 109 directs the agencies to calculate the covered interstate branch loan-to-deposit ratio from available information, including an agency’s sampling of the bank’s loan files during an examination, or such data as are otherwise available. The agencies are also required by section 109 to calculate the host state loan-todeposit ratio as determinable from relevant sources. As discussed in greater detail later, data that are currently required to be reported by banks have significant limitations for purposes of making the calculations described in section 109. In addition, the agencies’ supervisory experience indicates that data collection and availability vary substantially from bank to bank. Although sampling during an examination may produce relevant data, the extent and duration of an examination to gather complete information could impose significant regulatory burdens on the bank. To address these concerns in a manner consistent with section 109’s intent not to impose additional regulatory burdens on banks, the agencies propose to determine the covered interstate branch loan-todeposit ratio by reviewing the relevant data reasonably available for each bank covered by the proposed rule. These data would include deposit and loan data that are readily available and provided by the bank, and data already required to be reported by the bank or reasonably available to the agencies during an examination. If these data are sufficient to determine that a bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of the host state loan-to-deposit ratio, or if reasonably available data are insufficient to calculate the bank’s covered interstate branch loan-todeposit ratio, the agencies would make a credit needs determination for the bank. During the credit needs determination, the bank may provide the agencies with any relevant information, including deposit and loan data. The agencies believe that this approach will accomplish the purpose of section 109 while minimizing regulatory burden on the bank to produce or to assist the agencies in obtaining data to calculate the bank’s covered interstate branch loan-todeposit ratio. In this regard, the ratios required to be calculated provide a screen to identify when the appropriate agency is required to make a more comprehensive credit needs determination under section 109. The 12731 proposed rule ensures that the credit needs determination will be made in all cases in which the appropriate agency is unable to readily verify compliance by means of the section 109 loan-to-deposit ratio screen. The agencies seek comment on all aspects of the proposal, particularly data availability issues as they relate to the required calculations of the loan-todeposit ratios for banks with covered interstate branches and the host states, and the agencies’ proposed resolutions of these issues. The agencies also seek comment on all other aspects of the proposed rule. Available Deposit and Loan Data The most relevant data for calculating the ratios required under section 109 are data that provide the geographic location of the depositor or borrower. As discussed later, currently available data have significant limitations with respect to depositor or borrower location. Deposit Data Domestic banks report deposit data to the agencies primarily through three submissions: (1) The annual Summary of Deposits, (2) the quarterly Consolidated Reports of Condition and Income (Call Reports), and (3) the Report of Transaction Accounts, Other Deposits, and Vault Cash (FR 2900). The Summary of Deposits collects deposit data on a branch-by-branch basis and can be aggregated by state or other geographical region. The data in this report reflect the location where deposits are booked, however, and not the location of the depositor. Deposits may be booked at centralized locations and may include deposits from sources in other states. The Summary of Deposits therefore has limitations as a source of deposit data for calculating loan-to-deposit ratios in a particular area or state. The Call Report and the FR 2900 also provide deposit data that are of limited value in making the necessary calculations. The data in these reports are collected for each institution on a consolidated basis and are not segregated by geographic area. The data reported by foreign banks have similar limitations. The principal source of deposit data for U.S. branches of foreign banks is the Report of Assets and Liabilities of United States Branches and Agencies of a Foreign Bank (FFIEC 002). While this form separately identifies U.S. and non-U.S. depositors, it does not otherwise segregate depositors by location. Moreover, since foreign banks generally compete in wholesale deposit markets, the location where deposits are booked is likely to bear little relation to the 12732 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules location of the depositors. Other sources of deposit data for foreign banks are the FDIC’s Summary of Deposits (for insured U.S. branches of foreign banks, which are relatively few in number) and the FR 2900—Report of Transaction Accounts, Other Deposits, and Vault Cash (for U.S. branches of foreign banks with consolidated worldwide assets in excess of $1 billion) which, for the reasons previously discussed, are of limited use in the loan-to-deposit calculations required under section 109. Loan data The quarterly Call Reports provide information about the lending activity of domestic banks on a consolidated basis and do not require this information to be segregated by state or branch. Moreover, the Call Reports reflect only those loans actually held on the books of the bank as of the end of the reporting period, and do not reflect loans that have been originated and sold or that have been booked through affiliates. Certain types of loans by domestic banks are required to be reported under the Home Mortgage Disclosure Act (12 U.S.C. 2801 et seq.) (HMDA) and the new CRA regulations promulgated by the Federal financial supervisory agencies (60 FR 22156). An institution that is subject to HMDA reporting requirements must report annually the number of home-purchase and homeimprovement loans originated or purchased, and refinancings of both, by geographic location of the property subject to the mortgage.3 Additionally, large institutions are required under the new CRA regulations to report the following information annually on loans to small businesses and small farms, aggregated for each census tract or block numbering area: (1) Number and amount of loans with an original amount of $100,000 or less, more than $100,000 and less than or equal to $250,000, and more than $250,000; and (2) number and amount of loans to small businesses and small farms with gross annual revenues of $1 million or less (using the revenues the institution considered in making the credit 3 HMDA im poses reporting requirem ents on federally insured depository institutions th at in any year make at least one first-lien hom e-purchase loan secured by a one- to four-family dwelling, other than institutions that did n ot have a hom e or branch office in an MSA or that h ad assets of $28 m illion or less at the end of the previous calendar year. The reporting requirem ents also are im posed on certain mortgage lending subsidiaries and affiliates of depository institutions and in dependent mortgage com panies, unless the subsidiary, affiliate, or in dependent com pany did not have a hom e or branch office in an MSA at the end of the previous calendar year, or had, together w ith its parent, assets of $28 m illion or less and originated less than 100 mortgages in the previous calendar year. decision).4 While these sources contain lending data broken down by geographical location, the limited nature of the types of loans reported and of the lenders required to report significantly limit the usefulness of these data for purposes of calculating the ratios required under section 109. Loan data for U.S. branches of foreign banks are also reported on an aggregate basis in the FFIEC 002, which distinguishes only between U.S. and non-U.S. borrowers for some types of loans. These branches typically make very few loans that are subject to HMDA reporting requirements. The Section 109 Loan-to-Deposit Ratio Screen through sampling of loan files at the bank’s covered interstate branches. Under the proposed rule, the agencies would take into account all reasonably available data relevant to calculating the covered interstate branch loan-todeposit ratio on a case-by-case basis. The agencies would consider any deposit and loan data that are readily available and provided by the bank, and data reasonably available to the agencies through currently required reports and the examination process. In determining whether to sample a bank’s loan and deposit records, the agencies would consider whether the information would accurately reflect the bank’s activities in a host state, and whether the information could be obtained without imposing an undue regulatory burden on the bank. As previously noted, the agencies would conduct a credit needs determination in all cases where the agencies concluded that sufficient data were not available without imposing an additional regulatory burden on the bank to calculate the covered interstate branch loan-to-deposit ratio. The agencies seek comment on this approach and alternative approaches for accomplishing the purpose of section 109 without imposing regulatory burden. In particular, the agencies seek comment on the availability of deposit and lending data broken down by geographical area, and banking practices for allocating deposits and loans to branches or particular states. The agencies also seek comment on the regulatory burden associated with providing data, or permitting the agencies to obtain data through sampling in the examination process, that would be necessary to calculate a bank’s covered interstate branch loan-todeposit ratio. Covered Interstate Branch Loan-toDeposit Ratio Section 109 indicates that in calculating the covered interstate branch loan-to-deposit ratio, the agencies should consider available information, including information from the agency’s sampling of the bank’s loan files during an examination. As discussed later, sampling loan files to calculate this loan-to-deposit ratio could result in significantly increased regulatory burden. Sampling at a particular branch could produce unreliable data if a bank books loans or deposits at locations outside the state where the borrowers or depositors are located. In this regard, many domestic and foreign institutions consolidate certain types of business at the main office or other location. For example, commercial loans and deposits may be consolidated at a bank’s main office, while mortgage lending may be booked at a mortgage lending subsidiary. Although the loans may have been made through a bank’s Host State Loan-to-Deposit Ratio covered interstate branch, they would The agencies anticipate that the host not be booked at that branch. Sampling state loan-to-deposit ratio would be of loan files also would not provide calculated jointly by the agencies from information on loans that have been the data reported by banks in the Call sold. Since practices regarding loan Reports by dividing the total dollar sales differ from bank to bank, there amount of outstanding loans held by may be large variations in the loan-tohome state banks by the total dollar deposit ratios for individual banks over amount of deposits held by such banks. time that do not reflect underlying lending activity. If loans were booked at The ratio, which would be periodically updated, and the methodology used to the covered interstate branch closest to calculate the ratio would be made the borrower, the agencies would have available to the public. Determining the to expand significantly the extent and appropriate method of calculating a duration of their current examinations ratio that accurately reflects the deposit in order to obtain this information taking and lending activities of home 4 These reporting requirem ents do not apply to a state banks raises several issues bank that, as of December 31 of either of the prior discussed later. tw o calendar years, h ad total assets of less than Data for specialized banks that do not $250 m illion and was independent or an affiliate of engage in traditional deposit taking or a holding com pany that, as of December 31 of either lending may distort the host state loanof the prior two calendar years, had total banking and thrift assets of less than $1 billion. to-deposit ratio. Limited purpose banks, Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules such as credit card banks and wholesale banks, could have very large loan portfolios, but few, if any deposits. In addition, certain loan and deposit data reported on the Call Report relate to international banking activities that are not attributable to any state. These data include loans to banks in foreign countries, commercial and industrial loans to non-U.S. addresses, loans to foreign governments and official institutions, deposits from banks in foreign countries, and deposits from foreign governments and official institutions. The agencies anticipate that the host state loan-to-deposit ratio would exclude data from the types of limited purpose banks and the categories of Call Report data discussed earlier. The deposit taking and lending activities of multistate banks also could distort the host state loan-to-deposit ratio of their home states. Accounting for these activities, however, is difficult because consolidated reporting does not allow assignment of a multistate bank’s loans and deposits to particular states. Attributing all loans and deposits from banks with operations in more than one state to its home state could materially distort the host state loan-to-deposit ratio, particularly since multistate banks, which are likely to be large institutions, generally maintain higher loan-to-deposit ratios than smaller institutions.5 On the other hand, excluding multistate banks completely also could distort the host state loan-todeposit ratio. Multistate banks that have more than 50 percent of their branches outside their home state could be excluded from the host state loan-to-deposit ratio calculation since these institutions would be more likely to have more than 50 percent of their deposits and loans originated outside the host state under consideration. However, any methodology that excludes multistate banks could eventually result in a host state with few, if any, banks eligible for calculating the host state loan-to-deposit ratio as interstate branching becomes more prevalent. Under these circumstances, the agencies may need to include multistate banks. The agencies seek comment on the approaches to resolving the issues discussed earlier, and on any methodology that, using available data, would most accurately reflect the deposit taking and lending activities of retail banks in a host state. Commenters should also consider the extent to which 5 See Profit and Balance Sheet Developments at U.S. Commercial Banks in 1995, Federal Reserve Bulletin, June 1996, table A.2, pgs. 496-505. a methodology could calculate a host state loan-to-deposit ratio that would be roughly comparable to the calculation of the bank’s covered interstate branch loan-to-deposit ratio. In addition, the agencies anticipate that any methodology used to calculate the host state loan-to-deposit ratio could be adjusted in the future to take into account changes in reporting requirements or additional sources of relevant data. In this light, the agencies have not included the methodology for calculating the host state loan-to-deposit ratio in the regulation and seek comment on this approach. Credit Needs Determination As discussed earlier, the proposed rule would require the appropriate agency to review the loan portfolio of a bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank in the host state if the bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of the host state loan-to-deposit ratio, or if reasonably available data are insufficient to calculate the bank’s covered interstate branch loan-todeposit ratio. In making a credit needs determination, the appropriate agency will consider all of the factors specified in section 109, including the circumstances under which the branches were acquired, the nature of the branches’ business, economic conditions, safety and soundness considerations, and the CRA rating of the bank. The agencies also would consider any information provided by the bank, including loan and deposit data. The agencies believe that it is consistent with the language and intent of section 109 to carefully weigh the CRA rating of the bank in making a credit needs determination under the factors enumerated in section 109. Section 109 specifies the bank’s CRA rating as a factor to be considered, and most of the other considerations listed in section 109 are taken into account under the new CRA regulations as part of the performance context used to rate a bank’s CRA performance.6 6 The new CRA regulations perm it the agencies to evaluate a bank’s perform ance in the context of a num ber of considerations, including the nature of the bank’s product offerings and business strategy, the lending opportunities w ithin a bank’s assessm ent area, and any constraints on the bank such as the financial condition of th e bank, the econom ic clim ate (national, regional and local), and safety and soundness lim itations. See 12 CFR 25.21(b) (OCC), 12 CFR 228.21(b) (Board) and 12 CFR 345.21(b) (FDIC). 12733 For a bank with interstate branches, section 110 of the Interstate Act requires separate written evaluations of the institution’s CRA performance: as a whole; in each state in which it maintains a branch; and in any multistate metropolitan area in which it maintains a branch in two or more states. Section 110 also requires that the statewide written evaluation of a multistate bank must contain separate discussions of the institution’s performance in any metropolitan area in the state in which it maintains a branch, as well as in the nonmetropolitan area of the state if a branch is maintained there. Data considered in evaluating the bank’s CRA performance in a particular state would include information that contains the geographical location of housing-related, small business and small farm loans that are required to be reported under HMDA and the new CRA regulations. Accordingly, the agencies believe that information from a CRA performance examination is particularly relevant in determining compliance with section 109 because it directly evaluates a bank’s efforts to assist in meeting the credit needs of its communities. The agencies would expect that a credit needs determination for a bank with satisfactory or better ratings for CRA performance in the host state would be favorable. The agencies would also expect that a credit needs determination for a bank with less than satisfactory ratings for CRA performance in the host state would be adverse unless mitigated by the other factors enumerated in section 109. If the section 109 review is not performed in connection with the bank’s CRA performance examination, the agencies would also consider any available information that would indicate an improvement or weakening in a bank’s CRA performance since its most recent performance rating. Some entities that could be subject to section 109, including special purpose banks and uninsured branches of foreign banks,7 are not evaluated for CRA performance by the agencies. For these institutions, the agencies propose to use the new CRA regulations as guidelines in making a credit needs 7 A special p urpose bank does not perform com m ercial or retail banking services by granting credit to the public in the ordinary course of business, and is not evaluated for CRA perform ance by the agencies. See 12 CFR 25.11(c)(3) (OCC); 12 CFR 228.11(c)(3) (Board); and 12 CFR 345.11(c)(3) (FDIC). An u ninsured branch of a foreign bank also is not evaluated for CRA perform ance unless it results from an acquisition described in section 5(a)(8) of the IBA (12 U.S.C. 3103(a)(8)). See 12 CFR 25.11(c)(2) (OCC); 12 CFR 228.11(c)(2) (Board); and 12 CFR 345.11(c)(1) (FDIC). 12734 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules determination. However, the new CRA regulations would provide guidance only for determining the relevance of a particular activity to the credit needs determination, and would not obligate the institution to have a record of performance under the CRA or require that the bank pass any performance tests in the new CRA regulations. The agencies also intend to give substantial weight to the factor in section 109 relating to specialized activities in making a credit needs determination for institutions not evaluated under the CRA. For example, most branches of foreign banks derive substantially all of their deposits from the wholesale deposit markets that are generally national or international in scope.8 The agencies believe that this approach is consistent with section 109’s overall purpose of preventing banks from using the Interstate Act to establish branches primarily to gather deposits in their host state without engaging in activities designed to reasonably help meet the credit needs of the communities served by the bank in the host state. Before a bank could be sanctioned under section 109, the appropriate agency would be required to demonstrate that the bank failed to comply with the section 109 loan-todeposit ratio screen as well as failed to reasonably help in meeting the credit needs of the communities served by the bank in the host state. Accordingly, the proposed rule would require the agencies to determine a bank’s compliance with the section 109 loanto-deposit ratio screen, even if the agencies previously determined that the data are not reasonably available. The agencies seek comment on the proposed approach for making credit needs determinations, particularly the proposal to make credit needs determinations when data are insufficient to calculate the covered interstate branch loan-to-deposit ratio, and alternative approaches for accomplishing the purpose of section 8 U.S. branches of foreign banks generally accept only un in su red w holesale deposits. In 1991, the Federal Deposit Insurance Corporation Im provem ent Act am ended the IBA to prohibit U.S. branches of foreign banks from taking deposits in am ounts of less than $100,000, other than through the relatively few branches th at w ere already insured by the FDIC in 1991. 12 U.S.C. 3104(d). Congress reaffirmed this prohibition in the Interstate Act, directing the OCC and the FDIC to revise their regulations to reduce further the opportunities for retail deposit-taking available to these branches. See section 107(b) of the Interstate Act. As a result, interstate branches of foreign banks established un d er the Interstate Act cannot take retail deposits or draw a significant level of deposits from the com m unity, retail-oriented deposit markets w here the branches are located. 109 without imposing regulatory burden. The agencies also solicit comments on whether the agencies should carefully weigh the extent to which banks receive deposits from the host state if they are evaluated by the agencies under the CRA but engage in specialized activities. Timing o f Review and Agency Consultation The agencies anticipate that they will conduct a review under section 109 for all banks evaluated for CRA performance when the agencies initially rate the CRA performance of an interstate bank in a particular state as required by section 110 of the Interstate Act. Subsequent reviews, and reviews of banks not subject to CRA evaluations, would be conducted as deemed appropriate by the agencies. The agencies also intend to coordinate and consult in applying section 109 to banks that are subject to regulation by more than one agency. The agencies seek comment on these proposals for conducting section 109 reviews. Regulatory Flexibility A ct Analysis Consistent with the requirement in section 109 that the agencies use only available information to conduct the relevant analyses, the proposed rule does not impose any burden on banks beyond what is required by statute. Thus, the agencies reasonably believe that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. However, in light of the issues discussed previously in the preamble to the proposed rule relating to data availability, the agencies seek the views of interested parties on whether they believe that the proposed rule would have a significant impact on a substantial number of small business entities in accord with the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The agencies note that the proposal affects only banks that have branches in more than one state, which are likely to be primarily larger banks. Consistent with Congressional intent, the proposal would not require any additional paperwork or regulatory reporting. As discussed earlier, however, the agencies are concerned that the proposal would create additional regulatory burden for some institutions with covered interstate branches, as some institutions may be subject to more extensive examinations or requests for information necessary to obtain the data required under the proposed rule. In practice, institutions subject to the rule may need to provide additional data to examiners to avoid prolonged examinations. The agencies have requested comment on alternatives for reducing regulatory burden under the proposed rule. Paperwork Reduction Act The agencies have determined that this proposal would not increase the regulatory paperwork burden of banking organizations pursuant to the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). OCC Executive Order 12866 Determination The Office of Management and Budget has concurred with the OCC’s determination that this proposal is not a significant regulatory action under Executive Order 12866. OCC Unfunded Mandates Reform Act of 1995 Determination The OCC has determined that this proposal would not result in expenditures by State, local, and tribal governments, or by the private sector, of $100 million or more in any one year. Accordingly, a budgetary impact statement is not required under section 202 of the Unfunded Mandates Reform Act of 1995. List of Subjects 12 CFR Part 25 Community development, Credit, Investments, National banks, Reporting and recordkeeping requirements. 12 CFR Part 208 Accounting, Agriculture, Banks, banking, Confidential business information, Crime, Currency, Federal Reserve System, Mortgages, Reporting and recordkeeping requirements, Securities. 12 CFR Part 211 Exports, Federal Reserve System, Foreign banking, Holding companies, Investments, Reporting and recordkeeping requirements. 12 CFR Part 369 Banks, banking, Community development. 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: Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules 12735 §25.64 Credit needs determination. interstate branching authority granted by the Interstate Act, or any amendment (a) In general. The OCC will review made by the Interstate Act to any other the loan portfolio of the bank and 1. The authority citation for part 25 is provision of law; or determine whether the bank is revised to read as follows: (2) Could not have been established or reasonably helping to meet the credit Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, acquired outside of the bank’s home needs of the communities served by the 93a, 161, 215, 215a, 481, 1814, 1816, 1828(c), state but for the establishment or bank in the host state. 1835a, 2901 through 2907, and 3101 through acquisition of a branch described in (b) Guidelines. The OCC will use the 3111. paragraph (b)(1) of this section. following considerations as guidelines (c) Covered interstate branch loan-to- when making the determination 2. Part 25 is amended by adding a deposit ratio means the ratio of a bank’s pursuant to paragraph (a) of this section: new subpart E to read as follows: loans to its deposits in a state in which (1) Whether covered interstate Subpart E— Prohibition Against Use of the bank has a covered interstate branches were formerly part of a failed Interstate Branches Primarily for branch, as determined by the OCC. or failing depository institution; Deposit Production (d) Federal branch means federal (2) Whether covered interstate branches were acquired under branch as that term is defined in 12 Sec. circumstances where there was a low U.S.C. 3101(7) and 12 CFR 28.11(i). 25.61 Authority, purpose, and scope. (e) Home state means: loan-to-deposit ratio because of the 25.62 Definitions. (1) With respect to a state bank, the nature of the acquired institution’s 25.63 Loan-to-deposit ratio screen. state that chartered the bank; business or loan portfolio; 25.64 Credit needs determination. (2) With respect to a national bank, (3) Whether covered interstate 25.65 Sanctions. the state in which the main office of the branches have a high concentration of Subpart E— Prohibition Against Use of bank is located; and commercial or credit card lending, trust (3) With respect to a foreign bank, the services, or other specialized activities, Interstate Branches Primarily for home state of the foreign bank as Deposit Production including the extent to which the determined in accordance with 12 covered interstate branches accept §25.61 Authority, purpose, and scope. U.S.C. 3103(c) and 12 CFR 28.11(o). deposits in the host state; (a) Authority. The authority for this (f) Host state means a state in which (4) The CRA ratings received by the part is 12 U.S.C. 21, 22, 26, 27, 30, 36, a bank establishes or acquires a covered bank, if any, and if the credit needs 93a, 161, 215, 215a, 481, 1814, 1816, interstate branch. determination is not made concurrently 1828(c), 1835a, 2901 through 2907, and (g) Host state loan-to-deposit ratio with a CRA evaluation, available 3101 through 3111. means, with respect to a particular host information that would indicate an (b) Purpose. The purpose of this state, the ratio of total loans in the host improvement or weakening in the section is to implement section 109 (12 state relative to total deposits from the bank’s CRA performance since its most U.S.C. 1835a) of the Riegle-Neal host state for all banks (including all recent CRA evaluation; Interstate Banking and Branching institutions covered under the (5) Economic conditions, including Efficiency Act of 1994 (Pub. L. 103-328, definition of “bank” in 12 U.S.C. the level of loan demand, within the 108 Stat. 2338) (Interstate Act). 1813(a)(1)) that have that state as their communities served by the covered (c) Scope. (1) This subpart applies to home state, as updated periodically and interstate branches; any national bank that has operated a made available to the public. (6) The safe and sound operation and covered interstate branch for a period of (h) State means state as that term is condition of the bank; and at least one year, and any foreign bank defined in 12 U.S.C. 1813(a)(3). (7) The OCC’s Community that has operated a covered interstate Reinvestment Act Regulations (subparts § 25.63 Loan-to-deposit ratio screen. branch that is a Federal branch for a A through D of this part) and (a) Application o f screen. Beginning period of at least one year. interpretations of those regulations. no earlier than one year after a bank (2) This subpart describes the §25.65 Sanctions. establishes or acquires a covered requirements imposed under 12 U.S.C. interstate branch, the OCC will consider (a) In general. If the OCC determines 1835a, which prohibits a bank from whether the bank's covered interstate that a bank is not reasonably helping to using any authority to engage in meet the credit needs of the branch loan-to-deposit ratio is less than interstate branching pursuant to the 50 percent of the relevant host state communities served by the bank in the Interstate Act, or any amendment made loan-to-deposit ratio. host state, and that the bank’s covered by the Interstate Act to any other (b) Results o f screen. (1) If the OCC interstate branch loan-to-deposit ratio is provision of law, primarily for the determines that the bank’s covered less than 50 percent of the host state purpose of deposit production. interstate branch loan-to-deposit ratio is loan-to-deposit ratio, the OCC: §25.62 Definitions. (1) May order that a bank’s covered 50 percent or more of the host state For purposes of this subpart, the interstate branch or branches be closed loan-to-deposit ratio, no further following definitions apply: consideration under this subpart is unless the bank provides reasonable (a) Bank means, unless the context assurances to the satisfaction of the OCC required. indicates otherwise: (2) If the OCC determines that the that the bank has an acceptable plan (1) A national bank; and bank’s covered interstate branch loan-to- under which the bank will reasonably (2) A foreign bank as that term is deposit ratio is less than 50 percent of help to meet the credit needs of the defined in 12 U.S.C. 3101(7) and 12 CFR the host state loan-to-deposit ratio, or if communities served by the bank in the 28.11(j). reasonably available data are host state; and (b) Covered interstate branch means (2) Will not permit the bank to open insufficient to calculate the bank’s any branch of a national bank and any a new interstate branch in the host state covered interstate branch loan-toFederal branch of a foreign bank, that: that would be considered to be a deposit ratio, the OCC will make a (1) Is established or acquired outside credit needs determination for the bank covered interstate branch under the bank’s home state under the § 25.62(b) unless the bank provides as provided in § 25.64. PART 25— COMMUNITY REINVESTMENT ACT REGULATIONS 12736 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules reasonable assurances to the satisfaction of the OCC that the bank will reasonably help to meet the credit needs of the community that the new interstate branch will serve. (b) Notice prior to closure o f covered interstate branches. Before exercising the OCC’s authority to order the bank to close a covered interstate branch or branches, the OCC will issue to the bank notice of the OCC’s intent to order the closure and will schedule a hearing within 60 days of issuing the notice. (c) Hearing. A hearing scheduled under paragraph (b) of this section will be conducted under the provisions of 12 U.S.C. 1818(h) and 12 CFR part 19. Dated: March 1 1 ,1 9 9 7 . Eugene A. Ludwig, C om ptroller o f 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 parts 208 and 211 of chapter II of title 12 of the Code of Federal Regulations as follows: PART 208— MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL RESERVE SYSTEM (REGULATION H) 1. The authority citation for part 208 is revised to read as follows: Authority: 12 U.S.C. 24, 248(a), 248(c), 321—338a, 371d, 461, 481^186, 601, 611, 1814, 1820(d)(9), 1823(j), 1828(o), 18310, 1 8 3 1 p -l, 1835a, 3105, 3310, 3331 -3 3 5 1 , and 3906-3909; 15 U.S.C. 78b, 781(b), 781(g), 781(i), 78o-4(c)(5), 78q, 78q -l, and 78w; 31 U.S.C. 5318. 2. A new § 208.28 is added to subpart A to read as follows: § 208.28 Prohibition against use of interstate branches primarily for deposit production. (a) Purpose and scope—(1) Purpose. The purpose of this section is to implement section 109 (12 U.S.C. 1835a) of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338) (Interstate Act). (2) Scope, (i) This section applies to any State member bank that has operated a covered interstate branch for a period of at least one year, and any foreign bank that has operated a covered interstate branch licensed by a State for a period of at least one year. (ii) This section describes the requirements imposed under 12 U.S.C. 1835a, which prohibits a bank from using any authority to engage in interstate branching pursuant to the Interstate Act, or any amendment made by the Interstate Act to any other provision of law, primarily for the purpose of deposit production. (b) Definitions. For purposes of this section, the following definitions apply: (1) Bank means, unless the context indicates otherwise: (1) A State member bank as that term is defined in 12 U.S.C. 1813(d)(2); and (ii) A foreign bank as that term is defined in 12 U.S.C. 3101 (7) and 12 CFR 211.21. (2) Covered interstate branch means any branch of a State member bank and any branch of a foreign bank licensed by a State, that: (i) Is established or acquired outside the bank’s home state under the interstate branching authority granted by the Interstate Act, or any amendment made by the Interstate Act to any other provision of law; or (ii) Could not have been established or acquired outside of the bank’s home state but for the establishment or acquisition of a branch described in paragraph (b)(2)(i) of this section. (3) Home state means: (i) With respect to a state bank, the state that chartered the bank; (ii) With respect to a national bank, the state in which the main office of the bank is located; and (iii) With respect to a foreign bank, the home state of the foreign bank as determined in accordance with 12 U.S.C. 3103(c) and 12 CFR 211.22. (4) Host state means a state in which a bank establishes or acquires a covered interstate branch. (5) Host state loan-to-deposit ratio means, with respect to a particular host state, the ratio of total loans in the host state relative to total deposits from the host state for all banks (including all institutions covered under the definition of “bank” in 12 U.S.C. 1813(a)(1)) that have that state as their home state, as updated periodically and made available to the public. (6) Covered interstate branch loan-todeposit ratio means the ratio of a bank’s loans to its deposits in a state in which the bank has a covered interstate branch, as determined by the Board. (7) State means state as that term is defined in 12 U.S.C. 1813(a)(3). (c) Loan-to-deposit ratio screen—(1) Application o f screen. Beginning no earlier than one year after a bank establishes or acquires a covered interstate branch, the Board will consider whether the bank’s covered interstate branch loan-to-deposit ratio is less than 50 percent of the relevant host state loan-to-deposit ratio. (2) Results o f screen, (i) If the Board determines that the bank’s covered interstate branch loan-to-deposit ratio is 50 percent or more of the host state loan-to-deposit ratio, no further consideration under this section is required. (ii) If the Board determines that the bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of the host state loan-to-deposit ratio, or if reasonably available data are insufficient to calculate the bank’s covered interstate branch loan-todeposit ratio, the Board will make a credit needs determination for the bank as provided in paragraph (d) of this section. (d) Credit needs determination—(1) In general. The Board will review the loan portfolio of the bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank in the host state. (2) Guidelines. The Board will use the following considerations as guidelines when making the determination pursuant to paragraph (a) of this section: (i) Whether covered interstate branches were formerly part of a failed or failing depository institution; (ii) Whether covered interstate branches were acquired under circumstances where there was a low loan-to-deposit ratio because of the nature of the acquired institution’s business or loan portfolio; (iii) Whether covered interstate branches have a high concentration of commercial or credit card lending, trust services, or other specialized activities, including the extent to which the covered interstate branches accept deposits in the host state; (iv) The Community Reinvestment Act (CRA) ratings received by the bank, if any, under 12 U.S.C. 2901 et seq. and, if the credit needs determination is not made concurrently with a CRA evaluation, available information that would indicate an improvement or weakening in the bank’s CRA performance since its most recent CRA evaluation; (v) Economic conditions, including the level of loan demand, within the communities served by the covered interstate branches; (vi) The safe and sound operation and condition of the bank; and (vii) The Board’s Regulation BB— Community Reinvestment (12 CFR part 228) and interpretations of that regulation. (e) Sanctions—(1) In general. If the Board determines that a bank is not reasonably helping to meet the credit needs of the communities served by the Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules By order of the Board o f Governors o f the bank in the host state, and that the bank’s covered interstate branch loan-to- Federal Reserve System, March 1 1 ,1 9 9 7 . Jennifer J. Johnson, deposit ratio is less than 50 percent of D e p u ty Secretary o f the Board. the host state loan-to-deposit ratio, the Board: Federal Deposit Insurance Corporation (1) May order that a bank’s covered 12 CFR CHAPTER III interstate branch or branches be closed Authority and Issuance unless the bank provides reasonable assurances to the satisfaction of the For the reasons set forth in the joint Board that the bank has an acceptable preamble, the Board of Directors of the plan under which the bank will Federal Deposit Insurance Corporation reasonably help to meet the credit needs proposes to add part 369 to chapter III of title 12 of the Code of Federal of the communities served by the bank Regulations to read as follows: in the host state; and (ii) Will not permit the bank to open PART 369— PROHIBITION AGAINST a new interstate branch in the host state USE OF INTERSTATE BRANCHES that would be considered to be a PRIMARILY FOR DEPOSIT covered interstate branch under PRODUCTION paragraph (b)(2) of this section unless the bank provides reasonable assurances Sec. 369.1 Purpose and scope. to the satisfaction of the Board that the 369.2 Definitions. bank will reasonably help to meet the 369.3 Loan-to-deposit ratio screen. credit needs of the community that the 369.4 Credit needs determination. 369.5 Sanctions. new interstate branch will serve. Authority: 12 U.S.C. 1819 (Tenth) and (2) Notice prior to closure o f covered 1835a. interstate branches. Before exercising the Board’s authority to order the bank § 369.1 Purpose and scope. to close a covered interstate branch or (a) Purpose. The purpose of this part branches, the Board will issue to the is to implement section 109 (12 U.S.C. bank notice of the Board’s intent to 1835a) of the Riegle-Neal Interstate order the closure and will schedule a Banking and Branching Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. hearing within 60 days of issuing the 2338) (Interstate Act). notice. (b) Scope. (1) This part applies to any (3) Hearing. A hearing scheduled State nonmember bank that has under paragraph (e)(2) of this section operated a covered interstate branch for will be conducted under the provisions a period of at least one year. of 12 U.S.C. 1818(h) and 12 CFR part (2) This part describes the 263. requirements imposed under 12 U.S.C. 1835a, which prohibits a bank from PART 211—INTERNATIONAL using any authority to engage in BANKING OPERATIONS interstate branching pursuant to the (REGULATION K) Interstate Act, or any amendment made by the Interstate Act to any other 1. The authority citation for part 211 provision of law, primarily for the is revised to read as follows: purpose of deposit production. Authority: 12 U.S.C. 221 et seq., 1818, 1835a, 1841 et seq., 3101 e t seq., and 3901 e t seq. 2. In § 211.22, a new paragraph (d) is added to read as follows: § 211.22 Interstate banking operations of foreign banking organizations. * * * * * (d) Prohibition against interstate deposit production offices. A covered interstate branch of a foreign bank may not be used as a deposit production office in accordance with the provisions in § 208.28 of the Board’s Regulation H (12 CFR 208.28). §369.2 Definitions. For purposes of this part, the following definitions apply: (a) Bank means, unless the context indicates otherwise, a State nonmember bank. (b) Covered interstate branch means any branch of a State nonmember bank, that: (1) Is established or acquired outside the bank’s home state under the interstate branching authority granted by the Interstate Act, or any amendment made by the Interstate Act to any other provision of law; or (2) Could not have been established or acquired outside of the bank’s home state but for the establishment or acquisition of a branch described in paragraph (b)(1) of this section. 12737 (c) Covered interstate branch loan-todeposit ratio means the ratio of a bank’s loans to its deposits in a state in which the bank has a covered interstate branch, as determined by the FDIC. (d) Home state means: (1) With respect to a state bank, the state that chartered the bank; (2) With respect to a national bank, the state in which the main office of the bank is located; and (3) With respect to a foreign bank, the home state of the foreign bank as determined in accordance with 12 U.S.C. 3103(c). (e) Host state means a state in which a bank establishes or acquires a covered interstate branch. (f) Host state loan-to-deposit ratio means, with respect to a particular host state, the ratio of total loans in the host state relative to total deposits from the host state for all banks (including all institutions covered under the definition of “bank” in 12 U.S.C. 1813(a)(1)) that have that state as their home state, as updated periodically and made available to the public. (g) State means state as that term is defined in 12 U.S.C. 1813(a)(3). §369.3 Loan-to-deposit ratio screen. (a) Application o f screen. Beginning no earlier than one year after a bank establishes or acquires a covered interstate branch, the FDIC will consider whether the bank’s covered interstate branch loan-to-deposit ratio is less than 50 percent of the relevant host state loan-to-deposit ratio. (b) Results o f screen. (1) If the FDIC determines that the bank’s covered interstate branch loan-to-deposit ratio is 50 percent or more of the host state loan-to-deposit ratio, no further consideration under this part is required. (2) If the FDIC determines that the bank’s covered interstate branch loan-todeposit ratio is less than 50 percent of the host state loan-to-deposit ratio, or if reasonably available data are insufficient to calculate the bank’s covered interstate branch loan-todeposit ratio, the FDIC will make a credit needs determination for the bank as provided in § 369.4. §369.4 Credit needs determination. (a) In general. The FDIC will review the loan portfolio of the bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank in the host state. (b) Guidelines. The FDIC will use the following considerations as guidelines when making the determination pursuant to paragraph (a) of this section: 12738 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Proposed Rules (1) Whether covered interstate branches were formerly part of a failed or failing depository institution; (2) Whether covered interstate branches were acquired under circumstances where there was a low loan-to-deposit ratio because of the nature of the acquired institution’s business or loan portfolio; (3) Whether covered interstate branches have a high concentration of commercial or credit card lending, trust services, or other specialized activities, including the extent to which the covered interstate branches accept deposits in the host state; (4) The Community Reinvestment Act (CRA) ratings received by the bank, if any, under 12 U.S.C. 2901 et seq. and, if the credit needs determination is not made concurrently with a CRA evaluation, available information that would indicate an improvement or weakening in the bank’s CRA. performance since its most recent CRA evaluation; (5) Economic conditions, including the level of loan demand, within the that would be considered to be a covered interstate branch under § 369.2(b) unless the bank provides reasonable assurances to the satisfaction of the FDIC that the bank will reasonably help to meet the credit needs of the community that the new interstate branch will serve. (b) Notice prior to closure o f covered §369.5 Sanctions. interstate branches. Before exercising (a) In general. If the FDIC determines the FDIC’s authority to order the bank that a bank is not reasonably helping to to close a covered interstate branch or meet the credit needs of the branches, the FDIC will issue to the communities served by the bank in the bank notice of the FDIC’s intent to order host state, and that the bank’s covered the closure and will schedule a hearing interstate branch loan-to-deposit ratio is within 60 days of issuing the notice. less than 50 percent of the host state (c) Hearing. A hearing scheduled loan-to-deposit ratio, the FDIC: under paragraph (b) of this section will (1) May order that a bank’s covered be conducted under the provisions of 12 interstate branch or branches be closed U.S.C. 1818(h) and 12 CFR part 308. unless the bank provides reasonable By order of the Board o f Directors. assurances to the satisfaction of the Dated at W ashington, D.C., this 11th day of FDIC that the bank has an acceptable March, 1997. plan under which the bank will reasonably help to meet the credit needs Federal D eposit Insurance Corporation. Robert E. Feldm an, of the communities served by the bank D e p u ty E xecu tive Secretary. in the host state; and [FR Doc. 9 7 -6 5 9 9 Filed 3 -1 4 -9 7 ; 8:45 am] (2) Will not permit the bank to open a new interstate branch in the host state BILLING CODE 4 810 -33 -P , 6 210 -01 -P , 6 7 14 -01 -P communities served by the covered interstate branches; (6) The safe and sound operation and condition of the bank; and (7) The FDIC’s Community Reinvestment Act Regulations (12 CFR Part 345) and interpretations of those regulations.
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